Annual Financial Report
IQGeo Group plc
(the "Company" or the "Group")
Final results for the year ended 31 December 2019
Substantial growth in core business and increased momentum
IQGeo Group plc (AIM: IQG), a market leading provider of geospatial productivity and collaboration software for the telecoms and utility industries, is pleased to announce its results for the twelve months ended 31 December 2019 (the "Period").
IQGeo (myWorld) operational highlights:
· 13 new logos were added during 2019 with wins in all operating regions
· 70% of all new customers were contracted on a subscription basis
· New product launches including Network Manager expand and deepen the addressable market
Group financial highlights:
· Bookings of orders related to IQGeo own products increased by over 120% to £7.5 million during 2019
· Total revenue generated from IQGeo own products increased by 17% to £5.5 million
· Recurring IQGeo own product revenue increased by 78% to £1.6 million
· Net cash balance of £13.1 million at 31 December 2019 following £11.0 million returned to shareholders in September 2019
Outlook:
· Strong balance sheet to support continued investment in growing the business
· Annual Contracted Value including subscription and maintenance and support (M&S) is currently £2.0 million and anticipated to grow in future periods
· Operating cashflow in 2020 and beyond will improve quickly as continued sales momentum builds on our base of existing subscription revenues
Richard Petti, Chief Executive Officer, said:
"IQGeo is achieving substantial growth in its core business and has excellent momentum entering the new decade. The Company continued the good progress made in the first half with a strong second half performance against all its key KPIs. Significant increases in bookings for our software along with 13 new logos added in the period validate the strategic investments we have made in our product development and distribution capabilities. We remain positive about the market opportunity and are focused on controlled levels of investment, both of which will drive continued momentum. We are highly confident in the business' ability to deliver strong growth in the coming year and beyond."
For further information contact:
IQGeo Group plc +44 1223 606655
Richard Petti
Tim Gingell
finnCap Ltd +44 20 7220 0500
Henrik Persson, Anthony Adams (Corporate Finance)
Tim Redfern, Richard Chambers (ECM)
Notes to Editors
About IQGeo
IQGeo™ (AIM: IQG) a leading developer of geospatial software that improves productivity and collaboration across enterprise planning, design, construction, maintenance and sales processes for telecoms and utility network operators. Our mobile-first enterprise solutions create and maintain, an accurate view of complex network assets that is easily accessible by anyone, wherever and whenever needed. Specialized applications combined with our open IQGeo Platform help network operators create a single source of network truth to meet their digital transformation ambitions and operational KPIs. Our award-winning, cloud-enabled solutions save time and money, and improve safety and productivity, while enhancing customer satisfaction. Headquartered in Cambridge, with offices in Denver, Frankfurt and Tokyo, we work with some of the largest network infrastructure operators in the world. For more information visit: https://www.iqgeo.com/
Chair's statement
In our first full year of trading since the disposal of the Ubisense RTLS business and brand, we have made good progress in delivering sales to new and existing customers and developing a richer suite of products.
This is also the first year that we have offered our customers the ability to purchase products under a subscription licensing model. Whilst this is still at a relatively early stage, it is creating the opportunity to expand and develop closer relationships with our customers. This more flexible commercial model has already provided the business with a good in-year revenue stream and secured a strong order book and pipeline for future revenue.
In 2019, the organisation had to quickly establish and build business momentum focused on its geospatial platform. With an existing customer base and wide endorsement of the new business focus, the organisation worked hard in the early part of the year to develop both internal processes and customer opportunities. Whilst this led to a slower start to the year than we had anticipated, the second half saw greater stability, improved execution and better visibility on future growth.
Our three key geographical regions of North America, Japan and Europe all contributed to the growth of own product revenue. North America remains our biggest market and offers the greatest near-term opportunity where the customers are structured to allow the introduction of new technology more easily.
2019 also saw the release of several new and strategic software products. Workflow Manager streamlines our customer's construction and maintenance processes and Network Revenue Optimizer enables rapid and efficient quoting for network expansion. Both products were developed in conjunction with real-world requirements from existing customers, have already been sold to additional customers, and are included in our 2020 revenue pipeline. The most significant new product announcement of 2019 was our new Network Manager product that enables IQGeo to offer an end-to-end operational solution increasing our addressable market and revenue potential.
We have continued to develop our organisational capabilities by investing across all disciplines, providing a greater focus on sales and product delivery. We continue to see opportunities to invest in business growth, organisational efficiency improvement, and the delivery of higher margins in future periods. Investment that drives growth remains our primary focus.
These are exciting times for IQGeo. Our markets continue to strive for improvements in execution, where data quality and accessibility is key. IQGeo's products, customer relationships, and proof of delivery make us well positioned to benefit from such opportunities.
Results Overview
Bookings of orders related to IQGeo own products increased by over 120% to £7.5 million during 2019 (2018: £3.4 million) following expansion of our presence in North America as well as adding new contracts in Europe and Japan.
IQGeo own product revenue has increased by 17% to £5.5 million (2018: £4.7 million) with growth driven predominantly by recurring revenue streams.
Gross margin for the year is slightly below last year reflecting a subscription sales model with greater revenue deferral to future years. Consequently, historic trend comparisons are not relevant at this stage as the business transitions to higher subscription revenues.
Our Balance Sheet remains strong with a year-end cash position of £13.1 million. This is after returning £11.0 million to shareholders in September 2019. The strength of the balance sheet allows selective levels of investment and reflects the near-term cash impact on the business as it transitions to higher levels of recurring revenues.
Group strategy
We can see a clear opportunity in our target markets to grow quickly, enabling customers to realise significant collaboration and productivity improvements across their businesses.
Our priority is to deliver growth in our own product recurring revenue base through acquisition of new customers and further deployments with existing customers. We will continue to invest in developing our software with customer driven improvements in functionality including Network Manager.
The investment strategy will continue to be controlled, balancing growth achievements against the opportunity available, ensuring improved operating cash flows that turn positive within a few years.
Looking further out, we continue to assess the opportunity to significantly increase the addressable global market by developing a multi-tenant SaaS offering. There is an under serviced global opportunity to supply solutions to smaller network operators that have not historically had the resources or capital to invest in large-scale GIS systems.
Governance
As outlined later in this report, we continue our commitment to a high standard of corporate governance by maintaining the QCA Corporate Governance Code in our reporting structure. The Board continually reviews its composition and has made three Board level changes during the year.
As noted in the 2018 Annual Report, following a period of illness Peter Harverson resigned in February 2019. Recognising the need for additional experience in the target vertical markets, Andy MacLeod was appointed as an Independent non-executive director in June last year, bringing a wealth of telecoms industry experience to IQGeo.
Tim Gingell, CFO, has advised that he wishes to step down from the Board at the upcoming AGM to focus on his child's medical needs. Tim will however stay with the business, including remaining as Company Secretary, for a period beyond the AGM to help with an orderly and structured handover to his replacement. Tim has been with the business since 2015 and has been a key part of the management team over that period, developing the finance, IT and HR functions, executing on the Japan and Ubisense disposals in 2018, and establishing the IQGeo business. The Board would like to thank Tim for all his hard work and, whilst disappointed to see Tim step down, wish him and his family the very best for the future. The Board has instigated a search for a CFO and whilst this is at an early stage it is expected that a timely appointment can be made.
Oliver Scott (Kestrel Partners), who has been on the Board since May 2016, stepped down at the end of October 2019 and was replaced by Max Royde who is an experienced non-executive director and co-founder of Kestrel Partners. I would like to thank Oliver for his support and guidance over the last two and a half years in helping deliver a well-funded and focused business.
The board desires to improve diversity including consideration of gender, social and ethnic backgrounds in its members and the Company as a whole. However, it is keen, with its limited resources, to match the skills of available candidates with the responsibilities of open roles. Currently, this means that, with my CFO background, I will continue to act as chair of the Audit Committee, while Max Royde assumes chair of the Remuneration Committee and Robert Sansom continues to chair the Nominations Committee.
The Board recognises that it must evolve its Committee strategy as it grows in the future, noting that neither Max Royde nor Robert Sansom are Independent, and I have been a non-executive director for over 9 years. With these stated considerations, we feel that the skills and mix of its members best serve our current governance needs at this stage of the Group's development.
Organisation
In 2019 IQGeo has achieved rapid change and I would like to thank our committed staff in delivering an organisation that has prepared itself for growth and success. The Company remains totally focused on delivering geospatial productivity and collaboration solutions for our customers.
Future outlook
Opportunities within our markets continue to develop at pace as the organisations we serve, grow and evolve their digital transformation strategies. Our customer centric approach and first-class products are focused on closing these increasing opportunities and positioning IQGeo well for future growth.
Paul Taylor
Chair
6 March 2020
Chief Executive Officer's statement
2019 was a strong first year for IQGeo as a geospatial software-only focused business targeting the telecoms and utility industries. Across virtually every area of the business, we've made good progress against our key strategic objectives that I set out last year. Our three key goals for 2019 are summarised below:
1. Expand regional growth and market share
2. Grow subscription and recurring revenue base
3. Invest in product innovation to increase our competitiveness
We have established IQGeo as a leader in geospatial software focused on the telecoms and utility market, and successfully challenged our legacy Geospatial Information Systems (GIS) competitors with an exciting product suite and talented team.
Our target market is now recognising that the previous GIS approach does not meet their current and future needs of a dynamic and responsive business. Our major competitors produce what we term 'cartography-centric' software. These systems were built 20 to 30 years ago to create paper maps using a centralised, proprietary architecture focused on a small group of geospatial experts. We believe this model is no longer fit for purpose. Our prospects and customers have shared how this legacy approach creates process bottlenecks and data quality issues that compromise a company's ability to increase productivity, quality and safety.
IQGeo offers a 'reality-centric' approach that reimagines the role of geospatial software by positioning geospatial capabilities across all departments that touch the network lifecycle (i.e. fibre, mobile, gas, water or electric). We can give all staff the design, survey, construction, and maintenance capabilities they need at any time and in any location. The versatility of our solution means our products are rapidly adopted across an enterprise, providing our customers with a platform that drives transformation throughout their business.
We also see strong growth drivers across all our key markets. 5G and fibre are triggering large investments into telecoms, while smart grid and IoT technology, as well as the need for increased safety, is driving investments in utility networks. Thanks to our track record of strong Return on Investment (RoI) customer stories, we are now extremely well positioned to capitalise on these exciting industry changes.
Strategic goals
Market response to our reality-centric proposition has been very positive and enabled significant progress with our first strategic goal of Regional Growth. We have increased the number of logos (customers) to 50 across all operational territories and in all segments.
We hired two European sales directors in the first quarter of 2019 and have already secured new European customers in both the telecoms and utility sectors. Our small Japanese team added new customers in 2019 through our local partners in the utility sector. The North American operation also secured new telecoms and utility customers who provide a strong, referenceable installed base across most geographies in the US and Canada. We are not just pleased with the number of new logos but also their mix. We have secured both very large (organisations with over 20 million customers) and small customers (with up to 20,000 customers) while shortening sales lead times through more accurate solution targeting and opportunity qualification. This ability to mix customer sizes is extremely important because it means our market opportunity is much larger than if we were restricted to a single customer demographic.
Transition to Subscription is our second strategic goal. We have made great progress in transitioning our sales teams to selling subscriptions and we were delighted to see that 70% of all new software deals in 2019 were closed using a subscription model.
I do not foresee that we will abandon perpetual sales entirely in the future. Some new customers may insist on perpetual licensing and transitioning current customers away from their existing perpetual licensing arrangements will be a slower process. These exceptions aside, 2019 demonstrated that IQGeo can build a solid recurring revenue foundation that will reduce volatility of bookings and revenue in years to come.
Even during this launch year of our subscription service, customers have already begun to expand their initial user counts after successful field deployments. This model is extremely promising for IQGeo's year-on-year revenue growth potential. To further support ongoing customer growth, over the course of 2020 we will be emphasising account management with our sales team, will continue to develop our sales model to further accelerate sales, and will improve our customer procurement processes.
Our third strategic goal of Product Innovation was amply demonstrated by the release of several new products in 2019. This includes the highly innovative Network Revenue Optimizer that helps customers automate short cycle designs and quotations and our new Workflow Manager product (formerly Operations Manager and Construction Manager) that helps to reduce repair times and accelerate time-to-market. These new products have already been sold to existing and new customers, which is a great endorsement of IQGeo's ability to spot gaps in the market and create products our customers want to buy.
In recognition for software innovation, we were very pleased to receive two highly regarded Diamond Technology Awards in 2019 from Broadband Technology Report for our Network Revenue Optimizer and Capture products. Customers tell us that we are delivering world-class technology, but it is also extremely satisfying for the IQGeo team to be recognised by our peers in the industry.
In addition, we also announced in 2019 the impending release of our new Network Manager product in the first quarter of 2020 that allows us to tell a complete end-to-end enterprise solution story, and is already driving new business opportunities.
Financial performance
Our objective for 2019 was to use some of the funds generated in the Ubisense disposal to invest in the IQGeo geospatial business and create momentum for future growth. I am ensuring that our management team is focused on the following performance KPIs for 2020.
1. Growth in orders. Here we are pleased to report a very satisfying 120% growth in new orders worldwide. While a high proportion of these are subscriptions it means we enter 2020 with a backlog that has been strengthened by 40% compared to last year.
2. Growth in logos (aka customers). We're very pleased with an increase in customers to a total of 50 at the end of 2019 providing a platform for future growth.
3. Growth in recurring revenue. While our large increase in subscriptions has deferred revenue into future years, we have nevertheless managed to grow own-product recurring revenue by 78%.
4. Gross Profit and Margin. Gross Profit and Margin have fallen in 2019 as the business develops with a stronger subscription revenue stream that will deliver positive impact in future periods.
As we look forward to 2020 and beyond, we remain singularly focused on creating a business that combines high growth with good margins and cash generative capabilities.
The IQGeo team
Our accomplishments in 2019 would not have been possible without an exceptional team of people that create, promote, sell and support our award-winning products. Over the course of 2019 we strengthened our business across a number of key areas to achieve our improved performance. Organisational focus on sales teams, product development, services and product management, as well as HR initiatives, creates an attractive and high-performance work environment that delivers greater focus and higher productivity.
We have invested time and resources in developing our organisation because it is so central to the execution of our strategy. For this reason, I have been very pleased to see the positive responses from staff in our annual staff survey. The survey reflected improvements that we have made in communication, training, performance management and career management. This also included a very positive responses to the questions 'Would you recommend IQGeo to a friend?' and 'Do you understand our vision and strategy?'.
2020 and beyond
As I look to the year ahead, I will be expanding our list of business goals from three to five. We will continue our focus on our initial three business goals while also concentrating the management team on account development and operating margins.
1. Expand regional market share maintaining the pace of logo acquisition
2. Grow subscription and recurring revenue base
3. Invest in product innovation
4. Develop existing customer accounts. Our business model has shown that customers often spend more on our products in the second and third years than in the first. This means that the surge in new logos in 2019 creates a strong platform for upselling opportunities in the years ahead.
5. Improve operating margin. In 2019 our strategy of growing the organisation and increasing subscriptions has deferred operating margin to future years. It is a strategic priority to become a cash generative business in as little time as possible, while maintaining high growth rates in a market that has long sales lead times.
At IQGeo we are excited about the opportunities ahead of us. We see strong demand in all our markets globally and have timed the introduction of our new product offerings to help capitalise on the upgrade and expansion opportunities in our target markets.
The markets we target are largely uncorrelated to many of the global macro headwinds such as US-China trade relations, Brexit, UK retail gloom or declining European industrial output. The fundamentals in our target markets are largely isolated from global macroeconomic trends because network operators must maintain and upgrade their networks and outside plant assets, or risk permanently damaging their business models.
For these reasons, IQGeo is achieving growth in its core business independently of other market indicators and has excellent momentum entering the new decade. We remain positive about the prospects of continuing this progress, making IQGeo a strong growth business.
Richard Petti
Chief Executive Officer
6 March 2020
Chief Financial Officer's statement
The Group is focused on growing IQGeo own product revenues which include generating recurring revenues from software subscription products, selling perpetual software licences and the associated maintenance and support contracts, and delivering consultancy services revenues. Additionally, the Group has a legacy operation that provides lower margin consultancy services connected to third party products which have declined in the current period - in line with expectations, and may decline in future periods.
During 2019, the commercial model evolved with a strong focus on building a recurring revenue subscription-based software business through long-term relationships with customers. The subscription offering has been attractive to potential customers with 70% of all new customers being contracted on a subscription basis.
Increasing Annual Contracted Value ("ACV") is the benchmark of securing recurring revenue growth and achieving sustained profitability. The ACV won during 2019 from new subscription contracts was £0.7 million, which, in addition to the ACV associated with maintenance and support of perpetual licence sales, gives total ACV as at 31 December 2019 of £2.0 million (31 December 2018: £1.1 million) - an increase of over 80%.
Orders
Bookings of orders related to IQGeo own products increased by over 120% to £7.5 million during 2019 (2018: £3.4 million) following expansion of our presence in North America as well as adding new contracts in Europe and Japan.
Bookings of orders related to third-party Geospatial Services were £1.6 million (2018: £4.8 million) reflecting the managed decline in this legacy revenue stream.
IQGeo own product order backlog as at 31 December 2019 was £3.7 million (2018: £1.6 million). Third-party Geospatial Services order backlog was £1.4 million (2018: £2.1 million).
Revenue
Revenue composition by revenue stream is summarised in the table below:
|
Revenue by stream |
2019 £'000 |
% of total revenue |
2018 £'000 |
% of total revenue |
Year on year growth |
|
Software |
1,589 |
20% |
1,395 |
14% |
14% |
|
Services |
2,328 |
30% |
2,424 |
24% |
(4)% |
|
Non-recurring own product revenue |
3,917 |
50% |
3,819 |
38% |
3% |
|
Maintenance and support |
1,251 |
16% |
918 |
9% |
36% |
|
Subscription |
381 |
5% |
- |
- |
N/A |
|
Recurring own product revenue |
1,632 |
21% |
918 |
9% |
78% |
|
Total own product revenue |
5,549 |
71% |
4,737 |
47% |
17% |
|
Geospatial services from third party products |
2,257 |
29% |
5,242 |
53% |
(57)% |
|
Total revenue |
7,806 |
100% |
9,979 |
100% |
(22)% |
The transition of the commercial model to a subscription-based software business enables more customers to start with smaller deployments which can then be grown over time. Ultimately this approach will provide greater stability to income and operations in future periods but will have the impact of deferring revenue in the short term.
Despite 70% of all new customers being contracted on a subscription basis, software sold as a perpetual licence increased by 14% during 2019. In addition to software sales to new customers, IQGeo has sold further user licences and achieved product expansion within its existing customer base.
Services revenues associated with IQGeo products has decreased by 4% during the year, largely due to the timing of project delivery.
Maintenance and support revenues associated with perpetual licence sales has increased by 36% during 2019 due to an increase in users of the software and a strong renewal rate of annual contracts.
Subscription revenues of £0.4 million have been recognised in respect of contracts won during the 2019 period. These contracts have an associated ACV of £0.7 million with committed terms ranging between one and three years.
Gross profit
|
Gross profit |
2019 £'000 |
Gross margin % |
2018 £'000 |
Gross margin % |
Gross margin var |
|
Gross profit/gross margin |
3,243 |
42% |
4,380 |
44% |
(2)% |
Gross margin percentage has decreased during 2019 by 2%. While the revenue mix has moved in favour of higher margin software, subscription and maintenance and support revenues, the significant reduction in total services revenue which has a fixed cost of delivery, has led to an overall decline in the gross margin during 2019. Increases of recurring subscription and maintenance and support revenues, together with improved margins on services revenue, are expected to drive an improvement to both gross profit and gross margin percentage in future reporting periods.
Operating expenses and adjusted EBITDA from continuing operations
Operating expenses were £9.5 million (2018: £6.0 million) and are summarised as follows:
|
|
2019 |
2018 |
|
|
£'000 |
£'000 |
|
Other operating expenses |
8,091 |
5,446 |
|
Depreciation |
285 |
273 |
|
Amortisation and impairment |
815 |
774 |
|
Share option expense |
102 |
248 |
|
Unrealised foreign exchange on intercompany trading balances |
110 |
(151) |
|
Non-recurring items |
136 |
(619) |
|
Total operating expense |
9,539 |
5,971 |
Other operating expenses of the Group include sales, product development, marketing and administration costs, net of costs capitalised.
Sales costs have increased during 2019 as a result of headcount being added to develop sales channels in the North American and European utility and telecoms market. Sales headcount has increased by over 25% during the year with all new hires being quota carriers.
Product management and development headcount has increased by over 120% during the year as the Group focuses on creating the next generation geospatial platform.
The 2018 other operating costs reported above include an allocation of the administration and marketing costs of the Group which supported both the Geospatial and discontinued RTLS SmartSpace divisions during 2018. Accordingly, the 2018 other operating costs reported above do not reflect a realistic cost base to support the standalone IQGeo business. The 2019 other operating expenses are based on the IQGeo operating model which includes short-term serviced office leases in Cambridge, Frankfurt and Tokyo together with a subscription-based IT environment which provides the Group with a flexible cost base from which to develop with minimal capital expenditure other than product development.
Non-recurring costs in 2019 relate to the cost of completing the capital reduction and subsequent repurchase of share capital.
The operating loss for the period from continuing operations was £6.3 million (2018: £1.6 million).
EPS and dividends
Adjusted diluted loss per share from continuing operations was 8.8 pence (2018: 3.0 pence). Reported basic and diluted loss per share from continuing operations was 9.4 pence (2018: 2.2 pence). The Board does not feel it appropriate at this time to commence paying dividends.
Discontinued operations
During 2019, the Group received an additional £1.1 million cash consideration in respect of the RTLS SmartSpace business unit disposal as a result of the finalisation of the completion accounts. This sum was greater than the £0.8 million asset recognised within the balance sheet as at 31 December 2018. This cash inflow was offset by the settlement of £1.8 million of costs associated with the disposal being paid.
No additional asset has been recognised for potential earn-outs on the disposal which could be up to maximum of £3.0 million. The earn-out will be triggered if revenue milestones of the RTLS SmartSpace business unit are achieved for the year ended 31 December 2019. As at the date of this report, the final results of the RTLS SmartSpace business unit for the year ended 31 December 2019 are not available.
Repurchase of share capital
On 2 August 2019, the Company announced a proposed tender offer to repurchase up to a maximum of 28,260,869 of the Company's Ordinary Shares at a price of 46 pence per Ordinary Share. Following approval of the tender offer by a General Meeting of shareholders on 22 August 2019, the tender offer completed on 30 August 2019, resulting in the share capital reducing by 23,803,690 and £11.0 million of surplus funds being returned to shareholders in September 2019.
Consolidated statement of financial position
As at 31 December 2019, the Group had a cash position of £13.1 million with no debt (2018: £30.9 million), noting that £11.0 million was returned to shareholders in September 2019.
On 20 December 2019, the Group entered into a 7 year lease running to February 2028 on new premises in Denver as the lease on the existing premises in Denver ends on 30 April 2020. While the lease agreement has been contracted, a capital asset for the present value of the future payments, and its associated liability, have not been recognised on the balance sheet in accordance with IFRS16, as the lease period will not commence until March or April 2020. In addition, £0.2 million fit-out costs net of landlord's contribution will be incurred in the first half of 2020.
Non-current assets
Total non-current assets were £3.8 million (2018: £3.6 million).
Capitalised development costs represent the key intangible assets of the Group, being investment in IQGeo own products, which will support the future growth of the business. Capitalised development costs at 31 December 2019 were £1.5 million (2018: £1.2 million) with the increase reflecting the investment in the IQGeo product suite. No change has been made to the current three-year amortisation period, due to the fast-moving nature of the technology.
The consideration for disposal of the RTLS SmartSpace business included £2 million in a rollover investment into the sold business and accordingly an investment asset of £2 million is recognised as at 31 December 2019 (2018: £2 million).
Current assets
Total current assets decreased to £15.4 million (2018: £34.5 million) with £11.0 million of cash being returned to shareholders via the share repurchase during the year.
Total assets
Total assets decreased to £19.2 million (2018: £38.1 million) which includes £13.1 million (2018: £30.9 million) of cash.
Current liabilities
Total current liabilities decreased to £3.3 million (2018: £5.5 million) driven by trade payables decreasing to £0.3 million (2018: £2.2 million).
Non-current liabilities
Total non-current liabilities remained at £0.3 million year on year.
Net assets
Net assets decreased to £15.6 million (2018: £32.3 million).
Cash and cash flow
Operating cash outflow before working capital movement was £4.9 million (2018: £0.4 million inflow).
Operating cash outflow from operating activities after adjusting for working capital and tax was £4.7 million (2018: £0.9 million inflow).
The Group had investment outflows of £1.9 million (2018: £24.3 million inflow) due to cash flows associated with the RTLS SmartSpace business unit disposal and expenditure on capitalised software development costs.
Cash outflow from financing activities were £11.2 million (2018: £3.5 million) primarily due to the repurchase of share capital in September 2019.
Tim Gingell
Chief Financial Officer
6 March 2020
Consolidated income statement
for the year ended 31 December 2019
|
|
Notes |
2019 £'000 |
2018 £'000 |
|
|
Revenue |
5 |
7,806 |
9,979 |
|
|
Cost of revenues |
|
(4,563) |
(5,599) |
|
|
Gross profit |
|
3,243 |
4,380 |
|
|
Operating expenses |
|
(9,539) |
(5,971) |
|
|
Operating loss |
|
(6,296) |
(1,591) |
|
|
Analysed as: |
|
|
|
|
|
Gross profit |
|
3,243 |
4,380 |
|
|
Other operating expenses |
|
(8,091) |
(5,446) |
|
|
Adjusted EBITDA |
|
(4,848) |
(1,066) |
|
|
Depreciation |
13,14 |
(285) |
(273) |
|
|
Amortisation and impairment of other intangible assets |
12 |
(815) |
(774) |
|
|
Share option expense |
|
(102) |
(248) |
|
|
Unrealised foreign exchange gains/(losses) on intercompany trading balances |
|
(110) |
151 |
|
|
Non-recurring items |
9 |
(136) |
619 |
|
|
Operating loss |
|
(6,296) |
(1,591) |
|
|
Finance income |
8 |
72 |
1 |
|
|
Finance costs |
8 |
(10) |
(14) |
|
|
Loss before tax |
|
(6,234) |
(1,604) |
|
|
Income tax |
10 |
64 |
(39) |
|
|
Loss from continuing operations |
|
(6,170) |
(1,643) |
|
|
Profit from discontinued operations |
6 |
403 |
21,485 |
|
|
(Loss)/profit for the year |
|
(5,767) |
19,842 |
|
|
(Loss)/profit attributable to: |
|
|
|
|
|
Equity shareholders of the Company |
|
(5,767) |
19,842 |
|
|
Non-controlling interest |
|
- |
- |
|
|
(Loss)/profit for the year |
|
(5,767) |
19,842 |
|
|
Loss per share - continuing operations |
|
|
|
|
|
Basic |
11 |
(9.4p) |
(2.2p) |
|
|
Diluted |
11 |
(9.4p) |
(2.2p) |
|
Consolidated statement of comprehensive income
for the year ended 31 December 2019
|
|
2019 £'000 |
2018 £'000 |
|
Loss from continued operations |
(6,170) |
(1,643) |
|
Profit from discontinued operations |
403 |
21,485 |
|
(Loss)/profit for the year |
(5,767) |
19,842 |
|
Other comprehensive income: |
|
|
|
Items that may be reclassified subsequently to profit and loss |
|
|
|
Exchange difference on retranslation of net assets and results of overseas subsidiaries from continuing operations |
5 |
(50) |
|
Reclassification to income statement for discontinued operations |
- |
216 |
|
Total comprehensive (loss)/profit for the year |
(5,762) |
20,008 |
|
Attributable to: |
|
|
|
Equity shareholders of the Company |
(5,762) |
20,008 |
|
Non-controlling interest |
- |
- |
|
Total comprehensive (loss)/profit for the year |
(5,762) |
20,008 |
Consolidated statement of changes in equity
for the year ended 31 December 2019
|
|
|
Attributable to equity shareholders of the parent company |
|
|
||||||
|
|
Share capital £'000 |
Share premium £'000 |
Share based payment reserve £'000 |
Translation reserve £'000 |
Capital redemption reserve £000 |
Retained earnings £'000 |
Sub-total £'000 |
Non-controlling interest £'000 |
Total £'000 |
|
|
Balance at 1 January 2018 |
1,462 |
46,375 |
1,139 |
(2,037) |
- |
(35,260) |
11,679 |
434 |
12,113 |
|
|
Profit for the year |
- |
- |
- |
- |
- |
19,842 |
19,842 |
- |
19,842 |
|
|
Recycled translation reserve |
- |
- |
- |
216 |
- |
- |
216 |
- |
216 |
|
|
Exchange difference on retranslation of net assets and results of overseas subsidiaries |
- |
- |
- |
(50) |
- |
- |
(50) |
- |
(50) |
|
|
Total comprehensive profit for the year |
- |
- |
- |
166 |
- |
19,842 |
20,008 |
- |
20,008 |
|
|
Lapse of share options |
- |
- |
(725) |
- |
- |
725 |
- |
- |
- |
|
|
Reserve credit for equity-settled share-based payment |
- |
- |
303 |
- |
- |
- |
303 |
- |
303 |
|
|
Acquisition of non-controlling interest |
- |
- |
- |
- |
- |
282 |
282 |
(434) |
(152) |
|
|
Transactions with owners |
- |
- |
(422) |
- |
- |
1,007 |
585 |
(434) |
151 |
|
|
Balance at 31 December 2018 |
1,462 |
46,375 |
717 |
(1,871) |
- |
(14,411) |
32,272 |
- |
32,272 |
|
|
Loss for the year |
- |
- |
- |
- |
- |
(5,767) |
(5,767) |
- |
(5,767) |
|
|
Exchange difference on retranslation of net assets and results of overseas subsidiaries |
- |
- |
- |
5 |
- |
- |
5 |
- |
5 |
|
|
Total comprehensive loss for the year |
- |
- |
- |
5 |
- |
(5,767) |
(5,762) |
- |
(5,762) |
|
|
Capital reduction |
- |
(28,948) |
- |
- |
|
28,948 |
- |
- |
- |
|
|
Repurchase and cancellation of shares |
(476) |
- |
- |
- |
476 |
(10,950) |
(10,950) |
- |
(10,950) |
|
|
Exercise of share options |
4 |
27 |
(6) |
- |
- |
6 |
31 |
- |
31 |
|
|
Lapse of share options |
- |
- |
(60) |
- |
- |
60 |
- |
- |
- |
|
|
Reserve debit for equity-settled share-based payment |
- |
- |
(19) |
- |
- |
- |
(19) |
- |
(19) |
|
|
Transactions with owners |
(472) |
(28,921) |
(85) |
- |
476 |
18,064 |
(10,938) |
- |
(10,938) |
|
|
Balance at 31 December 2019 |
990 |
17,454 |
632 |
(1,866) |
476 |
(2,114) |
15,572 |
- |
15,572 |
|
Consolidated statement of financial position
for the year ended 31 December 2019
|
|
Notes |
2019 £'000 |
2018 £'000 |
|
Assets |
|
|
|
|
Intangible assets |
12 |
1,596 |
1,235 |
|
Property, plant and equipment |
13 |
86 |
84 |
|
Right of use assets |
14 |
73 |
304 |
|
Investments |
15 |
2,000 |
2,000 |
|
Total non-current assets |
|
3,755 |
3,623 |
|
Current assets |
|
|
|
|
Trade and other receivables |
16 |
2,353 |
3,586 |
|
Corporation tax receivable |
|
16 |
- |
|
Cash and cash equivalents |
17 |
13,053 |
30,915 |
|
Total current assets |
|
15,422 |
34,501 |
|
Total assets |
|
19,177 |
38,124 |
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
18 |
(3,241) |
(5,080) |
|
Current tax liabilities |
|
- |
(232) |
|
Lease obligation |
19 |
(79) |
(232) |
|
Total current liabilities |
|
(3,320) |
(5,544) |
|
Non-current liabilities |
|
|
|
|
Deferred income tax liabilities |
10 |
(285) |
(231) |
|
Lease obligation |
19 |
- |
(77) |
|
Total non-current liabilities |
|
(285) |
(308) |
|
Total liabilities |
|
(3,605) |
(5,852) |
|
Net assets |
|
15,572 |
32,272 |
|
Equity attributable to owners of the parent company |
|
|
|
|
Ordinary share capital |
20 |
990 |
1,462 |
|
Share premium |
20 |
17,454 |
46,375 |
|
Share based payment reserve |
|
632 |
717 |
|
Capital redemption reserve |
|
476 |
- |
|
Translation reserve |
|
(1,866) |
(1,871) |
|
Retained earnings |
|
(2,114) |
(14,411) |
|
Equity attributable to shareholders of the Company |
|
15,572 |
32,272 |
Consolidated statement of cash flows
for the year ended 31 December 2019
|
|
Notes |
2019 £'000 |
2018 £'000 |
|
Operating activities |
|
|
|
|
Loss before tax from continuing operations |
|
(6,234) |
(1,604) |
|
Gain/(loss) before tax from discontinued operations |
|
161 |
(824) |
|
Loss before tax |
|
(6,073) |
(2,428) |
|
Adjustments for: |
|
|
|
|
Depreciation |
13,14 |
285 |
1,081 |
|
Amortisation and impairment |
12 |
815 |
2,025 |
|
Loss on the disposal of property, plant and equipment |
|
- |
14 |
|
Revaluation of intercompany balances |
|
110 |
(151) |
|
Share-based payment charge |
|
(19) |
303 |
|
Gain on sale of Japan business |
|
- |
(619) |
|
Finance income |
8 |
(72) |
(8) |
|
Finance costs |
8 |
10 |
156 |
|
Operating cash flows before working capital movement |
|
(4,944) |
373 |
|
Change in inventories |
|
- |
198 |
|
Change in receivables |
|
388 |
2,012 |
|
Change in payables |
|
(10) |
(2,071) |
|
Cash generated from operations before tax |
|
(4,566) |
512 |
|
Net income taxes received/(paid) |
|
(124) |
407 |
|
Net cash flows from operating activities |
|
(4,690) |
919 |
|
Cash flows from investing activities |
|
|
|
|
Purchases of property, plant and equipment |
|
(56) |
(316) |
|
Expenditure on intangible assets |
|
(1,176) |
(1,844) |
|
Cash received on sale of the RTLS SmartSpace business unit |
|
1,060 |
28,882 |
|
Cash in RTLS SmartSpace business unit at disposal |
|
- |
(2,313) |
|
Disposal costs in relation to the RTLS SmartSpace business unit |
|
(1,839) |
(704) |
|
Sale of Japan Geospatial third-party services business |
|
- |
569 |
|
Interest received |
|
72 |
8 |
|
Net cash flows from investing activities |
|
(1,939) |
24,282 |
|
Cash flows from financing activities |
|
|
|
|
Repayment of borrowings |
|
- |
(2,500) |
|
Interest paid |
|
(2) |
(73) |
|
Payment of lease liability |
|
(238) |
(743) |
|
Purchase of non-controlling interest |
|
- |
(152) |
|
Repurchase of ordinary share capital |
|
(10,950) |
- |
|
Proceeds from the issue of ordinary share capital |
|
31 |
- |
|
Net cash flows from financing activities |
|
(11,159) |
(3,468) |
|
Net increase in cash and cash equivalents |
|
(17,788) |
21,733 |
|
Cash and cash equivalents at start of period |
|
30,915 |
9,114 |
|
Exchange differences on cash and cash equivalents |
|
(74) |
68 |
|
Cash and cash equivalents at end of period |
17 |
13,053 |
30,915 |
Notes to the consolidated financial statements
1 General information
IQGeo Group plc ("the Company") and its subsidiaries (together, "the Group") delivers geospatial software solutions that integrate data from any source - geographic, real-time asset, GPS, location, corporate and external cloud-based sources - into a live geospatial common operating picture, empowering all users in the customer's organisation to access, input and analyse operational intelligence to proactively manage their networks, respond quickly to emergency events and effectively manage day-to-day operations.
The Company is a public limited company which is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange (IQG) and is incorporated and domiciled in the United Kingdom. The value of IQGeo Group plc shares, as quoted on the London Stock Exchange at 31 December 2019, was 57.5 pence per share (31 December 2018: 67.5 pence).
The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to Ubisense Group plc on 31 May 2011 ahead of its initial public offering and listing on AIM on 22 June 2011. Following the sale of its RTLS SmartSpace business unit the Company changed its name to IQGeo Group plc on 2 January 2019 with its subsidiaries also changing name to IQGeo. The address of its registered office is CB1 Business Centre, 20 Station Road, Cambridge CB1 2JD.
The Group has its operations in the UK, USA, Canada, Germany and Japan, and sells its products and services in North America, Japan, UK and Europe. The Group legally consists of six subsidiary companies headed by IQGeo Group plc.
The consolidated financial statements have been approved for issue by the Board of Directors on 6 March 2020.
2 New accounting standards
For the purposes of the preparation of the consolidated financial statements, the Group has applied all standards and interpretations as adopted in the European Union that are effective and applicable for accounting periods beginning on or before 1 January 2019.
The accounting policies used are the same as set out in detail in the Report and Accounts 2018 and have been applied consistently to all periods presented in the financial statements.
IFRS 16 'Leases' became mandatory for adoption on 1 January 2019 and was early adopted from 1 January 2018. There were no other new standards or amendments or interpretations to existing standards that became effective during the year that were material to the Group.
No new standards, amendments or interpretations to existing standards having an impact on the financial statements that have been published and that are mandatory for the Group's accounting periods beginning on or before 1 January 2020, or later periods, have been adopted early.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet to become mandatory and have not been applied in the Group's financial statements, are not expected to have a material impact on the Group's financial statements.
• IFRS17 Insurance contracts
• Definition of a business (Amendment to IFRS 3)
• Definition of material (Amendment to IAS1 and IAS8)
3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of IQGeo Group plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (IFRSs as adopted by the EU) and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements are presented in GBP and all values are rounded to the nearest thousand pounds (£'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 consolidated financial statements, are disclosed in note 4.
Going concern basis
In determining the basis for preparing the consolidated financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the consolidated financial statements.
Management prepares detailed cashflow forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding the opportunity funnel from both existing and new clients, growth plans, risks and mitigating actions. In particular operating cashflow and profitability are highly sensitive to revenue mix and the positive contribution of continuing growth in software sales whether on a perpetual licence or subscription basis.
In reaching their going concern conclusion, the Directors have considered that the Group had cash of £13.1 million, with nil bank debt as at 31 December 2019 and sufficient working capital to continue operations.
The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. The Group, therefore, continues to adopt the going concern basis in preparing the consolidated financial statements.
Consolidation
The Group financial statements include the results, financial position and cash flows of the Company and all of its subsidiary undertakings. Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when the Company has the power to govern the financial and operating policies of an entity, uses this power to affect the returns from that entity and has exposure to variable returns from its investment in the entity.
Financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies. Businesses acquired or disposed during the year are accounted for using acquisition method principles from, or up to, the date control passed. Intra-group transactions and balances are eliminated on consolidation. All subsidiaries use uniform accounting policies for like transactions and other events and similar circumstances.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interest's share of changes in equity since the date of combination.
Foreign currencies
a. Functional and presentation currency
The functional currency of each Group entity is the currency of the primary economic environment in which each entity operates. The consolidated financial statements are presented in GBP.
b. Transactions and balances
Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the period end date. Such exchange differences are included in the income statement within "operating expenses". Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
c. Consolidation
For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of which have the currency of a hyperinflationary economy) that have a functional currency other than GBP are translated into GBP as follows:
· assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date;
· income and expenses for each income statement are translated at the exchange rate ruling at the time of each period the transaction occurred; and
· all resulting exchange differences are recognised in other comprehensive income.
Business reporting
IFRS 8 requires a "management approach" under which information in the financial statements is presented on the same basis as that used for internal management reporting purposes.
The Group is organised on a global basis for its Geospatial business following the sale of its RTLS SmartSpace business unit on 31 December 2018. The Directors believe that the Chief Operating Decision Maker (CODM) is the Chief Executive Officer of the Group. The CODM and the rest of the Board are provided with information on the Geospatial business as a single business unit to assess its financial performance.
The internal management accounting information is prepared on an IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary measure of profit and this is reported on the face of the income statement.
Revenue recognition
Revenue represents the fair value of consideration received or receivable for the sales of goods and services net of discounts and sales taxes. Revenue is recognised based on the distinct performance obligations under the relevant customer contract as set out below. Where goods and/or services are sold in a bundled transaction or on a subscription basis, the Group allocates the total consideration under the contract to the different individual elements based on actual amounts charged by the Group on a standalone basis.
Software
Revenue earned from software sales under perpetual licence agreements with maintenance and support is recognised when the software is made available to the customer for use.
If contracts include performance obligations which result in software being customised or altered, the software cannot be considered distinct from the labour service. Revenue recognition is dependent on the contract terms and assessment of whether the performance obligation is satisfied over time. If the conditions of IFRS15 to recognise revenue over time are not satisfied, revenue is deferred until the software is available for customer use.
Maintenance and support
Maintenance and support is recognised on a straight-line basis over the term of the contract, which is typically one year. Revenue not recognised in the consolidated income statement is classified as deferred revenue on the consolidated statement of financial position.
Subscription
Software sold on a non perpetual basis consists of two performance obligations: a licence obligation for the temporary right to use the software and a post contract customer support obligation for the right to receive updates, enhancements, error corrections and support throughout the contracted term. The customer obtains the right to use the software once the licence has been delivered and the licence period starts. Revenue for the licence obligation is recognised at the point in time when the licence is delivered, whereas the maintenance and support obligation is satisfied over time and the associated revenue recognised on a straight-line basis over the term of the contract. Revenue not recognised in the consolidated income statement is classified as deferred revenue in the consolidated statement of financial position.
Services
Services revenue includes consultancy and training. Services revenue from time and materials contracts is recognised in the period that the services 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 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.
Timing of payment
Maintenance and support income and subscription income is invoiced annually in advance at the commencement of the contract period. Other revenue is invoiced based on the contract terms in accordance with performance obligations. Amounts recoverable in contracts (contract assets) relate to our conditional right to consideration for completed performance obligations under the contract prior to invoicing. Deferred income (contract liabilities) relates to amounts invoiced in advance of services performed under the contract.
Employee benefits
a. Retirement benefits
The Group operates various defined contribution pension arrangements for its employees.
For defined contribution pension arrangements, the amount charged to the income statement represents the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the statement of financial position.
b. Share-based payments
The Group issues equity-settled share-based payments to certain employees. Vesting conditions are continuing employment and can include, for senior employees, a diluted EPS performance target or share price target. Equity-settled share-based payments are measured at fair value at the date of grant using an appropriate pricing model. The fair value is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity in the share-based payment reserve. Non market vesting conditions include assumptions about the number of options expected to vest.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material one-off items of income or expense that have been shown separately due to the significance of their nature or amount and do not reflect the ongoing cost base or revenue-generating ability of the Group.
Interest income and expense
Interest income and expense is included in the income statement on a time basis, using the effective interest method by reference to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:
a. Current tax
The current tax charge represents an estimate of the amounts payable or receivable to or from tax authorities in respect of the Group's taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit before tax as reported in the income statement because it excludes certain items of income and expense that are taxable or deductible in other years or are never taxable or deductible. Taxation received is recognised only when it is probable that the Group is entitled to the asset.
b. Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the reporting date. Deferred tax is recognised as a component of tax expense in the income statement, except where it relates to items charged or credited directly to other comprehensive income or equity when it is recognised in other comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their provisional fair values at the acquisition date. Fair values are reassessed during the measurement period and updated if required. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the net fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses.
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is only capitalised if all of the following conditions are met:
· completion of the intangible asset is technically feasible so that it will be available for use or sale;
· the Group intends to complete the intangible asset and use or sell it;
· the Group has the ability to use or sell the intangible asset;
· the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;
· there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
· the expenditure attributable to the intangible asset during its development can be measured reliably.
Internally-generated intangible assets, consisting mainly of direct labour costs, are amortised on a straight-line basis over their useful economic lives. Amortisation is shown within administrative expenses in the income statement. The estimated useful lives of current development projects are three years. Upon completion the assets are subject to impairment testing if impairment triggers are identified, based on expected future sales.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences that do not form an integral part of related hardware, are capitalised at cost and amortised on a straight-line basis over their useful economic life which is typically 3 years.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged to the income statement so as to write off the cost or valuation less estimated residual values over their expected useful lives on a straight-line basis over the following periods:
· Fixtures and fittings: three to ten years, or period of the lease if shorter
· Computer equipment: three years
Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in operating expenses.
Leased assets
The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is, or contains, a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
• the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group
• the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
• the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been presented as non-current assets and lease liabilities have been included in trade and other payables.
Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill - are not subject to amortisation and are tested at least annually for impairment and whenever there is an indication that the asset may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• amortised cost;
• fair value through profit or loss (FVTPL); and
• fair value through other comprehensive income (FVOCI).
The classification is determined by both:
• the entity's business model for managing the financial asset; and
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than 'hold to collect' or 'hold to collect and sell' are categorised at fair value through profit and loss. Further, irrespective of business model, financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL.
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.
Investments
As part of the sale transaction of the RTLS business unit on 31 December 2018, the Group holds a rollover equity investment in Abyssinian Topco Limited (registered number: 11650137) which following the transaction, is the parent company of the RTLS SmartSpace business unit.
The Group has made the irrevocable election to account for the investment in Abyssinian Topco Limited at fair value through other comprehensive income (FVOCI). In the current financial year, the fair value was determined in line with the requirements of IFRS 9, which does not allow for measurement at cost.
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.
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.
The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past du e .
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in the profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
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.
Cash and cash equivalents
In the consolidated statement of cashflows, 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.
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.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and the amounts paid over the nominal value in respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by the Company to the Group's employees under its employee share option plans.
Capital redemption reserve
The capital redemption reserve relates to the repurchase and subsequent cancellation of issued ordinary share capital.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency of GBP, are recognised directly in other comprehensive income and accumulated in the translation reserve.
Retained earnings
Retained Earnings include all current and prior period retained profits/losses.
Non-controlling interests
Non-controlling interests, presented as part of equity, represent a proportion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the assets of the parent and the non-controlling interests based on their respective ownership interests.
4 Critical accounting judgements and key sources of estimation and uncertainty
When preparing the financial statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are the judgements made by management in applying the accounting policies of the Group that have the most significant effect on the financial statements.
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 2019 is £1.5 million (2018: £1.2 million). After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.
Revenue recognition
Significant management judgement is applied in determining the distinct performance obligations included within contracts involving multiple deliverables. Additionally, for each identified significant performance obligation management are required to determine which obligations meet the criteria to recognise revenue over time.
As revenue from fixed price services agreements is recognised over time, the amount of revenue recognised in a reporting period depends on the extent to which the performance obligation has been satisfied. This requires an estimate of the time and value to deliver the services to be provided, based on historical experience with similar contracts. In a similar way, recognising revenue requires the estimated number of hours required to complete the promised work.
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.
Recognition of earn-out consideration
On 31 December 2018 the Group disposed of its RTLS SmartSpace business unit for a consideration of up to £35.0 million with £30.0 million paid in cash on completion (subject to adjustments for net debt and net working capital) in addition to a £2 million roll over investment and further £3.0 million earn out consideration .
The earn-out consideration of £3.0 million is subject to the RTLS SmartSpace business unit meeting the following milestones;
· £1.5 million is payable if revenue achieved for the year ended 31 December 2018 is £16.4 million. This milestone was not met.
· £1.5 million is payable if revenue achieved for the year ended 31 December 2019 is £22.0 million.
· If the first milestone is not met, the full £3.0 million will be paid if the revenue for the 2019 period meets the 2019 target plus the shortfall of the target of the 2018 period. Accordingly, the full £3.0 million earn-out would be achieved if the 2019 revenue for the RTLS SmartSpace business exceeds £22.9 million.
While the achievement of an additional £3.0 million earnout cash consideration remains possible, no contingent asset has been recognised within the statement of financial position as at 31 December 2019. Management believe that this is appropriate as achievement of the milestones is dependent on the new management team's strategy and performance, over which IQGeo have no influence as a minority shareholder. IQGeo have not been informed of the final consolidated results for the year ended 31 December 2019 of the RTLS SmartSpace business unit (Ubisense Limited) as at the release date of this report.
Estimating uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Amortisation and impairment of development costs
Capitalised development costs are amortised over a three year period which is management's estimate of the useful lives of current development projects. In reaching this conclusion, management have made assumptions in respect of future customer requirements and developments within the industry. These estimates have a high level of uncertainty and are matters outside of management's control.
The Group reviews capitalised development costs for impairment annually in accordance with the accounting policy stated in note 3. In performing the impairment review, management is required to make assumptions of the future cash flows generated from the software products. This includes consideration of both the current business pipeline and estimations beyond the existing pipeline. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate.
5 Business information
5.1 Operating segments
Management provides information reported to the Chief Operating Decision Maker (CODM) for the purpose of assessing performance and allocating resources. The CODM is the Chief Executive Officer.
The business delivers software solutions that integrate data from any source - geographic, real-time asset, GPS, location, corporate and external cloud-based sources - into a live geospatial common operating picture, empowering all users in the customer's organisation to access, input and analyse operational intelligence to proactively manage their networks, respond quickly to emergency events and effectively manage day-to-day operations. These geospatial operations are reported to the CODM as a single business unit.
The performance of the discontinued RTLS SmartSpace business unit which was disposed of on 31 December 2018 is disclosed within note 6.
5.2 Revenue by type of the continuing operations
The following table presents the different revenue streams of the Geospatial business unit:
|
Revenue of continuing Geospatial operations |
2019 £'000 |
% of total revenue |
2018 £'000 |
% of total revenue |
|
Software |
1,589 |
20% |
1,395 |
14% |
|
Maintenance and support |
1,251 |
16% |
918 |
9% |
|
Subscription |
381 |
5% |
- |
0% |
|
Services |
2,328 |
30% |
2,424 |
24% |
|
Total revenue generated from IQGeo own products |
5,549 |
71% |
4,737 |
47% |
|
Geospatial services from third party products |
2,257 |
29% |
5,242 |
53% |
|
Total revenue |
7,806 |
100% |
9,979 |
100% |
5.3 Geographical areas of continuing operations
The Board and Management Team also review the revenues on a geographical basis, based around the regions where the Group has its significant subsidiaries or markets.
The Group's revenue from external customers in the Group's domicile, the UK, and its major worldwide markets have been identified on the basis of the customers' geographical location. Non-current assets are allocated based on their physical location.
The following table represents the Group's continuing operational revenue and non-current assets by geographical region:
|
|
Revenue |
|
Non-current assets |
||
|
|
2019 £'000 |
2018 £'000 |
|
2019 £'000 |
2018 £'000 |
|
UK |
95 |
- |
|
3,630 |
3,252 |
|
Europe |
169 |
17 |
|
1 |
1 |
|
USA |
5,897 |
7,041 |
|
121 |
364 |
|
Canada |
1,164 |
1,596 |
|
2 |
4 |
|
Japan |
461 |
1,302 |
|
1 |
2 |
|
Rest of World |
20 |
23 |
|
- |
- |
|
|
7,806 |
9,979 |
|
3,755 |
3,623 |
The main country of operation of the Group is the United States of America as this is where the majority of revenue is generated.
2019 revenues include £0.9 million from income deferred at the beginning of the period (2018: £1.4 million) relating to performance obligations satisfied overtime.
5.4 Information about major customers of the continuing operations
During 2019, the Group had one customer who generated revenues of greater than 10% of total Geospatial revenue. £1.8 million was generated from one US customer.
During 2018, the Group had one customer who generated revenues of greater than 10% of total Geospatial revenue. £3.1 million was generated from one US customer.
6 Discontinued operations
On 31 December 2018 the Group disposed of its RTLS SmartSpace business unit for a consideration of up to £35.0 million with £30.0 million paid in cash on completion (subject to adjustments for net debt and net working capital) in addition to a £2 million roll over investment and further £3.0 million earn out consideration.
The disposal of the RTLS SmartSpace business followed reorganisation involving the creation of new legal entities within the UK, USA, Canada, Germany and Japan regions. The Group completed a reorganisation whereby the trade and assets of the RTLS SmartSpace and Geospatial business units were separated into different legal entities in each country. The restructured RTLS SmartSpace group of legal entities, headed by Ubisense Limited, was disposed of on 31 December 2018. Central functions such as finance and IT were allocated between the RTLS SmartSpace and Geospatial legal entities so that both divisions could continue trading post disposal. This was supported through a transition services agreement between IQGeo and the discontinued business.
The earn-out consideration of £3.0 million is subject to the RTLS SmartSpace business unit meeting the following milestones:
· £1.5 million is payable if revenue achieved for the year ended 31 December 2018 is £16.4 million. This milestone was not met.
· £1.5 million is payable if revenue achieved for the year ended 31 December 2019 is £22.0 million.
· If the first milestone is not met, the full £3.0 million will be paid if the revenue for the 2019 period meets the 2019 target plus the shortfall of the target of the 2018 period. Accordingly, the full £3.0 million earn-out would be achieved if the 2019 revenue for the RTLS SmartSpace business exceeds £22.9 million.
While the achievement of an additional £3.0 million earnout cash consideration remains possible, no contingent asset has been recognised within the statement of financial position as at 31 December 2019. Management believe that this is appropriate as achievement of the milestones is dependent on the new management team's strategy and performance, over which IQGeo have no influence as a non-controlling shareholder. IQGeo have not been informed of the final results for the year ended 31 December 2019 of the RTLS SmartSpace business unit as at the release date of this report.
The following information is attributable to the RTLS SmartSpace business unit:
6.1 Income statement for the year ended 31 December 2019
|
|
|
2019 £'000 |
2018 £'000 |
|
Revenue |
|
- |
15,519 |
|
Cost of revenues |
|
- |
(7,402) |
|
Gross profit |
|
- |
8,117 |
|
Operating expenses |
|
161 |
(8,804) |
|
Operating profit/(loss) |
|
161 |
(687) |
|
Analysed as: |
|
|
|
|
Gross profit |
|
- |
8,117 |
|
Other operating expenses |
|
- |
(6,204) |
|
Adjusted EBITDA |
|
- |
1,913 |
|
Depreciation |
|
- |
(808) |
|
Amortisation and impairment of other intangible assets |
|
- |
(1,251) |
|
Share option expense |
|
121 |
(55) |
|
Reorganisation costs |
|
40 |
(486) |
|
Operating profit/(loss) |
|
161 |
(687) |
|
Finance income |
|
- |
7 |
|
Finance costs |
|
- |
(144) |
|
Profit/(loss) before tax |
|
161 |
(824) |
|
Income tax |
|
- |
(57) |
|
Profit/(loss) from discontinued operations prior to gain on disposal |
|
161 |
(881) |
|
Gain on disposal of the RTLS SmartSpace business unit |
|
242 |
22,366 |
|
Profit/(loss) from discontinued operations |
|
403 |
21,485 |
The gain on disposal of the RTLS SmartSpace business unit discontinued operations is summarised as follows;
|
|
2019 £'000 |
2018 £'000 |
|
Consideration received or receivable: |
|
|
|
Cash received (as presented within the statement of consolidated cashflows) |
- |
28,882 |
|
Roll over investment in RTLS SmartSpace business unit |
- |
2,000 |
|
Amounts receivable on finalisation of completion accounts |
214 |
846 |
|
Total disposal consideration |
214 |
31,728 |
|
Consideration used to settle HSBC debt on 31 December 2018 |
- |
(1,753) |
|
Carrying value of net assets sold |
- |
(4,804) |
|
Transaction costs incurred |
38 |
(1,888) |
|
Accrued bonuses in respect of the transaction completion |
(10) |
(701) |
|
Gain on sale before income tax and reclassification of foreign currency reserve |
242 |
22,582 |
|
Reclassification of foreign currency reserve |
- |
(216) |
|
Gain on disposal of the RTLS SmartSpace business unit |
242 |
22,366 |
6.2 Cashflows from discontinued operations
|
|
2019 £'000 |
2018 £'000 |
|
Net cash inflow/(outflow) from operating activities |
- |
(599) |
|
Net cash inflow/(outflow) from investing activities: |
|
|
|
Purchase of property, plant and equipment |
- |
(245) |
|
Expenditure on intangible assets |
- |
(985) |
|
Cash received on sale of the RTLS SmartSpace business unit |
1,060 |
28,882 |
|
Cash in RTLS SmartSpace business unit at disposal |
- |
(2,313) |
|
Disposal costs in relation to the RTLS SmartSpace business unit |
(1,839) |
(704) |
|
Interest received |
- |
7 |
|
Total net cash inflow/(outflow) from investing activities: |
(779) |
24,642 |
|
Net cash inflow/(outflow) from financing activities: |
|
|
|
Repayment of bank debt |
- |
(2,500) |
|
Repayment of lease liability |
- |
(518) |
|
Interest paid |
- |
(71) |
|
Total net cash inflow/(outflow) from financing activities: |
- |
(3,089) |
7 Employee information
7.1 Employee numbers of continuing operations
The average monthly number of people, including Executive Directors, employed by the Group during the year was:
|
|
Actual number of people as at 31 December |
|
Average monthly number of people |
||
|
By activity |
2019 Number |
2018 Number |
|
2019 Number |
2018 Number |
|
Technical consultants |
21 |
24 |
|
20 |
30 |
|
Sales & marketing |
23 |
18 |
|
24 |
20 |
|
Research & development |
16 |
7 |
|
13 |
7 |
|
Administration |
11 |
10 |
|
11 |
10 |
|
|
71 |
59 |
|
68 |
67 |
|
By geography |
2019 Number |
2018 Number |
|
2019 Number |
2018 Number |
|
United Kingdom |
17 |
15 |
|
17 |
16 |
|
Europe |
4 |
1 |
|
4 |
1 |
|
North America |
47 |
40 |
|
44 |
41 |
|
Asia |
3 |
3 |
|
3 |
9 |
|
|
71 |
59 |
|
68 |
67 |
7.2 Employee benefits of continuing operations
The aggregate employee benefit expense, including Executive Directors, comprised:
|
|
Notes |
2019 £'000 |
2018 £'000 |
|
Wages and salaries |
|
7,872 |
6,395 |
|
Social security costs |
|
523 |
482 |
|
Contributions to defined contribution pension arrangements |
|
355 |
288 |
|
Share-based payments |
|
102 |
248 |
|
Total aggregate employee benefits |
|
8,852 |
7,413 |
8 Finance income and costs of continuing operations
|
|
2019 £'000 |
2018 £'000 |
|
Interest income from cash and cash equivalents |
72 |
1 |
|
Finance income |
72 |
1 |
|
Interest expense for lease arrangements |
(10) |
(14) |
|
Finance costs |
(10) |
(14) |
|
Net finance costs |
62 |
(13) |
9 Loss before tax: analysis of expenses by nature
9.1 Expenses by nature of continuing operations
The following items have been charged/ (credited) to the income statement in arriving at a gain before tax:
|
|
Notes |
2019 £'000 |
2018 £'000 |
|
Amortisation and impairment of other intangible assets |
12 |
815 |
774 |
|
Depreciation of owned property, plant and equipment |
13 |
57 |
57 |
|
Depreciation of right of use assets |
14 |
228 |
216 |
|
Lease rental charges - land and buildings |
19 |
221 |
- |
|
Research & development costs expensed |
|
238 |
95 |
|
Net foreign currency (gains)/losses |
|
(38) |
(89) |
|
Unrealised foreign exchange (gains)/losses on intercompany trading balances |
|
110 |
(151) |
|
Non-recurring items |
9.2 |
136 |
(619) |
9.2 Non-recurring items from continuing operations
|
|
2019 £'000 |
2018 £'000 |
|
Capital reduction |
136 |
- |
|
Sale of Japan geospatial third party services business |
- |
(619) |
|
Total non-recurring items |
136 |
(619) |
Capital reduction
On 2 August 2019, the Company announced a proposed tender offer to repurchase up to a maximum of 28,260,869 of the Company's Ordinary Shares at a price of 46 pence per Ordinary Share. Following approval of the tender offer by a General Meeting of shareholders on 22 August 2019, the tender offer completed on 30 August 2019, resulting in the share capital reducing by 23,803,690 and £10,950,000 of surplus funds being returned to shareholders in September 2019.
Sale of Japan geospatial third party services business
On 30 March 2018 the Group sold its Japan third party geospatial services including the Geoplan brand name for a gross consideration of JPY 100 million (£0.7 million). This has been credited to the income statement in arriving at a gain before tax.
Alongside this transaction, the 23% non-controlling interest of Geoplan Company Limited was acquired. The acquisition of this non-controlling interest gave the Group 100% ownership of its remaining Japanese operations.
The sale of the Japan geospatial third party services business was not presented as a discontinued operation because these geospatial services will be provided to customers based in other regions of the Group's continuing operations. Additionally, the Japan geospatial operations will continue, albeit solely focused on selling IQGeo products and related services. The sold geospatial business did not represent a significant part of the global business at the time of disposal.
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:
|
|
2019 £'000 |
2018 £'000 |
|
Fees payable to the Group's auditor for the audit of: |
|
|
|
Parent Company and consolidated financial statements |
70 |
59 |
|
Financial statements of subsidiaries, pursuant to legislation |
10 |
70 |
|
Total audit fees |
80 |
129 |
|
Fees payable to the Group's auditor for other services: |
|
|
|
Tax advisory |
17 |
7 |
|
Tax services associated with the group reorganisation |
- |
179 |
|
Audit related assurance services |
21 |
14 |
|
Other services |
- |
- |
|
Total non-audit fees |
38 |
200 |
|
Total auditors' remuneration |
118 |
329 |
The auditor of IQGeo Group plc is Grant Thornton UK LLP.
10 Income tax
10.1 Income tax recognised in the income statement
|
|
|
2019 £'000 |
2018 £'000 |
|
Current tax - continuing operations |
|
|
|
|
Corporation tax |
|
- |
- |
|
Adjustment in respect of prior year |
|
118 |
213 |
|
Foreign tax |
|
- |
(238) |
|
Total current tax credit/(charge) |
|
118 |
(25) |
|
Deferred tax - continuing operations |
|
|
|
|
Origination and reversal of temporary differences |
|
(54) |
(14) |
|
Total deferred tax charge |
|
(54) |
(14) |
|
Total income tax credit/(charge) for the year - continuing operations |
|
64 |
(39) |
|
|
|
2019 £'000 |
2018 £'000 |
|
Current tax - discontinued operations |
|
|
|
|
Corporation tax |
|
- |
- |
|
Adjustment in respect of prior year |
|
- |
300 |
|
Foreign tax |
|
- |
(407) |
|
Total current tax charge |
|
- |
(107) |
|
Deferred tax - discontinued operations |
|
|
|
|
Origination and reversal of temporary differences |
|
- |
50 |
|
Total deferred tax credit |
|
- |
50 |
|
Total income tax charge for the year - discontinued operations |
|
- |
(57) |
|
Total income tax credit/(charge) for the year |
|
64 |
(96) |
The tax credit differs from the standard rate of corporation tax in the UK for the year of 19% (2018: 19%) for the following reasons:
|
|
2019 £'000 |
2018 £'000 |
|
Loss before tax - continuing operations |
(6,234) |
(1,604) |
|
Gain before tax from discontinued operations |
403 |
21,542 |
|
Total gain before tax |
(5,831) |
19,938 |
|
Loss before tax multiplied by the standard rate of corporation tax in the UK of 19.0% (2018: 19%) |
(1,108) |
3,788 |
|
Tax effects of: |
|
|
|
Expenses not deductible for tax purposes |
16 |
75 |
|
Income not subject to income tax |
(77) |
(2,138) |
|
Utilisation of previously unrecognised tax losses |
(24) |
(1,987) |
|
Unrecognised deferred tax movements |
1,371 |
256 |
|
Tax unprovided/(overprovided) in prior years |
(118) |
15 |
|
Research & development tax credits - prior years |
- |
(513) |
|
Difference on tax treatment of share options - unrecognised |
19 |
57 |
|
Differential on overseas tax rates |
(143) |
543 |
|
|
|
|
|
Total income tax debit/(credit) |
(64) |
96 |
10.2 Factors that may affect future tax charges
The Group has tax losses of £17.6 million (2018: £8.7 million) that are available for offset against future taxable profits of those subsidiary companies in which the tax losses arose. The increase in tax losses from the prior year is partially due to clarification of the tax implications of the Group reorganisation undertaken in 2018. 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.
The deferred tax balances have been measured at 19%, the rate of realisation expected.
10.3 Deferred tax
The movement in deferred tax in the Consolidated statement of financial position during the year is as follows:
|
|
Deferred income tax assets |
|
Deferred income tax liabilities |
|||
|
|
2019 £'000 |
2018 £'000 |
|
2019 £'000 |
2018 £'000 |
|
|
At 1 January |
- |
- |
|
(231) |
(516) |
|
|
Deferred tax credited to the income statement |
- |
- |
|
150 |
349 |
|
|
Deferred tax charged to the income statement |
- |
- |
|
(204) |
(313) |
|
|
Disposal of RTLS SmartSpace business unit |
- |
- |
|
- |
249 |
|
|
At 31 December |
- |
- |
|
(285) |
(231) |
|
The components of deferred tax included in the Consolidated statement of financial position are as follows:
|
|
2019 £'000 |
2018 £'000 |
|
Development costs capitalised |
(285) |
(231) |
|
Total deferred income tax liabilities |
(285) |
(231) |
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:
|
|
2019 £'000 |
2018 £'000 |
|
Tax losses carried forward |
3,396 |
1,549 |
|
Equity-settled share options temporary differences |
8 |
33 |
|
Total unrecognised deferred tax assets |
3,404 |
1,582 |
11 Earnings per share (EPS)
|
|
2019 |
2018 |
|
Earnings attributable to Ordinary Shareholders |
|
|
|
Loss from continuing operations |
(6,170) |
(1,643) |
|
Gain from discontinued operations |
403 |
21,485 |
|
(Loss)/gain from continuing and discontinued operations |
(5,767) |
19,842 |
|
Number of shares |
|
|
|
Weighted average number of ordinary shares for the purposes of basic EPS ('000) |
65,977 |
73,088 |
|
Effect of dilutive potential ordinary shares: |
|
|
|
- Share options ('000) |
67 |
257 |
|
Weighted average number of ordinary shares for the purposes of diluted EPS ('000) |
66,044 |
73,345 |
|
Continuing operations EPS |
|
|
|
Basic and diluted EPS (pence) |
(9.4) |
(2.2) |
|
Discontinued operations EPS |
|
|
|
Basic and diluted EPS (pence) |
0.6 |
29.4 |
|
Continuing and discontinued operations EPS |
|
|
|
Basic and diluted EPS (pence) |
(8.7) |
27.1 |
Basic earnings per share is calculated by dividing profit/(loss) for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the effects of all dilutive share options and warrants outstanding at the end of the year. Options have no dilutive effect in loss-making years and are therefore not classified as dilutive for Discontinued and Total EPS since their conversion to ordinary shares does not decrease earnings per share or increase loss per share from continuing operations.
The Group also presents an adjusted diluted earnings per share figure which excludes share-based payments charge, unrealised foreign exchange gains/(losses) on intercompany trading balances and non-recurring items from the measurement of loss for the period.
|
Continuing operations |
Notes |
2019 |
2018 |
|
|
Continued earnings for the purposes of diluted EPS being net loss attributable to equity holders of the parent company (£'000) |
|
(6,170) |
(1,643) |
|
|
Adjustments: |
|
|
|
|
|
Reversal of share-based payments charge (£'000) |
|
102 |
248 |
|
|
Unrealised foreign exchange gains/(losses) on intercompany trading balances |
|
110 |
(151) |
|
|
Reversal of non-recurring items (£'000) |
9 |
136 |
(619) |
|
|
Net adjustments (£'000) |
|
348 |
(522) |
|
|
Adjusted earnings (£'000) |
|
(5,822) |
(2,165) |
|
|
Adjusted diluted EPS from continuing operations (pence) |
|
(8.8) |
(3.0) |
|
The adjusted EPS information is considered to provide a fairer representation of the Group's trading performance. Options have no dilutive effect in loss-making years.
12 Intangible assets
|
|
Goodwill £'000 |
Acquired customer relationships and order backlog £'000 |
Acquired software products £'000 |
Capitalised product development costs £'000 |
Software £'000 |
Total £'000 |
|
Cost |
|
|
|
|
|
|
|
At 1 January 2018 |
8,805 |
2,240 |
650 |
15,936 |
1,407 |
29,038 |
|
Exchange difference |
- |
- |
- |
- |
85 |
85 |
|
Additions |
- |
- |
- |
1,650 |
194 |
1,844 |
|
Disposal of RTLS SmartSpace business unit |
(3,256) |
- |
- |
(11,139) |
(355) |
(14,750) |
|
Disposal of Japan geospatial services business |
(2,579) |
(2,240) |
(650) |
- |
(403) |
(5,872) |
|
Disposal - other |
- |
- |
- |
- |
(906) |
(906) |
|
At 31 December 2018 |
2,970 |
- |
- |
6,447 |
22 |
9,439 |
|
Additions |
- |
- |
- |
1,074 |
102 |
1,176 |
|
At 31 December 2019 |
2,970 |
- |
- |
7,521 |
124 |
10,615 |
|
Accumulated amortisation |
|
|
|
|
|
|
|
At 1 January 2018 |
(8,805) |
(2,240) |
(650) |
(13,220) |
(1,161) |
(26,076) |
|
Effects of movement in exchange rates |
- |
- |
- |
- |
(79) |
(79) |
|
Charge for the year |
- |
- |
- |
(1,839) |
(186) |
(2,025) |
|
Disposal of RTLS SmartSpace business unit |
3,256 |
- |
- |
9,825 |
144 |
13,225 |
|
Disposal of Japan geospatial services business |
2,579 |
2,240 |
650 |
- |
376 |
5,845 |
|
Disposal - other |
- |
- |
- |
- |
906 |
906 |
|
At 31 December 2018 |
(2,970) |
- |
- |
(5,234) |
- |
(8,204) |
|
Charge for the year |
- |
- |
- |
(788) |
(27) |
(815) |
|
At 31 December 2019 |
(2,970) |
- |
- |
(6,022) |
(27) |
(9,019) |
|
Net book amount |
|
|
|
|
|
|
|
At 31 December 2019 |
- |
- |
- |
1,499 |
97 |
1,596 |
|
At 31 December 2018 |
- |
- |
- |
1,213 |
22 |
1,235 |
Capitalised product development costs relate to expenditure that can be applied to a plan or design for the production of new or substantial improvements to software products. On 31 December 2018 the RTLS SmartSpace business unit was disposed of and the remaining capitalised product development costs relate entirely to geospatial software products. The Group is loss-making and this is an indicator for potential impairment of development costs. Management have completed impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded that no impairment is required as the cash flows exceeded the carrying value of the asset.
The remaining average amortisation period for capitalised product development costs is 2 years.
The software assets represent assets purchased from third parties.
13 Property, plant and equipment
|
|
Fixtures and fittings £'000 |
Computer equipment £'000 |
Total £'000 |
|
Cost |
|
|
|
|
At 1 January 2018 |
733 |
1,292 |
2,025 |
|
Effect of movements in exchange rates |
19 |
29 |
48 |
|
Additions |
214 |
102 |
316 |
|
Disposal of RTLS SmartSpace business unit |
(760) |
(864) |
(1,624) |
|
Disposals - other |
- |
(383) |
(383) |
|
At 31 December 2018 |
206 |
176 |
382 |
|
Effect of movements in exchange rates |
(7) |
(4) |
(11) |
|
Additions |
7 |
49 |
56 |
|
Disposals - other |
(25) |
(35) |
(60) |
|
At 31 December 2019 |
181 |
186 |
367 |
|
Accumulated depreciation |
|
|
|
|
At 1 January 2018 |
(391) |
(1,141) |
(1,532) |
|
Effect of movements in exchange rates |
(15) |
(35) |
(50) |
|
Charge for the year |
(117) |
(95) |
(212) |
|
Disposal of RTLS SmartSpace business unit |
343 |
771 |
1,114 |
|
Disposals - other |
- |
382 |
382 |
|
At 31 December 2018 |
(180) |
(118) |
(298) |
|
Effect of movements in exchange rates |
7 |
7 |
14 |
|
Charge for the year |
(16) |
(41) |
(57) |
|
Disposals - other |
25 |
35 |
60 |
|
At 31 December 2019 |
(164) |
(117) |
(281) |
|
Net book amount |
|
|
|
|
At 31 December 2019 |
17 |
69 |
86 |
|
At 31 December 2018 |
26 |
58 |
84 |
14 Right of use assets
The Group early adopted IFRS 16 and from 1 January 2018 recognised right-of-use assets for leases previously classified as operating leases applying IAS 17.
Details of the Group's right of use assets and their carrying amount are as follows:
|
|
|
2019 £'000 |
2018 £'000 |
|
Cost |
|
|
|
|
At 1 January |
|
502 |
3,002 |
|
Effect of movements in exchange rates |
|
(10) |
- |
|
Additions |
|
- |
63 |
|
Disposal of RTLS SmartSpace business unit |
|
- |
(2,563) |
|
Cost at 31 December |
|
492 |
502 |
|
Depreciation |
|
|
|
|
At 1 January |
|
(198) |
- |
|
Effect of movements in exchange rates |
|
7 |
23 |
|
Charge for the year |
|
(228) |
(869) |
|
Disposal of RTLS SmartSpace business unit |
|
- |
648 |
|
Depreciation at 31 December |
|
(419) |
(198) |
|
Net book amount at 31 December |
|
73 |
304 |
15 Investments
At 31 December 2019, the Group holds a rollover investment in Abyssinian Topco Limited as part of the consideration for the sale of the RTLS SmartSpace business unit on 31 December 2018. Abyssinian Topco Limited is a UK registered company (company number 11650137) and is a parent company of Ubisense Limited (company number 04489603) which along with its subsidiary companies, comprise the RTLS SmartSpace business unit.
|
|
£'000 |
|
|
Investment as 31 December 2019 and 31 December 2018 |
2,000 |
|
|
|
|
|
IQGeo Group plc hold 5.3% (2018: 5.6%) of the ordinary share capital of Abyssinian Topco Limited.
16 Trade and other receivables
|
|
Notes |
2019 £'000 |
2018 £'000 |
|
Trade receivables, gross |
|
1,365 |
1,535 |
|
Allowances for expected credit losses |
16.1 |
(4) |
- |
|
Trade receivables, net |
16.2 |
1,361 |
1,535 |
|
Amounts recoverable on contracts |
|
336 |
610 |
|
Other receivables |
|
68 |
915 |
|
Prepayments |
|
540 |
485 |
|
VAT and taxation receivable |
|
48 |
41 |
|
Total trade and other receivables |
|
2,353 |
3,586 |
All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.
The following disclosures are in respect of trade receivables that are either impaired or past due. The individually impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations and are assessed on a customer-by-customer basis following detailed review of the particular circumstances. To the extent they have not been specifically provided against, the trade receivables are considered to be of sound credit rating.
16.1 Movement in allowance for expected credit losses
|
|
2019 £'000 |
2018 £'000 |
|
At 1 January |
- |
(1,460) |
|
Exchange differences |
- |
(25) |
|
Amounts recovered in the year |
- |
204 |
|
Amounts written off in the year |
35 |
- |
|
Allowance released |
- |
42 |
|
Provided debts disposed of on 31 December 2018 |
- |
1,239 |
|
Allowance made |
(39) |
- |
|
At 31 December |
(4) |
- |
16.2 Ageing of past due but not impaired receivables
|
|
|
2019 £'000 |
2018 £'000 |
|
Neither past due nor impaired |
|
1,173 |
1,533 |
|
Past due but not impaired: |
|
|
|
|
0 to 90 days overdue |
|
188 |
2 |
|
More than 90 days overdue |
|
- |
- |
|
Total |
|
1,361 |
1,535 |
17 Cash and cash equivalents
|
|
2019 £'000 |
2018 £'000 |
|
Cash at bank and in hand |
13,053 |
30,915 |
|
Cash and cash equivalents |
13,053 |
30,915 |
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:
|
By currency |
2019 £'000 |
2018 £'000 |
|
British Pound (GBP) |
10,083 |
29,076 |
|
Euro (EUR) |
373 |
- |
|
US Dollar (USD) |
1,936 |
1,030 |
|
Japanese Yen (JPY) |
392 |
5 |
|
Canadian Dollar (CAD) |
269 |
804 |
|
Cash and cash equivalents |
13,053 |
30,915 |
18 Trade and other payables
|
|
2019 £'000 |
2018 £'000 |
|
Deferred income |
1,118 |
913 |
|
Trade payables |
272 |
2,175 |
|
Trade accruals |
1,428 |
1,734 |
|
Other taxation and social security |
317 |
214 |
|
Other payables |
106 |
44 |
|
Total trade and other payables |
3,241 |
5,080 |
All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation of fair value.
19 Lease obligation
The Group early adopted IFRS 16 and from 1 January 2018 has recognised a lease liability for leases previously classified as operating leases applying IAS 17.
The Group has measured lease liabilities at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at the date of initial application.
Details of the Group's liability in respect of right of use assets and their carrying amount are as follows:
|
|
2019 £'000 |
2018 £'000 |
|
At 1 January |
309 |
3,002 |
|
Effect of movements in exchange rates |
1 |
23 |
|
New leases entered into during the year |
- |
63 |
|
Finance costs incurred |
7 |
96 |
|
Payments made during the year |
(238) |
(743) |
|
Disposal of RTLS SmartSpace business unit |
- |
(2,132) |
|
At 31 December |
79 |
309 |
|
Presented as: |
|
|
|
Lease liability payable within 1 year |
79 |
232 |
|
Lease liability payable in more than 1 year |
- |
77 |
|
At 31 December |
79 |
309 |
On 20 December 2019, the Group entered into a 7 year lease running to February 2028 on new premises in Denver as the lease on the existing premises in Denver ends on 30 April 2020. While the new Denver lease agreement has been contracted, a capital asset for the present value of the future payments, and its associated liability, have not been recognised on the balance sheet in accordance with IFRS16, as the lease period will not commence until March or April 2020. In addition, £0.2 million fit-out costs net of landlord's contribution will be incurred in the first half of 2020.
The lease liability consists of £80,000 of lease payments after deduction £1,000 of future finance charges.
Leases as lessee
The Group maintains short-term office rental agreements within Germany, Japan and the UK. The leases entered into are 12 months or less and the Group has elected to not apply IFRS 16 to these leases due to their short-term nature. The 2019 operating expense presented within the consolidated income statement includes £221,000 of rent expense in respect of these leases. The future obligations for the new short-term leases are reported within the table below.
The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets.
The Group's future aggregate minimum lease payments under non-cancellable operating leases are as follows:
|
|
Land and buildings 2019 £'000 |
Land and buildings 2018 £'000 |
|
No later than one year |
231 |
191 |
|
Total |
231 |
191 |
The above table reflects the committed cash payments under operating leases, rather than the expected charge to the income statement in the relevant periods.
20 Share capital and premium
|
|
Number of ordinary shares of £0.02 each |
Share capital '000 |
Share premium £'000 |
Total £'000 |
|
Balance at 1 January 2018 and 31 December 2018 |
73,087,904 |
1,462 |
46,375 |
47,837 |
|
Issued under share-based payment plans |
219,215 |
4 |
27 |
31 |
|
Capital reduction |
- |
- |
(28,948) |
(28,948) |
|
Repurchase and cancellation of shares |
(23,803,690) |
(476) |
- |
(476) |
|
Change in year |
(23,584,475) |
(472) |
(28,921) |
(29,393) |
|
Balance at 31 December 2019 |
49,503,429 |
990 |
17,454 |
18,444 |
The Company has one class of ordinary shares which carry no right to fixed income.
At the Company Annual General meeting on 5 June 2019, the Directors obtained shareholder approval to complete a Capital Reduction with the Company's share premium account being reduced by £28,948,000. On 16 July 2019 a Court Order was granted to allow a capital reduction.
On 2 August 2019, the Company announced a proposed tender offer to repurchase up to a maximum of 28,260,869 of the Company's Ordinary Shares at a price of 46 pence per Ordinary Share. Following approval of the tender offer by a General Meeting of Shareholders on 22 August 2019, the tender offer completed on 30 August 2019 resulting in the share capital reducing by 23,803,690 and £10,950,000 of surplus funds being returned to shareholders in September 2019.
21 Final Results Announcement
This final results announcement, which has been agreed with the auditors, was approved by the Board of Directors on 6 March 2020. It is not the Group's statutory accounts for the year ended 31 December 2019 within the meaning of section 435 of the Companies Act 2006 but is extracted from those financial statements. Copies of the Group's audited statutory accounts for the year ended 31 December 2019 will be available at the Company's website, www.iqgeo.com , promptly after the release of this preliminary announcement and a printed version will be dispatched to shareholders shortly. Copies will also be delivered to the registrar of Companies following the Annual General Meeting.
The audit reports for the years ended 31 December 2019 and 31 December 2018 did not contain statements under Sections 498(2) or 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies, but the 31 December 2019 accounts have not yet been filed.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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