REG - Journeo PLC - Interim Results
17/09/2024 07:00
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RNS Number : 4105E Journeo PLC 17 September 2024
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the EU
Market Abuse Regulation (2014/596) which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, as amended and supplemented from time to
time.
17 September 2024
Journeo plc
("Journeo", the "Company" or the "Group")
Interim results for the six months ended 30 June 2024
Journeo plc (AIM: JNEO) a leading provider of information systems and
technical services to transport operators and local authorities, announces its
interim results for the six months ended 30 June 2024 ("H1 2024").
Financial headlines
· Group revenue grew 17% to £25.6m (H1 2023: £21.8m)
o Fleet systems revenue grew 17% to £9.3m (H1 2023: £7.9m)
o Passenger Systems revenue grew 12% to £5.2m (H1 2023: £4.6m)
o Infotec revenue was £8.5m (H1 2023: £9.3m) and MultiQ, acquired in H2
2023, delivered revenue of £2.7m
· Underlying profit before depreciation and amortisation increased 40%
to £3.4m (H1 2023: £2.5m)
· Cash and cash equivalents at the end of the period increased to
£12.9m (H1 2023: £11.3m)
· Basic undiluted profit per share was 15.30p (H1 2023: 9.03p)
Operational headlines
· Record order intake during the period of £24m (H1 2023: £18m)
· R&D investment increased to £1.0m as a core component of Group
strategy
· Established the Journeo Design Centre, a centre of excellence that
brings together specialists from across the Group
· Progressing unification of manufacturing and production
· Strengthening the senior leadership team
· Extended cloud-based Journeo portal for RTI infrastructure
applications
· Strong sales pipeline across the Group
Russ Singleton, CEO of Journeo plc, said:
"The Group has continued to deliver strong performance, achieving growth in
revenues, profits, margins and order intake in H1 2024.
We retain our strategy of bonding closely with our customers to develop and
deliver new products, solutions and services, that meet their requirements of
creating a more sustainable and efficient transport network. This focus,
supported by the ongoing integration of Infotec, MultiQ and the newly formed
Journeo Design Centre, is further strengthening our capabilities and driving
the organic growth of the business as we continue to assess complementary
acquisition targets.
Journeo is evolving into a more capable and resilient business as we aim to
become the market-leader for Intelligent Transport Systems. With a growing
customer base and a strong sales opportunity pipeline, the Board looks to the
future with confidence."
A digital copy of this announcement will be available on the Group's website:
www.journeo.com (http://www.journeo.com/)
For further information, please contact:
Journeo plc +44 (0) 203 651 9166
Russ Singleton/ Nick Lowe
Cavendish Capital Markets Limited - Nominated Adviser and Broker +44 (0) 207 220 0500
Katy Birkin/ Callum Davidson
Notes to editors:
Journeo plc is a leading Intelligent Transport Systems provider, delivering
solutions in towns, cities, airports, and the public transport networks that
connect them. The Company works extensively with local and combined
authorities, Network Rail and many of the largest multinational transport
operators, supporting them as systems converge towards a more efficient and
sustainable future.
The business has five operating companies:
· Journeo Fleet Systems: CCTV video surveillance to improve passenger
& driver safety, telematics for vehicle and driver performance monitoring,
real-time communications for remote condition monitoring and automatic
passenger counting.
· Journeo Passenger Systems: design, manufacture, installation, and
management of hardware and software for electronic public transport
information systems, in and around towns, cities, ferry terminals and airports
which includes smart-ticketing and wayfinding.
· Infotec Limited: design, advanced manufacture, installation and
software management of information displays hardware for rail applications in
stations, on-platform and on-vehicle.
· Journeo AS, formerly MultiQ AS (based in Aarhus, Denmark):
full-service provider of Intelligent Transport Systems ("ITS") with customers
in Denmark, Sweden and Iceland.
· Journeo AB (based in Stockholm, Sweden): technical services provider
to public transport customers in Sweden.
In the last 4 years, the Company has invested over £6 million in research and
development, enabling it to design and supply powerful innovative solutions
for customers' complex requirements and the demands of modern public
transport. With an Internet of Things ("IoT") approach and open standards,
together with field-proven and reliable engineering, Journeo is able to offer
flexible, scalable products and services that can integrate with existing
technology while preparing for future advancements.
Chairman and Chief Executive's review
Overview
The Board is pleased to report continued strong performance for H1 2024. The
results are in line with management expectations, with the Group delivering
year-on-year increases for revenue, gross profit and underlying profit.
The Group delivered strong organic growth in H1 2024 and the acquisitions of
Infotec and MultiQ, completed in 2023, are further increasing the number of
sales opportunities for Journeo technology in new regional and adjacent
markets.
The need to encourage people away from personal use vehicles by providing more
sustainable, better structured and better delivered public transport remains a
priority. We welcome the new legislation announced in the King's Speech (15
July 2024) for Rail Reform, Passenger Railway Service (Public Ownership) and
Better Buses. Journeo is well positioned to play an increasingly important
role as governments invest in national and local transport infrastructure in
the coming years.
Strategic progress
We continue to forge and maintain strong relationships with our customers as
we support their current and legacy systems and help prepare them for future
technologies.
The cultural alignment between Journeo, Infotec and MultiQ has been evident as
we continue to integrate the companies, with new opportunities for
collaboration and delivery of our deepened capabilities emerging. As part of
this convergence, we have established the Journeo Design Centre (JDC).
Formed with specialists from each of our operating companies, this group-wide
centre of excellence is creating the next generation of products and solutions
that will support the ongoing growth of the Group.
Cost efficiencies in our supply chain and optimisation through the design for
manufacturing process continue to be realised and will further improve the
quality and scalability of our solutions. These key strategies are an
integral part of our ESG commitments of continual improvement and product
responsibility.
Our customer-centric strategy to create deep customer bonds, demonstrate
technology leadership and deliver engineering excellence continues. We are
building on these attributes as we target both acquisitive and organic growth.
Financial results
Revenue for H1 2024 increased by 17% to £25.6m (H1 2023: £21.8m). Fleet
Systems revenue of £9.3m (H1 2023: £7.9m) and Passenger Systems revenue of
£5.2m (H1 2023: £4.6m) grew by 17% and 12%, respectively.
The revenue from Infotec was £8.5m (H1 2023: £9.3m) and MultiQ, acquired in
H2 2023 delivered revenue of £2.7m.
Fleet Systems gross profit of £2.3m (H1 2023: £1.9m) increased by £0.4m,
with an increase in overall gross margin to 25% (H1 2023: 24%).
Passenger Systems gross profit of £2.4m (H1 2023: £2.0m) also increased by
£0.4m, with an improvement in gross margin to 46% (H1 2023: 43%).
Infotec gross margin improved to 38% (H1 2023: 27%), delivering a gross profit
of £3.2m (H1 2023: £2.5m), whilst MultiQ produced a 40% gross margin,
delivering a gross profit of £1.1m.
Group underlying profit before depreciation and amortisation increased by 40%
to £3.4m (H1 2023: £2.5m) and basic undiluted profit per share was 15.30p
(H1 2023: 9.03p).
Cash and cash equivalents at the end of the year increased to £12.9m (H1
2023: £11.3m).
Research and Development
We continue our investment in Research and Development (R&D) which is
shaped by the close bonds we share with customers. This underpins our growth
and provides the Group with new opportunities, both in creating future systems
and supporting existing technology estates.
H1 2024 saw the first passenger information displays connected to the Journeo
Portal at Cardiff Bus Interchange, as part of the new and national Content
Management System (CMS) for Wales. The solution is not only the first of its
kind to operate on recently released open industry standards; it demonstrates
the power and flexibility of our software. The cloud-based Journeo Portal
enables transport operators, local authorities and transport executives to
manage their systems from a single, highly-secure and scalable platform.
Operational review
Passenger Infrastructure Systems
We are pleased to see Passenger Infrastructure Systems delivering strong
year-on-year growth. Revenue for H1 2024 increased 12% to £5.2m (H1 2023:
£4.6m) and the business has achieved a strong sales order intake throughout
H1 2024.
In February, the Group announced a four-year framework with a Northern
Transport Partnership which is expected to generate £5m in revenue across the
length of the contract. The framework covers a range of Journeo display
technologies, including high-definition Thin Film Transistor (TFT),
ultra-bright Light Emitting Diode (LED) and low-power e-ink solutions. We
are working closely with the Partnership as they continue to invest in their
transport infrastructure; maintaining their position as one of the leading
public transport estates in the UK.
In March, Journeo secured further expansion within Transport for Wales (TfW)
through a £1.5m purchase order from Swansea Council to manufacture, install
and maintain Journeo's advanced passenger information systems. Approximately
35% of the displays will work off-grid, powered only by solar panels, aligning
with the council's drive to achieve Carbon Net Zero. These displays will be
connected to TfW's new Welsh Bus Data Content Management System (WBDCMS), also
supplied by Journeo.
The WBDCMS was announced by Journeo in 2023, and the first displays to use the
software platform, operating from cloud-based Journeo Portal software, went
live during H1 2024 at Cardiff Bus Interchange. The WBDCMS will support
local authorities in Wales by being the first solution to manage transport
content for the entire country using the latest open industry communication
standards. Each additional display connected to the system, regardless of
manufacturer, is licenced onto the Journeo software platform, generating
recurring revenue.
Fleet Transport Operator Systems
We are delighted with the progress that our Fleet Transport Operator Systems
business has demonstrated throughout H1 2024. Revenue has increased 17% to
£9.3m (H1 2023: £7.9m) and underlying profit increased 57% to £0.6m (H1
2023: £0.4m).
The drive to move the industry towards carbon-zero through hydrogen, hybrid
and electric vehicles, coupled with retrofit programmes for safety critical
systems is fuelling strong sales order growth.
In March of this year, we announced purchase orders totalling £3.0m to
complete retrofit programmes for Journeo's digital wing mirror system. The
technology supports Transport for London (TfL) in its commitment to reduce
accidents and injuries on London's road networks. The orders include
installation of the solution onto London's iconic Routemaster vehicles.
Success is continuing, with significant new orders announced as we entered H2
2024.
In mid-July, we announced major new contracts for Rail systems totalling
£3m. The first, for the provision of on-board CCTV and Automatic Passenger
Counting (APC) systems for East Midlands Railway and CrossCountry was valued
at £2.4m. The second, with Arriva TrainCare, valued at £0.6m, is to
provide similar solutions alongside design and support services.
These awards demonstrate the flexibility of our solutions and the power of our
software to operate in a multi-modal landscape. Importantly, these
mission-critical software applications generate monthly recurring revenue for
user licencing and asset connection.
In late July, we also announced purchase orders totalling £2.1m for Metroline
Manchester to supply safety-critical CCTV and Journeo Portal services. Part
of ComfortDelGro, Metroline has been awarded four franchises in Transport for
Greater Manchester (TfGM) by the Greater Manchester Combined Authority (GMCA).
This is a significant geographical win for Journeo, supplying solutions to
GMCA for the first time.
Infotec
Infotec performed strongly during the period, delivering revenues of £8.5m
(H1 2023 £9.3m) and underlying profit increasing by 11% to £1.8m (H1 2023:
£1.6m).
The last tranche of deliveries for our US-based contract to deliver display
technology for the first 535 New York City subway cars will be completed in Q3
2024. As ridership has so far only recovered to 58% of pre-pandemic levels,
the next phase of 640 subway cars will have printed advertising but will be
pre-wired to enable digital displays to be retrofitted in the future.
We have a strong sales opportunity pipeline, and the rail industry has
recently entered Control Period 7 (CP7), the five-year period from April 2024
to March 2029 during which Network Rail will invest £45 billion in railway
infrastructure.
MultiQ
H1 2024 marks the first full half-year results for our latest acquisition.
Achieving revenues of £2.7m and an underlying profit of £0.2m, our
Denmark-based Intelligent Transport Systems (ITS) integrator has performed
well and is delivering value for the Group.
We announced in April that MultiQ had secured a contract to supply display
hardware, installation and technical support services for up to six years to
Grassfish AB throughout the Skåne County in the south of Sweden. This
contract is anticipated to generate £0.3m revenue per year and provides
access to the many fleet operators working in the region, for the supply of
Journeo products, services and software. In September 2024, MultiQ's company
name was changed to Journeo AS Denmark to support our ambitions to offer all
of the Group's products, software, know-how and services to the Continental
European and Nordic public transport markets.
ESG update
The Group continues to focus on important Environmental, Social and Governance
(ESG) projects and is making good progress with its Carbon Reduction Plan.
Outlook
The Group has delivered its strongest set of interim results to date in H1
2024, with improving performance from Passenger Infrastructure Systems and
Fleet Transport Operator Systems, strong performance from Infotec and valuable
contribution from our most recent acquisition, MultiQ.
The Board is pleased with this performance and is confident that we will meet
our financial targets and trade in line with market expectations for the full
year.
We are focusing on areas where we can achieve efficiencies following our
acquisitions, and nurturing the numerous cross-selling opportunities that are
developing within the Group.
Our investment in Research and Development is delivering powerful new
technologies which are the cornerstone of the Group's continued growth.
The Board continuously monitors risk and surveys the competitive landscape.
We actively evaluate acquisition opportunities that can bring further value to
the Group, where there is access to a new customer base and complementary
capabilities that can benefit customers. The Company is continuing
discussions with a number of potential acquisition targets.
The Group retains a strong cash position at £12.9m (H1 2023: £11.3m) to
enable the Board to capitalise on opportunities, as and when they arise.
Through organic growth and acquisition, Journeo is more resilient, capable and
has increasing access to customers and opportunities. We enter H2 2024 with
confidence, holding a strong sales pipeline and a growing customer base for
our solutions. We are confident that the Group will continue to deliver
value for all stakeholders as we build Journeo into a market leader in
intelligent transport systems.
Mark Elliott, Non-executive Chairman
Russ Singleton, Chief Executive
Consolidated statement of comprehensive income
for the six months ended 30 June 2024
Unaudited six months ended 30 June 2024 Unaudited six months ended 30 June 2023
£'000 £'000 Year ended 31 December 2023
£'000
Revenue (notes 4,5) 25,620 21,824 46,092
Cost of sales (16,618) (15,425) (31,782)
Gross profit 9,002 6,399 14,310
Other income - 49 49
Underlying administrative expenses (6,268) (4,493) (10,075)
Underlying profit 2,734 1,955 4,284
Share-based payments (9) (13) (22)
Acquisition costs - (132) (289)
Total administrative expenses and other income (6,277) (4,589) (10,337)
Operating profit 2,725 1,810 3,973
Net Finance income / (expense) 57 (146) (240)
Profit before taxation from continuing operations 2,782 1,664 3,733
Taxation charge (262) (260) (760)
Profit for the period being total comprehensive profit attributable to owners
of parent
2,520 1,404 2,973
Profit per share (note 6)
Basic 15.30p 9.03p 18.64p
Diluted 14.76p 8.72p 17.96p
Consolidated statement of changes in equity shareholders' funds
for the six months ended 30 June 2024
Total equity shareholders'
Share capital Share premium Retained earnings funds
£'000 £'000 £'000 £'000
Balance as at 1 January 2023 6,250 1,174 (5,276) 2,148
Proceeds from issue of new shares 486 6,851 - 7,337
Profit and total comprehensive income for the period - - 1,404 1,404
Share-based payments - - 13 13
Balance at 30 June 2023 6,736 8,025 (3,859) 10,902
Balance at 1 January 2023 6,250 1,174 (5,276) 2,148
Proceeds from issue of new shares 503 7,092 - 7,595
Profit and total comprehensive income for the year - - 2,973 2,973
Share-based payments - - 22 22
Balance at 31 December 2023 6,753 8,266 (2,281) 12,738
Profit and total comprehensive income for the period - - 2,520 2,520
Share-based payments - - 9 9
Balance at 30 June 2024 6,753 8,266 248 15,267
Consolidated statement of financial position
at 30 June 2024
Unaudited Unaudited
30 June 2024 30 June 2023
31 December 2023
£'000 £'000
£'000
Assets
Non-current assets
Goodwill (note 7) 4,058 3,581 4,058
Other intangible assets 2,722 1,998 2,685
Property, plant and equipment 1,534 1,589 1,585
Deferred Tax asset 269 - 189
Trade and other receivables 40 40 40
8,623 7,208 8,557
Current assets
Inventories 6,520 7,463 6,868
Trade and other receivables 8,369 9,631 12,212
Cash and cash equivalents 12,904 11,300 8,116
27,793 28,394 27,196
Total assets 36,416 35,602 35,753
Equity and liabilities
Shareholders' equity
Share capital 6,753 6,736 6,753
Share premium account 8,266 8,025 8,266
Retained earnings 248 (3,859) (2,281)
Total equity 15,267 10,902 12,738
Non-current liabilities
Deferred revenue 3,874 2,810 2,841
Other payables 82 - 207
Loans and borrowings 140 205 163
Lease liabilities 737 698 756
Deferred Tax 25 25 25
Provisions 2,410 925 2,234
7,268 4,663 6,226
Current liabilities
Trade and other payables 5,500 8,323 9,921
Deferred revenue 5,850 8,758 5,831
Loans and borrowings 16 412 64
Lease liabilities 219 150 195
Tax liabilities 1,424 414 -
Provisions 872 1,980 778
13,881 20,037 16,789
Total equity and liabilities 36,416 35,602 35,753
Consolidated statement of cash flows
for the six months ended 30 June 2024
Unaudited six months ended Unaudited six months ended
30 June 2024 30 June 2023
Year ended
£'000 £'000
31 December 2023
£'000
Net cash from operating activities (note 8) 5,550 2,472 1,664
Cash flows from investing activities
Purchases of property, plant and equipment (78) (382) (434)
Purchases / generation of intangible assets (520) (281) (789)
Acquisition costs - (132) (289)
Net cash inflow on acquisition - 4,423 3,030
Net cash from investing activities (598) 3,628 1,518
Financing activities
Cash flow from financing activities - 206 215
Principal element of lease repayments (138) (131) (266)
Issue of shares - 6,837 7,095
Repayment of loans (24) (2,244) (2,643)
Net cash from financing activities (162) 4,668 4,401
Net increase in cash and cash equivalents 4,790 10,768 7,583
Cash and cash equivalents at beginning of period 8,116 533 533
Effect of foreign exchange rate changes (2) (1) -
Cash and cash equivalents at end of period 12,904 11,300 8,116
Notes to the interim financial statements
for the six months ended 30 June 2024
1. Basis of preparation and approval of interim statement
The financial information for the six months ended 30 June 2024 and for the
six months ended 30 June 2023 is unaudited.
The interim financial statement for the six months to 30 June 2024 does not
include all of the information required for full annual financial statements
and should be read in conjunction with the consolidated financial statements
for the year ended 31 December 2023.
The financial information has been prepared on the basis of UK adopted
international accounting standards (IFRSs) that the Directors expect to be
applicable as at 31 December 2024.
The accounting policies adopted in the preparation of the interim financial
statements are consistent with those set out in the Group's Annual Report and
Financial Statements 2023, which were prepared in accordance with IFRSs.
This interim financial statement does not comprise statutory accounts within
the meaning of Section 435 of the Companies Act 2006. Statutory accounts for
the year ended 31 December 2023 were approved by the Board on 26 March 2024
and delivered to the Registrar of Companies. The report of the auditor on
those accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498(2) or Section
498(3) of the Companies Act 2006.
AIM-quoted companies are not required to comply with IAS 34 'Interim Financial
Reporting' and accordingly the Company has not applied this standard in
preparing this report.
The interim financial statement was approved by the Board of Directors on 17
September 2024.
2. International Financial Reporting Standards
The Group follows the standards and interpretations issued by the
International Accounting Standards Board (IASB) and the International
Financial Reporting Interpretations Committee of the IASB and endorsed by the
UK that are relevant to its operations.
3. Going concern
The Group's business activities together with factors likely to affect its
future development, performance and position were set out in the Strategic
Report and Chairman's Statement of the 2023 Annual Report and the principal
risks and uncertainties were set out in the Strategic Report. The Directors
have reviewed the cash flow forecasts for the period up to and including 31
December 2025.
Based on the above, the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future and for at least twelve months from the date of the report.
For this reason the Directors continue to adopt the going concern basis in
preparing the financial statements.
4. Revenue
The revenue split between goods and services is:
Unaudited
six months
Unaudited
Year ended
six months ended 30 June 2024 ended 30 June 2023
31 December
£'000 £'000 2023
£'000
Revenue
Goods 20,550 18,138 38,402
Services 5,070 3,686 7,690
25,620 21,824 46,092
Construction contracts included in goods 4,131 4,102 6,994
5. Segmental reporting
IFRS 8 requires operating segments to be determined on the basis of those
segments whose operating results are regularly reviewed by the Board of
Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make
strategic decisions.
Unaudited Unaudited
six months
six months
Year ended
ended 30 June 2024 ended 30 June 2023
31 December
£'000 £'000 2023
£'000
Revenue
Fleet Systems 9,250 7,893 16,332
Infotec 8,486 9,303 19,669
MultiQ 2,732 - 1,139
Passenger Systems 5,199 4,627 9,045
Intersegment Sales (47) - (93)
25,620 21,823 46,092
Gross profit
Fleet Systems 2,297 1,858 3,949
Infotec 3,205 2,534 5,862
MultiQ 1,090 - 542
Passenger Systems 2,410 2,007 3,957
9,002 6,399 14,310
Underlying profit
Fleet Systems 552 352 583
Infotec 1,750 1,580 3,697
MultiQ 236 - 153
Passenger Systems 374 161 115
2,912 2,093 4,548
Central
(178) (270) (264)
Underlying profit 2,734 1,823 4,284
Reconciling to profit before interest and tax
Underlying profit/(loss) Share-based payments Operating profit/(loss)
£'000 £'000 £'000
Fleet Systems 552 (5) 547
Infotec 1,750 - 1,750
MultiQ 236 - 236
Passenger Systems 374 (4) 370
2,912 (9) 2,903
Central (178) - (178)
Total 2,734 (9) 2,725
Net assets
Net assets attributed to each business segment represent the net external
operating assets of that segment, excluding goodwill, bank balances and
borrowings, which are shown as unallocated amounts, together with central
assets and liabilities.
Unaudited Unaudited Year ended
six months
six months
31 December
ended 30 June 2024 ended 30 June 2023
2023
£'000 £'000
£'000
Assets
Fleet Systems 7,894 8,456 8,754
Infotec 4,364 7,084 6,477
MultiQ 1,960 - 2,645
Passenger Systems 5,155 5,181 5,679
19,373 20,721 23,555
Goodwill 4,058 3,581 4,058
Cash and borrowings 12,904 11,300 8,116
Unallocated 81 - 24
36,416 35,602 35,753
Liabilities
Fleet Systems (2,971) (4,518) (3,736)
Infotec (5,503) (11,328) (8,999)
MultiQ (744) - (534)
Passenger Systems (11,605) (8,237) (7,774)
(20,823) (24,083) (21,043)
Cash and borrowings (156) (617) (641)
Unallocated (170) - (1,331)
(21,149) (24,700) (23,015)
Net assets / (liabilities)
Fleet Systems 4,923 3,938 5,018
Infotec (1,139) (4,244) (2,522)
MultiQ 1,216 - 2,111
Passenger Systems (6,450) (3,056) (2,095)
(1,450) (3,362) 2,512
Goodwill 4,058 3,581 4,058
Cash and borrowings 12,748 10,683 7,475
Unallocated (89) - (1,307)
15,267 10,902 12,738
6. Profit per Ordinary Share
Details of the weighted average number of Ordinary Shares used as the
denominator in calculating the basic and diluted earnings per Ordinary Share
are given below:
Unaudited Unaudited
six months six months Year ended
ended 30 June 2024 ended 30 June 2023 31 December
000 000 2023
000
Basic weighted average number of shares 16,475 15,551 15,945
Dilutive potential Ordinary Shares 594 560 605
17,069 16,111 16,550
7. Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the
cash-generating unit (CGU) that is expected to benefit from that business
combination. The Group has two CGUs which are its three operating segments,
Fleet Systems, Passenger Systems and Infotec. The carrying amount of goodwill
has been allocated to the CGUs as follows:
Journeo Passenger Systems Limited Total
£'000 £'000
MultiQ Infotec
£'000 £'000
Deemed cost:
At 1 January 2023 1,345 - - 1,345
At 30 June 2023 1,345 - 2,236 3,581
At 31 December 2023 and 1 January 2024 1,345 477 2,236 4,058
At 30 June 2024 1,345 477 2,236 4,058
The Group tests goodwill annually for impairment as at 31 December, or more
frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined based on a value-in-use
calculation which uses cash flow projections based on financial budgets and
business plans approved by the Directors covering a five-year period. Cash
flows beyond that period have been extrapolated in perpetuity assuming no
growth, which the Directors consider to be a conservative approach.
The key assumptions for the value-in-use calculations are those regarding
discount rates and sales forecasts.
The discount rates needed to equate the net present value from these cash
flows to the carrying value of goodwill are compared to the required rate of
return from the CGU based upon an assessment of the time value of money,
prevailing interest rates and the risks specific to the CGU. If this discount
rate is in excess of the required rate of return then it is assumed that no
impairment has occurred to the carrying value of goodwill.
The discount rates are as follows:
Unaudited Unaudited
six months
six months
Year ended
ended 30 June 2024 ended 30 June 2023
31 December
% % 2023
%
Passenger Systems 13 13 13
MultiQ 13 N/A 13
Infotec 13 13 13
The discount rates used are based on the Board's judgement considering
macroeconomic factors and reflecting specific risks in each segment such as
the nature of the market served, the concentration of customers, cost profiles
and barriers to entry.
Passenger Systems also has intangible assets, which are considered in the same
value-in-use calculations as goodwill.
The Passenger Systems cash flow projections used to determine value in use are
based upon assumptions of sales, margins and cost bases. Of these assumptions,
the value in use is most sensitive to the level of sales. Margins are fixed in
the forecast based upon past experience; the cost base is similarly based upon
past experience and will vary depending upon the level of sales. In accordance
with the requirements of IAS 36 our value-in-use calculations do not include
cash flows from restructurings to which the Group is not yet committed.
The level of sales is the key assumption used in the cash flow forecast. Sales
have been determined by management using estimates based upon past experience
and future performance with reference to market position and the sales
pipeline. The macroeconomic environment has improved and there continues to be
an increase in the number and size of contracts available.
Sensitivity analysis has been performed on the pre-tax discount rates, which
shows that a pre-tax discount rate of 48.2% (Passenger Systems), 38.2%
(Infotec) or 67.6% (MultiQ) would be required in order to eliminate the
headroom which exists in these CGUs. The Directors consider that the discount
rates used, which are already risk adjusted to capture the Directors' view of
the extent to which each CGU is exposed to macroeconomic factors, represent a
balanced view.
A sensitivity analysis has been performed on the impairment test. The
Directors consider that an absolute change in the key sales assumption is
possible and a reduction in the sales forecast in 2024 of 5% would result in
headroom remaining in the current carrying value of goodwill. If sales
forecasts were down 10% across the whole period and overheads remained
unchanged then headroom would still remain.
The Directors believe that, based on the sensitivity analysis and stress
testing performed, any reasonably possible change in the key assumptions on
which the recoverable amounts are based would not cause the carrying amounts
to exceed the recoverable amounts.
The value in use for the Group exceeds the carrying value of the assets.
In view of this, the Directors consider that no impairment of goodwill or
intangible assets is required.
8. Cash generated from operations
Unaudited Unaudited
six months
six months
Year ended
ended 30 June 2024 ended 30 June 2023
31 December
£'000 £'000 2023
£'000
Profit for the period 2,520 1,404 2,973
Adjustments for:
- Finance expense (57) 146 240
- Depreciation of property, plant and equipment 240 231 378
- Amortisation of intangible fixed assets 484 269 753
- Share-based payment expense 9 13 22
- Acquisition expenses - 132 289
- (Loss) / profit on disposal of fixed assets (6) 1 -
- Increase in provisions 270 399 2,506
- Foreign exchange rate - - (13)
Operating cash flows before movement in working capital 3,460 2,595 7,148
Decrease / (increase) in inventories 348 (961) 295
Decrease in receivables 5,300 2,988 1,609
Decrease in payables (3,919) (1,824) (6,560)
Cash inflow from operations 5,189 2,798 2,492
Income taxes paid 260 (207) (658)
Net interest earned / (paid) 101 (119) (170)
Net cash inflow from operating activities 5,550 2,472 1,664
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