TIDMUBI
RNS Number : 0648D
Ubisense Group PLC
25 March 2014
25 March 2014
Ubisense Group plc
Audited results for the year ended 31 December 2013
Ubisense Group plc ("Ubisense" or the "Company") (LSE: UBI), a
market leader in real time location intelligence solutions,
announces its audited results for the year ended 31 December
2013.
Highlights
Strategic highlights
-- Broadening reach of addressable market in Japan and South Korea with acquisition of Geoplan
-- Customer bookings in the year up 32.1% to GBP32.5 million, including multi-year contracts
-- Order book up 75.5% year-on-year to GBP17.9 million as at 31
December 2013 and continues to provide good revenue visibility
-- Appointment as Google Enterprise partner
Financial highlights
-- Group revenue increased by 11.2% to GBP27.0 million (FY 2012: GBP24.3 million)
-- Organic revenue increased by 8.2% to GBP26.3 million (excluding acquisitions)
-- Recurring revenues up, representing 26.5% of total revenues (FY 2012: 25.1%)
-- Accelerated investment in product development with gross
R&D costs of GBP4.0 million (FY 2012: GBP3.2 million)
-- Adjusted EBITDA* of GBP1.1 million (FY 2012: GBP1.2 million)
reflecting strong second half in line with previous guidance
-- Cash and cash equivalents of GBP4.0 million, following
acquisition of Geoplan, and net funds of GBP0.5 million (FY 2012:
GBP2.7 million)
-- Adjusted loss per share** 3.5p (FY 2012: 0.5p earnings per
share); Basic and diluted loss per share 8.9p (FY 2012: 2.8p loss
per share)
-- New GBP5.0 million bank facility to provide capacity to meet
future working capital requirements, with GBP3.5 million drawn
Operational highlights
-- Product certification granted in Japan and South Korea
enabling deployment of RTLI solutions
-- Significant orders during the period from leading European
telecoms network operator, the largest US agricultural
manufacturer, a Top-5 US Telecoms operator and a leading US energy
utility
-- All three German automotive groups deploying Ubisense Smart
Factory System in a step and repeat cycle
-- Robert Parker appointed Chief Financial Officer on 10 February 2014
* Measured as operating profit excluding depreciation,
amortisation, share-based payments charge and non-recurring costs
such as reorganisation costs, AIM listing expenses and acquisition
costs
** Earnings measured as profit for the period excluding
amortisation on acquired intangible assets, share-based payments
charge and non-recurring exceptional items such as acquisition and
reorganisation costs.
Richard Green, Chief Executive Officer, commented:
"2013 was a year of promising progress for the Group. The
investment we made in our converged location intelligence platform
has been rewarded with strong customer momentum, reflected in solid
revenue growth and acceleration in cash bookings. With an
established and growing presence in the three German automotive
OEMs, our progress in this strategic market has been a key driver
of the 2013 performance and importantly it represents the model
which we can replicate in North America and Asia, large attractive
markets where we have a strategic foothold and see a vast near term
opportunity. The Group enters 2014 with increasing momentum. With a
robust order book and broadening pipeline of opportunities across
new markets and applications, the Board looks to the future with
confidence."
Contact:
Ubisense Group Tel: +44 (0) 12 2353 5170
Richard Green
Robert Parker
Canaccord Genuity Limited (NOMAD) Tel: +44 (0) 20 7523 8000
Simon Bridges
Lucy Tilley
FTI Consulting Tel: +44 (0) 20 7831 3113
Jon Snowball
Tracey Bowditch
About Ubisense
Ubisense is a market leader in real time location intelligence
solutions which enable companies to optimise their business
processes. By keeping track of key assets, Ubisense solutions bring
clarity to complex operations whilst also improving quality and
reliability. Ubisense Real-Time Location Intelligence Solutions are
used by a number of blue chip customers across the world, such as
AGCO, Airbus, Aston Martin, BMW, Cablevision, Daimler, Deutsche
Telekom, Duke Energy, John Deere, MINI and VW.
Ubisense is headquartered in Cambridge, UK, with offices in the
USA; Canada; France; Germany; Japan; Korea; Philippines and
Singapore. For more information visit: http://www.ubisense.net
Chairman's statement
Introduction
2013 was a busy year for the Group, driving forward our aim to
be synonymous with enterprise location intelligence. We have seen
significant developments in our strategy to transform our business
to a single Real Time Location Intelligence (RTLI) solution, fully
leveraging our product IP across our customer base. To strengthen
this further and expand our global footprint, on 3 December 2013 we
completed the acquisition of the Geoplan Interworks K.K.
("Geoplan") group of companies.
We are still in the early stages of the integration process but
I am delighted with the progress to date and am excited by the
potential we see in Asia over the next few years.
Overview
Group revenue increased by 11.2% to GBP27.0 million and we
achieved an Adjusted EBITDA of GBP1.1 million. The Group's Gross
Profit was GBP9.2 million, representing a gross margin of 34.2%.
The Group has a robust balance sheet with Net Assets of GBP19.4
million, including cash and cash equivalents of GBP4.0 million.
During 2013 we experienced continued momentum across the
business as we migrated to a RTLI solutions focused business,
through the strengthening of key customer relationships,
acquisition of new customers, improved market reach and our
approach to product management. We have also ensured that our
resources are fully focused on delivering our leading location
intelligence technology for markets where we add the most
value.
The necessary investments and progress we have made has allowed
Ubisense to experience solid growth through major new strategic
client wins, as the use of real time location intelligence
solutions is becoming increasingly widespread through many
industries. Our year-end order book is up 75.5% year-on-year to
GBP17.9 million - a significant achievement and this continues to
provide us with good revenue visibility going forward.
We have also delivered excellent progress and further market
traction in the conversion of our consulting services customers
into RTLI solutions customers. Our market leading RTLI solutions
offering is benefiting from the acceleration in enterprise
acceptance as it allows customers across high value manufacturing,
utility and telecommunication sectors to achieve substantial
improvements in efficiency and cost savings. Our reputation with
all our customers continues to be one of value, reliability and
exceptional service.
Our aim is to deliver a single enterprise location intelligence
platform to address all our customer base and target markets.
Current trading and outlook
In the period since the year end, trading has been in line with
the Board's expectations. Ubisense has entered 2014 with increasing
momentum in the business and we are extremely well positioned to
capitalise on the opportunities we see.
We will continue to pursue growth both organically and through
acquisitions that align with our strategic objectives, enhance our
offering and deliver value for our shareholders. Although the world
economic recovery is still in an early stage, we are able to
provide market-leading innovative solutions for our customers and
we begin 2014 with a robust order book and pipeline which gives us
confidence for the future.
Conclusion
On behalf of the Board, I would like to thank our customers,
partners and employees for their support in making 2013 such a
strong year for the Ubisense Group. I look ahead with confidence
for the 2014 financial year.
Andy Hopper, CBE
Chairman
24 March 2014
Chief Executive's review
Overview
The Group made exceptional progress in 2013, delivering on our
stated strategy. In the year, we decided to bring together all of
our leading location based technologies into one converged offering
in order to meet the increasing demands of our customers. Our
single RTLI business allows the Company to benefit from the
emerging trends of smart devices and the growth in cloud
technologies.
The implementation of this strategy has allowed us to achieve
pleasing growth in the year. We experienced growing awareness and
increased deployment with a number of large manufacturers and
network operators.
Our strategic objectives are as follows:
-- Continue to evolve as a Solutions-based business with a
Services capability, developing IP licensed on perpetual or term
basis to customers
-- Develop additional software licence offerings for specific
business problems that deliver ROI to customers and represent
upsell opportunities and additional Maintenance and Support
revenue
-- Focus direct business on manufacturing, telecoms and utility
enterprises - particularly automotive manufacturing, cable
television and triple play operators as well as gas and electric
utilities
-- Drive step and repeat business in Automotive manufacturing
across new site locations where we have demonstrated business value
in initial deployments
-- Use channel partners to reach other vertical markets at low
cost of sale with specific domain know-how and market access
-- Continue to innovate and provide a rewarding work environment
to attract and retain talented staff
Business observations:
-- We continue to see location as a key asset attribute for many
critical business processes and the focal point for integration of
enterprise data
-- In our telecoms and utility markets, new mobile-based
capabilities are realising business opportunities for software
products in Field Operations, where real-time data access and
updates demonstrate improved business efficiency for the mobile
workforce
-- In our manufacturing markets, we see opportunities to
penetrate upstream and downstream around initial points of
deployment as customers recognise the value of location
Our value proposition is, and remains, our main growth driver as
customers are seeing clear return on investment from increased
operational efficiencies and reduced costs in their operations.
Customer momentum
In the year, the growth momentum in our Solutions business
continued, as we extended our product sales into our existing
client base and leveraged these existing relationships. Our focus
remained on our priority markets in high-value manufacturing and
network operators, where we delivered year-on-year growth in
revenues of 18%. Our RTLI solutions have strengthened our customer
relationships as we continue to innovate and offer a growing range
of applications to support their drive towards end-to-end location
intelligence solutions across their whole business.
Ubisense products and solutions have now been installed in 8 out
of the top 15 auto manufacturers and we continue to penetrate the
global automotive market with installations at more new plants in
North America, Europe and South Korea. Crucially, in the year, our
RTLS solution was authorised for certification for sale into Japan
which, along with the development of the Smart Warehouse System by
Daifuku for their large customer base, has opened up a large number
of new opportunities and potential new customers.
During the year, we saw repeat orders from our existing customer
base and won several new solutions contracts including major
strategic wins at customers such as VW, Honda and Toyota and we
have extended our installations at existing customers including
Airbus, Aston Martin, BMW, Cummins, Daimler and John Deere.
We continue to deliver into Telecoms and Utility network
operators, servicing both existing and new customers. We remain
committed to this customer base and strongly believe that we will
be able to further sell our enhanced RTLI solutions to them as a
trusted supplier. We are pleased to report new customer wins with
Swisscom, Central Hudson, Piedmont Gas and Kepco.
Chief Executive's review (continued)
Acquisitions
Geoplan was acquired for a maximum consideration of GBP3.4
million, with initial consideration of GBP2.3 million and GBP1.1
million being deferred. Of the initial consideration, GBP0.6
million consists of cash and the remainder Ubisense shares. Of the
deferred consideration, GBP0.2 million has been paid as at 24 March
2014.
The acquisition of Geoplan contributed GBP0.7 million to
revenues in the year. We are integrating the company into our
existing business and operations are being consolidated, providing
us with cross-selling opportunities and a strong presence in Japan
to open up the manufacturing market there. We are delighted with
the progress we have made so far in both Japan and South Korea and
will look to take advantage of the vast opportunities this
acquisition has brought to us across Asia.
We continue to look for acquisition opportunities to enhance our
market penetration, geographical footprint and product
portfolio.
Strategic Partnerships
Substantial progress was achieved with our strategic partners
Atlas Copco, Google and our partnership with the Daifuku
Corporation in Japan.
We remain committed to developing partnerships that deliver
differentiated value propositions, leveraging each other's
expertise and relationships to provide substantial benefit for our
joint customers.
Products
Implementing intelligent concepts through the development of
unique IP is core to our product offering and differentiates us
from our competitors. We continue to invest heavily in research and
development as well as extending our collaboration with university
and research institute partners.
We have continued with the consolidation of current products
into more market focused application suites such as Smart Factory,
our flagship, end-to-end manufacturing solution. Feedback has been
very positive and we are ultimately moving to a single enterprise
location intelligence platform to address all our customers'
requirements.
Additionally we have focused on integration with other
enterprise system platforms such as SAP, and this makes for more
effective deployment for our customers as integration timescales
and costs are much lower.
Conclusion
By continuing to invest in our product suite and working in
close co-operation with our customers we have established a strong
platform for growth and are in a good position to build on our
successes. We look forward to the future with confidence.
Richard Green
Chief Executive Officer
24 March 2014
Financial review
Orders
2013 saw a number of major new contract awards and extensions to
existing contracts resulting in record new orders for the period of
GBP32.5 million (2012: GBP24.6 million) including a number of
multi-year managed services deals. GBP31.5 million of these orders
were organic.
As a result of the record customer orders in the period, the
order book as at 31 December 2013 stood at GBP17.9 million (2012:
GBP10.2 million) - a 75.5% increase year-on-year. GBP14.7 million
of the order book comes from the organic business. This continues
the trend of an increasing order book and gives the Company good
visibility on revenues into 2014 and beyond.
Revenue
At the start of 2013, Ubisense reorganised into a single Real
Time Location Intelligence (RTLI) business integrating all our
leading location based technologies driving to a single platform
which we are increasingly converging. The RTLI strategy is outlined
further in the Strategic Report. While we market, organise and
report a single offering, Ubisense has two revenue streams which
are serviced by a common cost base:
-- Solutions - revenues driven from the Ubisense product suites
(Smart Factory System, netSolutions, netPlanning, myWorld,
Verotrack), technical expertise and exclusive reseller
arrangements. A solution sale will include a mixture of application
software (licences in perpetuity and subscription based),
installation and commissioning services, hardware and maintenance
and support. Margins in any given period will vary depending upon
the make-up and phase of the given set of Solutions being
delivered. The Company sees this revenue stream as critical to
driving the long term growth and profitability of the business.
-- Services - revenues not involving the Ubisense product suites
as defined above. These revenues are typically multi-year managed
services contracts, consultancy and training. The Company generally
has good visibility on future revenue from Services and believes it
is critical to driving customer loyalty and providing a customer
base into which it can sell its Solutions.
Total revenues grew by 11.2% to GBP27.0 million (2012: GBP24.3
million). Of the total revenue for 2013, an incremental
GBP0.7million was contributed by the Geoplan acquisition made at
the beginning of December 2013. Excluding Geoplan, organic revenue
increased by 8.2% to GBP26.3 million.
Solutions revenue grew by 6.7% to GBP13.4 million (2012: GBP12.5
million). Services revenue grew by 15.9% to GBP13.6 million (2012:
GBP11.8 million) primarily as a result of large contract wins in
the US in the Utility and Telecoms markets. Recurring revenues,
comprising managed services and maintenance and support, grew to
GBP7.2 million (2012: GBP6.1 million) or 26.5% of total revenues
(2012: 25.1%) as the installed base of products increases and more
customers adopt our managed services offering.
The majority of our revenues relate to a small number of large
deals the timing of which is not solely within our control and each
can carry a significant impact on our results in any single
reporting period.
Gross margin
The gross margin reduced from 39.5% to 34.2% in 2013. This was
the result of a number of factors: (i) an increase in Services
revenue in the revenue mix, (ii) within those Services revenues a
greater proportion was derived from lower margin data cleansing
services which will ultimately allow us greater access to sell our
solutions as a trusted partner, and (iii) our Solutions revenues,
which are generally higher margin, were in part delivered using
contractors to fill delivery capacity which has a direct impact on
the margin.
Operating expenses
Operating expenses of GBP10.9 million (2012: GBP10.4 million)
increased by 4.8% year-on-year. Operating expenses includes Sales
& Marketing, Product Marketing, Product Development, General
& Administration and foreign exchange. Gross expenditure on
Product Development increased 26% to GBP4.0 million (2012: GBP3.2
million) reflecting increased investment in our flagship Smart
Factory and myWorld products. Capitalised product development costs
at GBP3.0 million (2012: GBP1.8 million) represented 76% (2012:
58%) of gross development spend whilst amortisation of the
capitalised development costs was GBP1.2 million (2012: GBP0.9
million).
The Group incurred exceptional items of GBP0.8 million, of which
GBP0.7 million related to strategic Asia Pacific market entry costs
comprising GBP0.5 million acquisition costs relating to Geoplan and
GBP0.2 million relating to product certification costs in Japan and
South Korea and the termination of our previous agent network in
the region.
In addition, the Group incurred GBP0.1 million of costs, mainly
comprising professional fees, in connection with an acquisition
which did not proceed. The Board continues to evaluate suitable
acquisition opportunities to enhance its geographical footprint,
product offerings, delivery capacity and customer base.
EBITDA and operating profit
Group Adjusted EBITDA for the period was GBP1.1 million (2012:
GBP1.2 million). To provide a better guide to underlying business
performance adjusted EBITDA excludes share-based payment charges
and exceptional items along with depreciation, amortisation,
interest and tax from the measure of profit.
Both the operating loss of GBP1.6 million (2012: GBP0.8 million)
and loss before tax of GBP1.7 million (2012: GBP0.7 million)
includes amortisation and depreciation charges of GBP1.9 million
(2012: GBP1.4 million) which have increased as a result of the
increased amortisation of capitalised product development costs, as
well as the exceptional items noted above of GBP0.8 million (2012:
GBP0.4 million).
Interest and tax
Net interest payable for the period was GBP0.1 million (2012:
GBPnil) as a result of drawing down on our HSBC bank loan.
The Group has a net tax expense of GBP0.2 million (2012: GBP0.1
million income) almost entirely a result of non-cash deferred tax
on capitalised development costs and acquired intangible assets.
Management's best estimate of the effective current tax rate is nil
due to the availability of prior years' losses. The Group has
substantial tax losses carried forward and expects to benefit from
the Patent Box tax regime being introduced in the UK.
EPS and dividend
Adjusted diluted loss per share was 3.6 pence (2012: 0.5 pence
earnings). Reported basic and diluted loss per share was 8.9 pence
(2012: 2.8 pence). The Board does not feel it appropriate at this
time to commence paying dividends.
Balance sheet, cash and cash flow
The Group has a robust balance sheet with Net Assets at 31
December 2013 of GBP19.4 million (31 December 2012: GBP18.9
million).
In August 2013, the Group agreed a GBP5.0 million three-year
loan to provide future working capital replacing the previous
GBP2.0 million facility negotiated in 2012 and drawn down in 2013.
GBP3.5 million of the new loan was drawn as at 31 December 2013
(2012: GBPnil) of which GBP2.0 million was used to repay the
original facility.
Cash and cash equivalents held in the balance sheet at 31
December 2013 was GBP4.0 million (31 December 2012: GBP2.7
million). With the bank loan outstanding of GBP3.5 million, net
funds at 31 December 2013 were GBP0.5 million (31 December 2012:
GBP2.7 million).
The main components to the gross cash increase of GBP1.3 million
for the year (2012: GBP3.3 million decrease) were operating cash
outflow of GBP0.8 million (2012: GBP0.8 million outflow), the cash
consideration paid for Geoplan of GBP0.7 million in December 2013
(2012: GBP0.4 million outflow on prior acquisitions), the cash
acquired with Geoplan of GBP2.5 million, capital investment in
plant and equipment and intangibles including product development
of GBP3.2 million (2012: GBP2.3 million) and the receipt of the new
bank loan of GBP3.5 million (2012: GBPnil).
Capital structure
The issued share capital at 31 December 2013 was 23,079,146
(December 2012: 21,919,744) ordinary shares of GBP0.02 each. The
increase of 1,159,402 shares related to 759,809 shares issued as
part of the consideration of acquiring Geoplan and 399,593 shares
as a result of share option exercises by employees. In addition,
421,500 share options were granted to employees on 19 April 2013 at
an exercise price of GBP2.055, being the share price at the time.
The total number of unexercised share options at 31 December 2013
was 2,023,180.
Robert Parker
Chief Financial Officer
24 March 2014
Strategic report
Strategy and business model
Ubisense is a market leader in real time location intelligence
solutions which enable companies to optimise their business
processes. By keeping track of key assets, Ubisense solutions bring
clarity to complex location based operations that facilitate
improved human decision making whilst also improving quality,
efficiency and reliability. Ubisense Real-Time Location
Intelligence Solutions are used by a number of blue chip customers
across the world, such as AGCO, Airbus, Aston Martin, BMW,
Cablevision, Daimler, Deutsche Telekom, Duke Energy, John Deere,
MINI and VW.
Ubisense is headquartered in Cambridge, UK, with offices in the
USA; Canada; France; Germany; Japan; South Korea; Philippines and
Singapore.
In recent years, there has been a significant demand from
customers requiring a single solution which combines indoor and
outdoor components as well as dynamic and static data. This overlap
of our traditional Geospatial and RTLS businesses enabled us to
integrate both divisions into a single Real Time Location
Intelligence (RTLI) business that brings together all of our
leading location based technologies.
The enterprise acceptance of our RTLI solutions has been
accelerated by several factors such as the consumerisation of maps
led by Google, the proliferation of smart devices and the growth in
cloud technologies. Ubisense's software products and services
capability benefits from these trends enabling enterprises across
the high value manufacturing, utility and telecommunications
sectors to deliver significant improvements in efficiency and cost
savings. This also opens up new, adjacent markets for Ubisense.
With the business reorganised, the strategy of the Group is
to:
-- Continue to evolve as a Solutions-based business with Services capability
-- Develop next-generation applications that deliver ROI to customers
-- Focus direct business on Manufacturing, Telecoms and Utility enterprises
-- Drive step and repeat business in Automotive manufacturing across new site locations
-- Use channel partners to reach other vertical markets at low cost of sale
-- Continue to innovate and provide a rewarding work environment
to attract and retain talented staff
Business review and future developments
Business development
A significant increase in customer bookings, over 30%
year-on-year, validates our new strategy focused on real time
location intelligence and the investment we have made in our next
generation platforms and sales and marketing infrastructure.
Considerable effort and investment in key strategic accounts in
both Europe and North America has resulted in Ubisense securing
contracts with three major manufacturing customers with global
presence and reach which will result in lower cost of sales and
increased profitability going forward. Furthermore, the Group now
has relationships with all three German auto manufacturers and is
targeting repeat orders across these groups in the coming
months.
It is still too early to see the momentum of our increased
solution sales being reflected in the Group accounts, but on a
regional basis we can start to see the delivery of our strategy.
Our European business shows the acceleration of solution revenues
over services and resultant increase in margins and profits whilst
the Americas business is still transitioning and we look forward to
the acceleration of its solutions revenues this year.
In our telecommunications and utility markets, new mobile
technologies, embodied in our myWorld product, have opened up new
business opportunities for our software products in real time
operational use, not traditionally an area of focus for us.
Customer wins for the period included a leading European telecoms
network operator, a Top-5 US Telecoms operator and a leading US
energy utility.
As the Company's products become more generally accepted across
its chosen industries and markets, Ubisense expects to be able to
penetrate deeper into its customer base to deploy multiple
applications on each site. It's acquisition strategy aims to
enhance the Company's product portfolio, geographical reach and the
ability to service its customers from a local office. The Company
expects repeat business to have a more profitable product mix and a
lower cost of sale which ultimately will drive up margins and
profitability.
Partnerships
While our direct sales channel is receiving strong customer
traction, our channel partners have also contributed to the strong
customer bookings performance. Notably, we became an official
enterprise partner of Google in the year.
Our channel partner relationships have resulted in an increase
in the number of pipeline deals. This gives us confidence in
achieving our growth goals for 2014. Furthermore, developments with
partners such as Daifuku in Asia Pacific have increased our
optimism with regards to the opportunities to significantly
increase the Company's presence in this key market.
Strategic report (continued)
Key performance indicators
The primary financial key performance indicator for the Group is
adjusted EBITDA, on which it reports monthly. Adjusted EBITDA for
the year was GBP1.1 million (2012: GBP1.2 million). The Group also
monitors the order pipeline and cash balances. At the close of the
year the outstanding orderbook totalled 69% of annual sales (2012:
47%). The closing cash balance for the Group was GBP4.0 million
(2012: GBP2.7 million). Having regularly reviewed the KPIs in
respect of changes within periods and changes between reporting
periods the Directors believe that the Group has made satisfactory
progress against the KPIs, especially the order pipeline, compared
to budget.
Financial instruments
Information on both the Group's financial risk management
objectives and the Group's policies on exposure to relevant risks
in respect of financial instruments are set out in note 27 of the
preliminary financial information.
Principal risks and uncertainties
The Group faces competitive and strategic risks that are
inherent in a rapidly growing emerging market. The Board of the
Company and the Executive Management Team review strategy and risks
to the business regularly. Where possible, processes are in place
to monitor and mitigate the identified risks.
The key business risks affecting the Group are set out
below:
Technological risks
The Group operates in an industry where competitive advantage is
heavily dependent on technology. It is possible that technological
development may reduce the importance of the Group's function in
the market or render the patents on which it relies redundant. For
instance, the Group's real time location systems rely on
ultra-wideband radio signals to operate. There is no guarantee that
technological advances will not render systems based on
ultra-wideband radio obsolete. The Group's existing reference
designs may become obsolete or may be superseded by new
technologies or changes in customer requirements. The technology
used in the Group's products is still evolving and is highly
complex and may change rapidly.
In order to mitigate this risk, Ubisense invests in a range of
research and development activities to maintain its competitive
advantage and participates in industry and research forums in order
to keep abreast of technological advances.
Growth management and acquisitions
The Directors believe that further expansion, either organic or
via acquisition, will be required in the future to capitalise on
the anticipated increase in demand for the Group's solutions. The
Group's future success will depend, in part, on its ability to
manage this anticipated expansion. Such expansion is expected to
place demands on management, support functions, accounting, sales
and marketing and other resources. If the Group is unable to manage
its expansion effectively, its business and financial results could
suffer.
In order to mitigate this risk, the Group undertakes extensive
due diligence on acquisition targets and uses dedicated project
teams to integrate acquisitions into the Group.
Staff recruitment and retention
The contribution made by Ubisense's highly skilled and
experienced staff is vital to the Group's success. As the Group
grows, it is important to recruit and retain staff.
The Group has in place appropriate incentivisation structures to
attract and retain the calibre of employees necessary to ensure the
efficient management and development of the Group.
Strategic report (continued)
Reliance on third parties, including manufacturers
The Group relies on third party equipment manufacturers in the
completion of its products and, therefore, does not always have
complete control over the equipment and materials it requires to
comply with its obligations under customer contracts. To the extent
that the Group cannot acquire equipment or materials according to
its plans and budgets, its ability to complete its work for its
customers within the timetable laid down by the contract or at a
profit may be impaired. If a manufacturer is unable to deliver the
products for any reason, the Group may be required to purchase such
equipment or materials from another source at a higher price. The
resulting additional costs may be substantial and the Group may be
in breach of its contracts with customers, which may result in a
financial loss on a particular contract or a loss of business. In
addition, any resulting failure to fulfil contracts with customers
and other business partners may have an adverse effect on the
Group's future profitability and reputation. One key supplier
supplies more than 75 per cent hardware required annually by the
Group.
In order to mitigate this risk, the Group closely manages and
reviews its relationship with key suppliers on a regular basis.
Dependence on key customers
The Group is dependent on a number of key contracts and customer
relationships for its current and future growth and development.
Ubisense has strong customer relationships with considerable repeat
business from a number of large international organisations. In the
financial year to 31 December 2013 the Group's ten largest
customers accounted for 60% of the Group's revenue (2012: 67%), of
which one customer accounted for in excess of 10% (2012: 2). The
loss of a major customer could result in a decrease in Group
revenues, margins and profitability.
In order to mitigate this risk, the Group has extensive sales
and account management processes and procedures.
Contracts
Some of the Group's commercial contracts include terms where
revenues and/or invoicing are related to customer acceptance.
The Group's exposure under such contracts is review regularly by
the Executive Management Team and the main Board.
Credit
The main credit risk is attributable to trade receivables owed
by customers. As the majority of the Group's customers are very
large, blue chip utilities, telecoms and manufacturing companies,
the risk of non-payment tends to be less of a traditional credit
nature and more related to customer satisfaction.
Credit exposure by customer is reviewed regularly by the
Executive Management Team and the main Board with provision made
for doubtful receivables when there are circumstance which, based
on experience, are evidence of a likely reduction in the
recoverability of the receivable.
Bank covenants
In August 2013, the Group agreed a GBP5.0 million loan facility
with HSBC Bank plc to provide future working capital capacity. The
loan is repayable in three years and the outstanding balance at 31
December 2013 was GBP3.5 million.
The Group is required to meet certain financial criteria agreed
as covenants for the bank loan. The financial measures are
regularly reviewed against covenant requirements to ensure the
Group's obligations can be met. All covenants tests during the year
were met and all tests for the forthcoming twelve months are
forecast to be met based on our annual operating plan and our
latest rolling forecast.
Research and development (R&D)
The Group continues to invest in R&D, spending GBP4.0
million in its R&D programmes in the year (2012: GBP3.2
million) of which GBP3.0 million (2012: GBP1.8 million) was
capitalised. In the opinion of the directors, these investments
will maintain and generate significant revenues in future
years.
Intellectual property
The Group owns intellectual property both in its software tools
and the products derived from them. The Directors consider such
properties to be of significant value to the business.
Strategic report (continued)
Employee involvement
The Group aims to attract, retain and motivate the best staff
regardless of race, religion, sexual orientation, age or
disability. To that end it is committed to offering equal
employment opportunities.
The Group provides its employees systematically with information
on matters of concern to them and regularly consults its staff, or
their representatives, for views on matters affecting them.
The Group encourages employee involvement in the Group's
performance by granting share options and Group performance related
variable compensation, and ensures that employees are fully aware
of financial and economic factors affecting the performance of the
Group.
Employee policies
The Group is committed to following the applicable employment
laws in each territory in which it operates.
The Group is committed to ensuring that disabled persons,
whether registered or not, have equal opportunities when applying
for vacancies, with due regard to their aptitudes and abilities. In
addition to complying with legislative requirements, procedures
ensure that disabled employees are fairly treated and that their
training and career development needs are carefully managed. For
those employees becoming disabled during the course of their
employment, every effort is made, whether through retraining or
redeployment, to provide an opportunity for them to remain with the
Group.
Health and safety environment
The Group is committed to maintaining a safe and healthy working
environment for all staff. To that end it provides appropriate
training and supervision and complies with all applicable
regulatory requirements.
The Group seeks wherever possible to minimise its impact on the
environment for the benefit of its staff and the public at large.
The Group is committed to complying with environmental regulations
in particular WEEE and encourages and supports staff in waste
recycling within its offices.
Approved by the Board of Directors
And signed on behalf of the Board
Gordon Campbell
Company Secretary
24 March 2014
Ubisense Group plc
Registered number: 05589712
Consolidated income statements
For the year ended 31 December 2013
2013 2012
Notes GBP'000 GBP'000
------------------------------------------------- ------- ---------- ----------
Revenue 5 27,002 24,292
Cost of revenues (17,761) (14,690)
================================================= ======= ========== ==========
Gross profit 9,241 9,602
Operating expenses (10,867) (10,368)
================================================= ======= ========== ==========
Operating loss (1,626) (766)
Analysed as:
Gross profit 9,241 9,602
Other operating expenses (8,100) (8,445)
================================================= ======= ========== ==========
Adjusted EBITDA 1,141 1,157
Depreciation (266) (227)
Amortisation of acquired intangible
assets (313) (257)
Amortisation of other intangible
assets (1,332) (953)
Share-based payments charge 21.2 (92) (63)
Exceptional items 9.2 (764) (423)
================================================= ======= ========== ==========
Operating loss (1,626) (766)
Finance income 8 10 38
Finance costs 8 (103) -
------------------------------------------------- ------- ---------- ----------
Loss before tax 9 (1,719) (728)
Income tax 10.1 (219) 90
------------------------------------------------- ------- ---------- ----------
Loss for the year (1,938) (638)
------------------------------------------------- ------- ---------- ----------
Loss attributable to:
* Equity shareholders of the Company (1,968) (638)
* Non-controlling interest 30 -
------------------------------------------------- ------- ---------- ----------
(1,938) (638)
------------------------------------------------- ------- ---------- ----------
Loss per share attributable to the equity shareholders
of the parent (pence)
---------------------------------------------------------- ---------- ----------
Basic 11 (8.9p) (2.8p)
Diluted 11 (8.9p) (2.8p)
------------------------------------------------- ------- ---------- ----------
The notes 1 to 27 are an integral part of the preliminary
financial information.
Consolidated statement of comprehensive income
For the year ended 31 December 2013
2013 2012
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Loss for the year (1,938) (638)
Other comprehensive income:
(203) 33
Items that may be reclassified subsequently
to profit and loss
Exchange difference on retranslation
of net assets and results of overseas
subsidiaries
------------------------------------------------ --------- ---------
Total comprehensive loss for the
year (2,141) (605)
------------------------------------------------ --------- ---------
Attributable to:
* Equity shareholders of the Company (2,141) (605)
* Non-controlling interest - -
------------------------------------------------ --------- ---------
Total comprehensive loss for the
year (2,141) (605)
------------------------------------------------ --------- ---------
The notes 1 to 27 are an integral part of the preliminary
financial information.
Consolidated statement of changes in equity
For the year ended 31 December 2013
Attributable to equity shareholders
of the parent company
========================================================
Share Share Other Retained Sub-total Non-controlling Total
Capital Premium Reserves Earnings GBP'000 interest GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ========= ========= ========== ========== ========== ================ =========
Balance at 1 January
2012 433 22,031 510 (3,736) 19,238 - 19,238
============================= ========= ========= ========== ========== ========== ================ =========
Loss for the year - - - (638) (638) - (638)
Exchange difference
on retranslation of
net assets and results
of overseas subsidiaries - - 33 - 33 - 33
============================= ========= ========= ========== ========== ========== ================ =========
Total comprehensive
loss for the year - - 33 (638) (605) - (605)
Reserve credit for
equity-settled share-based
payment - - 63 - 63 - 63
Issue of new share
capital 5 - - - 5 - 5
Premium on new share
capital - 220 - - 220 - 220
Transactions with
owners 5 220 63 - 288 - 288
============================= ========= ========= ========== ========== ========== ================ =========
Balance at 31 December
2012 438 22,251 606 (4,374) 18,921 - 18,921
============================= ========= ========= ========== ========== ========== ================ =========
Loss for the year - - - (1,968) (1,968) 30 (1,938)
Exchange difference
on retranslation of
net assets and results
of overseas subsidiaries - - (173) - (173) (30) (203)
============================= ========= ========= ========== ========== ========== ================ =========
Total comprehensive
loss for the year - - (173) (1,968) (2,141) - (2,141)
Reserve credit for
equity-settled Share-based
payment - - 92 - 92 - 92
Non-controlling interest
in new subsidiary - - - - - 704 704
Issue of new share
capital 23 - - - 23 - 23
Premium on new share
capital - 1,799 - - 1,799 - 1,799
Transactions with
owners 23 1,799 92 - 1,914 704 2,618
============================= ========= ========= ========== ========== ========== ================ =========
Balance at 31 December
2013 461 24,050 525 (6,342) 18,694 704 19,398
============================= ========= ========= ========== ========== ========== ================ =========
The notes 1 to 27 are an integral part of the preliminary
financial information.
A reconciliation of the components of Other reserves is given in
note 22.
Consolidated statement of financial position
For the year ended 31 December 2013
2013 2012
Notes GBP'000 GBP'000
--------------------------------- ------ --------- ---------
Assets
Non-current assets
Intangible assets 12 15,962 10,319
Property, plant and equipment 13 628 621
Total non-current assets 16,590 10,940
================================= ====== ========= =========
Current assets
Inventories 14 3,106 862
Trade and other receivables 15 11,547 10,302
Cash and cash equivalents 16 3,964 2,716
================================= ====== ========= =========
Total current assets 18,617 13,880
================================= ====== ========= =========
Total assets 35,207 24,820
================================= ====== ========= =========
Liabilities
Current liabilities
Trade and other payables 17 (10,023) (5,246)
Total current liabilities (10,023) (5,246)
================================= ====== ========= =========
Non-current liabilities
Deferred income tax liabilities 10 (1,856) (653)
Bank loans 18 (3,500) -
19,
Other payables 25 (430) -
================================= ====== ========= =========
Total non-current liabilities (5,786) (653)
================================= ====== ========= =========
Total liabilities (15,809) (5,899)
================================= ====== ========= =========
Net assets 19,398 18,921
================================= ====== ========= =========
Consolidated statement of financial position (continued)
For the year ended 31 December 2013
.
2013 2012
Notes GBP'000 GBP'000
------------------------------------- ------ --------- ---------
Equity attributable to owners of
the parent company
Ordinary share capital 20 461 438
Share premium 20 24,050 22,251
Other reserves 22 525 606
Retained earnings (6,342) (4,374)
===================================== ====== ========= =========
Equity attributable to shareholders
of the Company 18,694 18,921
===================================== ====== ========= =========
Non-controlling interests 704 -
===================================== ====== ========= =========
Total equity 19,398 18,921
===================================== ====== ========= =========
The notes 1 to 27 are an integral part of the preliminary
financial information.
The preliminary financial information was approved by the Board
of Directors on 24 March 2014 and signed on its behalf by:
Richard Green, Chief Executive Officer Robert Parker, Chief
Financial Officer
Ubisense Group plc
Registered Number: 05589712
Consolidated statement of cash flows
For the year ended 31 December 2013
2013 2012
Notes GBP'000 GBP'000
-------------------------------------- ------ --------- ---------
Loss before tax (1,719) (728)
Adjustments for:
9,
Depreciation 14 266 227
9,
Amortisation 13 1,645 1,210
Loss on the disposal of property,
plant and equipment 9 - 5
6.2,
Share-based payments charge 21.2 92 63
Finance income 8 (10) (38)
Finance costs 8 103 -
Operating cash flows before
working capital movement 377 739
Change in inventories (639) 805
Change in receivables 242 (839)
Change in payables (727) (1,691)
-------------------------------------- ------ --------- ---------
Cash used in operations before
tax (747) (986)
-------------------------------------- ------ --------- ---------
Net income taxes (paid)/received (7) 203
-------------------------------------- ------ --------- ---------
(783)
Net cash flows from operating
activities (754) 3)
-------------------------------------- ------ --------- ---------
Cash flows from investing activities
Acquisition of subsidiaries,
net of cash acquired 25 1,846 (400)
Purchases of property, plant
and equipment (140) (492)
Proceeds on disposal of property,
plant and equipment - 1
Expenditure on intangible assets (3,085) (1,849)
Interest received 10 38
-------------------------------------- ------ --------- ---------
Net cash flows from investing
activities (1,369) (2,702)
-------------------------------------- ------ --------- ---------
Cash flows from financing activities
Proceeds of borrowings 3,500 -
Interest paid (92) -
Proceeds from the issue of
ordinary share capital 111 225
-------------------------------------- ------ --------- ---------
Net cash flows from financing
activities 3,519 225
Net increase/(decrease) in
cash and cash equivalents 1,396 (3,260)
Cash and cash equivalents at
start of period 2,716 6,034
Exchange differences on cash and
cash equivalents
7 (148) (58)
============================================== ========= =========
Cash and cash equivalents at
end of period 16 3,964 2,716
====================================== ====== ========= =========
The notes 1 to 27 are an integral part of the preliminary
financial information.
Notes to the Preliminary financial information
1 General information
Ubisense Group plc ("the Company") and its subsidiaries
(together, "the Group") deliver mission-critical location-based
smart technology which enables companies to optimise their business
processes.
The Company is a public limited company which is listed on the
Alternative Investment Market ("AIM") of the London Stock Exchange
(UBI) and is incorporated and domiciled in the United Kingdom. The
value of Ubisense Group plc shares, as quoted on the London Stock
Exchange plc at 31 December 2013, was 246.0 pence per share (31
December 2012: 230.0 pence).
The Company was incorporated as Ubisense Trading Limited on 11
October 2005 and changed its name to Ubisense Group plc on 31 May
2011 ahead of its initial public offering and listing on AIM on 22
June 2011. The address of its registered office is St. Andrew's
House, St. Andrew's Road, Chesterton, Cambridge, CB4 1DL.
The Group has its main operations in the UK, US, Canada, France,
Germany, Japan, S. Korea, Singapore and the Philippines and sells
mainly in North America, Europe and Asia. The Group legally
consists of twelve companies headed by Ubisense Group plc (UK). A
full list of subsidiaries is given in note 24 of the financial
statements.
The Board of Ubisense Group plc approved the release of this
audited preliminary announcement on 24 March 2013.
The preliminary financial information does not constitute
statutory financial statements for the years ended 31 December 2013
and 2012 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 2012
have been delivered to the Registrar of Companies. Statutory
accounts for the year ended 31 December 2013 will be delivered to
the Registrar of Companies following the Company'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.
2 New accounting standards
For the purposes of the preparation of the preliminary financial
information, the Group has applied all standards and
interpretations that are effective for accounting periods beginning
on or after 1 January 2013.
During 2013, the Group has applied several new revised and
amended standards and interpretations which became effective in the
year: IFRS13 "Fair value measurement", the Annual Improvements to
IFRS and IAS 1 (amended) "Presentation of items of Other
Comprehensive Income". The Group has early adopted "Recoverable
Amount Disclosures for Non-Financial Assets" (Amendments to IAS36).
Their adoption has not had a material impact on the disclosures and
amounts reported. Otherwise the accounting policies used are the
same as set out in detail in the Report and Accounts 2012 and have
been applied consistently to all periods presented in the
preliminary financial information. No new standards, amendments or
interpretations to existing standards that have been published and
that are mandatory for the Group's accounting periods beginning on
or after 1 January 2014, or later periods, have been adopted early.
The Directors do not consider that the adoption of these standards
and interpretations would have a material impact on the Group's
financial statements.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet
to become mandatory, have not been applied in the preliminary
financial information.
-- IFRS 10 Consolidated Financial Statements (effective date
financial year commencing on/after 1 January 2014).
-- IAS 27 (revised) Separate Financial Statements (effective
date financial year commencing on/after 1 January 2014).
-- Amendments to IAS 32 offsetting financial assets and
financial liabilities (effective date financial year commencing
on/after 1 January 2014).
-- Amendments to IFRS 10 transition guide (effective date
financial year commencing on/after 1 January 2014).
-- Amendments to IAS 36 Recoverable amount disclosures for
non-financial assets (effective date financial year commencing
on/after 1 January 2014).
All standards and interpretations are not expected to have any
significant impact on the financial statements when applied.
The principal accounting policies applied in the preparation of
the preliminary financial information are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Notes to the Preliminary financial information (continued)
3 Summary of significant accounting policies
Basis of preparation
The preliminary financial information of Ubisense Group plc has
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 preliminary financial
information has been prepared under the historical cost convention.
The preliminary financial information are presented in Sterling and
all values are rounded to the nearest thousand pounds (GBP'000)
except when otherwise indicated.
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 preliminary
financial information, are disclosed in note 4.
Going concern basis
The Group meets it day-to-day working capital requirements
through its bank facilities. The Group had cash of GBP4.0 million
at the balance sheet date along with a GBP1.5 million undrawn bank
facility as well as an order book equivalent to 69% of annual
revenue. In this context, the Group's forecasts and projections,
taking account of reasonably possible changes in trading
performance, support the conclusion that there is a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future, a
period of not less than twelve months from the date of this report.
The Group, therefore, continues to adopt the going concern basis in
preparing its financial statements.
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 so as to obtain benefits from its
activities.
Co-terminous 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
preliminary financial information is presented in Sterling, which
is the Company's functional and presentation currency.
(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 preliminary financial information,
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 Sterling are translated into
Sterling 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
Notes to the Preliminary financial information (continued)
3 Summary of significant accounting policies (continued)
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 as a single Real-Time
Location Intelligence (RTLI) business. This is the basis of the
Group's external market offering and internal organisational and
management structure and is the primary way in which the Chief
Executive Officer, who is the Chief Operating Decision Maker,
receives financial information to assess Group performance. As a
result, the Group has therefore determined that it has only one
reportable segment as defined by IFRS 8.
The internal management accounting information is prepared on an
IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary
measure of profit and this is reported on the face of the income
statement.
In addition, the Board and Management Team consider the business
to have two revenue streams with different characteristics,
Solutions and Services, which are generated from the same asset and
cost base.
Revenue recognition
Revenue represents amounts derived from the provision of goods
and services which fall within the Group's ordinary activities,
exclusive of 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 rateably 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. Equity-settled share-based payments are measured at fair
value at the date of grant using the Black-Scholes pricing model.
The fair value is expensed on a straight-line basis over the
vesting period, together with a corresponding increase in equity,
based on the Group's estimate of the number of shares that will
eventually vest.
(c) Termination benefits
Termination benefits are recognised as an expense when the Group
is demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate
employment before the normal retirement date, or to provide
termination benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for voluntary
redundancies are recognised as an expense if the Group has made an
offer of voluntary redundancy, it is probable the offer will be
accepted, and the number of acceptances can be estimated reliably.
If benefits are payable more than twelve months after the reporting
date, then they are discounted to their present value.
Notes to the Preliminary financial information (continued)
3 Summary of significant accounting policies (continued)
Operating lease income and expense
(a) 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.
(b) 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.
Exceptional items
Exceptional 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 non-recurring items of income or expense that have been
shown separately due to the significance of their nature or
amount.
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 to 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.
(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 preliminary
financial information 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 fair values at the
acquisition date. 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 acquiree's identifiable net
assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified
as equity is not remeasured and its subsequent settlement is
accounted for within equity.
Notes to the Preliminary financial information (continued)
3 Summary of significant accounting policies (continued)
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
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 on new or substantially improved products and processes.
Development expenditure is only capitalised if all of the following
conditions are met:
-- completion of the intangible asset is technically feasible so
that it will be available for use or sale;
-- the Group intends to complete the intangible asset and use or sell it;
-- the Group has the ability to use or sell the intangible asset;
-- the intangible asset will generate probable future economic
benefits. Among other things, this requires that there is a market
for the output from the intangible asset or for the intangible
asset itself, or, if it is to be used internally, the asset will be
used in generating such benefits;
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset; and
-- the expenditure attributable to the intangible asset during
its development can be measured reliably.
Internally-generated intangible assets, consisting mainly of
direct labour costs, are amortised on a straight-line basis over
their useful economic lives. Amortisation is shown within
administrative expenses in the income statement. The estimated
useful lives of current development projects are three years. Upon
completion the assets are subject to impairment testing.
Where no internally-generated intangible asset can be
recognised, development expenditure is recognised as an expense in
the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as
software licences that do not form an integral part of related
hardware, are capitalised at cost and amortised on a straight-line
basis over their useful economic life which is typically 3 to 5
years.
Intangible assets acquired through a business combination are
initially measured at fair value and amortised on a straight line
basis over their useful economic lives. Amortisation is shown
within operating expenses in the income statement. The useful
economic lives of the intangible assets recognised on acquisition
are as follows:
-- Software products recognised on acquisition: 3 years
-- Customer relationships recognised on acquisition: 5 - 10 years
-- Order backlog: based on contract life recognised on acquisition, typically less than 1 year
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is charged to the income statement so as to write off
the cost orvaluation less estimated residual values over their
expected useful lives on a straight-line basis over the following
periods:
-- Fixtures and fittings: 5 to 8 years, or period of the lease if shorter
-- Computer equipment: 3 years
-- Demonstration equipment: 1 year
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 annually for impairment. 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.
Notes to the Preliminary financial information (continued)
3 Summary of significant accounting policies (continued)
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).
Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at
each reporting date.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on the cost of purchase on a first in, first
out basis. Net realisable value is based on estimated selling price
less additional cost to completion and disposal. Provision is made
for obsolete, slow moving or defective items where appropriate and
are recognised as an expense in the period in which the write-down
or loss occurs.
Trade receivables
Trade receivables are amounts due from customers for products
sold or services performed in the ordinary course of business. If
collection is expected in one year or less, they are classified as
current assets. If not, they are presented as non-current
assets.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash
equivalents includes cash in hand, deposits held at call with banks
and other short-term highly liquid investments with original
maturities of three months or less.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Fees paid on the establishment of debt facilities are recognised
as transaction costs of the debt to the extent that it is probable
that some or all of the facility will be drawn-down. In this case,
the fee is deferred until the draw-down occurs. To the extent there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a pre-payment for
liquidity services and amortised over the period of the facility to
which it relates.
All borrowing costs are recognised in the income statement in
the period they are incurred.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds. The
nominal value of shares issued is classified as share capital and
the amounts paid over the nominal value in respect of share issues,
net of related costs, is classified as share premium.
4 Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future.
Actual results may differ from these estimates. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.
Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually. This requires
an estimation of the value in use of the cash-generating units to
which the goodwill is allocated. Estimating the value in use
requires the Group to make an estimate of the expected future cash
flows from the cash-generating unit and also to choose a suitable
discount rate in order to calculate the present value of those cash
flows. The Group uses pre-tax discount rates of between 10.0% and
14.5% for this purpose. The carrying amount of goodwill at 31
December 2013 is GBP9,116,000. Further consideration of the
impairment of goodwill is included in note 12.
Notes to the Preliminary financial information (continued)
4 Critical accounting judgements and key sources of estimation and uncertainty (continued)
Capitalisation of development costs
The point at which development costs meet the criteria for
capitalisation is critically dependent on management's judgement of
the point at which technical and commercial feasibility is
demonstrable. The carrying amount of capitalised development costs
at 31 December 2013 is GBP3.9 million.
Revenue recognition
Significant management judgement is applied in determining the
allocation and timing of the recognition of revenue on 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 amount of amounts
recoverable on contracts at 31 December 2013 is GBP3.3 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 or
products and the length of time that they have been available for
resale.
Deferred tax
A deferred tax asset is recognised where the Group considers it
probable that future tax profits will be available against which
the tax credit will be utilised in the future. This specifically
applies to tax losses and to outstanding vested share options at
the statement of financial position date. In estimating the amount
of the deferred tax asset that should be recognised, the Directors
make judgements based on current budgets and forecasts about the
amount of future taxable profits and the timings of when these will
be realised. No deferred tax asset is currently recognised.
Valuation of separately identifiable intangible assets
As detailed in note 3, separately identifiable intangible assets
are identified and amortised over defined periods. The Directors
use an acknowledged valuation approach but this is reliant upon
certain judgements which they determine are reasonable by reference
to companies in similar industries.
Contingent consideration
The Group initially estimates the amounts payable under
'earn-out' plans to the former shareholders of acquired companies
based on the business model produced at the time of acquisition.
Earn-out clauses within acquisition agreements typically contain
provisions for amounts payable to the former shareholders based on
future financial performance. In order to calculate the expected
future payments, the acquisition business model contains estimates
of the future financial performance for the acquired business.
The post-acquisition performance and expected future performance
of acquired companies is reviewed throughout the year. Any
adjustments required to contingent consideration arising from a
significant departure of financial performance from the original
acquisition plan are made as required.
The Directors do not consider that there are any other critical
accounting judgements or key sources of estimation uncertainty.
5 Segment information
IFRS 8 requires a "management approach" under which information
in the financial statements is presented on the same basis as that
used for internal management reporting purposes. As announced in
September 2013, the Group is now organised on a global basis as a
single Real-Time Location Intelligence (RTLI) business. This is the
basis of the Group's external market offering and internal
organisational and management structure and is the primary way in
which the Chief Executive Officer, who is the Chief Operating
Decision Maker, receives financial information to assess Group
performance. As a result, the Group has therefore determined that
it has only one reportable segment as defined by IFRS 8. The prior
year disclosures have been restated to reflect these changes.
The internal management accounting information is prepared on an
IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary
measure of profit and this is reported on the face of the income
statement.
In addition, the Board and Management Team consider the business
to have two revenue streams with different characteristics,
Solutions and Services, which are generated from the same asset and
cost base.
Notes to the Preliminary financial information (continued)
5 Segment information (continued)
5.1 Revenue by nature
2013 2012
GBP'000 GBP'000
================ ========= =========
Solutions 13,375 12,537
Services 13,627 11,755
Total Revenues 27,002 24,292
================ ========= =========
In addition 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.
5.2 Geographical areas
The Group's revenue from external customers and information
about its non-current assets (excluding goodwill and deferred tax)
by geography is detailed below:
Revenue Non-current assets
-------------- -------------------------- --------------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------ ------------ ------------ ------------
UK 539 1,441 4,239 2,576
Europe 12,478 10,533 294 239
Americas 11,988 9,585 477 675
Asia Pacific 1,997 2,733 2,464 -
============== ============ ============ ============ ============
27,002 24,292 7,474 3,490
============== ============ ============ ============ ============
Revenues from external customers in the Group's domicile, the
UK, as well as its major markets, Europe, Americas and Asia
Pacific, have been identified on the basis of the customer's
geographical location. Non-current assets are allocated based on
their physical location.
5.3 Information about major customers
During 2013, revenues of GBP6.0 million (2012: GBP2.6 million)
derived from one European customer and revenues of GBP1.1 million
(2012: GBP2.6 million) from one Americas customer. There were no
other customers in 2013 or 2012 who contributed in excess 10% of
revenue.
Notes to the Preliminary financial information (continued)
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 at 31 Average monthly
December number of people
------------------------ ------------------------ ------------------------
2013 2012 2013 2012
By activity Number Number Number Number
------------------------ ----------- ----------- ----------- -----------
Technical Consultants 130 93 97 96
Sales & Marketing 40 32 34 37
Research & Development 40 32 35 31
Administration 29 18 20 20
======================== =========== =========== =========== ===========
239 175 186 184
======================== =========== =========== =========== ===========
2013 2012 2013 2012
By geography Number Number Number Number
------------------------ ----------- ----------- ----------- -----------
United Kingdom 53 48 51 51
Europe 54 55 56 58
Americas 72 68 71 71
Asia Pacific 60 4 8 4
======================== =========== =========== =========== ===========
239 175 186 184
======================== =========== =========== =========== ===========
6.2 Employee benefits
2013 2012
Notes GBP'000 GBP'000
--------------------------------------- ------ --------- ---------
Wages and salaries 13,152 12,286
Social security costs 1,346 1,265
Contributions to defined contribution
pension arrangements 626 562
Share-based payments 21.2 92 63
======================================= ====== ========= =========
Total aggregate employee benefits 15,216 14,176
======================================= ====== ========= =========
Included in the above are termination benefits of GBPnil (2012:
GBP404,000) which are presented as reorganisation costs in the
income statement - see note 9.2.
Notes to the Preliminary financial information (continued)
6 Employee information (continued)
6.3 Key management compensation
Key management includes Directors (Executive and non-executive)
and members of the Global Management Team. During the year, there
were 12 key management personnel (2012: 13). The compensation paid
or payable to key management for employee services is shown
below:
2013 2012
GBP'000 GBP'000
----------------------------------------------- -------- --------
Short-term employee benefits
Wages and salaries 998 879
Social security costs 151 84
Other benefits 28 21
1,177 984
----------------------------------------------- -------- --------
Post employment benefits
Contributions to defined contribution pension
arrangements 49 52
Share-based payments
Equity-settled share-based payments 37 24
Total key management compensation 1,263 1,060
----------------------------------------------- -------- --------
7 Directors' remuneration and interests
7.1 Directors' remuneration
Employer's
contributions
to defined
contribution
Basic Performance Benefits pension Total Total
Salary Payments in kind Subtotal arrangements 2013 2012
Director GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- ------------ --------- --------- -------------- -------- --------
Gordon Campbell* 93 56 2 151 18 169 124
Richard Green* 132 116 3 251 16 267 201
Peter Harverson 15 - - 15 - 15 15
Andrew Hopper 25 - - 25 - 25 25
J Keith Lomas 15 - - 15 - 15 15
Richard Newell 15 - - 15 - 15 15
Robert Sansom** - - - - - - -
Paul Taylor 15 - - 15 - 15 15
Total 310 172 5 487 34 521 410
------------------ -------- ------------ --------- --------- -------------- -------- --------
* The directors are remunerated through the Company's flexible
benefits scheme under which they can elect to switch basic salary
into pension contributions and other benefits. The basic salary
entitlement in the year was: Richard Green GBP140,000; Gordon
Campbell GBP105,000.
** Robert Sansom has waived his entitlement to annual
remuneration in the year of GBP15,000
Notes to the Preliminary financial information (continued)
7 Directors' remuneration and interests (continued)
7.2 Directors' interests - share options
Awards Awards Awards
Outstanding Granted Exercised Lapsed outstanding exercisable
at 1 during during during at 31 at 31
Award Exercise January the the the December December
date Vests Expires Price 2013 year year year 2013 2013
Director Years Years Year GBP number number number number number number
Gordon
Campbell 2010 2011-13 2020 0.140 120,500 - - - 120,500 120,500
2011 2012-14 2021 1.050 32,500 - - - 32,500 21,667
2012 2013-15 2022 2.125 40,000 - - - 40,000 13,333
2013 2014-16 2023 2.055 - 40,000 - - 40,000 -
======= ========= ===================== ========= ============ ======== ========== ======= ============ ============
193,000 40,000 - - 233,000 155,500
======================================= ========= ============ ======== ========== ======= ============ ============
Richard
Green 2010 2011-13 2020 0.140 76,278 - (76,278) - - -
2011 2012-14 2021 1.050 100,000 - - - 100,000 66,667
2012 2013-15 2022 2.125 60,000 - - - 60,000 20,000
2013 2014-16 2023 2.055 - 60,000 - - 60,000 -
======= ========= ===================== ========= ============ ======== ========== ======= ============ ============
236,278 60,000 (76,278) - 220,000 86,667
======================================= ========= ============ ======== ========== ======= ============ ============
Peter
Harverson 2010 2011-13 2020 0.140 91,333 - - - 91,333 91,333
Andrew
Hopper 2010 2011-13 2020 0.140 20,278 - - - 20,278 20,278
Richard
Newell 2010 2011-13 2020 0.140 1,056 - - - 1,056 1,056
Total 541,945 100,000 (76,278) - 565,667 354,834
------------------------------------------ --------- ------------ -------- ---------- ------- ------------ ------------
The 2013 grants vest subject to meeting performance criteria set
out in the long-term incentive plan ("LTIP"). No other Directors
have been granted share options in the Company or other Group
entities. None of the terms and conditions of the share options
were varied during the year. All options were granted in respect of
qualifying services. There have been no options granted to or
exercised by Directors between 31 December 2013 and 25 March
2014.
The market price of the Company's shares at the end of the
financial year was GBP2.46. The range of market prices during the
year was between GBP1.825 and GBP2.50.
Directors' gains on
share options
Gain Gain
on on
exercise exercise
2013 2012
GBP'000 GBP'000
-------------------- -------------------- ---------
Richard Green 155 -
---------------------- -------------------- ---------
Notes to the Preliminary financial information (continued)
7 Directors' remuneration and interests (continued)
7.3 Directors' interests - shares
Directors' interests in the ordinary shares of Ubisense Group
plc, at 31 December 2013 and 31 December 2012, were as follows:
2013 2012
Number Number
----------------- ---------------- -----------------
Gordon Campbell 87,987 87,987
Richard Green 1,619,289 1,543,011
Peter Harverson 65,161 65,161
Andrew Hopper 225,000 225,000
J Keith Lomas 47,712 47,712
Richard Newell 643,354 643,354
Robert Sansom 2,493,676 2,493,676
5,182,179 5,105,901
----------------- ---------------- -----------------
There has been no change in the interests set out above between
31 December 2013 and 24 March 2014.
8 Finance income and costs
2013 2012
GBP'000 GBP'000
=========================== ========= ============
Interest income from cash
and cash equivalents 10 38
=========================== ========= ============
Finance income 10 38
=========================== ========= ============
Interest payable - bank (103) -
------
Finance costs (103) -
---------------------------- ------ ---
Net finance (costs)/income (93) 38
---------------------------- ------ ---
9 Loss before tax: analysis of expenses by nature
9.1 Expenses by nature
The following items have been charged/ (credited) to the income
statement in arriving at loss before tax:
2013 2012
Notes GBP'000 GBP'000
----------------------------------------- ------ --------- ---------
Amortisation of acquired intangible
assets 12 313 257
Amortisation of other intangible assets 12 1,332 953
Depreciation of owned property, plant
and equipment 13 266 227
Loss on disposal of property,
plant and equipment - 5
Operating lease rental charges
- land and buildings 445 355
Operating lease rental charges
- other 135 124
Inventory recognised as an
expense 1,057 1,571
Research and development costs
expensed 946 1,312
Net foreign currency (gains)/losses (153) 153
Exceptional items 9.2 764 423
Auditors' remuneration 9.3 216 81
========================================= ====== ========= =========
Notes to the Preliminary financial information (continued)
9 Loss before tax: analysis of expenses by nature (continued)
9.2 Exceptional items
2013 2012
Notes GBP'000 GBP'000
------------------------------- ------- --------- ---------
Strategic Asia Pacific market
entry costs 650 -
Aborted acquisition costs 114 -
Reorganisation costs - 423
======================================== ========= =========
764 423
======================================= ========= =========
During 2013, the Group incurred exceptional items of GBP764,000
of which GBP650,000 related to strategic Asia Pacific market entry
costs comprising GBP464,000 acquisition costs relating to Geoplan
and GBP186,000 costs relating to product certification costs in
Japan and S. Korea and the termination of the Group's previous
agent network in the region. In addition, the Group incurred
GBP114,000 costs, mainly comprising professional fees, in
connection with an acquisition which did not proceed.
During 2012, the Group incurred reorganisation costs totalling
GBP423,000 comprising mainly redundancy costs in order to integrate
acquisitions made in 2011 and to centralise the Research and
Development and Sales and Marketing functions.
9.3 Auditors' remuneration
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor and its
associates:
2013 2012
GBP'000 GBP'000
--------------------------------------- --------- ---------
Fees payable to the Group's
auditor for the audit of:
Parent Company and consolidated
financial statements 16 14
Financial statements of subsidiaries,
pursuant to legislation 91 43
======================================= ========= =========
107 57
======================================= ========= =========
Fees payable to the Group's auditor
for other services:
Tax services 26 15
Corporate Finance services 75 -
Other services 8 9
======================================= ========= =========
109 24
======================================= ========= =========
Auditors' remuneration 216 81
======================================= ========= =========
The auditor of Ubisense Group plc is Grant Thornton UK LLP.
During the year, the auditor was used for due diligence work as
this was considered most beneficial to the Group due to the
auditor's established knowledge and experience of the Group's
activities. The auditor's independence and objectivity was
safeguarded through the use of separate engagement teams. No
services were provided pursuant to contingent fee arrangements.
Notes to the Preliminary financial information (continued)
10 Income tax
10.1 Income tax recognised in the income statement
2013 2012
GBP'000 GBP'000
-------------------------------------- --------- ---------
Current tax
UK Corporation Tax 2 -
Foreign tax 36 9
Research and development tax credits
- prior years (177) (203)
====================================== ========= =========
Total current tax credit (139) (194)
====================================== ========= =========
Deferred tax
Origination and reversal of
temporary differences 358 104
====================================== ========= =========
Total deferred tax expense 358 104
====================================== ========= =========
Total income tax expense/(credit) 219 (90)
====================================== ========= =========
The tax expense (2012: credit) differs from the standard rate of
corporation tax in the UK for the year of 23% (2012: 24%) for the
following reasons:
2013 2012
GBP'000 GBP'000
=============================================== ========= =========
Loss before tax (1,719) (728)
=============================================== ========= =========
Loss before tax multiplied by the standard
rate of corporation tax in the UK of 23%
(2012: 24%) (395) (175)
Tax effects of:
Expenses not deductible for
tax purposes 219 21
Accrued contingent consideration released not
subject to tax - (38)
Utilisation of previously unrecognised
tax losses (96) (259)
Tax losses for which no deferred tax asset
was recognised 708 832
Tax unprovided in prior years 38 9
Research and development tax
credits - prior years (188) (203)
Difference on tax treatment
of share options 74 -
Differential on overseas tax
rates (149) (233)
Remeasurement of deferred tax
- change of rate - (58)
Other temporary differences 8 14
=============================================== ========= =========
Total income tax expense/(credit) 219 (90)
=============================================== ========= =========
10.2 Factors that may affect future tax charges
The Group has tax losses of GBP8.9 million (2012: GBP4.4
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.
As a result of the reduction in the UK corporation tax rate to
23% that was substantively enacted on 3 July 2012 and effective
from 1 April 2013, the deferred tax balances have been remeasured.
The UK Government has also announced a further reduction in the
main rate of corporation tax to 21% effective from 1 April 2014 and
has proposed a further reduction of 1% by 1 April 2015. These
further tax rate reductions had not been substantively enacted at
the balance sheet date and, therefore, are not recognised in the
financial statements.
Notes to the Preliminary financial information (continued)
10 Income tax (continued)
10.3 Deferred tax
The movement in deferred tax in the Consolidated statement of
financial position during the year is as follows:
Deferred income Deferred income
tax assets tax liabilities
---------------------------------------- ------------------------------ ----------------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- --------------- ------------- -------------- ------------
At 1 January - - (653) (549)
Arising on acquisition of subsidiaries - - (844) -
Deferred tax credited to the
income statement - - 57 88
Deferred tax charged to the
income statement - - (416) (192)
======================================== =============== ============= ============== ============
At 31 December - - (1,856) (653)
======================================== =============== ============= ============== ============
The components of deferred tax included in the Consolidated
statement of financial position are as follows:
2013 2012
GBP'000 GBP'000
======================================= ========= =========
Development costs capitalised (901) (485)
Intangible assets recognised on
acquisition of subsidiaries (955) (168)
Total deferred income tax liabilities (1,856) (653)
======================================= ========= =========
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:
2013 2012
GBP'000 GBP'000
======================================== ========= =========
Tax losses carried forward 2,537 1,343
Equity-settled share options temporary
differences 452 289
Total unrecognised deferred
tax assets 2,989 1,632
======================================== ========= =========
Notes to the Preliminary financial information (continued)
11 Earnings per share (EPS)
Basic and diluted earnings
per share 2013 2012
---------------------------------------------- -------- -------
Earnings
Earnings for the purposes of basic
and diluted EPS being net loss attributable
to equity holders of the parent company
(GBP'000) (1,968) (638)
============================================== ======== =======
Number of shares
Weighted average number of ordinary shares
for the purposes of basic EPS ('000) 21,984 21,764
Effect of dilutive potential
ordinary shares:
* Share options ('000) 1,034 1,383
Weighted average number of ordinary shares
for the purposes of diluted EPS ('000) 23,018 23,147
============================================== ======== =======
Basic EPS (pence) (8.9p) (2.8p)
============================================== ======== =======
Diluted EPS (pence) (8.9p) (2.8p)
============================================== ======== =======
Basic earnings per share is calculated by dividing profit for
the period attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares outstanding during
the period. For diluted earnings per share, the weighted average
number of shares is adjusted to allow for the effects of all
dilutive share options and warrants outstanding at the end of the
year. Options have no dilutive effect in loss-making years, and
hence the diluted loss per share for the year is the same as the
basic loss per share.
The Group also presents an adjusted diluted earnings per share
figure which excludes amortisation on acquired intangible assets,
share-based payments charge and non-recurring exceptional items
such as acquisition, integration or reorganisation costs from the
measurement of profit for the period.
Notes 2013 2012
Adjusted diluted earnings per
share
----------------------------------------- ----------------- -------- ------
Earnings for the purposes of diluted
EPS being net loss attributable to
equity holders of the parent company
(GBP'000) (1,968) (638)
Adjustments:
Reversal of amortisation on acquired
intangible assets (GBP'000) 9, 12 313 257
Reversal of share-based payments charge
(GBP'000) 21 92 63
Reversal of exceptional items (GBP'000) 9 764 423
----------------------------------------- ----------------- -------- ------
Net adjustments (GBP'000) 1,169 743
----------------------------------------- ----------------- -------- ------
Adjusted earnings (GBP'000) (799) 105
----------------------------------------- ----------------- -------- ------
Adjusted diluted EPS (pence) (3.6p) 0.5p
----------------------------------------- ----------------- -------- ------
The adjusted EPS information is considered to provide a fairer
representation of the Group's trading performance.
Notes to the Preliminary financial information (continued)
12 Other intangible assets
Goodwill Acquired Acquired Capitalised Software Total
GBP'000 customer software product GBP'000 GBP'000
relationships product development
and order GBP'000 costs
backlog GBP'000
GBP'000
Cost
At 1 January 2012 7,418 449 529 2,579 295 11,270
Effects of movement
in exchange rates - - - - (12) (12)
Additions - - - 1,845 16 1,861
At 31 December 2012 7,418 449 529 4,424 299 13,119
========================== ========= =============== ========== ============= ========= =========
Additions - - - 3,037 161 3,198
Acquisition of Geoplan 1,698 1,593 626 - 173 4,090
========================== ========= =============== ========== ============= ========= =========
At 31 December 2013 9,116 2,042 1,155 7,461 633 20,407
========================== ========= =============== ========== ============= ========= =========
Accumulated amortisation
At 1 January 2012 - (68) (44) (1,452) (30) (1,594)
Effects of movement
in exchange rates - - - - 4 4
Charge for the year - (80) (177) (862) (91) (1,210)
========================== ========= =============== ========== ============= ========= =========
At 31 December 2012 - (148) (221) (2,314) (117) (2,800)
========================== ========= =============== ========== ============= ========= =========
Charge for the year - (120) (193) (1,227) (105) (1,645)
========================== ========= =============== ========== ============= ========= =========
At 31 December 2013 - (268) (414) (3,541) (222) (4,445)
========================== ========= =============== ========== ============= ========= =========
Net book amount
========================== ========= =============== ========== ============= ========= =========
At 31 December 2013 9,116 1,774 741 3,920 411 15,962
========================== ========= =============== ========== ============= ========= =========
At 31 December 2012 7,418 301 308 2,110 182 10,319
========================== ========= =============== ========== ============= ========= =========
The acquired software products, customer relationships and order
backlog assets arose on the acquisition in 2013 of the Geoplan
Interworks K.K. group of companies and in 2011 of Integrated
Mapping Solutions, Inc. (now merged into Ubisense Inc.) and
Realworld OO Systems Limited (now re-named Geospatial Systems
Limited). Capitalised development assets relate to expenditure that
can be applied to a plan or design for the production of new or
substantially improved products and processes. The software assets
represent assets purchased from third parties.
In assessing whether goodwill has been impaired, the carrying
amount of the cash-generating unit (CGU) or groups of CGUs
(including goodwill) is compared with the recoverable amount of the
CGU or groups of CGUs. The recoverable amount is the higher of fair
value less costs to sell and value in use. In the absence of
readily available information about the fair value of a
cash-generating unit, the recoverable amount is deemed to be the
value in use for the purposes of performing an impairment test of
goodwill, unless this would lead to an impairment loss. If goodwill
would be impaired using value in use as the recoverable amount, a
fair value less costs to sell assessment would be performed as this
may lead to a higher recoverable amount. The group calculates the
value in use using a discounted cash flow model. The future cash
flows are adjusted for risks specific to the cash-generating unit
and are discounted using a pre-tax discount rate. The discount rate
is derived from the group's post-tax weighted average cost of
capital and is adjusted where applicable to take into account any
specific risks. Discount rates of 12.5% and 14.5% have been used
for goodwill impairment calculations performed in 2013 (2012: 9.7%
and 12.5%). The recoverable amounts of all CGUs have been
determined from value-in-use calculations based on 5 year forecasts
projected from the 2014 annual operating plan approved by the Board
for each CGU with an assumed terminal growth rate of nil and no
improvement in relative operating margin after the forecast period.
The Board has considered reasonable possible sensitivities in key
assumptions on which the value-in-use calculations are based. If
the underlying organic revenue growth rate reduced to 0%, or if the
discount factor increased to 20%, this would not cause the carrying
value to exceed estimated recoverable amount. There was no
impairment of goodwill as the estimated recoverable amount exceeded
the carrying value for all CGUs.
Notes to the Preliminary financial information (continued)
13 Property, plant and equipment
Fixtures Computer Total
and Fittings Equipment GBP'000
GBP'000 GBP'000
============================= ====== ======== ============== =========== =========
Cost
At 1 January 2012 221 605 826
Effect of movements
in exchange rates (7) (13) (20)
Reclassification 31 (31) -
Additions 321 174 495
Disposals (23) (218) (241)
=============================================== ============== =========== =========
At 31 December 2012 543 517 1,060
=============================================== ============== =========== =========
Effect of movements
in exchange rates (42) 4 (38)
Additions 52 88 140
Acquisition of subsidiaries 136 - 136
Disposals - (2) (2)
=============================================== ============== =========== =========
At 31 December 2013 689 607 1,296
=============================================== ============== =========== =========
Accumulated depreciation
At 1 January 2012 (128) (332) (460)
Effect of movements
in exchange rates 6 7 13
Charge for the year (77) (150) (227)
Reclassification (20) 20 -
Disposals 20 215 235
=============================================== ============== =========== =========
At 31 December 2012 (199) (240) (439)
=============================================== ============== =========== =========
Effect of movements
in exchange rates 32 3 35
Charge for the year (88) (178) (266)
Disposals - 2 2
At 31 December 2013 (255) (413) (668)
=============================================== ============== =========== =========
Net book amount
At 31 December 2013 434 194 628
=============================================== ============== =========== =========
At 31 December 2012 344 277 621
=============================================== ============== =========== =========
14 Inventories
2013 2012
GBP'000 GBP'000
------------------- --------- ---------
Raw materials 811 182
Finished goods 2,295 680
------------------- --------- ---------
Total inventories 3,106 862
------------------- --------- ---------
Included in the analysis above are impairment provisions against
inventory amounting to GBPnil (2012: GBP44,000). The Group's
inventories are comprised of products which are not generally
subject to rapid obsolescence on account of technological,
deterioration in condition or market trends.
Notes to the Preliminary financial information (continued)
15 Trade and other receivables
2013 2012
Notes GBP'000 GBP'000
----------------------------------- ------ --------- ---------
Trade receivables, gross 7,072 7,390
Allowances for doubtful debts 15.1 (141) (80)
=================================== ====== ========= =========
Trade receivables, net 15.2 6,931 7,310
Amounts recoverable on contracts 3,347 2,439
Other receivables 285 40
Prepayments and accrued income 645 502
Corporation tax recoverable 177 -
VAT and taxation receivable 162 11
=================================== ====== ========= =========
Total trade and other receivables 11,547 10,302
=================================== ====== ========= =========
All amounts disclosed are short term. The carrying value of
trade receivables is considered a reasonable approximation of fair
value.
Due to having a blue chip customer base and effective credit
control procedures, the Group is not significantly exposed to the
risk of bad debt. 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. Any impairment is
assessed on a customer-by-customer basis following a detailed
review of the particular circumstances. To the extent they have not
been specifically provided against, the trade receivables are
considered to be of sound credit rating.
15.1 Movement in allowance for doubtful debts
2013 2012
GBP'000 GBP'000
------------------------------- --------- ---------
At 1 January (80) (7)
Amounts recovered in the year 2 7
Allowance made (63) (80)
At 31 December (141) (80)
=============================== ========= =========
15.2 Ageing of past due but not impaired receivables
2013 2012
GBP'000 GBP'000
------------------------------- --------- ---------
Neither past due nor impaired 5,114 5,360
Past due but not impaired:
0 to 90 days overdue 1,500 1,360
More than 90 days overdue 317 590
Total 6,931 7,310
=============================== ========= =========
Notes to the Preliminary financial information (continued)
16 Cash and cash equivalents
2013 2012
GBP'000 GBP'000
--------------------------- --------- ---------
Cash at bank and in hand 3,848 2,716
Short-term bank deposits 116 -
=========================== ========= =========
Cash and cash equivalents 3,964 2,716
=========================== ========= =========
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:
2013 2012
By currency GBP'000 GBP'000
--------------------------- --------- ---------
British Pound (GBP) 489 723
Euro (EUR) 496 1,101
US Dollar (USD) 739 847
Japanese Yen (JPY) 1,718 -
South Korean Won (KRW) 352 -
Canadian Dollar (CAD) 11 45
Turkish Lira (TRY) 159 -
Cash and cash equivalents 3,964 2,716
=========================== ========= =========
17 Trade and other payables
2013 2012
Notes GBP'000 GBP'000
------------------------------------ ------ --------- ---------
Payments received on account 2,765 1,002
Trade payables 3,570 1,936
Trade accruals 1,748 1,404
Current tax liability 41 -
Other taxation and social security 667 612
Other payables 705 292
Other liabilities - deferred
consideration 25 172 -
Other liabilities - contingent
consideration 25 355 -
==================================== ====== ========= =========
Total trade and other payables 10,023 5,246
==================================== ====== ========= =========
All amounts disclosed are short term. The carrying value of
trade payables is considered a reasonable approximation of fair
value.
Notes to the Preliminary financial information (continued)
18 Bank loans
In August 2013, the Group agreed a new three year bank loan of
up to GBP5.0 million to provide additional future working capital
capacity and is repayable in full in August 2016. Interest is
payable at LIBOR plus 3% and the facility is secured on the fixed
and floating assets of the Group. The facility is subject to
certain operating performance and net worth covenants of the
business. The loan replaced an existing loan which was drawn down
in the year, was due to expire in November 2013 and on which there
was an outstanding balance of GBP2.0 million which had been drawn
down in full in April 2013. The new loan was used pay the
outstanding balance on this previous loan. As at 31 December 2013,
and as at 24 March 2014, GBP3.5 million (31 December 2012: GBPnil)
is outstanding and is repayable by Ubisense Limited to HSBC Bank
plc.
19 Other liabilities
2013 2012
Notes GBP'000 GBP'000
-------------------------------- ------ --------- ---------
Other liabilities - contingent
consideration 25 430 -
-------------------------------- ------ --------- ---------
20 Share capital and premium
Number of Share Share
ordinary shares capital premium Total
of GBP0.02 each GBP'000 GBP'000 GBP'000
------------- -------------------------------- --------------------- ---------------------- ----------------------------
Balance at 1
January
2012 21,657,698 433 22,031 22,464
------------- -------------------------------- --------------------- ---------------------- ----------------------------
Issued under
share-based
payment
plans 154,937 3 29 32
Issued on
conversion
of
warrants 107,109 2 191 193
============= ================================ ===================== ====================== ============================
Change in
year 262,046 5 220 225
------------- -------------------------------- --------------------- ---------------------- ----------------------------
Balance at
31 December
2012 21,919,744 438 22,251 22,689
------------- -------------------------------- --------------------- ---------------------- ----------------------------
Issued under
share-based
payment
plans 399,593 8 103 111
Issued on
acquisition
of
subsidiary 759,809 15 1,696 1,711
Change in
year 1,159,402 23 1,799 1,822
------------- -------------------------------- --------------------- ---------------------- ----------------------------
Balance at
31 December
2013 23,079,146 461 24,050 24,511
------------- -------------------------------- --------------------- ---------------------- ----------------------------
The Company has one class of ordinary shares which carry no
right to fixed income.
During the period, the Company issued 1,159,402 shares,
increasing the total number of shares in issue from 21,919,744 to
23,079,146 as follows:
-- 399,593 shares as a result of options exercised with a
weighted average exercise price of GBP0.28 per share for total cash
consideration of GBP111,000; and
-- 759,809 shares as a result of the acquisition of the Geoplan
Interworks K.K. group of companies at GBP2.2525 per share for cash
consideration of GBPnil.
Notes to the Preliminary financial information (continued)
21 Share-based payments: options and warrants
21.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over
shares in the Company to the best performing employees of the Group
around the world.
Options are generally granted at an exercise price equal to the
market price of the shares under option at the date of the grant.
The options generally vest evenly over three years on the
anniversary from the date of the grant or entirely on the third
anniversary from the date of grant, depending on continuing service
during the vesting period. The contractual life of the options is
ten years from the date of grant after which they expire if
unexercised.
21.2 Analysis of amounts recognised in the financial
statements
a) Analysis of amounts recognised in the Consolidated income statement
2013 2012
GBP'000 GBP'000
---------------------------------------------- ========= ---------
Total share-based payments charge recognised
in operating profit 92 63
============================================== ========= =========
b) Analysis of amounts recognised in the Consolidated statement
of changes in equity in the year
2013 2012
GBP'000 GBP'000
-------------------------------------------- ========= ---------
Net share-based payments credit recognised
in Equity 92 63
============================================ ========= =========
c) Cumulative amounts included within equity in the Consolidated
statement of financial position
2013 2012
GBP'000 GBP'000
==================================================== ========= =========
Cumulative reserve credit for share-based payments 746 654
==================================================== ========= =========
21.3 Reconciliation of movements in equity-settled share-based
payment arrangements in the year
Arrangement Award Vests Expires Exercise Awards Granted Exercised Forfeited Awards Awards
date Years Year price outstanding during during during outstanding exercisable
Year GBP at the the the at at
1 January year year year 31 December 31
2013 number number number 2013 December
number number 2013
number
============= ======= ========= ========= ========= ============ ======== ========== ========== ============ ============
Options 2006 2007-09 2016 0.900 2,500 - (2,500) - - -
2007 2008-10 2017 0.900 300 - - - 300 300
2008 2009-11 2018 0.900 650 - - - 650 650
2009 2009 2019 0.900 4,457 - (707) - 3,750 3,750
2010 2011-13 2020 0.140 1,243,815 - (360,338) (333) 883,144 883,144
2011 2012-14 2021 1.050 427,466 - (14,902) (4,114) 408,450 269,932
2011 2012-14 2021 1.975 32,532 - (21,146) - 11,386 7,591
2012 2013-15 2022 2.125 346,000 - - (2,000) 344,000 33,334
2013 2014-16 2023 2.055 - 421,500 - (50,000) 371,500 -
======= ========= ======================= ========= ============ ======== ========== ========== ============ ============
Total 2,057,720 421,500 (399,593) (56,447) 2,023,180 1,198,701
============================================ ========= ============ ======== ========== ========== ============ ============
Weighted average exercise
price (GBP) 0.695 2.055 0.277 1.973 1.025 0.415
======================================================= ============ ======== ========== ========== ============ ============
The weighted average share price at the date of exercise for
options exercised during the year was GBP2.1053 (2012:
GBP2.126).
21.4 Principal assumptions
The fair value of share-based payments grants has been valued
using the Black-Scholes option-pricing model. Expected volatility
was determined based on the historic volatility of comparable
companies. The expected life is the expected period from grant to
exercise based on management's best estimate of the effects of
non-transferability, exercise restrictions and behavioural
considerations. The risk-free rate of return is an average yield on
the zero-coupon UK Government Bond in issue at the date of grant
with a similar life to the option or warrant.
Notes to the Preliminary financial information (continued)
21 Share-based payments: options and warrants (continued)
21.4 Principal assumptions (continued)
The following assumptions were used in the model for options
granted during the years ended 31 December 2013 and 31 December
2012:
Instrument Option Option
========================== ============== =================
Number granted 421,500 347,000
29 June
Grant date 19 April 2013 2012
Share price at grant
date (GBP) 2.055 2.125
Exercise price (GBP) 2.055 2.125
Fair value per option
(GBP) 0.3 0.3
Expected life (years) 3.0 3.0
Expected volatility
(%) 20.00 20.00
Risk-free interest
rate (%) 0.79 0.87
Expected dividends
expressed as a dividend
yield% 0.00 0.00
========================== ============== =================
22 Other reserves
Share-based payment reserve
The share-based payment reserve relates to 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
Sterling are recognised directly in other comprehensive income and
accumulated in the translation reserve.
23 Operating lease commitments
Share-based Translation Total
payment reserve reserve GBP'000
GBP'000 GBP'000
---------------------------------------- ----------------- ------------ ---------
Balance at 1 January 2012 591 (81) 510
Exchange difference on retranslation
of net assets and results of overseas
subsidiaries - 33 33
Reserve credit for equity-settled
share-based payment 63 - 63
Balance at 31 December 2012 654 (48) 606
======================================== ================= ============ =========
Exchange difference on retranslation
of net assets and results of overseas
subsidiaries - (173) (173)
Reserve credit for equity-settled
share-based payment 92 - 92
======================================== ================= ============ =========
Balance at 31 December 2013 746 (221) 525
======================================== ================= ============ =========
Notes to the Preliminary financial information (continued)
23 Operating lease commitments (continued)
Leases as lessee
At 31 December 2013, the Group has lease agreements in respect
of property and equipment for which payments extend over a number
of years. The Group enters into these arrangements as these are a
cost-efficient way of obtaining the short-term benefits of these
assets. The Group lease rental charge is disclosed in note 9. There
are no other material off-balance sheet arrangements.
The Group's future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
Land and buildings Other
--------------------- --------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- --------- --------- ---------
No later than one year 433 360 111 111
Later than one year and no
later than five years 1,409 1,512 117 91
Later than five years 550 853 - -
Total 2,392 2,725 228 202
============================ ========== ========= ========= =========
The above table reflects the committed cash payments under
operating leases, rather than the expected charge to the income
statement in the relevant periods. The effect on the income
statement will differ to the above figures due to the amortisation
of rent-free and discounted rent periods included in a new property
lease signed in 2012. The expected charge in 2014 for operating
leases is expected to be GBP30,000 higher than the committed cash
payments shown above.
The Group has guaranteed rent bonds issued by its banks on its
behalf totalling GBP122,000 as at 31 December 2013 (2012:
GBP125,000). These are not expected to result in any material
financial loss.
24 Principal subsidiaries
Proportion Proportion
of ordinary of ordinary
shares shares held
held by non-controlling
Country by group interests
Subsidiary of incorporation Principal activity (%) (%)
============================ =================== ====================== ============= ====================
Ubisense Limited UK Location solutions 100 -
Ubisense AG Germany Location solutions 100 -
Ubisense SAS France Location solutions 100 -
Ubisense Inc. US Location solutions 100 -
Ubisense Solutions Inc Canada Location solutions 100 -
Geospatial Systems Limited UK Location solutions 100 -
Intermediate holding
Geoplan Interworks K.K. Japan company 100 -
Geoplan Company Limited* Japan Location solutions 77 23
Binary Star Developments
K.K.* Japan Non-trading 100 -
Geoplan Korea Company South
Limited* Korea Location solutions 100 -
Geoplan Philippines,
Inc.* Philippines Location solutions 100 -
============================ =================== ====================== ============= ====================
All subsidiaries are directly held by Ubisense Group plc except
those denoted* which are held by intermediate holding
companies.
All subsidiaries prepare local statutory accounts up to 31
December each year except for Geospatial Systems Limited which
prepares accounts up to 31 March, Geoplan Company Limited to 30
June and Binary Star Developments K.K. to 31 January. For
subsidiaries who which have a different financial year-end to the
Group, additional co-terminous accounts are prepared reflecting the
same financial reporting as the Group for the purposes of
consolidation.
Notes to the Preliminary financial information (continued)
25 Business combinations
25.1 Subsidiaries acquired
Proportion
of equity
Country of Principal Date of interest
Subsidiary incorporation activity acquisitions acquired
Geoplan Interworks Location 3 December
K.K. Japan solutions 2013 100%
-------------------- ---------------- ------------ --------------- -----------
The Geoplan Interworks K.K group of companies ("Geoplan") was
acquired to enhance the Group's geographic reach into the Asian
market to deploy RTLI solutions to utility, telecoms and
manufacturing customers in Japan, South Korea and Philippines.
Geoplan, formerly the Master Distributor for the Group in Asia, is
a location solutions business providing geospatial software
products and consulting, with a focus on the utility and telecoms
sectors. The acquisition will enhance the Group's product range,
customer list, sector presence and geographical footprint, bringing
locally based skills and presence to the Group. The Group expects
Japan to be the headquarters for its Asian operations and to
develop the markets in China from there.
25.2 Consideration transferred
Total
GBP'000
Cash consideration paid 635
Consideration satisfied by issue
of Ubisense shares 1,711
Deferred consideration 178
Contingent cash consideration arrangement 816
------------------------------------------- ---------
Consideration transferred 3,340
------------------------------------------- ---------
Consideration satisfied by issue of Ubisense shares comprised
759,809 new ordinary shares of nominal value of GBP0.02 in Ubisense
at a price of 225.25 pence per ordinary share, being the average of
the volume weighted mid-market closing price on each of the
preceding five business days.
The deferred consideration was paid in full in January 2014.
Under the contingent cash consideration arrangement, the Group
is required to pay additional amounts to the vendors of Geoplan
based on the achievement of two separate performance milestones
that may arise between 2014 and 2017 with a combined undiscounted
range of outcomes between nil and GBP892,000. The fair value of the
contingent consideration of GBP816,000 recognised at the
acquisition date was based on management's best estimate of the
probability-adjusted estimated future cash outflows from the
arrangement discounted at 3.5%. The discount rate used is 3.5%,
based in the Group's estimated incremental borrowing rate for
unsecured liabilities at the reporting date, and therefore reflects
the Group's credit position. The effects on the fair value of risk
and uncertainty in future cash flow are dealt with by adjusting the
estimated cash flows rather than adjusting the discount rate.
As at 31 December 2013, the fair value amount recognised for
this arrangement was unchanged based on the most recent management
estimates although as the liability is denominated in Japanese Yen
it is subject to the impact of exchange rates:
Effect
of exchange At 31
Upon rates December
acquisition 2013
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- ----------
Deferred consideration - current 178 (6) 172
---------------------------------- ------------- ------------- ----------
Contingent consideration -
current 369 (14) 355
Contingent consideration -
non-current 447 (17) 430
Total contingent consideration 816 (31) 785
================================== ============= ============= ==========
Total 994 (37) 957
================================== ============= ============= ==========
Acquisition related costs amounting to GBP464,000 have been
excluded from the consideration transferred and have been
recognised as an expense in the current year within the "operating
expenses" line item in the consolidated income statement.
Notes to the Preliminary financial information (continued)
25 Business combinations (continued)
25.3 Assets acquired and liabilities recognised at the date of
acquisition
Total
GBP'000
Assets
Non-current assets
Software products 626
Customer relationships 1,246
Order backlog 347
Other intangible assets 173
Property, plant and equipment 132
Total non-current assets 2,524
--------------------------------- ---------
Current assets
Inventories 1,605
Trade and other receivables 1,080
Cash and cash equivalents 2,481
Total current assets 5,166
--------------------------------- ---------
Liabilities
Current liabilities
Trade and other payables (4,500)
Total current liabilities (4,500)
--------------------------------- ---------
Non-current liabilities
Deferred income tax liabilities (843)
--------------------------------- ---------
Total non-current liabilities (843)
--------------------------------- ---------
Non-controlling interest (704)
--------------------------------- ---------
Fair value of identifiable
net assets acquired 1,643
--------------------------------- ---------
The fair value of trade and other receivables of GBP1,080,000
includes trade receivables with a fair value and gross contractual
value of GBP1,080,000 all of which is expected to be
collectable.
As at 31 December 2013, the fair values of acquired assets,
liabilities and goodwill for Geoplan have been determined on a
provisional basis as these businesses were acquired in close
proximity to the year end, pending finalisation of the
post-acquisition review of the fair value of the acquired net
assets.
25.4 Goodwill arising on acquisitions
Total
GBP'000
Fair value of consideration transferred 3,340
Less: fair value of identifiable
net assets acquired 1,643
----------------------------------------- ---------
Goodwill arising on acquisitions 1,697
----------------------------------------- ---------
Goodwill arose on the acquisition of Geoplan in respect of the
benefits of a highly knowledgeable workforce, expected operational
synergies, revenue growth and future market development. These
benefits are not recognised separately from goodwill because they
do not meet the recognition criteria for identifiable intangible
assets.
Goodwill is not expected to be deductible for tax purposes.
Notes to the Preliminary financial information (continued)
25 Business combinations (continued)
25.5 Net cash inflow on acquisition of subsidiaries
Total
GBP'000
Cash consideration paid (635)
Less: cash and cash equivalent
balances acquired 2,481
Net cash inflow on acquisition
of subsidiaries 1,846
-------------------------------- ---------
25.6 Impact of acquisitions on the results of the Group
The incremental impact of acquisitions to the Group's results
for the year are set out in the table below:
Before
acquisitions Geoplan Total
GBP'000 GBP'000 GBP'000
Revenue 26,284 718 27,002
Adjusted EBITDA 929 212 1,141
(Loss)/profit before
tax (1,828) 109 (1,719)
---------------------- -------------- --------- ---------
If the acquisitions were effective from 1 Jan 2013, the Group's
estimated results would have been as follows:
Before
acquisitions Geoplan Total
GBP'000 GBP'000 GBP'000
Revenue 26,284 5,365 31,649
Adjusted EBITDA 929 (59) 870
Loss before tax (1,828) (75) (1,903)
----------------- -------------- --------- ---------
26 Related party transactions
Other than compensation of key management personnel disclosed in
note 6.3 there are no transactions with other related parties. Full
details of Directors' remuneration are given in note 7.
There were no other transactions with Directors of the
Company.
27 Financial risk management
27.1 Risk management objectives and policies
The Group is exposed to various risks in relation to financial
instruments. The Group's financial assets and liabilities by
category are summarised below. The main types of risks are market
risk, credit risk and liquidity risk. The Group is exposed to
market risk through its use of financial instruments and
specifically to currency risk and interest rate risk, which result
from its operating activities.
The Group's risk management is coordinated at its headquarters,
in close cooperation with the Board of Directors, and focuses on
actively securing the Group's short to medium-term cash flows. The
Group does not actively engage in the trading of financial assets
for speculative purposes. The most significant financial risks to
which the Group is exposed are described below.
27.2 Foreign currency risk management
The Group undertakes certain transactions denominated in foreign
currencies. The Group's policy is to maintain natural hedges where
possible, by matching foreign currency revenue and expenditure. The
Group does not enter into forward exchange contracts to mitigate
the exposure to foreign currency risk as the Group's currency
transactions are not considered significant enough to warrant
this.
The carrying amounts of the Group's foreign currency denominated
monetary assets and liabilities at the reporting date, not
denominated in the local functional currency, are as follows:
Japanese Yen US Dollars Euros
============= ====================== ==================== ====================
2013 2012 2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============= ========== ========== ========= ========= ========= =========
Assets - - 777 752 623 817
Liabilities - - (5) (16) (5) (3)
============= ========== ========== ========= ========= ========= =========
Notes to the Preliminary financial information (continued)
27 Financial risk management (continued)
27.3 Foreign currency sensitivity analysis
The Group is mainly exposed to US Dollars, Euros and Japanese
Yen. The Group seeks to manage cash inflows and outflows in each
currency to mitigate currency exposure and exchange risk. The
following table details the Group's sensitivity to a 5% increase
and decrease in the Sterling exchange rate against the relevant
foreign currencies. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts
their translation at the period end for a 5% change in foreign
currency rates. A positive number indicates an increase in profit
or equity.
Japanese Yen US Dollars Euros
================== ====================== ==================== ====================
2013 2012 2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== ========== ========== ========= ========= ========= =========
Effect of a 5% strengthening in
relevant exchange rate on:
Income statement - - 41 37 33 39
Equity - - 41 37 33 39
Effect of a 5% weakening in
relevant exchange rate on:
Income statement - - (37) (40) (30) (43)
Equity - - (37) (40) (30) (43)
------------------ ---------- ---------- --------- --------- --------- ---------
27.4 Interest rate sensitivity
The Group's exposure to market risk for the changes in interest
rates relates primarily to the Group's three year GBP5.0 million
bank loan. Interest is payable at LIBOR plus 3% and GBP3.5 million
of the loan was outstanding as at 31 December 2013 (2012:
GBPnil).
The following table illustrates the sensitivity of the net
profit of the Group for the year and equity to a possible change in
interest rates of +0.5% and -0.5%, with effect from the beginning
of the year. A positive number indicates an increase in profit or
equity.
2013 2012
GBP'000 GBP'000
====================================== ========= =========
Effect of a 0.5% decrease in interest
rate on:
Income statement 17 -
Equity 17 -
Effect of a 0.5% increase in interest
rate on:
Income statement (17) -
Equity (17) -
-------------------------------------- --------- ---------
27.5 Credit risk analysis
The Group's maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at the reporting
date, as summarised in note 27.8, which are principally cash and
cash equivalents and trade receivables.
Cash and cash equivalents are held at banks with good
independent credit ratings in accordance with the Group Treasury
policy. The Group continuously monitors defaults of customers and
other counterparties, identified either individually or by group,
and incorporates this information into its credit risk controls.
Where available at reasonable cost, external credit ratings and/or
reports on customers and other counterparties are obtained and
used.
The Group's policy is to deal only with creditworthy
counterparties. The Group's management considers that its financial
assets that are not impaired or past due for each of the reporting
dates under review are of good credit quality. All receivables are
subject to regular review to ensure that they are recoverable and
any issues identified as early as possible. In order to manage
credit risk the Directors set limits for customers based on a
combination of payment history and third party credit references.
Credit limits are reviewed by the credit controller on a regular
basis in conjunction with debt ageing and collection history. In
addition many of the Group's customers, and approximately 80% by
balance at any given time, are large utility companies and other
blue-chip companies that would be considered a low credit risk.
None of the Group's financial assets are secured by collateral
or other credit enhancements.
Notes to the Preliminary financial information (continued)
27 Financial risk management (continued)
27.6 Liquidity risk analysis
Liquidity risk is the risk arising from the Group not being able
to meet its obligations as they fall due. The Group seeks to manage
this risk by ensuring sufficient liquidity is available to meet the
foreseeable needs and to invest cash assets safely and profitably.
The Group manages its liquidity needs by carefully monitoring
forecast cash inflows and outflows due in day-to-day business. Net
cash requirements are compared to balances in order to determine
headroom or any shortfalls. The Group policy throughout the year
has been to place surplus funds on short-term treasury deposit or
interest bearing reserve accounts based on its cash flow
forecasting and to draw down on borrowing facilities for when
required. As disclosed in note 18, the Group entered into a GBP5.0
million bank facility in the year, of which GBP3.5 million was
drawn down as at 31 December 2013.
The Group's financial liabilities have contractual maturities as
summarised below:
Current Non-current
-------------------------- ----------------------- --------------------
Between
Between 1 Later
Within 6 and and 5 than
6 months 12 months years 5 years
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- ----------- --------- ---------
As at 31 December 2013
Trade and other payables 6,195 355 430 -
Bank loan - - 3,500 -
As at 31 December 2012
Trade and other payables 3,632 - - -
========================== ========== =========== ========= =========
Financial assets used for managing liquidity risk
Cash flows from trade and other receivables are contractually
due within six months. Cash is generally held in accounts with
immediate notice. Where surplus cash deposits are identified these
are placed in accounts with access terms of no more than three
months.
27.7 Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concern whilst maximising
the return to stakeholders. The capital structure of the Group
consists of cash and cash equivalents and capital and reserves
attributable to the owners of the Company, and the Group's
borrowing facilities.
The capital structure is continually monitored by the Group. In
order to maintain or adjust the capital structure, the Group may
issue shares, take on debt, sell assets to raise cash, adjust the
amount of dividends payable to shareholders or return capital to
shareholders. The Group is not subject to externally imposed
capital requirements. The Group has entered into a GBP5 million
bank facility in 2013 of which GBP3.5 million was drawn as at 31
December 2013 (2012: GBPnil) in order to provide working capital
capacity to fund business growth.
27.8 Categories of financial instruments
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised in respect of each class of financial asset, financial
liability and equity instrument, are disclosed in the accounting
policies in note 3. The carrying amounts presented in the
Consolidated Statement of Financial Position relate to the
following categories of financial instrument:
Notes to the Preliminary financial information (continued)
27 Financial risk management (continued)
27.8 Categories of financial instruments (continued)
2013 2012
Notes GBP'000 GBP'000
========================================= ====== ========= =========
Financial assets
Loans and receivables:
* Trade receivables 15 6,931 7,310
* Amounts recoverable on contracts 15 3,347 2,439
* Other receivables 15 285 40
* Cash and cash equivalents 16 3,964 2,716
========================================= ====== ========= =========
Total financial assets 14,527 12,505
========================================= ====== ========= =========
Financial liabilities
Amortised cost:
* Trade payables 17 3,570 1,936
* Trade accruals 17 1,748 1,404
* Other payables 17 705 292
* Deferred consideration 25.2 172 -
* Contingent consideration 25.2 785 -
* Bank loan 18 3,500 -
========================================= ====== ========= =========
Total financial liabilities 10,480 3,632
========================================= ====== ========= =========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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