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IQGeo Group PLC (IQG)

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Thursday 11 April, 2019

IQGeo Group PLC

Annual Financial Report

RNS Number : 8747V
IQGeo Group PLC
11 April 2019
 

THE INFORMATION COMMUNICATED IN THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.

11 April 2019

IQGeo Group plc

(the "Company" or the "Group")

Final results for the year ended 31 December 2018

Strong balance sheet powers investment to build industry-leading offering

IQGeo Group plc (AIM: IQG), a market leading provider of geospatial productivity and collaboration software for the telecommunications and utilities industries, is pleased to announce its final results for the year ended 31 December 2018.

Sale of RTLS SmartSpace positions company for geospatial growth:

·      RTLS SmartSpace sale completed on 31 December 2018 for up to £35.0 million

·      Group rebranded IQGeo, a market leading geospatial software provider

·      Funding and focus will allow the company to take advantage of structural opportunities in our end markets

·      A clear and compelling strategy to increase software revenue and develop a strong recurring revenue base

IQGeo (myWorld) operational highlights:

·      myWorld sales: 11 new customers, including another top ten utility in North America

·      myWorld product strategy: customer led development plans agreed, leading to Construction Manager and Operations Manager being already launched in 2019

·      Improved sales execution, increased quota-carrying personnel

 

Group Financial highlights:

·      Net cash balance: £30.9 million (2017: £6.6 million) before payment of professional fees of around £2.4 million associated with the sale and reorganisation

·      Total Geospatial / RTLS SmartSpace results: 22% own product revenue growth with total gross margins increased to 49%

Capital Return:

·      The Board intends to return a proportion of the Group's cash reserves to shareholders

·      The quantum, timing and structure is currently being assessed in light of ongoing investment requirements and further details will be announced in due course

·      The Board expects to seek approval from shareholders of the restructuring of the Company's share capital and reserves at the AGM in June.

 

Outlook:

·      Long term pipeline remains healthy by both number and value of opportunities

·      Robust balance sheet for controlled and targeted investment

·      Resources now in place to expand customer base and deepen geographic presence

 

Richard Petti, Chief Executive Officer, said:

"2018 was a transformational year for IQGeo in which the Group disposed of its RTLS SmartSpace business and Ubisense brand creating a focused geospatial software group benefitting from with a strong balance sheet, and a new focus on software revenue growth and strong recurring revenue base. IQGeo will continue to adopt a controlled investment strategy, focusing on product development, sales and partnerships, that will allow us to build an industry-leading offering. We are well positioned to exploit high profile digital transformation initiatives within communications and utilities companies thereby delivering significant productivity improvements and cost saving for our customers. We look forward to updating shareholders on the new initiatives following the intended capital return."

 

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)

 

Tulchan Communications LLP                                                        +44 20 7353 4200

James Macey White, Matt Low, Deborah Roney

 

Notes to Editors

 

About IQGeo

IQGeo (AIM: IQG) is the world leader in geospatial software for the telecommunication and utility industries, accelerating productivity and collaboration across enterprise planning, design, construction and maintenance processes. Our mobile first myWorld platform creates a unique geo operations hub that unlocks the right information at the right time, accessing data previously hidden away in complex and disconnected back end systems. More than 35,000 users from 45 operators and partners around the globe rely on the myWorld software every day to easily visualize and manage their operational assets from anywhere, on any device, online or offline, in the office or in the field. For more information visit: https://www.iqgeo.com/ 

 

 

 

Chairman's statement

The announced sale of the RTLS SmartSpace business to Investcorp advised funds in November and its completion on 31 December will be transformational. Rebranding the Geospatial business line as IQGeo initiated a sequence of changes for both newly established businesses. The response from the market, our customers and our employees has been overwhelmingly positive, which is a strong endorsement for the underlying financial rationale that drove our decision to split the two businesses.

Since a new executive management team joined the Company in 2016, we have continued to evaluate the strategy, organisation and structure of the continued business. While we are extremely proud of the technological and business success that the Geospatial myWorld and RTLS SmartSpace products have achieved, it became clear that maintaining the right levels of focus on these increasingly different business opportunities was proving challenging. This position made it difficult to provide the level of investment required for each of these two, largely independent, businesses to develop the momentum they needed to achieve the ambitious growth targets established.

Having worked with Ubisense for many years, we are all sad to be saying goodbye to our Ubisense colleagues. They are an excellent group of people that have developed world-class technology used in automotive and industrial manufacturing around the globe. However, we are confident that under the leadership and investment of Investcorp, their technology will be well positioned to realise its full business potential. This report does not focus on the details of the Ubisense trading results, but the products and activities of that business are outlined on their website (www.ubisense.net) and in previous years' annual reports.

For the new IQGeo, this is an exciting change. The freshly branded Company is developing a unique, customer-focused voice to clearly articulate the compelling benefits that the myWorld software brings to the telecommunications and utilities industries. From the perspective of the Board, we are encouraged by the pace of the structural change at IQGeo. The business now has a sharper market focus, has strong customer relationships and a rapidly developing market opportunity. Richard's CEO Statement outlines more details on the future direction and strategy for IQGeo.

Results overview

As the RTLS SmartSpace division was managed throughout the year as part of the combined Group with the disposal being concluded on 31 December 2018, it was felt appropriate that the financial performance is described with reference to the results of the total operations. Whilst this data would be considered in the category of Alternative Performance Measures, it must be recognised that the business was managed on a combined basis for almost the full period, and significant reorganisation was required to create clear legal separation between the two divisions. Where KPIs are outlined, clear separation of combined Group metrics and continuing operations metrics is made.

The combined Group financial results for 2018 were slightly below where we had hoped, in part impacted by the distraction of both managing and then disposing of the RTLS SmartSpace division on 31 December. The combined Group delivered revenue of £25.5 million across the Geospatial myWorld and RTLS SmartSpace businesses. The planned decline in third party geospatial service revenues continued, but was offset by increasing own product revenues of 22% driven by RTLS SmartSpace growth.

For the continuing operations of IQGeo, total revenue reduced primarily due to a £5.4 million expected decline in third party geospatial service revenue, but also due to the delay in closing of certain myWorld contracts. Gross margin percentage improved with the increased balance towards myWorld products, though the gross profit value was reduced impacting overall profitability and creating an operating loss in 2018 having been profitable in 2017. Our closing order book for the IQGeo business amounted to £3.7 million.

Following the completion of the RTLS SmartSpace business unit disposal, the Board intends to return excess funds to Shareholders (subject to complying with all relevant law and regulation in effecting such return which is likely to include a capital reorganisation). Further details of the amount and timing of the return to shareholders will be made in due course.

For the 2018 financial year and 2017 restated comparatives, the RTLS SmartSpace business is reported within the consolidated income statement of IQGeo as discontinued operations. The balance sheet reported is that of the new IQGeo business only, establishing a clear financial baseline going into 2019.

Group strategy

Our focus remains on software revenue growth and the development of a strong recurring revenue base. Greater focus and a strong balance sheet will allow the right level of investments and give our customers confidence that IQGeo can support the growing needs of their business for many years.

To support our growth ambitions, we are embarking on a controlled investment strategy to provide the organisation with additional software engineering, sales and support infrastructure. This is being done in direct response to the myWorld opportunities we are seeing across the telecommunications and utilities industries. Delivering to our ambitions brings with it many challenges but we have never been better positioned to meet these challenges. We can now provide IQGeo with the levels of focus and investment that it needs to realise the market potential of the myWorld products.

Governance

In the middle of 2018 I assumed interim responsibility for Board chairmanship as a result of a personal health issue of our Chairman, Peter Harverson. On 13 February 2019, Peter decided to step down from the Board, at which time I was made full-time Chairman.

This year we reinforced our commitment to a high standard of corporate governance by adopting the QCA Corporate Governance Code into our reporting structure. The Board continually reviews its composition and that of its Committees and feels that, at this stage of the Group's development, the skills and mix of its members best serve our current needs.

Currently this means that I will continue to act as Audit Committee Chair, whilst Oliver Scott assumes chair of the Remuneration Committee. The Board recognises that it must evolve its Committee strategy as it grows in the future.

Future outlook

The disposal of the RTLS SmartSpace business to Investcorp advised funds and the rebranding of the myWorld business to IQGeo creates exciting opportunities. The Board is very pleased that we have been able to negotiate such a positive outcome for both businesses, giving them the focus and investment needed to move forward with confidence. We would like to thank the management team and employees for all their hard work in executing this transaction and for completing the hundreds of large and small tasks required to successfully create the two new independent businesses.

This is a truly transformational change for IQGeo. We have an exciting new brand with a clear market and technology focus and, critically important, we have a strong balance sheet which this business needs. Our customers and prospects have responded with enthusiasm and the market opportunity for myWorld software is stronger now that it has ever been.

Our target markets are facing their own digital transformation journey as they implement new technology such as fibre, 5G and smart meters. myWorld is uniquely positioned to help these companies increase productivity and collaboration, making sense of their complex network environment to enable rapid, informed decision making.

2019 is a fresh start for the new IQGeo and we are well positioned to execute on our ambitious growth objectives.

 

Paul Taylor

Chairman

10 April 2019



Chief Executive Officer's statement

Dear shareholder,

2018 was an important year for us. Our three-point strategy of refocusing the overall business, improving sales execution and repositioning the product portfolio resulted in another year of increased own product sales, improved margins and more new customer logos to add to our roster. However, in 2018 we realised that our ability to grow two separate business lines in diverging markets was a stretch on both our resources and balance sheet. Therefore, the decision was taken to focus the business by disposing of the RTLS SmartSpace business line. Our vision for IQGeo is to create a company that provides the most advanced geospatial collaboration and productivity tools for utilities and telecommunications companies in the world. Our goal for IQGeo is to transform ourselves into a software-first business with high margins and levels of recurring revenue. In the rest of this statement I will explain why I believe that IQGeo will achieve this.

The IQGeo market

While the IQGeo brand is new, our flagship product myWorld is well established. In the eight years that this product has been in existence, it has become recognised as a market leader in geospatial mobile technology for utilities companies and our technology has been licensed to over 35,000 users at over 45 companies worldwide. In North America, our customers include three of the top ten cable/ telecommunication companies, and three of the top ten energy companies.

What makes us different? 

While many high-tech and e-businesses have come to dominate business headlines, few industries rival the sophistication and complexity of utilities or telecommunications. It is a complex production and distribution chain that can start with a burst of sunshine in Florida and then transforms and delivers that energy to a household that is tens of thousands of miles away. Telecommunications data networks are similarly complex, broadcasting high definition movies on demand to tens of millions of homes and devices simultaneously. By any standards these energy and data networks are technical triumphs. In fact, in telecommunications and utilities we see one of the most sophisticated, integrated and enduring producer-to-consumer relationships in any industry in the world.

These complex producer-to-consumer relationships are underpinned by nationwide technical infrastructures that are being constantly extended, upgraded and in need of constant care. This is essential for consumers to receive the safe and reliable service that they expect - and for producers to protect and grow their market share. This is why analysts are projecting a 60% increase in 5G small cell infrastructure investment between 2018 and 2022, and broadband fibre subscribers are projected to grow by more than 12% CAGR in North America and Eastern Europe and by more than 22% CAGR in Western Europe and Asia between 2015 and 2020.

Digitisation of utilities and telecommunications

Consumers will be familiar with the transformation digital tools that have delivered benefits in their relationship with their utility and telecommunications providers. Today, typical broadband consumers can log a fault, receive acknowledgement, be given an expected fix time and get hourly updates and final notification of resolution without ever speaking to another human. Similarly, they can order mobile phones, broadband services, electricity, water and gas online and receive a great product at a competitive price. In other words, when companies invest in digitisation, consumers receive a very effective service that has been shown to directly increase customer satisfaction.

What consumers will be less aware of is the amount of digitisation that goes on behind the customer portals. The utilities networks - be they telephony, cable, electricity, gas or water, are highly complex production, storage and distribution networks often combining many decades of different technology and standards. These networks do not stand still for a moment - they are constantly being extended, upgraded, maintained, monitored and, where necessary, fixed by many hundreds of engineers, employees and managers

In fact, one of our largest customers has over 12,000 employees using myWorld on a daily basis. From a digitisation perspective, the challenge these companies face is tremendous - they are dealing with vast amounts of network information, typically in different formats and often locked deep in legacy systems. Moreover, tens of thousands of users in the office and in the field need to interact with this information every day or face frustrating delays or worse, make mistakes that can compromise their service. It is a tremendous data challenge - and it is precisely where myWorld delivers value.

myWorld geospatial collaboration and productivity 

myWorld excels in its ability to bring together disparate and fragmented data in order to create a single, current view of the operator's network. This means bringing together not just accurate location information (geospatial data) but all the correct technical information of that network, down to individual switches, fibres, ports and customer data so that every employee whether in the office, the field or the call centre has the specific information they need to carry out an instruction, make a decision or sell a product.

Telus, one of our largest customers in Canada, has integrated 27 different data sources into myWorld to create a single view of its network assets, which service over 1,000 daily users. This level of geospatial network integration was unthinkable even ten years ago.

Accelerating sales

In order to accelerate sales, we market myWorld as a series of functional packages that are specific to each stage of the network asset lifecycle. For example, our recently launched Construction Manager tool helps companies design network changes, put these into work packages (that include technical design work, customer information, permissions, etc.) and which assign them to engineering teams which receive these packages on mobile devices in the field. Once completed, these same engineers can document any necessary variations they made to the design and certify the job as complete.

Further along the asset lifecycle we have also recently launched our Operations Manager module, which gives a network operations centre (NOC) the ability to combine all monitoring data network devices into a single network view, enabling it to monitor network performance degradation, predict outages and prioritise network resolution issues and assign outages to field operators. We are unique in providing our customers a single "office to field" platform.

Our myWorld product line is very well articulated. We have more applications along different parts of the value chain that are specific to each industry we serve.

In addition, we are changing the way we price and sell myWorld in order to encourage more long-term subscriptions and recurring revenue. Specifically, we are changing our pricing schemes to more usage-based models that provide our customers better price points to start using myWorld and better aligns value with increased usage as system integration and user adoption grows. Additionally, we have retrained our salesforce and created new pricing and marketing tools to foster a "subscription first" culture.

Market opportunity

In 2018 myWorld signed up eleven new customers, including another top ten utility in North America and thanks to our own product focus we were able to increase gross margins. That said, financial results for the IQGeo business in the second half of 2018 were out of line with our expectations as deals we had forecast slipped into 2019. During the period our sales team continued to mature and improve. We employed a number of new quota-carrying personnel and implemented programmes/training to optimise performance.

However, the potential of our target markets remains strong. The telecommunications industry is making major investments in fibre and 5G networks and utility operators are actively engaged in network upgrade programmes that include the rollout of new technologies such as smart metering. These investment activities are linked directly to strategic digital transformation initiatives that will improve their profitability, capture new customers, improve and extend product offerings and cut operating costs. Our myWorld and next generation geospatial platforms are uniquely positioned to help our customers enable the digital transformation initiatives that are mission critical to the growth and competitiveness of their business.

Outlook and competitive positioning

As telecommunications and utilities customers consider the merits of large upgrade programmes of their legacy Geospatial Information Systems ("GIS"), some of which are more than 20 years old, they are taking the opportunity to look at fresh technology. Customers continue to tell us they need systems that are cloud ready, mobile ready and very easy to integrate. On those measurements IQGeo is already well positioned. In response to this window of opportunity, IQGeo has announced that it will aim to not only integrate legacy geospatial data systems but allow them to be replaced by introducing our own system of record. This creates a tremendous opportunity for us to become the alternative for these well-established GIS vendors.

Initial response to our technology and business strategy has been positive with customers and prospects desiring a fresh approach. While many of these opportunities remain large, long sales cycle projects, we are seeing healthy pipeline growth and we are investing in a modular product roadmap that allows customers to embark on these large projects in a simplified and lower risk way.

In 2019, we anticipate the managed decline of the third party geospatial services revenue to continue, falling to minimal levels by the end of 2019, but being replaced by growth in, higher margin, myWorld revenues. In the longer-term, we anticipate revenues accelerating underpinned by increased recurring subscriptions in myWorld.

Reorganising for success

The creation of the new IQGeo has been well received by employees and has involved a substantial amount of internal work to deliver new subscription-based IT systems, updated internal processes and a move to serviced offices in Cambridge, Frankfurt and Tokyo.

We will expand the product development team to both deliver our product roadmap and address the system of record opportunity, expecting to double the size of the team by the end of 2019, split between Denver and Cambridge. To maximise sales activity and results, we have created dedicated telecommunications and utilities sales teams and in early 2019 added two sales people in Europe and three in the US.

Resetting the budget for 2019 to include the expanded organisation, the flexible support environment and additionally the corporate costs, such as insurance, that couldn't be shared with the discontinued operations means that operational expenses are expected to increase by approximately £2 million over 2018's figures.

Thanks to the hard work of our team, we have been able to make a smooth transition and communicated frequently through videos, emails and face-to-face meetings. The result has been to create a strong, shared group ethos. We are now a smaller and more focused team that is communicating more effectively than in the past and this is a positive culture change that will be essential for growth. The new IQGeo emerges at a very interesting time for the geospatial market in utilities and telecommunications.

We believe - and our customers tell us - that our technology is compelling in its ability to accelerate productivity and collaboration across enterprise planning, design, construction and maintenance processes. We know we deliver clear business value to our customers as they upgrade and expand their network assets and that large swathes of our target market are seriously considering what geospatial technology to adopt for the next 20 years. I can confidently speak for the entire team when I say that we are all extremely positive about the future of IQGeo.

 

Richard Petti

Chief Executive Officer

10 April 2019



Chief Financial Officer's statement

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 £2.0 million rollover investment and further £3.0 million earn-out consideration. The earn-out consideration is dependent on milestones set for the revenues achieved in 2018 and 2019, for which the first milestone was not met as outlined in note 6 of the financial statements. The transaction price reflected the 44% revenue growth achieved during the 2018 period together with the future anticipated growth of the business. The delivery of the software strategy that the Board first implemented in 2016 led to significant improvements in gross profit margin and profitability during 2018.

The trading performance of the RTLS SmartSpace business is summarised as follows;

Revenue of discontinued operations

2018

£'000

2017

£'000

Year on year growth

Total revenue

15,519

10,796

44%

Gross profit

8,117

4,486

81%

Gross margin

52%

42%

10%

The successful sale of the RTLS SmartSpace business unit enables the remaining IQGeo Group to be a focused and well-funded geospatial software operation working globally with telecommunications and utilities industries. Continued investment in myWorld products, building an industry-leading offering, alongside the development of sales channels, is anticipated to increase recurring own-product revenues and gross profit in future periods.

Revenue

The continuing operations of the Group are managed as a single Geospatial division. The Geospatial division is focused on growing own product myWorld revenues which include selling perpetual software licences, generating recurring revenues from software subscription products and maintenance and support contracts, and delivering consultancy services revenues. Additionally, the Geospatial division has a legacy operation that provides lower margin consultancy services connected to third party products which have declined in the current period and are expected to decline in future periods.

Revenue composition by revenue stream is summarised in the table below:

Revenue of continuing operations

2018

£'000

% of total revenue

2017

£'000

% of total revenue

Year on year growth

Software

1,395

14%

2,575

16%

(46)%

Maintenance and support

918

9%

750

5%

22%

Services

2,424

24%

2,459

15%

(1)%

Total revenue generated from myWorld products

4,737

47%

5,784

35%

(18)%

Geospatial services from third party products

5,242

53%

10,675

65%

(51)%

Total revenue

9,979

100%

16,459

100%

(39)%

The Group has shown growth in recurring maintenance and support contracts of 22%. Sales of perpetual software licences have declined during the 2018 period as the division has remained reliant on the timing of completion of a small number of significant orders. Going forward, the Group plans to evolve its business model to grow recurring revenues beyond maintenance and support contracts with additional subscription-based software sales contracts. This will provide greater stability to income and operations in future periods.

Orders

Total bookings of new Geospatial customer orders in 2018 decreased by 31% to £8.2 million (2017: £12.0 million). £3.4 million of this related to myWorld (2017: £6.8 million) and £4.8 million to third party Geospatial Services (2017: £5.2 million).

The order book backlog as at 31 December 2018 was £3.7 million (2017: £5.1 million), most of which will be recognised during 2019. £1.6 million of this related to myWorld (2017: £2.9 million) and £2.1 million to third party geospatial services (2017: £2.2 million).

Gross profit

Gross profit of continuing operations

2018

£'000

Gross margin %

2017

£'000

Gross margin %

Gross margin mvt

Geospatial division

4,380

44%

6,371

39%

5%

The gross margin % of the Geospatial division has increased during 2018 due to the increase in higher profit margin recurring maintenance and support revenues, and the managed reduction in lower profit margin service revenues associated with third party products.

Operating expenses and adjusted EBITDA from continuing operations

Operating expenses were £6.0 million (2017: £5.9 million) and are summarised as follows:


2018

2017


£'000

£'000

Other operating expenses

5,446

4,602

Depreciation

273

46

Amortisation and impairment

774

807

Share option expense

248

237

Unrealised foreign exchange on intercompany trading balances

(151)

252

Non-recurring items

(619)

-

Total operating expense

5,971

5,944

Other operating expenses of the Group include sales and product development costs directly attributable to the Geospatial division. Other operating costs have increased during 2018 due to investment in sales headcount to deliver future growth and investment in product engineering, in line with the strategy outlined last year.

The other operating costs reported above include an allocation of the central administration and marketing costs of the Group which supported both the Geospatial and discontinued RTLS SmartSpace divisions during 2018 and 2017. Accordingly, the figures reported above do not provide a realistic cost base to support the continuing operations going forward and other operating costs will be expected to increase in future periods. Following the separation, the Group will maintain flexibility within its cost base and these measures will include utilising short-term serviced office leases and a subscription-based IT environment. It is anticipated that other operating expenses will increase by approximately £2 million in 2019 from the 2018 expenses reported above. There will be a reduction in capital expenditure as a result of this strategy.

Non-recurring items relates to the profit on disposal of the third party geospatial services business of its Japanese subsidiary which occurred on 30 March 2018. Strategically this sale was part of the managed decline of the Group's third party geospatial services business.

Adjusted EBITDA from continuing operations excludes amortisation and impairment, depreciation, share option expense, foreign exchange gains/losses on intercompany trading balances and non-recurring items and is reported as it reflects the performance of the Group. Adjusted EBITDA for the period was £1.1 million loss (2017: £1.8 million profit).

The operating loss for the period from continuing operations was £1.6 million (2017: £0.4 million profit).

EPS and dividends

Adjusted diluted loss per share from continuing operations was 3.0 pence (2017: 1.6 pence gain).  Reported basic and diluted loss per share from continuing operations was 2.2 pence (2017: 0.8 pence gain).  The Board does not feel it appropriate at this time to commence paying dividends.

Impact of IFRS 15 and IFRS 16

IFRS 15 Revenue from Contracts with Customers has replaced IAS 18 Revenue. The new standard has been adopted from 1 January 2018. IFRS 15 introduces a number of new concepts and requirements, and also provides guidance and clarification on existing practice.

IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement of financial position in the form of a right-of-use asset and a lease liability. The consolidated statement of comprehensive income is impacted through reduced operating expenses, and higher depreciation and finance costs. The new standard is applicable from 1 January 2019 but the Group adopted the standard from 1 January 2018.

The impact of the adoption of IFRS 15 and IFRS 16 on the results for the period ended 31 December 2018 has been disclosed in detail within note 2 to the financial statements. In summary, implementation of IFRS 15 has had minimal revenue impact, whilst the impact of IFRS 16 has been to increase adjusted EBITDA from continuing operations by £0.2 million for the year ended 31 December 2018.

Discontinued operations

The profit recognised during 2018 from discontinued operations is £21.5 million (2017: £3.5 million loss). The 2018 results of the RTLS SmartSpace business reflected significant growth with revenues increasing by 44% from the prior period; however, the first milestone of the earn-out was not achieved due to the timing of certain customer orders. The full value of the 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 earn-out cash consideration remains possible, no contingent asset has been recognised within the statement of financial position as at 31 December 2018. 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 has no influence as a non-controlling shareholder.

The disposal of the RTLS SmartSpace business unit 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.

Disposal of Japanese geospatial services business

On 30 March 2018, the Group concluded the sale of its Japanese third party geospatial services business including the Geoplan brand name for a gross consideration of JPY 100 million (£0.7 million). This disposal was consistent with the Group's strategy to focus on higher margin own product revenues while managing a decline in lower margin services associated with third party products.

The Japan disposal has not been included within discontinued operations as geospatial services connected to third party products will continue in the short-term future within our North America operations, and the net assets disposed of under this transaction were not significant to the Group.

Alongside this transaction, the Group acquired the 23% non-controlling interest of Ubisense Japan K.K. in March 2018. The acquisition of this non-controlling interest gave the Group 100% ownership of its remaining Japanese operations prior to its inclusion as part of the sale of the RTLS SmartSpace business unit.

Consolidated statement of financial position

On 31 December 2018 the Group received a net sum of £27.1 million cash consideration from the sale of the RTLS SmartSpace business, after settlement of all outstanding debt of the Group, including the balance on the HSBC loan of £1.8 million.

As at 31 December 2018, the Group had a cash position of £30.9 million with no debt (2017: net cash position of £6.6 million being £9.1 million of cash and £2.5 million of debt).

Non-current assets

Total non-current assets were £3.6 million (2017: £3.5 million).

Capitalised development costs represent the key intangible assets of the Group being investment in IQGeo's own products, which will support the future growth of the business. Capitalised development costs at 31 December 2018 were of £1.2 million (2017: £2.7 million) with the reduction during the year being due to the disposal of the RTLS SmartSpace intellectual property. The remaining book value relates solely to myWorld products. The appropriateness of the assessment of the useful life of current development projects was reviewed, but no change has been made to the current three-year amortisation period, due to the fast-moving nature of the technology. The recoverable amount of the capitalised development costs is supported through the anticipated growth in revenues of the myWorld products.

As a result of the early adoption of IFRS 16, leases greater than 12 months have been recorded on the statement of financial position in the form of a right-of-use asset with £0.3 million recognised as at 31 December 2018 (2017: £nil).

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 2018 (2017: £nil).

Current assets

Total current assets increased to £34.5 million (2017: £21.1 million) which is driven by a cash increase to £30.9 million (2017: £9.1 million).

Following the sale of the RTLS SmartSpace business the working capital requirements of the Group have significantly decreased. Trade receivables net of provisions decreased to £1.5 million (2017: £6.2 million). Amounts recoverable on contracts totalled £0.6 million (2017: £2.7 million) which are generated from services contracts or end of period deliveries, and are then invoiced in the following month or as the relevant milestone is reached. Hardware inventories decreased to £nil (2017: £1.5 million) as the continuing operations do not involve hardware.

Total assets

Total assets increased to £38.1 million (2017: £24.6 million) which includes £30.9 million of cash.

Current liabilities

Total current liabilities decreased to £5.5 million (2017: £10.0 million). Trade payables decreased to £2.2 million (2017: £3.0 million).

Non-current liabilities

Total non-current liabilities decreased to £0.3 million (2017: £2.5 million) following the repayment of the HSBC loan (£1.8 million) on 31 December 2018.

Net assets

Net assets increased to £32.3 million (2017: £12.1 million) following the disposal of the RTLS SmartSpace business.

Cash and cash flow

Operating cash flow before working capital movement was £0.4 million inflow (2017: £0.4 million inflow).

Operating cash flows from operating activities after adjusting for working capital and tax was £0.9 million inflow (2017: £3.6 million inflow). Working capital improvements were driven by a reduction in the trade receivables balance at year end.

The Group had investment inflows of £24.3 million (2017: £2.1 million outflow), which is largely made up of cash received following the sale of the RTLS SmartSpace business unit.

Cash outflows from financing activities were £3.5 million (2017: £4.3 million inflows). This included repayment of the HSBC loan of £2.5 million during 2018.

Return to shareholders

Following the completion of the RTLS SmartSpace business unit disposal, the Board intends to return some of the excess funds to shareholders (subject to complying with all relevant law and regulation in effecting such return which is likely to include a capital reorganisation). Further details of the amount and timing of the return to shareholders will be made in due course.

 

Tim Gingell

Chief Financial Officer

10 April 2019



 

Consolidated income statement

for the year ended 31 December 2018

 

 

Notes

2018

£'000

2017

£'000

Revenue

5

9,979

16,459

Cost of revenues

 

  (5,599)

(10,088)

Gross profit

 

4,380

6,371

Operating expenses

 

(5,971)

(5,944)

Operating (loss)/profit

 

(1,591)

427

Analysed as:

 

 

 

Gross profit

 

4,380

6,371

Other operating expenses

 

(5,446)

(4,602)

Adjusted EBITDA

 

(1,066)

1,769

Depreciation

13,14

(273)

(46)

Amortisation and impairment of other intangible assets

12

(774)

(807)

Share option expense

 

(248)

(237)

Unrealised foreign exchange gains/(losses) on intercompany trading balances

 

151

(252)

Non-recurring items

9

619

-

Operating (loss)/profit

 

(1,591)

427

Finance income

8

1

3

Finance costs

8

(14)

-

(Loss)/profit before tax

 

(1,604)

430

Income tax

10

(39)

31

(Loss)/profit from continuing operations

 

(1,643)

461

Profit/(loss) from discontinued operations

6

21,485

(3,534)

Profit/(loss) for the year

 

19,842

(3,073)

Profit/(loss) attributable to:

 

 

 

Equity shareholders of the Company

 

19,842

(3,055)

Non-controlling interest

 

-

(18)

Profit/(loss) for the year

 

19,842

(3,073)

Profit/(loss) per share - continuing operations

 

 

Basic

11

(2.2p)

0.8p

Diluted

11

(2.2p)

0.8p

 



 

Consolidated statement of comprehensive income

for the year ended 31 December 2018

 

2018

£'000

2017

£'000

Profit/(loss) from continued operations

(1,643)

461

Profit/(loss) from discontinued operations

21,485

(3,534)

Profit/(loss) for the year

19,842

(3,073)

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

 

(50)

(33)

Reclassification to income statement for discontinued operations

216

-

Total comprehensive profit/(loss) for the year

20,008

(3,106)

Attributable to:

 

 

Equity shareholders of the Company

20,008

(3,067)

Non-controlling interest

-

(39)

Total comprehensive profit/(loss) for the year

20,008

(3,106)

 



 

Consolidated statement of changes in equity

for the year ended 31 December 2018

 

Attributable to equity shareholders of the parent company

 

 

 

Share

capital

£'000

Share

premium

£'000

Share based

payment

reserve

£'000

Translation

reserve

£'000

Retained

earnings

£'000

Sub-total

£'000

Non-controlling

interest

£'000

Total

£'000

Balance at 1 January 2017

1,118

41,554

823

(2,025)

(32,192)

9,278

473

9,751

Loss for the year

-

-

-

-

(3,055)

(3,055)

(18)

(3,073)

Exchange difference on retranslation of net assets and results of overseas subsidiaries

-

-

-

(12)

-

(12)

(21)

(33)

Total comprehensive loss for the year

-

-

-

(12)

(3,055)

(3,067)

(39)

(3,106)

Reserve credit for equity-settled share-based payment

-

-

316

-

-

316

-

316

Issue of new share capital

344

-

-

-

-

344

-

344

Premium on new share capital

-

5,158

-

-

-

5,158

-

5,158

Share issue costs

-

(337)

-

-

-

(337)

-

(337)

Transactions with owners

344

4,821

316

-

-

5,481

-

5,481

Balance at 31 December 2017

1,462

46,375

1,139

(2,037)

(35,247)

11,692

434

12,126

IFRS 15 adjustment

-

-

-

-

(13)

(13)

-

(13)

Adjusted Balance at 31 December 2017

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

 



Consolidated statement of financial position

for the year ended 31 December 2018

 

Notes

2018

£'000

2017

£'000

Assets

 

 

 

Intangible assets

12

1,235

2,962

Property, plant and equipment

13

84

493

Right of use assets

14

304

-

Investments

15

2,000

-

Total non-current assets

 

3,623

3,455

Current assets

 

 

 

Inventories

16

-

1,459

Trade and other receivables

17

3,586

10,544

Cash and cash equivalents

18

30,915

9,114

Total current assets

 

34,501

21,117

Total assets

 

38,124

24,572

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

19

(5,080)

(9,110)

Current tax liabilities

 

(232)

(101)

Lease obligation

20

(232)

-

Bank loans

21

-

(750)

Total current liabilities

 

(5,544)

(9,961)

Non-current liabilities

 

 

 

Deferred income tax liabilities

10

(231)

(516)

Trade and other payables

 

-

(40)

Lease obligation

20

(77)

-

Bank loans

21

-

(1,750)

Other payables

22

-

(179)

Total non-current liabilities

 

(308)

(2,485)

Total liabilities

 

(5,852)

(12,446)

Net assets

 

32,272

12,126

Equity attributable to owners of the parent company




Ordinary share capital

23

1,462

1,462

Share premium

23

46,375

46,375

Share based payment reserve

 

717

1,139

Translation reserve


(1,871)

(2,037)

Retained earnings


(14,411)

(35,247)

Equity attributable to shareholders of the Company


32,272

11,692

Non-controlling interests


-

434

Total equity


32,272

12,126

 



 

Consolidated statement of cash flows

for the year ended 31 December 2018

 

Notes

2018

£'000

2017

£'000

Operating activities

 



(Loss)/gain before tax from continuing operations  

 

(1,604)

430

Loss before tax from discontinued operations

 

(824)

(3,564)

Loss before tax from operating activities

 

(2,428)

(3,134)

Adjustments for:

 

 

 

Depreciation

13,14

1,081

417

Amortisation and impairment

12

2,025

2,435

Loss on the disposal of property, plant and equipment

 

14

2

Revaluation of intercompany balances

 

(151)

252

Share-based payment charge

 

303

316

Gain on sale of Japan business

 

(619)

-

Finance income

 

(8)

(8)

Finance costs

 

156

87

Operating cash flows before working capital movement

 

373

367

Change in inventories

 

198

(395)

Change in receivables

 

2,012

2,678

Change in payables

 

(2,071)

987

Cash generated from operations before tax

 

512

3,637

Net income taxes received/(paid)

 

407

(14)

Net cash flows from operating activities

 

919

3,623

Cash flows from investing activities

 

 

 

Payment of contingent consideration

 

-

(197)

Purchases of property, plant and equipment

 

(316)

(140)

Expenditure on intangible assets

 

(1,844)

(1,813)

Cash received on sale of the RTLS SmartSpace business unit

 

28,882

-

Cash in RTLS SmartSpace business unit at disposal

 

(2,313)

-

Disposal costs in relation to the RTLS SmartSpace business unit

 

(704)

-

Sale of Japan Geospatial third party services business

 

569

-

Interest received

 

8

8

Net cash flows from investing activities

 

24,282

(2,142)

Cash flows from financing activities

 

 

 

Repayment of borrowings

 

(2,500)

(750)

Interest paid

 

(73)

(110)

Payment of lease liability

 

(743)

-

Purchase of non-controlling interest

 

(152)

-

Proceeds from the issue of ordinary share capital

 

-

5,165

Net cash flows from financing activities

 

(3,468)

4,305

Net increase in cash and cash equivalents

 

21,733

5,786

Cash and cash equivalents at start of period

 

9,114

3,498

Exchange differences on cash and cash equivalents

 

68

(170)

Cash and cash equivalents at end of period

18

30,915

9,114

 



 

Notes to the consolidated financial statements

 

1 General information

IQGeo Group plc ("the Company") and its subsidiaries (together, "the Group") delivers enterprise location intelligence solutions that enable our customers to create a real-time digital twin of their physical operations. The principal activity going forward will relate to the Geospatial business (presented as continuing operations within the consolidated income statement), following the sale of the Group's RTLS SmartSpace business unit on 31 December 2018 (presented as discontinued operations within the consolidated income statement).

The Geospatial 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.

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 2018, was 67.5 pence per share (31 December 2017: 45.0 pence).

The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to Ubisense Group plc on 31 May 2011 ahead of its initial public offering and listing on AIM on 22 June 2011. 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 main operations in the UK, USA, Canada, Germany and Japan and sells its products and services mainly in North America, Japan and Europe. The Group legally consists of six subsidiary companies headed by IQGeo Group plc. A full list of subsidiaries is given in note 26 of the financial statements.

The consolidated financial statements have been approved for issue by the Board of Directors on 10 April 2019.

 

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 2018. There are no standards in issue and not yet adopted that will have a material impact on the financial statements.

New Standards adopted as at 1 January 2018

The Group has adopted the following new accounting pronouncements as follows:

·     IFRS 9 'Financial Instruments' (effective date financial year commencing on/after 1 January 2018)

·     IFRS 15 'Revenue from contracts with customers' (effective date financial year commencing on/after 1 January 2018)

·     IFRS 16 'Leases' (effective date financial year commencing on/after 1 January 2019). The Group have elected to adopt IFRS 16 'Leases' from 1 January 2018

IFRS 9

IFRS 9 Financial Instruments is the new accounting standard covering classification and measurement for financial instruments and introduces a new expected credit loss model for impairment of financial assets.

The Group does not enter into hedging arrangements or hold bonds, debentures, or other complex financial assets.

For trade and other receivables, the Group applies a simplified model of recognising lifetime expected credit losses as these items do not have a significant financing component.

In adopting IFRS 9, no differences in respect of the measurement, and impairment of financial assets has been identified for prior periods and accordingly no restatement of prior periods or adjustments to retained earnings have been applied.

Consideration received for the disposal of the RTLS SmartSpace business on 31 December 2018 unit included £2 million equity investment in Abyssinian Topco Limited. As the investment was recognised at fair value on initial recognition as at the 31 December 2018, no further adjustment has been made to the value of the asset in preparing the financial statements. However, in future periods this investment will be measured at fair value through other comprehensive income as disclosed within note 3.

IFRS 15

IFRS 15 Revenue from Contracts with Customers has replaced IAS 18 Revenue.

The new standard is applicable from 1 January 2018. IFRS 15 introduces a number of new concepts and requirements relating to revenue recognition and also provides guidance and clarification on existing practice.  The new Standard has been applied retrospectively without restatement, with the cumulative effect of initial application recognised as an adjustment to the opening balance of retained earnings at 1 January 2018. In accordance with the transition guidance, IFRS 15 has only been applied to contracts that are incomplete as at 1 January 2018.

In applying IFRS 15, hardware and certain software revenues within the discontinued RTLS SmartSpace business unit are deferred until the customer is in control of both the hardware and software components provided by the Group.

The revenue recognition policies of the continuing Geospatial operations are largely unaffected by the adoption of IFRS 15.

The conclusion of management's assessment of the adoption of IFRS15 on contracts which were incomplete as at 1 January 2018 is as follows;

•       In applying IFRS 15 to contracts which were incomplete as at 1 January 2018, revenue of £15,000 which had been previously reported within the 2017 financial year would have been deferred into the year ended 31 December 2018 due to the timing of delivery of hardware within the RTLS SmartSpace division.

•       Hardware costs of £3,000 associated with RTLS SmartSpace contracts which were incomplete as at 1 January 2018, would be deferred into the year ended 31 December 2018.

•       No adjustment has been made to defer the incremental costs of obtaining customer contracts, such as commission payments, as these costs would be amortised over a period of one year or less. Management have applied the practical expedient permitted under IFRS 15 in reaching this conclusion.

•       As a result of these adjustments, £12,000 has been recognised as an adjustment to the opening balance of retained earnings at 1 January 2018. Within the results for the year ended 31 December 2018, revenues have increased £15,000 and cost of revenues has increased by £3,000.

The Group's revenue policies under IFRS 15 are presented within note 3 to the financial statements:

IFRS 16

IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement of financial position in the form of a right-of-use asset and a lease liability. The consolidated statement of comprehensive income will be impacted through reduced operating expenses, and higher depreciation and finance costs. The new standard is applicable from 1 January 2019 with an option to adopt it early.

The Group has early adopted IFRS 16 effective from 1 January 2018.

The Group's accounting policies under IFRS 16 are as follows:

The policy applies to properties and cars where the Group has substantially all of the economic benefits from use of the asset. On adoption of the standard, a right-of-use asset and lease liability has been created.

The right-of-use asset is depreciated over the lease-term and if necessary impaired in accordance with applicable standards. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (application of the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The standard allows two options for adoption - fully retrospective and modified retrospective. The Group has elected to take the modified retrospective approach. As a result of this the Group has:

•       recognised a lease liability at 1 January 2018 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.

•       recognised a right-of-use asset at 1 January 2018 for leases previously classified as operating leases applying IAS 17. The Group has chosen to measure right-of-use assets at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to those leases recognised in the statement of financial position as at 31 December 2017.

•       2017 comparatives are left unchanged, and any opening adjustment to net assets was recognised on 1 January 2018.

The modified retrospective approach also allows a number of practical expedients which the Group has made use of:

•       Application of a single discount rate to a portfolio of leases with reasonably similar characteristics, being 3.5%.

•       Reliance on an assessment of whether a lease is onerous by applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application as an alternative to performing an impairment review using the principles in IAS 36 Impairment of Assets.

As noted above, no comparatives are given for the adoption of IFRS 16. The Group has calculated that the right of use asset recognised and corresponding liability as at 1 January 2018 is £3.0m.

The lease commitments as at 1 January 2018 were as follows:

 


Land and buildings

     £'000

Other

£'000

Total

£'000

No later than one year

681

94

775

Less than one year and no later than five years

1,513

10

1,523

Later than five years

982

-

982

Total

3,176

104

3,280

 

The opening lease liability is reconciled to the table of lease commitments as follows:


Total

£,000

 

Lease commitment as at 1 January 2018

3,280

 

Interest to be unwound over the lease term



(381)


Dilapidations liability recognised on adoption of IFRS 16



103


Opening lease liability and right of use asset at 1 January 2018



3,002

 

The impact on adoption within the results reported as continued operations for the twelve months ended 31 December 2018 is as follows:

•       Finance costs have increased by £14,000 due to interest charges on the lease liability.

•       Depreciation expense has increased by £0.2 million due to depreciation of the right-of-use asset.

•       EPS has not changed

•       Adjusted EBITDA has improved by £0.2 million due to reduction of rental expense.

 

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

The Group's business activities, together with factors likely to affect its future development, performance and position are set out in the Strategic report and Directors' report.

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.

As part of the sale of the RTLS SmartSpace business unit the group repaid its outstanding loan balance of £1.75m on 31 December 2018. The group has no further loans. 

Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding the opportunity funnel from both existing and new clients, growth plans, risks and mitigating actions. In particular operating cashflow and profitability are highly sensitive to revenue mix and the positive contribution of continuing growth in software sales.

In reaching their going concern conclusion, the Directors have considered the following points:

·     The Group had cash of £30.9m, with nil bank debt as at 31 December 2018 and has 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.

Co-terminus financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies. Businesses acquired or disposed during the year are accounted for using acquisition method principles from, or up to, the date control passed. Intra-group transactions and balances are eliminated on consolidation. All subsidiaries use uniform accounting policies for like transactions and other events and similar circumstances.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interest's share of changes in equity since the date of combination.

Foreign currencies

a. Functional and presentation currency

The functional currency of each Group entity is the currency of the primary economic environment in which each entity operates. The consolidated financial statements are presented in GBP.

b. Transactions and balances

Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the period end date. Such exchange differences are included in the income statement within "operating expenses". Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

c. Consolidation

For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of which have the currency of a hyperinflationary economy) that have a functional currency other than GBP are translated into GBP as follows:

·     assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date;

·     income and expenses for each income statement are translated at the exchange rate ruling at the time of each period the transaction occurred; and

·     all resulting exchange differences are recognised in other comprehensive income.

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 to assess the financial performance of, and allocate resources to, the Geospatial business and central resources.

The internal management accounting information is prepared on an IFRS basis but has a non-GAAP "Adjusted EBITDA" as the primary measure of profit and this is reported on the face of the income statement.

Revenue recognition

Geospatial business unit - continuing operations

Software

Revenue earned from myWorld software sales under perpetual licence agreements with maintenance and support is recognised when the software is made available to the customer for use. Revenue earned from myWorld software sold as a subscription is recognised over the period of the contract, which is generally one year, commencing from when the software is available 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 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.

Services

Services revenue includes consultancy, installation of hardware 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 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) relate to amounts invoiced in advance of services performed under the contract.

RTLS SmartSpace business unit - discontinued operations

Software

SmartSpace operates as standalone software that can be used to identify and manage assets in real time through the collection of data. Smartspace integrates with our own hardware or can be used alongside third party products. Smartspace software is sold under a perpetual licence arrangement and is recognised when the software is made available to the customer for use.

Additionally, the Group sells software that is required to allow our own hardware to operate. Accordingly, this software licence is only sold alongside hardware. Revenue is recognised at the point that the software has been made available to the customer and as the associated hardware becomes under the control of the customer, which is generally on delivery to the customer's premises.

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.

Hardware

Revenue is recognised at the point that the hardware supplied becomes under the control of the customer. This is generally on delivery to the customer's premises.

Services

Services revenue includes consultancy, installation of hardware 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 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) relate 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, based on the Group's estimate of the number of shares that will eventually 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.

Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Other intangible assets

Intangible assets that are purchased separately, such as software licences that do not form an integral part of related hardware, are capitalised at cost and amortised on a straight-line basis over their useful economic life which is typically 3 years.

Acquired intangible assets

Intangible assets acquired through a business combination are initially measured at fair value and amortised on a straight line basis over their useful economic lives. Amortisation is shown within operating expenses in the income statement. All acquired intangibles were fully amortised or impaired as at 31 December 2017 and 2018.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged to the income statement so as to write off the cost or valuation less estimated residual values over their expected useful lives on a straight-line basis over the following periods:

·     Fixtures and fittings: three to ten years, or period of the lease if shorter

·     Computer equipment: three years

Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in operating expenses.

Impairment of non-financial assets

Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready to use - are not subject to amortisation and are tested at least annually for impairment and whenever there is an indication that the asset may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Impairment losses are recognised immediately in profit or loss.

Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

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)

• fair value through other comprehensive income (FVOCI).

The classification is determined by both:

• the entity's business model for managing the financial asset

• 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

• 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 other comprehensive income (FVOCI)

Assets in this category are measured at fair value with gains or losses recognised directly in equity. The cumulative gain or loss arising from changes in fair value, impairment or sale is not recycled to the consolidated income statement. 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 SmartSpace business unit on 31 December 2018, the Group holds a rollover equity investment in Abyssinian Topco Limited (registered number: 11649721) 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 due.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is the actual cost of third-party components and labour, and is applied on a first in, first out basis. Net realisable value is based on estimated selling price less additional cost to completion and disposal. Provision is made for obsolete, slow moving or defective items where appropriate and are recognised as an expense in the period in which the write-down or loss occurs.

Classification and measurement of financial liabilities

As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Group's financial liabilities were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.

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.

All borrowing costs are recognised in the income statement in the period they are incurred.

Share capital and share premium

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and the amounts paid over the nominal value in respect of share issues, net of related costs, is classified as share premium.

Share-based payment reserve

The share-based payment reserve relates to a cumulative charge made in respect of share options granted by the Company to the Group's employees under its employee share option plans.

Translation reserve

Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency of GBP, are recognised directly in other comprehensive income and accumulated in the translation reserve.

Retained earnings

Retained Earnings include all current and prior period retained profits/losses.

Non-controlling interests

Non-controlling interests, presented as part of equity, represent a proportion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the assets of the parent and the non-controlling interests based on their respective ownership interests.

 

4 Critical accounting judgements and key sources of estimation and uncertainty

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 2018 is £1.2 million (2017: £2.7 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.

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 earn-out cash consideration remains possible, no contingent asset has been recognised within statement of financial position as at 31 December 2018. 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.

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 years 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 in respect of matters outside of managements control.

The Group tests capitalised development costs for impairment annually in accordance with the accounting policy stated in note 3. In performing the impairment review, management is required to make assumptions of the future cash flows generated from the myWorld 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. 

Revenue recognition

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 quantity of 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.

 

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 continuing Geospatial 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. The continuing geospatial operations are reported to the CODM as a single business unit.

The performance of the discontinued RTLS SmartSpace business unit 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

2018

£'000

% of total revenue

2017

£'000

% of total revenue

Software

1,395

14%

2,575

16%

Maintenance and support

918

9%

750

5%

Services

2,424

24%

2,459

15%

Total revenue generated from myWorld products

4,737

47%

5,784

35%

Geospatial services from third party products

5,242

53%

10,675

65%

Total revenue

9,979

100%

16,459

100%

Software includes £1.2 million (2017: £2.4 million) from perpetual software licences recognised at a point in time. All other revenue is recognised as services are transferred over time.

5.3 Geographical areas of continuing and discontinued 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

 

2018

£'000

2017

£'000


2018

£'000

2017

£'000

UK

-

1


3,252

1,142

Germany

14

2,842


1

-

Europe other

3

7


-

-

USA

7,041

8,300


364

66

Canada

1,596

2,783


4

3

Japan

1,302

2,496


2

33

Asia Pacific other

-

18


-

-

Rest of World

23

12


-

-

 

9,979

16,459


3,623

1,244

2018 revenues include £1.4 million from income deferred at the beginning of the period (2017: £1.9 million) relating to performance obligations satisfied overtime.

The following table represents the group's discontinued operational revenue and non-current assets by geographical region:

 

Revenue

 

Non-current assets

 

2018

£'000

2017

£'000


2018

£'000

2017

£'000

UK

426

271


3,268

1,991

Germany

4,571

5,350


411

29

Europe other

1,640

850


2

5

USA

7,313

2,783


122

114

Canada

137

71


-

-

Japan

956

1,049


147

72

Asia Pacific other

455

168


-

-

Rest of World

21

254


-

-

 

15,519

10,796


3,950

2,211

2018 revenues include £1.0 million from income deferred at the beginning of the period (2017: £0.4 million) relating to performance obligations satisfied overtime.

5.4 Information about major customers of the continuing operations

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.

During 2017, the Group had three customers who generated revenues of greater than 10% of total Geospatial revenue. £3.2 million was generated from one US customer, £2.8 million was generated from one European customer, and £2.4 million was generated from one Canadian 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 earn-out cash consideration remains possible, no contingent asset has been recognised within statement of financial position as at 31 December 2018. 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.

The following information is attributable to the RTLS SmartSpace business unit;

6.1 Income statement for the year ended 31 December 2018

 

 

 

2018

£'000

2017

£'000

Revenue

 

15,519

10,796

Cost of revenues

 

  (7,402)

(6,310)

Gross profit

 

8,117

4,486

Operating expenses

 

(8,804)

(7,968)

Operating loss

 

(687)

(3,482)

Analysed as:

 

 

 

Gross profit

 

8,117

4,486

Other operating expenses

 

(6,204)

(5,890)

Adjusted EBITDA

 

1,913

(1,404)

Depreciation

 

(808)

(371)

Amortisation and impairment of other intangible assets

 

(1,251)

(1,628)

Share option expense

 

(55)

(79)

Reorganisation costs

 

(486)

-

Operating loss

 

(687)

(3,482)

Finance income

 

7

5

Finance costs

 

(144)

(87)

Loss before tax

 

(824)

(3,564)

Income tax

 

(57)

30

Loss from discontinued operations prior to gain on disposal

 

(881)

(3,534)

Gain on disposal of the RTLS SmartSpace business unit

 

22,366

-

Profit/(loss) from discontinued operations

 

21,485

(3,534)

The gain on disposal of the RTLS SmartSpace business unit discontinued operations is summarised as follows;

 

2018

£'000

Consideration received or receivable:

 

Cash received on 31 December 2018 (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

846

Total disposal consideration

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

(1,888)

Accrued bonuses in respect of the transaction completion

(701)

Gain on sale before income tax and reclassification of foreign currency reserve

22,582

Reclassification of foreign currency reserve

(216)

Gain on disposal of the RTLS SmartSpace business unit

22,366

6.2   Cashflows from discontinued operations

 

2018

£'000

2017

£'000

Net cash (outflow)/inflow from operating activities

(599)

2,037

Net cash inflow/(outflow) from investing activities:

 

 

Purchase of property, plant and equipment

(245)

(116)

Expenditure on intangible assets

(985)

(1,064)

Cash received on sale of the RTLS SmartSpace business unit

28,882

-

Cash in RTLS SmartSpace business unit at disposal

(2,313)

-

Disposal costs in relation to the RTLS SmartSpace business unit

(704)

-

Interest received

7

5

Total net cash inflow/(outflow) from investing activities:

24,642

(1,175)

Net cash inflow/(outflow) from financing activities:

 

 

Repayment of bank debt

(2,500)

(750)

Repayment of lease liability

(518)

-

Interest paid

(71)

(110)

Total net cash outflow from financing activities:

(3,089)

(860)

6.3   Effect of the disposal on the consolidated statement of financial position

The carrying amount of the assets and liabilities of the RTLS SmartSpace business unit as at 31 December 2018 was as follows:

Statement of financial position of the discontinued operations

 

2018

£'000

Assets

 

 

 

1,525

Property, plant and equipment

 

510

 

1,915

 

1,261

 

3,932

 

1,697

Cash and cash equivalents

 

2,313

Total Assets

 

13,153

Liabilities

 

 

 

(5,078)

 

(350)

 

(2,132)

 

(405)

 

(249)

Other payables

 

(135)

Total liabilities

 

(8,349)

Net assets

 

4,804

 

7 Employee information

7.1 Employee numbers

The number of employees                at the end of the period were as follows:

 




Actual number of people as at 31 December


Average monthly number of people




2018


2017


2018


2017




Number


Number


Number


Number

Continuing operations



59


83


67


78

Discontinued operations


61


55


62


61




120


138


129


139

 

Employee numbers 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

2018

Number

2017

Number


2018

Number

2017

Number

Technical consultants

24

44


30

45

Sales & marketing

18

22


20

18

Research & development

7

7


7

6

Administration

10

10


10

9

 

59

83


67

78

 

By geography

2018

Number

2017

Number


2018

Number

2017

Number

United Kingdom

15

16


16

14

Europe

1

2


1

2

Americas

40

44


41

41

Asia

3

21


9

21


59

83


67

78

 

Employee numbers discontinued operations

The average monthly number of people employed by the Group during the year was:

 

Actual number of people as at 31 December

 

Average monthly number of people

By activity

2018

Number

2017

Number


2018

Number

2017

Number

Technical consultants

17

11


17

14

Sales & marketing

20

19


19

20

Research & development

13

13


13

14

Administration

11

12


13

13

 

61

55


62

61

 

By geography

2018

Number

2017

Number


2018

Number

2017

Number

United Kingdom

25

23


26

26

Europe

17

18


18

19

Americas

11

6


10

8

Asia

8

8


8

8


61

55


62

61



 

7.2 Employee benefits

Employee benefits of continuing operations

The aggregate employee benefit expense, including Executive Directors, comprised:

 

Notes

2018

£'000

2017

£'000

Wages and salaries

 

6,395

7,052

Social security costs

 

482

575

Contributions to defined contribution pension arrangements

 

288

270

Share-based payments

 

248

237

Total aggregate employee benefits

 

7,413

8,134

 

Employee benefits of discontinued operations

The aggregate employee benefit expense comprised:

 

Notes

2018

£'000

2017

£'000

Wages and salaries

 

5,636

4,539

Social security costs

 

518

551

Contributions to defined contribution pension arrangements

 

401

314

Share-based payments

 

55

79

Total aggregate employee benefits

 

6,610

5,483

 

8 Finance income and costs

Continued operations only

2018

£'000

2017

£'000

Interest income from cash and cash equivalents

1

3

Finance income

1

3

Interest expense for lease arrangements

(14)

-

Finance costs

(14)

-

Net finance costs

(13)

3

 

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

2018

£'000

2017

£'000

Amortisation and impairment of other intangible assets

 

774

807

Depreciation of owned property, plant and equipment

 

57

46

Depreciation of right of use assets

 

216

-

Operating lease rental charges - land and buildings

 

-

219

Research & development costs expensed

 

95

47

Net foreign currency (gains)/losses

 

(89)

(102)

Unrealised foreign exchange (gains)/losses on intercompany trading balances

 

(151)

252

Non-recurring items

9.2

619

-

 

9.2 Non-recurring items from continuing operations

The following item is associated with the sale on 30 March 2018 of the Group's Japan third party geospatial services including the Geoplan brand name for a gross consideration of JPY 100 million (£0.7 million).

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. Geoplan Company Limited has been renamed IQGeo Japan K.K. This has been credited to the income statement in arriving at a gain before tax:

 

 

2018

£'000

2017

£'000

Sale of Japan Geospatial third party services business

619

-

Total non-recurring items

619

-

 

The sale of the Japan Geospatial third party services business has not been 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.

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:

 

2018

£'000

2017

£'000

Fees payable to the Group's auditor for the audit of:

 

 

Parent Company and consolidated financial statements

59

39

Financial statements of subsidiaries, pursuant to legislation

70

72

Total audit fees

129

111

Fees payable to the Group's auditor for other services:

 

 

Tax compliance

7

30

Tax advisory associated with the group reorganisation

179

-

Audit related assurance services

14

14

Other services

-

2

Total non-audit fees

200

46

Total auditors' remuneration

329

157

 

The auditor of IQGeo Group plc is Grant Thornton UK LLP, covering both continuing and discontinued operations.

 

10 Income tax

10.1 Income tax recognised in the income statement

 

 

 

2018

£'000

2017

£'000

Current tax - continuing operations

 

 

 

Corporation tax

 

-

-

Adjustment in respect of prior year

 

(213)

-

Foreign tax

 

238

12

Total current tax charge

 

25

12

Deferred tax - continuing operations

 

 

 

Origination and reversal of temporary differences

 

14

(43)

Total deferred tax charge/(credit)

 

14

(43)

Total income tax charge/(credit) for the year - continuing operations

 

39

(31)

 

 

 

2018

£'000

2017

£'000

Current tax - discontinued operations

 

 

 

Corporation tax

 

-

-

Adjustment in respect of prior year

 

(300)

-

Foreign tax

 

407

93

Total current tax charge

 

107

93

Deferred tax - discontinued operations

 

 

 

Origination and reversal of temporary differences

 

(50)

(123)

Total deferred tax credit

 

(50)

(123)

Total income tax charge/(credit) for the year - discontinued operations

 

57

(30)

 

Total income tax charge/(credit) for the year

 

96

(61)



 

The tax credit differs from the standard rate of corporation tax in the UK for the year of 19% (2017: 19.3%) for the following reasons:

 

2018

£'000

2017

£'000

Loss before tax - continuing operations

(1,604)

430

Gain before tax from discontinued operations

21,542

(3,564)

Total gain before tax

19,938

(3,134)

Loss before tax multiplied by the standard rate of corporation tax in the UK of 19.0% (2017: 19.3%)

 

3,788

 

  (605)

Tax effects of:

 

 

Expenses not deductible for tax purposes

75

131

Income not subject to income tax

(2,138)

-

Utilisation of previously unrecognised tax losses

(1,987)

(82)

Unrecognised deferred tax movements

256

429

Tax unprovided in prior years

15

106

Research & development tax credits - prior years

(513)

-

Difference on tax treatment of share options - unrecognised

57

60

Differential on overseas tax rates

543

(100)

Total income tax debit/(credit)

96

(61)

10.2 Factors that may affect future tax charges

The Group has tax losses of £8.7 million (2017: £24.5 million) that are available for offset against future taxable profits of those subsidiary companies in which the tax losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group, and they have arisen in subsidiaries whose future taxable profits are uncertain. No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries, because the earnings are continually reinvested by the Group and no tax is expected to be payable on them in the foreseeable future.

The deferred tax balances have been measured at the local rate of realisation expected, which in the UK is 19%.

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

 

2018

£'000

2017

£'000


2018

£'000

2017

£'000

At 1 January

-

-


(516)

(683)

Deferred tax credited to the income statement

-

-


349

403

Deferred tax charged to the income statement

-

-


(313)

(236)

Disposal of RTLS SmartSpace business unit

-

-


249

-

At 31 December

-

-


(231)

(516)

The components of deferred tax included in the Consolidated statement of financial position are as follows:

 

2018

£'000

2017

£'000

Development costs capitalised

(231)

(516)

Total deferred income tax liabilities

(231)

(516)

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:

 

2018

£'000

2017

£'000

Tax losses carried forward

1,549

5,637

Equity-settled share options temporary differences

33

19

Total unrecognised deferred tax assets

1,582

5,656



 

11 Earnings per share (EPS)

 

2018

2017

Earnings attributable to Ordinary Shareholders

 

 

Gain /(loss) from continuing operations

(1,643)

461

Gain /(loss) from discontinued operations

21,485

(3,516)

Gain /(loss) from continuing and discontinued operations

19,842

(3,055)

Number of shares

 

 

Weighted average number of ordinary shares for the purposes of basic EPS ('000)

73,088

58,479

Effect of dilutive potential ordinary shares:

 

 

- Share options ('000)

257

215

Weighted average number of ordinary shares for the purposes of diluted EPS ('000)

73,345

58,694

Continuing operations EPS

 


Basic and diluted EPS (pence)

(2.2)

0.8

Discontinued operations EPS

 


Basic and diluted EPS (pence)

29.4

(6.0)

Continuing and discontinued operations EPS

 


Basic and diluted EPS (pence)

27.1

(5.2)

 

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 profit for the period.

Continuing operations

Notes

2018

2017

Continued earnings for the purposes of diluted EPS being net loss attributable to equity holders of the parent company (£'000)

 

(1,643)

461

Adjustments:

 

 

 

Reversal of share-based payments charge (£'000)

24

248

237

Unrealised foreign exchange gains/(losses) on intercompany trading balances

 

(151)

252

Reversal of non-recurring items (£'000)

9

(619)

-

Net adjustments (£'000)

 

522

489

Adjusted earnings (£'000)

 

(2,165)

950

Adjusted diluted EPS from continuing operations (pence)

 

(3.0)

1.6

 

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 2017

8,805

2,240

650

14,353

1,246

27,294

Exchange difference

-

-

-

-

(69)

(69)

Additions

-

-

-

1,583

230

1,813

At 31 December 2017

8,805

2,240

650

15,936

1,407

29,038

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

Accumulated amortisation

 

 

 

 

 

 

At 1 January 2017

(8,805)

(2,240)

(650)

(11,010)

(973)

(23,678)

Effects of movement in exchange rates

-

-

-

-

37

37

Charge for the year

-

-

-

(2,210)

(225)

(2,435)

At 31 December 2017

(8,805)

(2,240)

(650)

(13,220)

(1,161)

(26,076)

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)

Net book amount

 

 

 

 

 

 

At 31 December 2018

-

-

-

1,213

22

1,235

At 31 December 2017

-

-

-

2,716

246

2,962

 

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 RTLS SmartSpace and myWorld products. On 31 December 2018 the RTLS SmartSpace business unit was disposed of and the remaining capitalised product development costs relate entirely to the myWorld products. The Group is loss making and this is an indicator for potential impairment of development costs. Management have completed impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded that no impairment is required as the cash flows exceeded the carrying value of the asset.

On 30 March 2018, the Group concluded the sale of its Japanese third party geospatial services business including the Geoplan brand name. The disposal of the business included historic and fully written down goodwill, acquired customer relationships and acquired software products.

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 2017

834

1,216

2,050

Effect of movements in exchange rates

(9)

(19)

(28)

Additions

30

110

140

Disposals

(122)

(15)

(137)

At 31 December 2017

733

1,292

2,025

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

Accumulated depreciation

 

 

 

At 1 January 2017

(295)

(1,010)

(1,305)

Effect of movements in exchange rates

3

52

55

Charge for the year

(221)

(196)

(417)

Elimination on disposals

122

13

135

At 31 December 2017

(391)

(1,141)

(1,532)

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)

Net book amount

 

 

 

At 31 December 2018

26

58

84

At 31 December 2017

342

151

493

 

14 Right of use assets

The Group has early adopted IFRS 16 effective from 1 January 2018 and has 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:

 

 

2018

£'000

Cost

 

 

 

3,002

Effect of movements in exchange rates

 

-

 

63

Disposal of RTLS SmartSpace business unit

 

(2,563)

Cost at 31 December 2018

 

502

Depreciation

 

 

 

23

 

(869)

Disposal of RTLS SmartSpace business unit

 

648

Depreciation at 31 December 2018

 

(198)

Net book amount

 

 

At 31 December 2018

 

304



 

15 Investments

At 31 December 2018, the Group holds a rollover investment in Abyssinian Topco Limited as part of the consideration for the sale of the RTLS SmartSpace business unit. Abyssinian Topco Limited is a UK registered company (company number 11649721) and is the parent company of Ubisense Limited which along with its subsidiary companies, comprise the RTLS SmartSpace business unit.

 

 

£'000

Investment as at 31 December 2017

-

Investment in Abyssinian Topco Limited

2,000

Investment as 31 December 2018

2,000


 

IQGeo Group plc holds approximately 5.6% of the ordinary share capital of Abyssinian Topco Limited.

 

16 Inventories

 

2018

£'000

2017

£'000

Raw materials

-

414

Finished goods

-

1,045

Total inventories

-

1,459

 

Inventory recognised as an expense was £2.8 million (2017: £2.4 million) and is included within discontinued operations.

At 31 December 2017 the balance sheet included £0.6 million impairment provision. As at 31 December 2018 the inventory was disposed of within the sale of the RTLS SmartSpace business.

 

17 Trade and other receivables

 

Notes

2018

£'000

2017

£'000

Trade receivables, gross

 

1,535

7,663

Allowances for expected credit losses

17.1

-

(1,460)

Trade receivables, net

17.2

1,535

6,203

Amounts recoverable on contracts

 

610

2,666

Other receivables

 

915

275

Prepayments

 

485

933

Corporation tax recoverable

 

-

4

VAT and taxation receivable

 

41

463

Total trade and other receivables

 

3,586

10,544

 

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.

The above comparative for impairment provisions refers to the IAS 39 measurement basis which applied an incurred loss model, whereas the current year applies IFRS 9 which is an expected loss model.

Amounts recoverable on contracts as at 31 December 2018 has reduced from the prior period due to the disposal of the RTLS SmartSpace business unit on 31 December 2018. The disposal balance sheet of the RTLS SmartSpace business unit includes £1.7 million relating to amounts recoverable on contracts as disclosed within note 6.3.

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.

17.1 Movement in allowance for expected credit losses

 

2018

£'000

2017

£'000

At 1 January

(1,460)

(2,151)

Exchange differences

(25)

50

Amounts recovered in the year

204

519

Amounts written off in the year

-

217

Allowance released

42

30

Provided debts disposed of on 31 December 2018

1,239

-

Allowance made

-

(125)

At 31 December

-

(1,460)

 

As at 31 December 2017, the allowance includes £1,326,000 in respect of amounts owed by two entities in the Asia Pacific region. These debts were disposed of as part of the sale of the RTLS SmartSpace business unit on 31 December 2018.

17.2 Ageing of past due but not impaired receivables

 

2018

£'000

2017

£'000

Neither past due nor impaired

1,533

4,784

Past due but not impaired:

 

 

0 to 90 days overdue

2

1,084

More than 90 days overdue

-

335

Total

1,535

6,203

 

18 Cash and cash equivalents

 

2018

£'000

2017

£'000

Cash at bank and in hand

30,915

9,114

Cash and cash equivalents

30,915

9,114

 

Included in the above figure is an amount of £27.1 million held on account with the Company's lawyers following the completion of the sale of the RTLS SmartSpace business unit. The funds meet the IAS 7 definition of cash being short-term, highly liquid investments and readily convertible into known amounts of cash. Cash held on account with the Company's lawyers was transferred to the IQGeo GBP bank account on 2 January 2019.

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

2018

£'000

2017

£'000

British Pound (GBP)

29,076

4,474

Euro (EUR)

-

1,829

US Dollar (USD)

1,030

1,693

Japanese Yen (JPY)

5

480

Canadian Dollar (CAD)

804

638

Cash and cash equivalents

30,915

9,114

 

19 Trade and other payables

 

2018

£'000

2017

£'000

Deferred income

913

2,386

Trade payables

2,175

3,040

Trade accruals

1,734

2,840

Other taxation and social security

214

768

Other payables

44

76

Total trade and other payables

5,080

9,110

 

All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation of fair value.

Deferred income as at 31 December 2018 has reduced from the prior period partially due to the disposal of the RTLS SmartSpace business unit on 31 December 2018. The disposal balance sheet of the RTLS SmartSpace business unit includes £0.4 million relating to deferred income as disclosed within note 6.3.



 

20 Lease obligation

The Group has early adopted IFRS 16 effective from 1 January 2018 and has recognised a lease liability at 1 January 2018 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:

 

 

2018

£'000

 

3,002

Effect of movements in exchange rates

 

23

 

63

 

96

 

(743)

Disposal of RTLS SmartSpace business unit

 

(2,132)

At 31 December 2018

 

309

Presented as:

 

 

 

232

Lease liability payable in more than 1 year

 

77

At 31 December 2018

 

309

 

21 Bank loans

In October 2016, an £8.0 million HSBC working capital facility was restructured, becoming a £4.0 million repayment loan with £0.75 million repayable each year. £0.75 million of this facility was repaid in each of December 2016, December 2017 and 1 January 2018.

This loan was secured on the fixed and floating assets of the Group, attracted an interest charge of LIBOR + 3% and was subject to an operating covenant linked to "operating cash flow" performance (profit or loss before tax adding back any non-recurring items, finance costs, foreign exchange costs, share based payments, depreciation, amortisation or capitalisation of product development). Following the placing in November 2017, the terms of the operating covenant were amended as follows: 2017 - from nil to £2 million negative; 2018 - from £1 million positive to £2 million negative; 2019 - from £1 million positive to £1 million negative, 2020 and beyond - remained at £1 million positive.

On 31 December 2018, the debt and all outstanding interest in respect of the debt was fully settled and the bank's security was released. The Group has no other bank debt.

 

22 Other payables

 

2018

£'000

2017

£'000

Property provisions

-

179

Total other payables

-

179

 

The property provision is a dilapidation provision to restore the UK offices to their original state. On 31 December 2018, the UK lease was held by the RTLS SmartSpace business unit and so the provision is no longer required following the sale of that business.

 

23 Share capital and premium

 

Number of

ordinary shares

of £0.02 each

Share capital

 £'000

Share premium

£'000

Total

£'000

Balance at 1 January 2017

55,883,154

1,118

41,554

42,672

Issued under share-based payment plans

17,250

-

2

2

Issued on placing to institutional shareholders

17,187,500

344

4,819

5,163

Change in year

17,204,750

344

4,821

5,165

Balance at 31 December 2017 and at 31 December 2018

73,087,904

1,462

46,375

47,837

 

The Company has one class of ordinary shares which carry no right to fixed income.

 

24 Company balance sheet of IQGeo Group plc

The Company balance sheet of IQGeo Group plc has been prepared in compliance with United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS 102") and the Companies Act 2006.

Company balance sheet

For the year ended 31 December 2018

 

 

 

2018

£'000

2017

£'000

Fixed assets

 

 

 

Investments

 

2,110

9,808

Current assets

 

 

 

Debtors falling due within one year

 

14,027

10,189

Debtors falling due after one year

 

9,715

1,059

Cash at bank and in hand

 

28,948

10

 

 

52,690

11,258

Creditors - amounts falling due within one year

 

(6,207)

(557)

Net current assets

 

46,483

10,701

Total assets less current liabilities

 

48,593

20,509

Net assets

 

48,593

20,509

Capital and reserves

 

 

 

Called-up share capital

 

1,462

1,462

Share premium account

 

46,375

46,375

Share-based payment reserve

 

717

1,139

Profit and loss reserve

 

39

(28,467)

Equity shareholders' funds

 

48,593

20,509

 

25 Final Results Announcement

This final results announcement, which has been agreed with the auditors, was approved by the Board of Directors on 10 April 2019.  It is not the Group's statutory accounts for the year ended 31 December 2018 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 2018 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 2018 and 31 December 2017 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 2017 have been delivered to the Registrar of Companies, but the 31 December 2018 accounts have not yet been filed.

 

 


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