Final Results
27/03/2023 07:00
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RNS Number : 2273U IQGeo Group PLC 27 March 2023
27 March 2023
IQGeo Group plc
(the "Company" or the "Group")
Final results for the year ended 31 December 2022
Resilient markets and acquisition drive revenue and profit
IQGeo Group plc (AIM: IQG), a market leading provider of geospatial
productivity and collaboration software for the telecoms and utility
industries, is pleased to announce its final audited results for the twelve
months ended 31 December 2022 (the "Year" or the "Period").
Operational highlights:
· Acquisition of Comsof NV ("Comsof"), a provider of market leading
automated fibre planning software which also brings a European hub and around
80 customers in Europe, for consideration of up to €13.0 million.
· Substantial progress in all regions with in excess of, 450 exit
customer logos by the end of the year, a record for the Group
· £5.3 million of new Annual Recurring Revenue ("ARR") added,
excluding ARR acquired from Comsof, up from £3.4 million in the prior year
· 108% recurring revenue Net Retention Rate ("NRR" *) (2021: 113%)
· Initial 3 year contract and further extension won in period with
Global top 5 telecom operator worth in excess $10.4 million delivering $2.6
million of ACV (Annual Contract Value) per year and $2.6 million of services
Financial highlights:
· Headline figures have continued to exceed market expectations
· Headline revenue growth of 92% to £26.6 million (2021: £13.8
million)
· Organic revenue growth of 57% to £21.8 million
· Recurring revenue growth of 84% to £10.6 million (2021: £5.8
million)
· Recurring revenues account for 40% of all revenues (2021: 42%)
· Material increases in exit ARR** of 84% to £15.1 million (2021:
£8.2 million)
· Gross margin of 59% (2021: 64%)
· Substantially improved adjusted EBITDA*** profit of £1.9 million
(2021: £0.8 million loss) and reduced loss for the year of £0.9 million
(2021: £1.9 million)
· Comsof acquisition completed in August for a total consideration
of up to €13.0 million (£11.1 million)
· Cash as at 31 December of £8.1 million (no borrowings) (2021:
£11.5 million) after £7.5 million cash outflow for the acquisition of Comsof
and a fundraising resulting in £3.5 million of inflow
Outlook:
· Our customers' end markets have remained very resilient and our
contract wins of new and existing software modules in both telecommunications
and utilities markets give us great confidence that we have the right product
set to meet our customers' demands moving forwards
· Exit ARR** of £15.1 million provides strong visibility of future
revenues and cash flows
· We remain very confident in our ability to deliver on our targets
for 2023 and beyond
*NRR is the growth in recurring revenues from existing customers, less any
customer churn
**Exit ARR is defined as the current go forward run rate of annually renewable
subscription and M&S agreements
***Adjusted EBITDA excludes amortisation, 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
Richard Petti, Chief Executive Officer, said:
"In 2022 we have delivered a strong financial performance with growth in
revenues, profits and cashflows. The asset investment dynamics of the
underlying markets we serve - telecoms and utilities - have remained resilient
and we see continued long term investment in fibre optic networks and in
electric grid modernisation in all our key markets.
Thanks to these strong fundamentals, IQGeo has produced another highly
positive performance including enterprise deployments at some of the largest
telecoms and grid operators in the world. Our strong competitive performance
has been underpinned by investments we have made in our product and in our
organisation and today our ability to operate at scale against our competition
means we are no longer just challengers, but leaders.
Our acquisition of Comsof NV has been a strategic highlight for the year; not
only have we augmented our product set with market-leading predictive design
analytics but we have acquired a significant physical presence in continental
Europe where we look forward to working with an exceptional team and an
exciting new customer base.
We expect current levels of investment for fiber optic networks and grid
modernisation to continue for a significant time and thanks to our competitive
software offering and our highly capable organisation, we head into 2023 with
high degree of confidence."
For further information contact:
IQGeo Group
plc
+44 1223 606655
Richard Petti
Haywood Chapman
finnCap
Ltd
+44 20 7220 0500
Henrik Persson, Seamus Fricker (Corporate Finance)
Tim Redfern, Charlotte Sutcliffe (ECM)
Notes to Editors
About IQGeo
Telecommunications and utility operators are "Building better networks" with
IQGeo's award-winning software solutions. The ability to powerfully model any
network requirement, integrate every system and data source, and support field
and office teams with continual innovation is helping operators create the
networks of the future. Our solutions ensure greater cross-team collaboration
and process efficiency throughout the network lifecycle, from planning and
design to construction, operations, and sales.
Whether it's highly competitive fibre and 5G broadband rollouts or complex
utility grid modernization projects, customers trust IQGeo's enterprise
solutions, OSPInsight fibre management, and Comsof automated design software.
We partner with large multinationals and smaller regional operators to deliver
the digital innovation they need to increase network resilience, operational
safety, and business ROI.
Chair's statement
A year of strong organic growth and a key acquisition combine to deliver
excellent performance across all metrics.
I am very pleased with the progress that has been made in 2022. We continue
to develop long term engagements with our customers in addition to winning a
number of new blue chip telecom and utility industry customers during the
year. Working closely with these customers, we continue to develop a strong
and differentiated suite of products aimed directly at resolving the issues
they face in managing complex networks and projects.
Driven by global megatrends for faster broadband and grid decarbonisation, our
markets are fuelled by major public and private sector investment and
increasing regulatory mandates. Our success in establishing new customers and
deploying high-profile projects demonstrates that the IQGeo solutions have
crossed the chasm from early adopters and into the mainstream such that we are
now recognised as an innovative industry leader.
I am also pleased to welcome the team from Comsof NV. The acquisition of
Comsof in August brought with it a market leading design engine, a strong
presence in Europe and some of the industry's most well regarded experts. I
look forward to seeing how the values of both businesses continue to combine
to expand our market penetration and enhance the experience of our customers
across the lifecycle of their networks.
Results Overview
Our financial results delivered another year of growth across all of our key
metrics. The business generated £1.9 million adjusted EBITDA profit (2021
Loss £0.8 million). Recurring revenue increased by over 80% to £10.6 million
(2021 £5.7 million) and overall revenue increased to £26.6 million, an
increase of 92% on prior year. Organic revenue increased by 57% to £21.8
million (2021 £13.8 million). Cash held on balance sheet amounted to £8.1
million (2021 £11.5 million).
Organisation
The ongoing investment in our business has remained focused. We have
increased head count by 78 expanding our global presence in the US, UK, and in
Europe on the back of the Comsof acquisition. These investments have been
across all aspects of the business including sales, services, technology and
support functions. We have the confidence to do this through the greater
visibility afforded from a strong order book, an increase in a recurring
revenue base, and growing customer demand. We believe these strategic and
ongoing investments will help the business to be right sized for our future
growth ambitions.
In addition to the strong organic growth delivered within the business, the
last two years have seen two software acquisitions. These acquisitions have
brought substantial opportunity where industry expertise and market leading
products are allowing our customers and markets to use our software across an
expanding number of operational use cases and departments. Integration of
these acquisitions remains important to our customers and our people, and I am
extremely pleased with how both have contributed to our shared mission. We
are already benefiting from a clearly defined, single ambition within the
IQGeo Group.
Outlook
2022 has seen substantial progress across all aspects of our business. We
continue to work closely with our customers to support and develop solutions
through a global presence that meets ever-more complex and growing
opportunities that are demanded by the telecom and utility industries. Wider
adoption, reputational excellence, and growing market needs continue to expand
our market presence and allow for the development of those products that serve
our customers.
Our strategy has remained consistent for some years, to provide a set of
solutions that allow our customers to build and manage key infrastructure. The
past year has further validated this conviction with some key customer wins
and existing customer expansions. With growing visibility comes greater
conviction and as such, this allows us to invest and expand business and
market opportunities. It is on this basis that we remain very confident in our
ability to deliver on our revenue and market targets.
I would like to thank all those stakeholders that have joined the business
this year and those who have been part of our journey for some time for their
trust and hard work.
Paul Taylor
Chair
24 March 2023
Chief Executive Officer's statement
CEO Statement
In 2022 we continued to do what we do best; listen to our customers. In our
mission to help build better networks we have remained committed to our vision
of providing our customers with the world's only integrated platform that
allows them to plan, build and operate their physical assets in a single
solution.
This singular vision has proven to be highly compelling and has resulted in
another record haul of new contracts including some of the largest telecoms
and utilities customers in the world. Moreover, and of equal importance, as
our revenue growth has outpaced our investments, for the first time we have
achieved the combination of both high growth and profitability.
Last year in my CEO statement I spoke of a more confident, focused
organisation and over the last 12 months we have leveraged our strengths to
expand both our organic and inorganic revenue in all our markets, to increase
the long-term recurring revenue and to launch exciting new software
capabilities.
Our "land and expand" software sales strategy continues to build momentum as
we deploy initial 'proof of value' solutions and then expand our presence into
new operational areas over time. As a result, I am pleased to again report
that we have made significant progress against our three strategic business
KPIs:
1. Global growth
a. We now have solutions deployed in over 40 countries worldwide
b. 64 new clients signed in 2022
c. 207 client expansions (to include all license and service orders)
2. Recurring revenue
a. Exit recurring revenue run rate ACV grew by 84 %
b. In year recurring revenues grew by 84%
3. Product innovation
a. 8 major Enterprise software releases across 4 key product lines
b. 8 Enterprise software compatibility releases
c. 5 major SMB software releases
d. Initial IQGeo and Comsof integration project release
Our acquisition of Comsof NV in August of 2022 also added the industry-leading
automated planning and design engine to our software suite and in just 4.5
months of ownership quickly validated our acquisition logic and contributed
significantly to our results. The Comsof customer base gives us a
well-established launch pad for cross-selling expansion into EMEA and the
Comsof team brings both a substantial physical presence in continental Europe
as well as best in class analytical skills that accelerate our ability to
innovate, particularly in the area of predictive data modelling and analytics.
I have often said that we ride a global wave of 'once in a generation' capex
investments in fibre networks and grid modernisation. The market opportunity
for our software technology remains very strong as there is still a great deal
of work to be done in deploying fibre networks and modernising electricity
grids around the world.
Broadband market opportunity
Recent market research published by the Fibre-to-the-home Global Alliance
reports(1) low FTTH/B (Fibre to the home/business) penetration rates in many
of our key target markets.
These low penetration figures represent the growth opportunity in our telecoms
business as nations aim for fibre broadband and 5G market saturation. For
example, in the US nearly $130bn(2) in federal, state and local subsidies are
being invested across a range of broadband initiatives to support urban, rural
and low-income areas.
As broadband operators race to rollout fibre and build valuable market share,
we see these investments trigger a complete overhaul of supporting business
systems. IQGeo's flexible technology foundation and integrated lifecycle
strategy has been well-received by the market and is driving the sales success
for our software and services.
Electric utility market opportunity
While different in nature to the fibre broadband market, the electric grid
modernisation market opportunity is also very compelling for IQGeo. Worldwide,
we see that electric grids are undergoing fundamental redesign driven by
increasing net-zero governmental mandates and the deployment of Distributed
Energy Resources (DERs), electric vehicles, and battery storage. These
infrastructure investments will be accompanied by parallel investments in
intelligent software and sensors to manage them.
Significant projected growth in grid technology investment is forecast in
recent research completed by the Indigo Advisory Group(3). In their report the
IQGeo technology falls neatly into their classification of "Grid tech" which
they define as software solutions, sensors, and applications that focus on
grid performance and utility innovation. In addition, we are seeing major
public sector stimulus investment in grid modernisation. One prominent example
is the American Recovery and Reinvestment Act (ARRA)(4) that allocates $4.5b
in public sector spending for modernisation of the US electric grid. This
investment is supported by private sector investment commitments of an
additional $5b for a total of $9.5b.
Handicapped by years of regulatory inertia and legacy computer systems and
software, the industry is undergoing an essential transformation to adopt the
increasingly complex grid architecture of the future. Generations of these
older asset management systems and processes are slowly, but surely, being
replaced by alternative software to design, construct and maintain a modern
distributed grid. IQGeo's integrated network lifecycle solution is finding
success in this market with influential grid operators that are focused on
decarbonisation initiatives and through a "land" strategy of deploying our
industry-leading mobile technology for field service and inspection
applications.
In Japan, our software is also being used by some of the country's largest
electric utilities to create damage assessment and disaster response
dashboards that help to manage their networks during frequent severe storms
and natural disasters. The experience gained from our Japanese customer
deployments are being used to create similar disaster response solutions with
customers elsewhere in the world where utility disaster response is a high
priority.
Organisational maturity
A challenge for IQGeo in FY2023 and beyond will be to evolve and mature our
own organisational structures and processes to successfully manage the
increase in the volume and diversity of our customers.
While it is exciting to announce new projects with tier 1 telecom or utility
operators, we also recognise that these customers bring an increased
expectation for service levels and customer support. As part of our growth
strategy we have been working across the entire organisation to up-scale our
skills, processes, and tools to create a truly world-class delivery and
service capability.
In 2022 we significantly expanded our delivery and service team and upgraded
our software tools to optimise our processes and adapt industry best
practices. This included hiring a new Senior Vice President of Delivery who
came to us with extensive experience in building a scalable global delivery
strategy.
While IQGeo already has a strong working relationship with our existing
customers with a 108% net retention for recurring revenue in 2022, looking
ahead to 2023, we are not complacent about this success given the strategic
importance of recurring revenue to our business model. The challenge of
scaling up our business touches on virtually every department and individual
across the organisation and we are investing in the talent, technology, and
processes we need to ensure our future success and secure predictable
recurring revenue with our growing customer base.
Product Development
In 2022 I was particularly proud of what our Engineering and Product
Management team have achieved with our product development. Major new releases
of our strategic Network Manager products, and the acquisition and integration
of the Comsof automated planning software have given our sales team the
innovative software they need to execute our "land and expand" sales model to
secure new business and lay the foundation for long-term recurring
subscription revenue.
Net Zero Journey
Something I'd like to call special attention to is our progress in positively
impacting the environment. In both our core markets, the new generation
networks we help our customers build have significantly lower power
requirements which means they emit less carbon than the networks they
replace. We take great pride knowing that our software solutions result in a
direct impact on the reduction of global CO(2) emissions.
Additionally, as a business, we monitor, mitigate, and offset 100% of the
carbon footprint of our own operations thereby supporting the world's net-zero
emission journey.
Summary
The success that the IQGeo team achieved in 2022 continues to validate our
core strategy, our sales model, and our software technology strategy going
forward into 2023. Our 92% increase in revenue is evidence of the investment
being made in network infrastructure by the telecom and utility industries and
our ability to respond with innovative software solutions.
The broadband industry is in a race to rollout new fibre and capture market
share for the valuation of their business, and the electric utility industry
is ramping up their grid modernisation initiatives to meet essential
decarbonisation targets. We have established an impressive customer base and
proven track record and I believe that we are uniquely positioned to further
capitalise on the investments being made by our customers and prospects.
Our success in 2022 has given us a renewed confidence to continue our focus on
core business growth and product innovation. We are operating in strong
telecom and utility markets that we believe will continue to invest in new
technology for the long-term. Through strategic acquisitions and in-house
development we have created a singular suite of award winning software
technology that is mission critical for our customers as they pursue their
business and regulatory goals.
In short, IQGeo is in the right place, at the right time, with the right
solutions, and we are confident that we will continue to build market momentum
in 2023 and beyond.
Footnotes
1. FTTH/B Global Ranking report, May 2022 - Fibre-to-the-home Global
Alliance.
2. Fiber Broadband Association - The status of U.S. broadband and the
impact of fiber broadband - July 2022
3. Indigo Advisory Group
(https://www.indigoadvisorygroup.com/blog/grid-tech-the-decade-of-deployment
(https://www.indigoadvisorygroup.com/blog/grid-tech-the-decade-of-deployment)
)
4. US Department of Energy
(https://www.energy.gov/oe/articles/arra-grid-modernization-investment-highlights-fact-sheet
(https://www.energy.gov/oe/articles/arra-grid-modernization-investment-highlights-fact-sheet)
)
Richard Petti
Chief Executive Officer
24 March 2023
Chief Financial Officer's statement
Principal events and overview
2022 has been another successful year for the Group as we continue to grow
Annual Recurring Revenue ("ARR") and our customer base, both organically and
through acquisition. In addition, we achieved the major milestone of
profitability at the adjusted EBITDA level and as we continue to be successful
in the growing markets in which we operate, we will continue to grow revenue
and achieve sustained profitability and cash inflows.
On 11 August 2022, the Group acquired Comsof for a total consideration of up
to €13.0 million (£11.1 million). Comsof not only brings market-leading
automated fibre planning software, but also gives IQGeo a substantial European
hub via its office in Ghent, Belgium and a significant European customer base
with c.100 telecom customers that will provide the potential to increase the
cross-selling of IQGeo software products. The positive results of the
acquisition along with the organic growth achieved by IQGeo's pre-existing
operations are reflected in the Group KPIs. The OSPI business acquired in
December 2020 (now called the Small and Medium Business (SMB) unit) also
continued to perform well in 2022, winning 43 new logos during the 2022 year
and increasing the new ARR won to £1.3 million compared to £1.1 million in
2021 which itself was more than double the rate compared to the year before
the acquisition.
As at 31 December 2022, the Exit ARR of the Group was £15.1 million and this
will give us greater visibility of revenues and cash flows moving forwards.
40% of the Group's revenues during the year were recurring compared to 42% in
2021, the slight decrease due to the dilutive effect of Comsof revenues with
that business having approximately 25% recurring revenue under their current
commercial model and the much-increased IQGeo professional services revenue as
the Group implemented an increased number of customer projects during 2022.
Key performance indicators
On a monthly basis, the Directors review revenue, operating costs, cash and
KPIs to ensure the continued growth and development of the Group. Primary
KPIs for 2022 and 2021 were as follows:
KPIs 2022 2021
£'000 £000
Total revenue 26,592 13,849
Recurring revenue 10,610 5,751
Recurring revenue % 40% 42%
New ARR added in year 7,017 3,370
Exit recurring revenue run rate 15,081 8,178
IQGeo own product orders 40,539 18,887
IQGeo own product revenue 25,632 12,851
Gross margin % 59% 64%
Adjusted EBITDA 1,898 (829)
Loss for the year (913) (1,929)
Recurring revenue net retention 108% 113%
Recurring revenue order intake 21,957 10,321
Cash, net of debt 8,055 11,499
Annual recurring revenue
Annual recurring revenue or ARR arises from both subscription-based software
sales and also maintenance and support arrangements from perpetual licence
sales. During 2022, the Group has added net new ARR of £7.0 million. £5.3
million new ARR has been added through sales of our enterprise and SMB
products, a 55% increase over the £3.4 million added during 2021 and a
further £1.7 million has been added via the acquisition of Comsof. Of the
£5.3 million new ARR won during the year, £1.3 million was from our Tier 3
and Tier 4 customer base - namely the OSPI business acquired in December 2020,
and an increase from £1.1 million won by the business in 2021 which itself
was more than double the run rate of that business in the year to December
2020. The Group achieved a recurring revenue net retention figure of 108%
which reflects the Group's continued ability to grow existing customer
accounts through new products and increasing the user count, along with
excellent logo retention. Whilst this is slightly behind the 113% net
retention figure achieved in 2021, we are still pleased with the 2022
performance.
The Exit ARR of the Group as of 31 December 2022 has increased by 84%
to £15.1 million (2021: £8.2 million) including organic sales and the
acquired Comsof ARR. Recurring revenues now account for 40% of all revenue,
compared to 42% in 2021, down marginally due to the lower recurring revenue
percentage from the acquired Comsof business which had approximately 15%
recurring revenue in the year. We plan to change the business model for the
Comsof business over time to increase the recurring revenue. Another reason
for the decrease in recurring revenue percentage is the considerable growth we
have seen in our services revenue due to a number of large projects the Group
has undertaken as we on-board the large number of new customers. We do
however expect the recurring revenue percentage to grow over the coming years,
bringing increased visibility of revenues and cash flows as well as increased
margins given the 87% gross margin that our recurring IQGeo product revenues
bring.
Additionally, to recurring revenue, revenue is derived from consultancy
services on own IP products and also consultancy services connected to third
party products. Revenues from third party product services have declined in
the current period and are still expected to decline in future periods as the
Group continues to focus on growing recurring revenues.
Orders
Bookings of orders increased by 109% to £41.0 million during 2022 (2021:
£19.6 million) and the closing order book relating to revenue to be taken in
future years increased by 88% from £14.6 million at the end of 2021 to £27.5
million at 31 December 2022.
Revenue
Revenue composition by revenue stream is summarised in the table below:
Revenue by stream 2022 £'000 % of total revenue 2021 £'000 % of total revenue
Subscription 8,107 31% 3,964 29%
Maintenance and support 2,503 9% 1,787 13%
Recurring product revenue 10,610 40% 5,751 42%
Perpetual Software 1,138 4% 2,011 15%
Demand Points 3,357 13% - 0%
Services 10,527 39% 5,089 36%
Non-recurring product revenue 15,022 56% 7,100 51%
Total product revenue 25,632 96% 12,851 93%
Geospatial services from third party products 960 4% 998 7%
Total revenue 26,592 100% 13,849 100%
Total revenue grew by 92% over the prior year to £26.6 million. Included in
this was £4.8 million from Comsof which meant that underlying organic revenue
growth from the existing IQGeo business was 57% to £21.8 million. The Group
has achieved recurring revenue growth of 84% during 2022 to £10.6 million
(2021: £5.8 million) largely as a result of the ARR won during 2021/2022.
Comsof revenue includes recurring revenue of £0.7 million and £3.4 million
of Demand Points - revenue from the number of end points that the fibre
planning software is used to plan for customers. This Demand Point revenue
is similar to our perpetual licence revenue and is included in our
non-recurring IQGeo product revenue. Sales of perpetual software licences
have decreased from the prior year as the Group continues to focus on
subscription sales, although some customers - particularly in the utility
market - prefer a perpetual software offering. It is anticipated that this
one-off revenue will continue to fluctuate year on year.
As the number of customers and new contract wins has increased, our associated
service revenues from initial deployments and expansion orders have also grown
by 107% over the prior year and the Group went into 2023 with a strong backlog
of services orders, providing visibility of services revenues for six months
and beyond. Labour backlog as at 31 December 2022 was £5.0 million.
Gross profit
Gross profit 2022 Gross margin % 2021 £'000 Gross margin % Gross margin movement
£'000
Gross profit / gross margin 15,665 59% 8,797 64% -5%
Gross margin percentage for the year was 59%. The decrease from the prior
year has been driven by the shift in product mix, especially the large
increase in services revenues which carry a 20% gross margin compared to the
87% gross margin on our recurring revenues and 90% gross margin on perpetual
software licences and demand points.
Operating expenses and adjusted EBITDA
Operating expenses were £17.2 million (2021: £11.4 million) and are
summarised as follows:
2022 2021
£'000 £'000
Other operating expenses 13,767 9,626
Depreciation 447 315
Amortisation 2,241 1,656
Share option expense 303 282
Unrealised foreign exchange (gain) / loss on intercompany trading balances (574) 42
Non-recurring items 1,007 (550)
Total operating expense 17,191 11,371
Other operating expenses of the Group include sales, product development,
marketing and administration costs, net of costs capitalised.
Other operating costs during the period have increased with the addition of
the Comsof acquired business adding £0.8 million of operating costs to the
Group. The lifting of Covid-19 restrictions has meant that travel both
internally within the Group and externally for face-to-face sales activities
has increased which has resulted in increased costs, although there are
obvious benefits such as collaboration within teams and enhanced messaging of
the benefits our products can bring amongst our customers. Operating costs are
anticipated to increase in the future to drive further revenue growth.
Non-recurring items in 2022 relate to the Comsof acquisition costs and the
costs of integrating the business with the IQGeo business. With effect from
1(st) January 2023, all finance activities and peripheral systems used by
IQGeo had been adopted by the Comsof business and in North America, we
successfully merged the Comsof Canadian legal entity together with the IQGeo
Canadian legal entity, leaving IQGeo Solutions Canada Inc as the sole
operating company in Canada. The exceptional credit in 2021 related to a
loan waiver under the USA CARES Act's "Paycheck Protection Program" in order
to support the USA operations during the uncertainty caused by the impact of
the global Covid-19 pandemic. This loan was forgiven by the US Small Business
Administration along with interest accrued in June 2021.
Adjusted EBITDA excludes amortisation, 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. 2022 was a milestone year for the Group with a first Adjusted EBITDA
profit of £1.9 million (2021: Adjusted EBITDA loss of £0.8 million).
The operating loss for the period was £1.5 million (2021: £2.6 million),
£0.5 million loss before non-recurring items (2021: £3.1 million loss)
EPS and dividends
Adjusted diluted per share was 0.6 pence (2021: 3.1 pence loss). Reported
basic and diluted per share was 1.5 pence loss (2021: 3.4 pence loss). The
Board does not feel it appropriate at this time to commence paying dividends.
Consolidated statement of financial position
As at 31 December 2022, the Group had a cash position of £8.1 million and no
debt (2021: £11.5 million and no debt).
Assets
Total assets were £41.7 million (2021: £27.4 million). Total current assets
increased to £19.8 million (2021: £16.7 million).
Total non-current assets were £21.9 million (2021: £10.7 million). Goodwill
increased to £11.5 million (2021: £4.4 million) due to the Comsof
acquisition. Capitalised development costs at 31 December 2022 were £3.8
million (2021: £2.5 million) with the increase reflecting the investment in
the IQGeo product suite, offset by the amortisation charge. No change has been
made to the current three-year amortisation period, due to the fast-moving
nature of the technology.
Liabilities
Total current liabilities increased to £16.9 million (2021: £8.8 million)
which includes an increase in deferred revenue of £2.9 million as would be
expected in a business that is increasing annual recurring revenue through
subscription-based customer contracts. Current liabilities also include £1.2
million of contingent consideration in respect of the Comsof acquisition.
Total non-current liabilities increased to £3.0 million (2021: £1.4 million)
and non-current liabilities of £1.0 million of contingent consideration for
the Comsof acquisition.
Net assets
Net assets increased to £21.7 million (2021: £17.2 million).
Cash and cash flow
Operating cash before working capital movement was £0.9 million inflow (2021:
£0.9 million outflow). Cash inflow from operating activities after adjusting
for working capital and tax was £2.5 million (2021: £0.7 million).
The Group had investment outflows of £8.7 million (2021: £0.1 million) for
tangible assets and £2.9 million on R&D investments in own products
(2021: £1.9 million). The 2022 figures include £5.0 million paid for the
acquisition of Comsof, net of £2.5 million cash acquired and £1.0 million on
non-recurring costs related to the acquisition and integration of the Comsof
business, together with £0.6 million of deferred payments in relation to OSPI
acquisition (2021: £0.6 million). 2021 figures included £2.5 million
received from the RTLS disposal.
Cash inflows from financing activities were £3.1 million (2021: £0.3 million
outflow) with the year-on-year movement primarily due to the fundraise
associated with the placing of shares to assist fund the Comsof acquisition,
both completed in August 2022.
Going concern
As at 31 December 2022, the Group had £8.1 million of cash (2021: £11.5
million) and no debt. The Directors have prepared detailed cash flow
projections including sensitivity analysis on key assumptions. The
projections prepared until 31 March 2024 show that the Group will be able to
operate comfortably within the current levels of cash available and, based on
this, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis in preparing
its consolidated financial statements.
Haywood Chapman
Chief Financial Officer
24 March 2023
Consolidated income statement
for the year ended 31 December 2022
Notes 2022 2021
£'000 £'000
Revenue 5 26,592 13,849
Cost of revenue (10,927) (5,052)
Gross profit 15,665 8,797
Operating expenses (17,191) (11,371)
Operating loss (1,526) (2,574)
Analysed as:
Gross profit 15,665 8,797
Other operating expenses (13,767) (9,626)
Adjusted EBITDA 1,898 (829)
Depreciation 14, 15 (447) (315)
Amortisation 13 (2,241) (1,656)
Share option expense (303) (282)
Unrealised foreign exchange gains / (losses) on intercompany trading balances 574 (42)
Non-recurring items 10 (1,007) 550
Operating loss (1,526) (2,574)
Finance income 9 - 7
Finance costs 9 (288) (174)
Loss before tax (1,814) (2,741)
Income tax 11 901 812
Loss for the year (913) (1,929)
Consolidated statement of comprehensive income
for the year ended 31 December 2022
2022 2021
£'000 £'000
Loss for the year (913) (1,929)
Other comprehensive income:
Exchange difference on retranslation of net assets and results of overseas 417 170
subsidiaries
Total comprehensive loss for the year (496) (1,759)
Consolidated statement of changes in equity
for the year ended 31 December 2022
Ordinary share capital Share premium Share based payment reserve Capital redemption reserve Merger relief reserve Translation reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 1,146 22,494 190 476 739 (1,786) (4,868) 18,391
Loss for the year - - - - - - (1,929) (1,929)
Exchange difference of retranslation of net assets and results of overseas - - - - - 170 - 170
subsidiaries
Total comprehensive loss for the year - - - - - 170 (1,929) (1,759)
Issue of shares - acquisition (OSPI) 3 - - - 220 - - 223
Exercise of share options 1 13 (6) - - - 6 14
Lapse of share options - - (12) - - - 12 -
Equity-settled share-based payment - - 282 - - - - 282
Transactions with owners 4 13 264 - 220 - 18 519
Balance as at 31 December 2021 1,150 22,507 454 476 959 (1,616) (6,779) 17,151
Loss for the year - - - - - - (913) (913)
Exchange difference of retranslation of net assets and results of overseas - - - - - 417 - 417
subsidiaries
Total comprehensive loss for the year - - - - - 417 (913) (496)
Exercise of share options 4 109 (30) - - - 30 113
Issue of shares - acquisition (Comsof) 16 - - - 957 - - 973
Deferred consideration - (OSPI) 3 - - - 237 - - 240
Issue of shares - associated costs - (95) - - - - - (95)
Issue of shares - fundraise 56 3,444 - - - - - 3,500
Lapse of share options - - (93) - - - 93 -
Equity-settled share-based payment - - 303 - - - - 303
Transactions with owners 79 3,458 180 - 1,194 - 123 5,034
Balance as at 31 December 2022 1,229 25,965 634 476 2,153 (1,199) (7,569) 21,689
Consolidated statement of financial position
for the year ended 31 December 2022
The financial statements were approved and authorised for issue by the Board
of Directors on 24 March 2023 and signed on its behalf by:
2022 2021
Notes £'000 £'000
Assets
Non-Current assets
Intangible assets 13 20,029 9,207
Property, plant and equipment 14 310 167
Right-of-use assets 15 1,480 1,336
Total non-current assets 21,819 10,710
Current assets
Trade and other receivables 16 11,064 5,025
Corporation tax receivable 662 176
Cash and cash equivalents 17 8,055 11,499
Total current assets 19,781 16,700
Total assets 41,600 27,410
Liabilities
Current liabilities
Trade and other payables 18 (16,217) (8,579)
Lease liability 20 (417) (246)
Total current liabilities (16,634) (8,825)
Non-Current liabilities
Deferred income tax liabilities 11 (802) -
Trade and other payables 18 (996) -
Lease liability 20 (1,479) (1,434)
Total non-current liabilities (3,277) (1,434)
Total liabilities (19,911) (10,259)
Net Assets 21,689 17,151
Equity attributable to owners of the Company
Ordinary share capital 21 1,229 1,150
Share premium 21 25,965 22,507
Share-based payment reserve 634 454
Capital redemption reserve 476 476
Merger relief reserve 2,153 959
Translation reserve (1,199) (1,616)
Retained earnings (7,569) (6,779)
Equity attributable to shareholders of the company 21,689 17,151
Consolidated statement of cash flows
for the year ended 31 December 2022
2022 2021
Notes £'000 £'000
Loss before tax from operating activities (1,814) (2,741)
Depreciation 14,15 447 315
Amortisation 13 2,241 1,656
Unrealised foreign exchange (gain) / loss on intercompany trading balances (574) 42
Forgiveness of bank loan - (592)
Share-based payment charge 303 282
Finance income 9 - (7)
Finance costs 9 288 174
Operating cashflows before working capital investment 891 (871)
Change in receivables (6,039) (2,175)
Change in payables 7,051 2,807
Cash used in operations before tax 1,903 (239)
Net income taxes received 607 984
Net cash flows from operating activities 2,510 745
Cashflows from investing activities
Purchases of property, plant, equipment 14 (170) (72)
Expenditure on intangible assets 13 (2,900) (1,907)
Cash received on sale of RTLS Smartspace business unit 7 - 2,500
Acquisition of subsidiaries, net of cash acquired 6 (5,613) (580)
Interest received - 7
Net cashflows (used in) investing activities (8,683) (52)
Cashflows from financing activities
Payment of lease liability (444) (269)
Proceeds from the issue of ordinary share capital on exercise of options 103 14
Proceeds from the issue of ordinary share capital from 3,405 -
fundraising, net of associated costs
Net cashflows (used in) from financing activities 3,064 (255)
Net increase/(decrease) in cash and cash equivalents (3,109) 438
Cash and cash equivalents at start of period 11,499 11,078
Exchange difference on cash and cash equivalents (335) (17)
Cash and cash equivalents at year end 17 8,055 11,499
Notes to the consolidated financial statements
1 General information
IQGeo Group plc ("the Company") and its subsidiaries (together, "the Group")
delivers geospatial software solutions that integrate data from any source -
geographic, real-time asset, GPS, location, corporate and external cloud-based
sources - into a live geospatial common operating picture, empowering all
users in the customer's organisation to access, input and analyse operational
intelligence to proactively manage their networks, respond quickly to
emergency events and effectively manage day-to-day operations.
The Company is a public limited company which is listed on the Alternative
Investment Market ("AIM") of the London Stock Exchange (IQG) and is
incorporated and domiciled in the United Kingdom. The value of IQGeo Group plc
shares, as quoted on the London Stock Exchange at 31 December 2022, was 188.5
pence per share (31 December 2021: 129.0 pence).
The address of its registered office is Nine Hills Road, Cambridge, United
Kingdom, CB2 1GE.
The Group has its operations in the UK, USA, Canada, Belgium, Germany and
Japan, and sells its products and services in over 40 countries globally. The
Group legally consists of eight subsidiary companies headed by IQGeo Group plc
at 31 December 2022 (seven at 1 January 2023).
The consolidated financial statements have been approved for issue by the
Board of Directors on 24 March 2023.
2 New accounting standards
The consolidated financial statements are prepared in accordance with
UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006.
The accounting policies used are the same as set out in detail in the Annual
Report and Accounts 2021 and have been applied consistently to all periods
presented in the financial statements.
There were no new standards or amendments or interpretations to existing
standards that became effective during the year that were material to the
Group.
No new standards, amendments or interpretations to existing standards having
an impact on the financial statements that have been published and that are
mandatory for the Group's accounting periods beginning on or before 1 January
2022, or later periods, have been adopted early.
Standards and interpretations not yet applied by the Group
The following new Standards and Interpretations, which are yet to become
mandatory and have not been applied in the Group's financial statements, are
not expected to have a material impact on the Group's financial statements.
• IFRS 17 Insurance Contracts
• Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS
4)
• References to the Conceptual Framework
• Proceeds before Intended Use (Amendments to IAS 16)
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
• Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS
1, IFRS 9, IFRS 16, IAS 41)
• Classification of Liabilities as Current or Non-current (Amendments to IAS
1)
These amendments are not expected to have a significant impact on the
financial statements in the period of initial application and therefore the
disclosures have not been made.
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 are prepared in
accordance with UK-adopted international accounting standards in conformity
with the requirements of the Companies Act 2006 ('IFRS'). The consolidated
financial statements have been prepared under the historical cost convention.
The consolidated financial statements are presented in GBP and all values are
rounded to the nearest thousand pounds (£'000) except when otherwise
indicated.
The preparation of these financial statements in conformity with IFRS requires
the Directors to make certain critical accounting estimates and judgements
that affect the amounts reported in the financial statements and accompanying
notes. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements, are disclosed in note 4.
Going concern basis
In determining the basis for preparing the consolidated financial statements,
the Directors are required to consider whether the Company can continue in
operational existence for the foreseeable future, being a period of not less
than twelve months from the date of the approval of the consolidated financial
statements.
Management prepares detailed cash flow 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 cash flow and profitability are
highly sensitive to revenue mix and the positive contribution of continuing
growth in software sales whether on a perpetual licence or subscription basis.
In reaching their going concern conclusion, the Directors have considered that
the Group had cash of £8.1 million as at 31 December 2022 and sufficient
working capital to continue operations. Management have also prepared analysis
to support that even in the event of a significant downturn in performance,
cash reserves are sufficient to continue trading.
The Group's forecasts and projections to 31 March 2024, taking account of
reasonably possible changes in trading performance, support the conclusion
that there is a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future, a period of not less than twelve months from the date of this report.
The Group, therefore, continues to adopt the going concern basis in preparing
the consolidated financial statements.
Consolidation
The Group financial statements include the results, financial position and
cash flows of the Company and all of its subsidiary undertakings. Subsidiary
undertakings are those entities controlled directly or indirectly by the
Company. Control arises when the Company has the power to govern the financial
and operating policies of an entity, uses this power to affect the returns
from that entity and has exposure to variable returns from its investment in
the entity.
Financial statements of the subsidiaries are prepared for the same reporting
year as the Company, using consistent accounting policies. Businesses acquired
or disposed during the year are accounted for using acquisition method
principles from, or up to, the date control passed. Intra-group transactions
and balances are eliminated on consolidation. All subsidiaries use uniform
accounting policies for like transactions and other events and similar
circumstances.
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 consolidated 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. 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 as a single
business unit to assess its financial performance.
The internal management accounting information is prepared on an IFRS basis
but has non-GAAP "Adjusted EBITDA" as the primary measure of profit and this
is reported on the face of the consolidated income statement.
Revenue recognition
Revenue represents the consideration that the entity expects to receive for
the sales of goods and services net of discounts and sales taxes. Revenue is
recognised based on the distinct performance obligations under the relevant
customer contract as set out below. Where goods and/or services are sold in a
bundled transaction or on a subscription basis, the Group allocates the total
consideration under the contract to the different individual elements based on
actual amounts charged by the Group on a standalone basis.
Revenue is recognised at different points in time, up front, over time and at
points in time, as described below. Such recognition takes into
consideration the term of the licence granted or services to be provided as
much as the term of any longer agreement that the licencing and services are
provided within. Where there are recognisable points which require actions
from the customer and or the company, which includes the renewal of annual
licences within a term contract, the Company recognises revenue only to the
next renewal point to reflect inherent uncertainties of future revenues and
separate performance obligations. Revenue is recognised either on a
subscription / monthly basis or upfront annually dependant on the basis of the
agreement and services to be provided or upfront for the term of the licence
where there are no separate performance obligations or renewal points within
the customer agreement.
Recurring IQGeo Product revenue - subscription
Subscription services, which may include hosting services, are considered to
be a single distinct performance obligation due to the promises stated within
the contract. Revenue is recognised evenly over the subscription period as the
customer receives the benefits of the subscription services.
Recurring IQGeo Product revenue - 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.
Perpetual software
Software is also sold under perpetual licence agreements. Under these
arrangements revenue is recognised at a point in time, when the software is
made available to the customer for use, provided that all obligations
associated with the sale of the licence have been made fulfilled.
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 IFRS 15 to recognise revenue over time are not satisfied,
revenue is deferred until the software is available for customer use, because
once software has been installed by the customer, the Group has no further
obligations to satisfy.
Demand Points revenue (Comsof products)
Annual licence revenue
For Comsof software products which are sold within an agreement based on
Demand Points and which contain an annual licence renewal, revenue is
recognised annually upfront. Hosting or associated services within the same
agreement are recognised over time. This reflects that whilst the
contractual term may extend across multiple annual renewals, there is a
trigger at the annual renewal which if not met could cause the contract to be
terminated.
Term licence revenue
For Comsof software products which are sold within an agreement based on
Demand Points, which is for a fixed period, but which does not contain an
annual licence renewal, revenue is recognised in full upfront. Hosting or
associated services within the same agreement are recognised over time. This
reflects that the customer has the benefit of the software for the duration of
the term contract.
Services
Services revenue includes consultancy and training. Services revenue from time
and materials contracts is recognised in the period that the services are
provided on the basis of time worked at agreed contractual rates and as direct
expenses are incurred.
Revenue from fixed price, long-term customer specific contracts is recognised
over time following assessment of 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 consolidated
income statement.
Timing of payment
Maintenance and support income and subscription income is invoiced annually in
advance at the commencement of the contract period. Other revenue is invoiced
based on the contract terms in accordance with performance obligations.
Amounts recoverable in contracts (contract assets) relate to our conditional
right to consideration for completed performance obligations under the
contract prior to invoicing. Deferred income (contract liabilities) relates to
amounts invoiced in advance of services performed under the contract.
Employee benefits
a. Retirement benefits
The Group operates various defined contribution pension arrangements for its
employees.
For defined contribution pension arrangements, the amount charged to the
consolidated 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
consolidated statement of financial position.
b. Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Vesting conditions are continuing employment. Equity-settled share-based
payments are measured at fair value at the date of grant using an appropriate
pricing model. The fair value is expensed on a straight-line basis over the
vesting period, together with a corresponding increase in equity in the
share-based payment reserve. Non-market vesting conditions include assumptions
about the number of options expected to vest.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where
it is necessary to do so to provide further understanding of the financial
performance of the Group. They are material one-off items of income or expense
that have been shown separately due to the significance of their nature or
amount and do not reflect the ongoing cost base or revenue-generating ability
of the Group.
Interest income and expense
Interest income and expense is included in the consolidated 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 consolidated 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 consolidated 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 IFRS 9 in the consolidated income statement.
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.
Costs relating to ongoing obligations of customer contracts are expensed.
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
consolidated income statement. The estimated useful lives of current
development projects are three years. Upon completion the assets are subject
to impairment testing if impairment triggers are identified, based on expected
future sales.
Where no internally generated intangible asset can be recognised, development
expenditure is recognised as an expense in the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences
that do not form an integral part of related hardware, are capitalised at cost
and amortised on a straight-line basis over their useful economic life which
is typically 3 years.
Customer relationships acquired following a business combination are amortised
on a straight-line basis over their useful economic life which is 10 years.
Brands acquired following a business combination are amortised on a
straight-line basis over their useful economic life which is 2 to 5 years.
Intellectual Property acquired following a business combination is amortised
on a straight-line basis over its useful economic life which is 5 years.
Acquired software recognised following a business combination is amortised on
a straight-line basis over their useful economic life which is 3 years.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any recognised impairment loss. Depreciation is charged to the
consolidated income statement so as to write off the cost or valuation less
estimated residual values over their expected useful lives on a straight-line
basis over the following periods:
· Fixtures and fittings: three to ten years, or period of the lease if
shorter
· Computer equipment: three years
Residual values and useful economic lives are assessed annually. The gain or
loss on the disposal or retirement of an asset is determined as the difference
between the sales proceeds and the carrying amount of the asset and is
recognised in operating expenses.
Leased assets
The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is,
or contains, a lease. A lease is defined as 'a contract, or part of a
contract, that conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration'. To apply this definition the
Group assesses whether the contract meets three key evaluations which are
whether:
• the contract contains an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified at the
time the asset is made available to the Group
• the Group has the right to obtain substantially all of the economic
benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
• the Group has the right to direct the use of the identified asset
throughout the period of use. The Group assesses whether it has the right to
direct 'how and for what purpose' the asset is used throughout the period of
use
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the consolidated statement of financial position. The
right-of-use asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset at the end
of the lease, and any lease payments made in advance of the lease commencement
date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in-substance fixed), variable payments based on
an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment
or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the right-of-use
asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value
assets using the practical expedients. Instead of recognising a right-of-use
asset and lease liability, the payments in relation to these are recognised as
an expense in profit or loss on a straight-line basis over the lease term.
On the consolidated statement of financial position, right-of-use assets have
been presented as non-current assets and lease liabilities presented within
current and non-current liabilities.
Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill - are not
subject to amortisation and are tested at least annually for impairment and
whenever there is an indication that the asset may be impaired. Assets that
are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units). Impairment
losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date. Where
an impairment loss is reversed, it is reversed to the extent that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS
15, all financial assets are initially measured at fair value adjusted for
transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging
instruments, are classified into the following categories:
• amortised cost;
• fair value through profit or loss (FVTPL); and
• fair value through other comprehensive income (FVOCI).
The classification is determined by both:
• the entity's business model for managing the financial asset; and
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the
financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash flows that
are solely payments of principal and interest on the principal amount
outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than
'hold to collect' or 'hold to collect and sell' are categorised at fair value
through profit and loss. Further, irrespective of business model, financial
assets whose contractual cash flows are not solely payments of principal and
interest are accounted for at FVTPL.
Assets in this category are measured at fair value with gains or losses
recognised in profit or loss. The fair values of financial assets in this
category are determined by reference to active market transactions or using a
valuation technique where no active market exists.
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 assesses impairment of trade receivables on a collective basis as
they possess shared credit risk characteristics and they have been grouped
based on the days past due.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and other
payables.
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 cash flows, cash and cash equivalents
includes cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
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 consolidated income statement over the period of
the borrowings using the effective interest method.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. The nominal value of shares issued
is classified as share capital and the amounts paid over the nominal value in
respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect
of share options granted by the Company to the Group's employees under its
employee share option plans.
Capital redemption reserve
The capital redemption reserve relates to the repurchase and subsequent
cancellation of issued ordinary share capital.
Merger relief reserve
The merger relief reserve relates to the issue of shares as consideration for
acquisitions of direct or indirect 100% owned subsidiaries within the Group.
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.
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 2022 is £3.8 million (2021: £2.5 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. In particular, where additional services are sold alongside
perpetual licence sales, management must make an assessment if contracts
include performance obligations which would result in software being
customised or altered, prior to reaching a conclusion as to whether the
software can or cannot be considered distinct from the labour service.
Significant judgement is required around the duration of a licence agreement
where the contractual term extends beyond an annual licence renewal in
determining whether revenue should be recognised over the contractual term or
the licence term. In making this judgement management consider historic
practice of renewal's, contractual termination clauses, interaction with the
licence renewal terms and enforceability of termination clauses contained
within. This includes the certainty over such revenues given the changing
nature of a customer's requirements through the lifecycle of the products
utilisation and the Group's ability to provide a stack of products that can
change through a customer's journey.
For each identified significant performance obligation management are required
to determine which obligations meet the criteria to recognise revenue over
time. As revenue from fixed price services agreements is recognised over time,
the amount of revenue recognised in a reporting period depends on the extent
to which the performance obligation has been satisfied. This requires an
estimate of the time and value to deliver the services to be provided, based
on historical experience with similar contracts. In a similar way, recognising
revenue requires the estimated number of hours required to complete the
promised work.
Deferred tax
A deferred tax asset is recognised where the Group considers it probable that
future tax profits will be available against which the tax credit will be
utilised in the future. This specifically applies to tax losses and to
outstanding vested share options at the statement of financial position date.
In estimating the amount of the deferred tax asset that should be recognised,
the Directors make judgements based on current budgets and forecasts about the
amount of future taxable profits and the timings of when these will be
realised.
Estimating uncertainty
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.
Amortisation and impairment of development costs
Capitalised development costs are amortised over a three-year period which is
management's estimate of the useful lives of current development projects. In
reaching this conclusion, management have made assumptions in respect of
future customer requirements and developments within the industry. These
estimates have a high level of uncertainty and are matters outside of
management's control.
The Group reviews capitalised development costs for indicators of impairment
annually in accordance with the accounting policy stated in note 3. In
assessing if an indication of impairment exists management review current year
sales of each product capitalised. For the majority of products capitalised,
current year sales support management's assessment that no indication of
impairment exists. Where current year sales do not support this conclusion,
such as for new products developed, management are required to make
assumptions of the future cash flows generated from these software products.
This includes consideration of both the current business pipeline, the
expected conversion of that pipeline and the future cash flows to be generated
through recurring revenue contracts, including the application of a suitable
discount rate.
5.1 Operating segments
Management provides information reported to the Chief Operating Decision Maker
(CODM) for the purpose of assessing performance and allocating resources. The
CODM is the Chief Executive Officer.
The business delivers software solutions that integrate data from any source -
geographic, real-time asset, GPS, location, corporate and external cloud-based
sources - into a live geospatial common operating picture, empowering all
users in the customer's organisation to access, input and analyse operational
intelligence to proactively manage their networks, respond quickly to
emergency events and effectively manage day-to-day operations. These
geospatial operations are reported to the CODM as a single operating segment
which includes the operations of Comsof acquired during the year. Whist the
Comsof brand will be retained as part of the Company's product portfolio, the
operations, people, sales, development, administration and systems have all
been fully integrated into the IQGeo group and amalgamated within the existing
single operating segment
5.2 Revenue by type
The following table presents the different revenue streams of the IQGeo Group:
Revenue by stream 2022 % of total revenue 2021 £'000 % of total revenue
£'000
Subscription 8,107 31% 3,964 29%
Maintenance and support 2,503 9% 1,787 13%
Recurring IQGeo product revenue 10,610 40% 5,751 42%
Perpetual Software 1,138 4% 2,011 15%
Demand Points Software 3,357 13% - 0%
Services 10,527 39% 5,089 36%
Non-recurring IQGeo product revenue 15,022 56% 7,100 51%
Total IQGeo product revenue 25,632 96% 12,851 93%
Geospatial services from third party products 960 4% 998 7%
Total revenue 26,592 100% 13,849 100%
5.3 Geographical areas
The Board and management team also review the revenues on a geographical
basis, based around the regions where the Group has its significant
subsidiaries or markets.
The Group's revenue from external customers in the Group's domicile, the UK,
and its major worldwide markets have been identified on the basis of the
customers' geographical location. Non-current assets are allocated based on
their physical location.
The following table represents the Group's operational revenue and non-current
assets by geographical region:
Revenue Non-current assets
2022 2021 2022 2021
£'000 £'000 £'000 £'000
UK 1,133 278 9,755 2,575
Europe 1,983 275 2,920 -
USA 17,867 9,211 8,308 8,129
Canada 2,893 2,297 2 1
Japan 1,867 1,556 891 5
Rest of World 849 232 - -
Total 26,592 13,849 21,876 10,710
5.4 Information about major customers
During 2022, the Group had no customer who generated revenues of greater than
10% of total revenue.
During 2021, the Group had no customer who generated revenues of greater than
10% of total revenue.
6 Acquisitions
On 11th August 2022 the Group acquired 100% of the equity instruments of
Comsof NV ("Comsof"), a business based in Ghent, Belgium, thereby obtaining
control. Comsof had a wholly owned subsidiary based in Toronto Canada,
Comsof Technologies America Ltd. Effective 1 January 2023 ownership of
Comsof Technologies America Ltd was transferred directly under IQGeo Group plc
ownership and amalgamated with IQGeo's existing Canadian subsidiary IQGeo
Solutions Canada Inc.
Comsof and contribution to the Group results
The acquisition of Comsof was concluded on 11(th) August 2022, with 100% of
the share capital acquired with the total consideration of up to £11.1
million (up to €13.0 million) of which assets and liabilities as shown below
were acquired and recognised, including £2.5 million of cash. Consideration
shown below of £10.5 million includes a fair value adjustment from the £11.1
million total consideration above, which is expected to be recognised as a
finance charge through the consolidated income and expenditure statement
through the current year, 2023 and 2024.
£'000
Fair value of the consideration transferred
Amount settled in cash 7,503
Amount settled in shares 972
Fair value of contingent consideration 2,035
Total fair value consideration 10,510
Recognised amounts of identifiable net assets
Right of use assets 233
Intangible assets 2,834
Tangible assets 56
Total non-current assets 3,123
Cash and cash equivalents 2,515
Trade and other receivables 1,155
Total current assets 3,670
Deferred tax liability (841)
Lease obligations (172)
Total non-current liabilities (1,013)
Trade and other payables (1,738)
Lease obligations (89)
Total current liabilities (1,827)
Identifiable net assets 3,953
Goodwill on acquisition 6,557
Consideration settled in cash (7,503)
Cash acquired 2,515
Net Cash outflow from acquisition (4,988)
The consideration included up to £2.4 million (€3.0 million) as contingent
consideration based on the achievement of contract awards to agreed Demand
point values and subsequent collection of cash in settlement of the first
year's invoice values. At 31 December 2022, all contingent consideration was
expected to be settled - 50% by April 2023 and 50% by March 2024 (and is
subject to discount in the values recognised to reflect the timing of cash
flows). The discounted consideration at 31 December 2022 is included within
current liabilities (£1.2 million) and non-current liabilities (£1.0
million).
Contingent consideration was discounted on recognition in the current year
with £0.2 million recognised as interest expense during the year 2022.
Funding for the acquisition was predominantly from cash reserves with £7.5
million (€8.85 million) in cash and £1.0 million (€1.15 million) through
the issue of 777,657 new 2p ordinary shares at £1.25 per share. £3.5
million gross funds were raised in support of the acquisition through a
placing of 2.8 million 2p ordinary shares at £1.25 each. Post acquisition
the Comsof business, comprising the Belgium based parent and a Canadian based
subsidiary contributed £4.8 million of revenue, generating (after Group
charges) £1.2 million adjusted EBITDA.
OSPI
On 21 December 2020 the Group acquired 100% of the equity instruments of
OSPInsight International Inc. ('OSPI'), a business based in Utah, USA,
thereby obtaining control. The acquisition of OSPI was completed in December
2020. The acquisition included deferred consideration which was satisfied in
December 2021 by cash payment of £0.58 million and the issue of 173,446
ordinary 2p shares of IQGeo Group plc.
The purchase agreement included additional consideration of up to £0.80
million subject to achievement of defined levels of recurring revenue
invoicing and subsequent cash collection of those invoices during the year
ended 31 December 2021. This earn out was settled in full in the year with a
cash payment of £0.63 million and 160,266 2p ordinary shares issued in
February 2022 as final settlement of all outstanding consideration.
7 Assets held for sale
There were no assets held for sale in the year or at 31 December 2021.
During January 2021 the Group entered an agreement for and completed the sale
of Abyssinian Topco Limited for a consideration of £2.5 million, an asset
which had been held for sale at 31 December 2020. The sale resulted in no
gain or loss being recorded in the consolidated income statement in 2021.
8 Employee information
8.1 Employee numbers
The number of people as at 31 December and the average monthly number of
people employed during the year, including Executive Directors, was:
Actual number of people as at 31 December Average monthly number of people in the year
By activity 2022 2021 2022 2021
Number Number Number Number
Technical consultants 68 34 47 34
Sales & marketing 54 35 44 33
Research & development 41 21 29 23
Administration 17 12 15 11
180 102 135 101
By geography 2022 2021 2022 2021
Number Number Number Number
United Kingdom 36 22 31 21
Europe 43 2 19 3
North America 95 74 80 73
Asia 6 4 5 4
180 102 135 101
8.2 Employee benefits
The aggregate employee benefit expense, including Executive Directors,
comprised:
2022 2021
£'000 £'000
Wages and salaries 14,434 10,822
Social security costs 1,161 700
Contributions to defined contribution pension arrangements 433 337
Share-based payments 303 282
Total aggregate employee benefits 16,331 12,141
9 Finance income and costs
2022 2021
£'000 £'000
Interest income from cash and cash equivalents - 7
Finance income - 7
Bank loan interest - -
Interest expense for lease arrangements (95) (88)
Interest expense for contingent and deferred consideration (193) (86)
Finance costs (288) (174)
Net finance costs (288) (167)
10 Loss before tax: analysis of expenses by nature
10.1 Expenses by nature
The following items have been charged / (credited) to the consolidated income
statement in arriving at a gain before tax:
Notes 2022 2021
£'000 £'000
Amortisation of capitalised development and software costs 13 1,686 1,267
Amortisation of acquired intangible assets 13 555 389
Depreciation of owned property, plant and equipment 14 99 73
Depreciation of right of use assets 15 348 242
Lease rental charges - land and buildings 20 95 248
Development costs expensed 1,022 584
Net foreign currency expense 378 40
Unrealised foreign exchange losses on intercompany trading balances (574) 42
Non-recurring items expense / (credit) 10.2 1,007 (550)
10.2 Non-recurring items
2022 2021
£'000 £'000
Waiver of loan - (592)
Acquisition costs 1,007 42
Total non-recurring items 1,007 (550)
Acquisition costs
On 11(th) August 2022 the Group acquired Comsof NV. Costs of acquisition and
business integration have been expensed during the year as non-recurring
items.
Waiver of loan
In April 2020, IQGeo America Inc, a subsidiary of IQGeo Group plc, applied for
and received a loan of $819,000 under the USA CARES Act's "Paycheck Protection
Program" in order to support the USA operations during the uncertainty caused
by the impact of the global Covid-19 pandemic. The loan was provided by HSBC
Bank USA and accrued interest at a rate of 1.0% p.a. In June 2021, the loan
was forgiven by the US Small Business Administration along with interest
accrued. The waiver of the loan resulted in a credit to the income statement
which was recognised during 2021.
10.3 Auditor's remuneration
During the year, the Group (including its overseas subsidiaries) obtained the
following services from the Company's auditor and its associates:
2022 2021
£'000 £'000
Fees payable to the Group's auditor for the audit of:
Parent Company and consolidated financial statements 129 91
Financial statements of subsidiaries, pursuant to legislation 17 12
Total audit fees 146 103
Fees payable to the Group's auditor for other services:
Tax advisory 28 28
Audit-related assurance services 18 16
Tax compliance services 12 26
Total non-audit fees 58 70
Total auditor's remuneration 204 173
The auditor of IQGeo Group plc is Grant Thornton UK LLP.
11 Income tax
11.1 Income tax recognised in the consolidated income statement
2022 2021
£'000 £'000
Current tax
Corporation tax (862) (746)
Adjustment in respect of prior year - (2)
Foreign tax - 2
Total current tax credit (862) (746)
Deferred tax
Origination and reversal of temporary differences (39) (66)
Total deferred tax charge (39) (66)
Total income tax credit for the year (901) (812)
The tax credit differs from the standard rate of corporation tax in the UK for
the year of 19% in 2022 (2021:19%) for the following reasons:
2022 2021
£'000 £'000
Loss before tax (1,814) (2,741)
Loss before tax multiplied by the standard rate of corporation tax
in the UK of 19% (2021: 19%)
(345) (521)
Tax effects of:
Expenses not deductible for tax purposes 696 382
Income not chargeable for tax purposes - (112)
Additional overseas tax deduction (92) (28)
Utilisation of previously unrecognised tax losses (19) (364)
Unrecognised deferred tax movements (664) 435
Tax (overprovided) in prior years - (2)
Research & development tax (credits) - prior years (431) (570)
Difference on tax treatment of share options - unrecognised 58 54
Differential on overseas tax rates (104) (86)
Total income tax (credit) (901) (812)
During the current and prior year IQGeo UK Limited has and intends to submit
claims for UK Research & Development tax credit relief ("R&D tax
claim") under the HMRC SME scheme. IQGeo elects to receive a cash refund for
this claim at this time at a discounted rate of 14.5%. The funds were
received during 2022 for the 2021 claim which was agreed by HMRC at a higher
level than provided at 31 December 2021. As 31 December 2022, the Group
financial statements reflect an asset for the cash amount estimated to be
receivable in respect of the 2022 financial year, The 2022 and 2021
consolidated income statement reflects both the tax credit for the 2021
financial year and an additional estimate for a claim which will be submitted
during 2023 in respect of the 2022 financial year. IQGeo Europe NV claims
R&D tax grants through the Belgium tax authorities which has the effect of
reducing the tax payable in each year of claim.
Other tax matters
During the current year, notification was received that a potential tax claim
has been issued by a foreign tax authority relating to the sale of the RTLS
business in 2018. A tax audit in this regard is currently in progress which
the Company is a party to. As the outcome remains uncertain, it is not
practical to estimate the potential claim on the acquiror or any subsequent
effect of such claims on the Group.
11.2 Factors that may affect future tax charges
The Group has tax losses of £18.0 million (2021: £18.0 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 25%, based on the expected UK
tax rate as at April 2023 (2021: 25%).
11.3 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
2022 2021 2022 2021
£'000 £'000 £'000 £'000
At 1 January 630 285 (630) (351)
Deferred tax liability recognised on acquisition - - (841) -
Deferred tax charged to the income statement 307 345 (268) (279)
At 31 December 937 630 (1,739) (630)
The components of deferred tax included in the consolidated statement of
financial position are as follows:
2022 2021
£'000 £'000
Deferred tax liability on development costs capitalised (937) (630)
Deferred tax liability recognised on acquisition of intangible assets (802) -
Deferred tax asset on losses 937 630
Total net deferred tax liabilities (802) -
Deferred tax assets have not been recognised in respect of the following
amounts because it is not probable that future taxable profits will be
available against which the Group can utilise the benefits:
2022 2021
£'000 £'000
Tax losses carried forward 3,529 4,062
Equity-settled share options temporary differences 906 230
Total unrecognised deferred tax assets 4,435 4,292
12 Earnings / (Loss) per share (EPS)
2022 2021
Earnings attributable to ordinary shareholders
Loss from operations (£'000) (913) (1,929)
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS 58,816 57,314
('000)
Effect of dilutive potential ordinary shares:
- Share options ('000) 6,411 2,416
Weighted average number of ordinary shares for the purposes of diluted EPS 67,850 59,730
('000)
EPS
Basic and diluted EPS (pence) (1.6) (3.2)
Basic earnings per share is calculated by dividing 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 EPS since their conversion to
ordinary shares does not decrease earnings per share or increase loss per
share.
The Group also presents an adjusted diluted earnings per share figure which
excludes amortisation of acquired intangibles, share-based payments charge,
unrealised foreign exchange gains/(losses) on intercompany trading balances
and non-recurring items from the measurement of loss for the period.
2022 2021
Notes £'000 £'000
Earnings for the purposes of diluted EPS, being net loss attributable to (913) (1,929)
equity holders of the parent company
Adjustments:
Amortisation and impairment of acquired intangible assets 555 389
Reversal of share-based payments charge 303 282
Unrealised foreign exchange (gains)/losses on intercompany trading balances
(574) 42
Reversal of non-recurring items 10 1,007 (550)
Net adjustment 1,291 163
Adjusted earnings / (loss) (£'000) 378 (1,766)
Adjusted diluted EPS (pence) 0.6 (3.1)
The adjusted EPS information is considered to provide an alternative
representation of the Group's trading performance and in particular, it
excludes non-recurring items. Options have no dilutive effect in loss-making
years.
13 Intangible assets
On 11(th) August 2022, the Group acquired Comsof, a business based in Belgium
and Canada, thereby obtaining control. Goodwill, acquired customer
relationships, acquired software products and acquired brands have been
recognised following the business combination.
Management have undertaken a detailed review of the future cash flows which
are anticipated to be generated from the Comsof and OSPI business acquired and
following a successful integration during 2022 for Comsof and OSPI in 2021.
With the continued expectation of growth and profitability, management have
concluded that no impairment is required to Goodwill as at 31 December 2022.
Management have projected cash flows to 2026 and then applied a terminal
growth rate of 1% to future periods. The key underlying assumption is that the
acquired Comsof and OSPI business will continue to add additional annual
revenue and recurring revenue contracts through subscription and demand point
sales at a rate consistent to that achieved in 2022. A discount rate of 12%
has been applied to future cash flows. No reasonably possible changes to the
assumptions would lead to an impairment. Management believe the assumptions
used after considering the market factors are appropriate.
Capitalised product development costs relate to expenditure that can be
applied to a plan or design for the production of new or substantial
improvements to software products. Management have assessed the underlying
products capitalised to identify if any indicators of impairment exist. Where
an indication of impairment does exist, 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
discounted cash inflows exceeded the carrying value of the asset as at the
year end.
The intangible assets include those acquired with the Comsof business
including goodwill, acquired software products, acquired brands and acquired
customer relationships. Values have been recognised from a valuation
conducted by external experts as shown in note 13.
Amortisation for capitalised product development costs is 3 years. Software
assets represent assets purchased from third parties.
13 Intangible assets
Goodwill Acquired Customer relationships Acquired Software Products Acquired Brands Capitalised Product Development Costs Software Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
As at January 2021 7,373 2,072 470 56 8,826 126 18,923
Additions - - - - 1,905 2 1,907
Effect of movements in exchange rates 35 21 4 1 - - 61
At 31 December 2021 7,408 2,093 474 57 10,731 128 20,891
Additions - - - - 2,888 12 2,900
Additions as a result of acquisition 6,557 1,954 606 274 - - 9,391
Effect of movements in exchange rates 521 216 - - - - 737
At 31 December 2022 14,486 4,263 1,080 331 13,619 140 33,919
Accumulated amortisation
As at January 2021 (2,970) - - - (6,983) (68) (10,021)
Charge for the year - (206) (155) (28) (1,225) (42) (1,656)
Effect of movement in exchange rates - (3) (3) (1) - - (7)
At 31 December 2021 (2,970) (209) (158) (29) (8,208) (110) (11,684)
Charge for the year - (293) (213) (49) (1,668) (18) (2,241)
Effect of movements in exchange rates - - 33 2 - - 35
At 31 December 2022 (2,970) (502) (338) (76) (9,876) (128) (13,890)
Net book value
At 31 December 2022 11,516 3,761 742 255 3,743 12 20,029
At 31 December 2021 4,438 1,884 316 28 2,523 18 9,207
14 Property, plant and equipment
Fixtures and fittings Computer equipment Leasehold improvements Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2021 163 193 - 356
Effect of movements in exchange rates 2 1 - 3
Additions - 72 - 72
Disposals - (26) - (26)
At 31 December 2021 165 240 - 405
Effect of movements in exchange rates 18 19 - 37
Additions - 170 - 170
Additions on acquisition - 61 73 134
At 31 December 2022 183 490 73 746
Accumulated depreciation
At 1 January 2021 (40) (149) - (189)
Effect of movements in exchange rates (1) (1) - (2)
Charge for the year (33) (40) - (73)
Disposals - 26 - 26
At 31 December 2021 (74) (164) - (238)
Effect of movements in exchange rates (9) (12) - (21)
Charge for the year (30) (66) (3) (99)
Transfer on acquisition - (23) (55) (78)
At 31 December 2022 (113) (265) (58) (436)
Net book value
At 31 December 2022 70 225 15 310
At 31 December 2021 91 76 - 167
15 Right of use assets
Details of the Group's right-of-use assets and their carrying amount are as
follows:
2022 2021
£'000 £'000
Cost
At 1 January 1,793 1,775
Effect of movements in exchange rates 227 18
Additions 93 -
Lease acquired on acquisition 233 -
Disposal (80) -
Cost at 31 December 2,266 1,793
Amortisation
At 1 January (457) (208)
Effect of movements in exchange rates (61) (7)
Charge for the year (348) (242)
Disposal 80 -
Amortisation at 31 December (786) (457)
Net book amount at 31 December 1,480 1,336
16 Trade and other receivables
2022 2021
Notes £'000 £'000
Cost
Trade receivables, gross 9,930 3,570
Allowances for expected credit losses 16.1 (244) (250)
Trade receivables, net 16.2 9,686 3,320
Amounts recoverable on contracts 303 943
Other receivables 132 77
Prepayments 943 611
VAT and taxation receivable - 74
Total trade and other receivables 11,064 5,025
All amounts disclosed are short term. The carrying value of trade receivables
is considered a reasonable approximation of fair value. Expected credit losses
are not material.
The following disclosures are in respect of trade receivables that are either
impaired or past due. The individually impaired receivables mainly relate to
customers who are in unexpectedly difficult economic situations and are
assessed on a customer-by-customer basis following detailed review of the
particular circumstances. To the extent they have not been specifically
provided against, the trade receivables are considered to be of sound credit
rating.
16.1 Movement in allowance for expected credit losses
2022 2021
£'000 £'000
At 1 January (250) (31)
Allowance released / (provided) 6 (219)
As 31 December (244) (250)
16.2 Ageing past due but not impaired receivables
2022 2021
£'000 £'000
Neither past due nor impaired 1,736 2,765
0 to 90 days overdue 7,042 541
More than 90 days overdue 908 14
Total 9,686 3,320
17 Cash and cash equivalents
2022 2021
£'000 £'000
Cash at bank and in hand 8,055 11,499
Cash and cash equivalents 8,055 11,499
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:
17 Cash and cash equivalents
2022 2021
By currency £'000 £'000
British Pound (GBP) 1,630 8,917
Euro (EUR) 2,910 54
US Dollar (USD) 1,814 585
Japanese Yen (JPY) 912 813
Canadian Dollar (CAD) 789 1,130
Cash and cash equivalents 8,055 11,499
18 Trade and other payables
Notes 2022 2021
£'000 £'000
Trade and other payables due within 1 year:
Deferred income 7,450 4,501
Trade payables 1,247 458
Trade accruals 5,371 2,339
Other taxation and social security 866 452
Other payables 72 33
Contingent acquisition consideration 6 1,211 796
Total trade and other payables due within 1 year 16,217 8,579
Trade and other payables due after 1 year:
Contingent acquisition consideration 6 996 -
Trade and other payables due after 1 year 996 -
Total trade and other payables 17,213 8,579
The carrying value of trade payables is considered a reasonable approximation
of fair value which includes a fair value discount on the contingent
consideration relating to the Comsof acquisition of £0.2 million,see note 6.
19 Bank overdraft
During 2022 an overdraft facility of £3.0 million was agreed with HSBC, the
Groups bank, as a contingent arrangement around the acquisition of Comsof
NV. The facility was not drawn down and has now lapsed. Security in the
form of a group debenture and was put in place to facilitate this. The
security remains in place at 31 December 2022 to facilitate additional funding
options for the Group.
20 Lease obligation
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:
2022 2021
£'000 £'000
At 1 January 1,680 1,846
Effect of movements in exchange rates 211 15
New leases entered into during the year 93 -
Lease related to acquisition 261 -
Finance costs incurred 95 88
Payments made during the year (444) (269)
At 31 December 1,896 1,680
Presented as:
Lease liability payable within 1 year 417 246
Lease liability payable in more than 1 year 1,479 1,434
At 31 December 1,896 1,680
At 31 December 2022, the lease liability consists of £1.9 million of lease
payment commitments including:
Following the acquisition of Comosf NV, a nine year lease was acquired on the
existing office premises in Ghent. with the remaining term running to 2024. A
number of motor vehicles were acquired on lease commitments, typically between
three and five years duration.
The lease liability consists of £0.24 million of lease payments after
deduction of £18,000 thousand of future finance charges.
The Group commenced has a seven-year lease running to February 2028 on office
premises in Denver.
The OSPI business ceased operating from premises in Utah in the year, the
lease commitments ceased on 31 December 2022.
Leases as lessee
The Group maintains short-term office rental agreements within Germany, Japan,
Canada, the US (Utah - released 31 December 2022) and the UK. The leases
entered into are 12 months or less and the Group has elected to apply the
practical expedient permitted under IFRS 16 to not recognise a right-of-use
asset and lease liability in respect of these leases due to their short-term
nature. The 2022 operating expense presented within the consolidated income
statement includes £0.3 million of rent expense in respect of these leases.
The future obligations for the new short-term leases are reported within the
table below.
The Group enters into these arrangements as these are a cost-efficient way of
obtaining the short-term benefits of these assets.
The Group's future aggregate minimum lease payments under non-cancellable
short-term leases are as follows:
Land and buildings Land and buildings
2022 2021
£'000 £'000
No later than one year 177 178
Total 177 178
The above table reflects the committed cash payments under short-term leases,
rather than the expected charge to the consolidated income statement in the
relevant periods.
21 Share capital and premium
The Company has one class of ordinary shares which carry no right to fixed
income.
Where shares have been issued as part of the consideration for the acquisition
of OSPI by IQGeo America Inc and Comsof NV, excess proceeds over nominal value
are recognised in a merger relief reserve.
Share capital Share premium Merger relief reserve Total
Ordinary shares of £0.02 each
No.of £'000 £'000 £'000 £'000
Balance at 1 January 2021 57,312,252 1,146 22,494 739 24,379
Issued under share-based payment plans 29,998 1 13 - 14
Issued as part consideration for acquisition 173,446 3 - 220 223
Balance at 31 December 2021 57,515,696 1,150 22,507 959 24,616
Issued under share-based payment plans 184,998 4 109 - 113
Issue of shares - acquisition (Comsof) - - - 957 957
Issued on placing to institutional investors - legal fees - - (95) - (95)
Issued on placing to institutional investors 2,800,000 56 3,444 - 3,500
Issued as part consideration for acquisition 937,923 16 - - 16
Deferred consideration - OSPI - 3 - 237 240
Balance at 31 December 2022 61,438,617 1,229 25,965 2,153 29,347
22 Final Results Announcement
This final results announcement, which has been agreed with the auditors, was
approved by the Board of Directors on 24 March 2023. It is not the Group's
statutory accounts for the year ended 31 December 2022 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 2022 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.
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