REG - Microlise Group PLC - Final Results for the 12 Months ended 31 Dec.22
30/03/2023 07:00
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RNS Number : 6972U Microlise Group PLC 30 March 2023
30 March 2023
MICROLISE GROUP PLC
("Microlise", "the Company" or "the Group")
Final Results for the 12 Months ended 31 December 2022
Strong organic ARR growth and cash generation
Microlise Group plc (AIM: SAAS), a leading provider of transport management
software to fleet operators, announces its results for the 12 months ended 31
December 2022.
Financial Overview
Calendar Year Results ((1)) Statutory Results
(Audited)
Audited 12 months Unaudited 12 months Change FY21
Dec-22
Dec-21 (1)
(12 months)
18-months
%
to Dec-21
Financial Revenue 63.2 60.3 5% 88.2
Recurring Revenue 40.5 36.7 10% 54.0
Gross Profit 37.6 34.5 9% 50.5
Gross Profit Margin % 60% 57% 3% 57%
Adjusted EBITDA ((2)) 8.2 7.8 6% 11.4
Adjusted EBITDA % 13% 13% - 13%
Adjusted Profit/(loss) before tax ((3)) 2.7 2.6 3% 3.4
Profit/(loss) before tax 1.4 (0.8) 280% (0.0)
Cash and cash equivalents 16.7 13.2 27% 13.2
Non Financial ARR run rate ((4)) 42.6 38.9 10% 38.9
Number of like-for-like subscriptions ((5)) 599,000 551,000 9%
Long-term contract customer churn by value 0.4% 0.1%
1. To assist users of the accounts with understanding the underlying
business trading, the Group is presenting a set of unaudited calendar year
results on a like-for-like basis for the comparative period covering the 12
months ended 31 December 2021 (CY21).
2. Adjusted EBITDA excludes exceptional costs in relation to the IPO,
exceptional costs in relation to acquisitions, depreciation, amortisation,
share of loss of associate, interest, tax and share based payments.
3. Adjusted Profit / (loss) before taxation excludes IPO costs of
£3.4m (CY21), exceptional costs in relation to acquisitions of £0.2m (FY22),
share based payments and loss of share of associate.
4. ARR run rate change figure and % compare the annualised recurring
revenue figure for December 2022 with the annualised recurring revenue figure
for December 2021.
5. Like-for-like subscriptions change figure and % compare the
subscriptions as at 31 December 2022 with the subscriptions as at 31 December
2021
Financial and Operating Highlights
· Against the backdrop of component shortages, the Group has driven
an increase in revenue to £63.2m (5%) for the 12 months ended 31 December
2022 (CY21: £60.3m).
· Recurring revenue +10% to £40.5m for the 12 months ended 31
December 2022, supported by the renewal of several major customer contracts
and new customer wins (CY21: £36.7m).
· Increased gross profit +9% to £37.6m (CY21: £34.5m), at a gross
profit margin of 60% (CY21 57%) due to increased proportion of high margin
SaaS revenues and also improved non-recurring margins.
· Adjusted EBITDA +6% to £8.2m (CY21: £7.8m), ahead of guidance.
· Cash and Cash equivalents of £16.7m, an increase of 27% (CY21:
£13.2m) together with a £20.0m undrawn Revolving Credit Facility.
· Subscriptions rose 9%, driven by continued growth in our existing
customers together with new customer wins, despite component shortages and
inflationary headwinds (CY21: 551,000).
· Annual recurring revenue (ARR) run rate of £42.6m at period end,
growing 10% in last 12 months.
· The Group added over 250 new customers in the 12 months ended 31
December 2022 and long-term contract customer churn rate by value remained
very low at 0.4%.
· UK business obtained Great Place To Work accreditation, with
Microlise listed as one of the UK's Best Workplaces™ for Wellbeing in 2023
by Great Place to Work™, placing 29th in Great Place to Work's ranking of
'Large Organisations'.
Current Trading and Outlook
· Entered the financial year in a strong position, with the
continued growth in ARR providing good visibility on sustainable profitable
growth.
· Positive start to the year together with pipeline gives the board
confidence in delivering the full year numbers.
· Microlise currently have a very strong pipeline with both direct
and OEM customers, therefore directing investment into our global sales force
to enable us to capitalise on the many opportunities that are being presented
to us.
· Recent acquisition of Transportation Management System (TMS)
provider, Vita Software, to support the Group's strategy to expand its value
proposition further into medium sized fleets, with an enriched product
offering.
· Well-funded to continue to deliver on our value accretive
acquisition strategy with a healthy number of M&A opportunities in the
pipeline.
Nadeem Raza, CEO of Microlise, said: "We are pleased to report another strong
year of growth for Microlise, together with significant operational
enhancements. We continued to strengthen our business through international
growth, numerous major customer renewals and new contract signings, alongside
several innovative new product launches. All of which has ensured we start the
year with a record order book and healthy pipeline of opportunities across all
the markets in which we operate."
For further information, please contact:
Microlise Group plc c/o SEC Newgate
Nadeem Raza, CEO / Bill Wynn, CFO
Singer Capital Markets (NOMAD & Broker) Tel: +44 20 7496 3000
Steve Pearce / James Moat / Harry Gooden
SEC Newgate (Financial Comms) Tel: 020 3757 6880
Bob Huxford / Molly Gretton / Harry Handyside Email: microlise@secnewgate.co.uk
About Microlise
Microlise Group Plc is a leading provider of transport management software to
fleet operators helping them to improve efficiency, safety, and reduce
emissions. These improvements are delivered through reduced fuel use, reduced
mileage travelled, improved driver performance, fewer accidents, elimination
of paperwork and delivery of an enhanced customer experience.
Established in 1982, Microlise is an award-winning business with over 400
enterprise clients. With 463 employees based at the Group's headquarters in
Nottingham in the UK, the Company also has offices in France, Australia, and
India, with a total global staff base of over 670.
Microlise is listed on the AIM market of the London Stock Exchange (AIM: SAAS)
and qualifies for the London Stock Exchange's Green Economy Mark.
Chairman's Statement
I am delighted to report that Microlise delivered a strong performance for the
full year 2022. The Company achieved 5% Revenue growth to £63.2m for the
12-month period ended 31 December 2022 (CY21 1 (#_ftn1) : £60.3m), and 10%
Annual Recurring Revenue growth to £42.6m for the 12-month period ended 31
December 2022 (CY21: £38.9m). The Company also achieved record profitability
and cash generation, with cash 18% ahead of market expectations, up 27% to
£16.7m.
This strong performance was even more admirable given the enduring multiple
headwinds effecting the markets in which we operate. These include the global
component shortages, high inflation, continuing war in Ukraine and general
economic uncertainty.
The global component shortages were a particular issue Microlise had to
navigate during the period, which consumed substantial time and resources for
the Company. These supply issues also reduced the availability of new vehicles
for our customers, which, along with driver shortages and economic
uncertainty, led to delays in customer projects and spending. Although we
expect inflation and an unpredictable macro-economic environment will continue
to present challenges, we do expect component shortages to ease in the second
half of 2023.
Despite market difficulties, Microlise made strong operational and strategic
progress during the year. In addition, we recorded our highest sales to
original equipment manufacturers. We also generated record international
revenue after securing important new customers in France and Australia,
alongside renewing valuable contracts with some of our largest customers. We
also successfully integrated TruTac, our Fleet Compliance and Tachograph
Management solution, at both the product and organisational levels.
Our strategic focus for the year ahead is on ensuring our customers benefit
through the broader use of our comprehensive integrated product range. In
addition, we will forge ahead with our international expansion, with a
particular focus on France and Australasia, where we are seeing an increasing
number of exciting opportunities.
We remain committed to profitable growth and will continue to review
acquisition opportunities that complement our product and customer strategy
across the jurisdictions we operate. We were pleased to announce the
acquisition of Vita Software, a Transportation Management System, post year
end on 14 March 2023. We will continue to search for additional M&A
opportunities, with the right combination of value, product, and geography,
and intend to use our significant cash resources to make additional suitable
acquisitions at the appropriate time.
I would like to express my heartfelt thanks to the Microlise team who have
been hard-working, resourceful, and innovative in overcoming the many
challenges they faced during the year. As a result, Microlise is now a more
efficient business which is better positioned to deliver sustainable,
long-term growth as the economy stabilises and component shortages ease.
I would like to take this opportunity to thank our CFO Bill Wynn for his
significant contributions to Microlise. His dedication, expertise and
leadership have been critical in the growth and development of the company. We
are deeply grateful for as many years of service, and I wish him all the best
in his well-deserved retirement. We are confident that the foundation he
helped build will continue to support Microlise's success in many years to
come. I also look forward to working with his newly appointed successor, Nick
Wightman, as we look to develop the business into new markets and grow
globally.
John Lee, Non-Executive Chairman
1 The 2021 financial year comprised 18 months. To assist users of the accounts
with understanding the underlying business trading, the Group is presenting a
set of unaudited calendar year results on a like-for-like.
CEO's Statement
We are pleased to report another strong year of growth for Microlise, along
with significant operational enhancements. We continued to strengthen our
business through international growth, numerous major renewals and new
contract signings, as well as launched several innovative new products. All of
which has ensured we start the year with a record order book and healthy
pipeline of opportunities across all the markets in which we operate.
This year's performance was set against another challenging period for the
transport and logistics industry caused by global supply chain shortages
combined with inflation and staff shortages. We successfully navigated a
course around the ongoing issues through the introduction of various
initiatives. These included replacing or designing-out difficult to source or
expensive components, sometimes to the extent of redesigning a whole product,
all made possible due to our in-house hardware and procurement teams.
This demonstrates the ingenuity and hard-working nature of our development
team as well as the agile and flexible nature of Microlise as a business.
However, with the team being engaged in adapting existing products to mitigate
supply issues, there has been less time dedicated to hardware innovation. We
are seeing improvement, and are confident that the supply chain issues will
return to near normal from the second half of 2023 and expect to increasingly
return our focus to the creation of new innovative products as the year
progresses.
It is the trends in microchip availability witnessed over the past year that
gives rise to our confidence in a return to normal supply conditions during
the second half of 2023. This time last year we were experiencing
approximately 20 supplier delivery decommits per month; in the second half of
2022 this fell to 10, and currently we are at four. Our customers ability to
purchase vehicles has also followed a similar trend with a lead time of 12 -14
months a year ago, falling to 6 months at the end of 2022 and now standing at
4-5 months.
These are clear, established trends, and reports from suppliers as well as
other leading bodies, such as KPMG and the Global Semi-Conductor Alliance,
further support our expectations.
I would like to take a moment to express our sincere gratitude to Bill Wynn,
for his outstanding service and valuable contributions to our company during
his tenure as CFO. Bill's extensive financial and management experience,
gained over 25 years at board level in various industry sectors, has been
instrumental in shaping Microlise into the successful and thriving business it
is today. We thank him for his dedication and wish him a happy and fulfilling
retirement.
At the same time, we are excited to welcome Nick Wightman as our new CFO,
previously Finance Director of the Group. Nick has worked at Microlise for
over 10 years and has been a driving force in the growth and structure of the
company. He has played a pivotal role in many significant accomplishments,
including the successful completion of our IPO, the successful completion of
two acquisitions, and the creation of Microlise subsidiaries in France,
Australia, and India. Nick has also been instrumental in implementing a global
ERP system, which has improved our efficiency and effectiveness.
We are confident that Nick's extensive financial knowledge and experience,
will serve us well as we continue to grow and evolve. We excited see the
impact that Nick will bring to the Microlise group as our new CFO, and look
forward to working with him closely as we continue to drive the business
forward.
Financial Performance
The Group delivered a strong full year performance, particularly given the
environment in which we were operating. Record levels of OEM sales were
recorded, which impacted sales mix and resulted in a positive working capital
effect. This was achieved by prioritising shipments to OEMs, who had large
order books, while still ensuring we could supply other customers. As a result
of the change in sales mix, our Annual Recurring Revenues grew by 10% to
£42.6m for the 12-month period ended 31 December 2022, a faster rate than
revenue, such that recurring revenues now represent 64% of the total (CY21:
61%).
We continued to see extremely low customer churn (0.4%) alongside winning more
than 250 new customers, resulting in a record order book as we enter the new
financial year. This pays testament to the loyalty of our customers as well as
the quality of our product offerings.
Microlise has carefully managed the supply chain disruption, improving its
cost controls and the efficiency of the business, such that margins have
improved with EBITDA slightly ahead of market expectations. These improved
efficiencies better position us to benefit as the component supply problems
ease, as expected in the second half of 2023.
A Growing Business
We continue to work closely with our customers to review and enhance our
product offering, ensuring we are always offering best-in-class products and
services that promote an efficient, safe, cost-effective, sustainable and
compliant environment.
In order to maintain our market leading position as provider of the
best-in-class solution, we invested in several new products and services
during the period, that provide even greater value to our loyal and new
customers.
Most notably, we successfully on-boarded our first customer to our new IIoT
(Industrial Internet of Things) platform, which provides a secure connection
to remote assets for users to view operational information. This represents
our first expansion into transport-adjacent markets.
The platform is providing Parking Facilities Limited (PFL), a manufacturer of
automated gates and barriers, with a live view of its products including
utilisation data. The two-way system enables the gates to be controlled from
anywhere, even allowing for faults to potentially be fixed remotely.
Built on a modern system architecture, the platform provides OEM customers
with the potential to drive productivity and efficiency while redefining the
way manufacturers interact with their customers, distributors, and suppliers.
Developing this new platform is a key part of the Company's long-term
strategy, where we can enable other assets in the depot, warehouse or factory
to communicate with each other and with the fleet of vehicles.
The Group also increased investment into sales and product development to
capture the growing opportunity in international markets, with the recent
acquisition post period another addition to the product suite. We have
expanded our teams in France, Australia and New Zealand and have successfully
accommodated regional differences into our products which we continue to
tailor to these markets. We have also developed bespoke marketing approaches
to each region.
This is beginning to have a positive effect. Growth in Australia was
particularly strong and included a five-year renewal with Coles. Significant
new customers were also signed in France, including Aryzta, and Foodstuffs in
New Zealand.
Our People
Our progress during the year was only made possible by the talent, expertise
and passion of our team who have delivered ever greater service and products
to our customers. Their commitment to ensuring our transport management
software remains the market leader has not wavered, despite the many hurdles
presented by the markets in the past year, and I would like to thank all our
staff for their continued hard work.
During the period, we focused on attracting and retaining staff through the
development and implementation of our Employee Engagement strategy. As part of
this we ensured market rate alignment for salary roles; introduced numerous
cross-company social events and team collaboration events, introduced employee
engagement initiatives, increased staff training; introduced a share option
scheme for staff; and have retained hybrid working, allowing staff to work at
home where preferred.
We were also delighted be awarded the 'Great Place to Work' accreditation, a
reliable and globally respected recognition for excellent employee experience,
trust-based work culture, and commitment to building a great workplace. This
award recognises our commitment to providing a supportive and inclusive
workplace for employees and we will endeavour to maintain this standard across
the business.
Strategic Focus
The Group's immediate focus is on continued positive performance, continuing
to steer a course through inflation and the ongoing global supply chain
challenges. With supply chain issues expected to ease during the second half
of 2023, leading to materials becoming more readily available, we anticipate
an associated increased focus on hardware development.
Microlise is also investing further into the security requirements of our
blue-chip customer base. As technology develops, our customers are demanding
ever improving assurance. We are focussed on providing this and on remaining
at the forefront of the security landscape within our industry.
M&A plays an important role in our strategy, having raised money at IPO to
enable us to acquire companies that can add technological capabilities and
increase our geographic reach. Post year end on 14th March 2023 we announced
the acquisition of Vita Software, for a total consideration of £2.06M. A
initial consideration of £1.86M cash payment and a deferred consideration of
£0.2 million after 12 months subject to any claims.
Vita Software is a TMS (Transportation Management System) software company
based in Hull in the United Kingdom. Established in 2012, Vita Software has a
strong reputation in the industry, with its software already in use by several
Microlise customers.
Vita Software's TMS adds the key capabilities of resource and transport
costing, subcontractor management, and invoicing, which, alongside Microlise's
order intake and planning solutions, will enable the Company to offer
customers a full end-to-end Order-to-Cash solution.
The acquisition provides upsell and cross-sell opportunities, embedding
Microlise even further into its customers' operations. A number of
opportunities have already been identified within the current customer base,
where the new TMS would be a welcome addition to our existing services. The
TMS is also applicable to fleets of all sizes, supporting our strategy to
expand into smaller fleets.
In terms of this strategic initiative, we have developed a lighter product for
smaller fleets during the period. We are also developing offerings for smaller
vehicles having launched Tru-Van during the year, a compliance product for
vans. We are currently expanding footprint with customers that have the large
fleets of vans and have doubled the size of the sales team that is focussed on
these customers within the UK.
ESG considerations are central to all strategic decisions we make as a Company
and this has been recognised by third party organisations with which we work
through the granting of numerous awards. We are also Grade A by Unicorn
investor, as well as the Green Mark by London Stock Exchange.
This was in part due to the contribution our software products make to
improving sustainability, such as reducing our customers' fuel use. In our
newest products we have also extended support for gas powered vehicles;
increased the number of features for electric vehicles, including improved
data collection and reporting; and introduced support for hydrogen powered
vehicles.
Outlook
The outlook for Microlise is positive and we have entered FY23 in a strong
position, with the Group trading in line with Board expectations since the
start of the new financial year. We have significant market share, a proven
offering and loyal customers in multiple geographies, helping us to drive
growth in revenue and profits.
We believe the transport and logistics market is becoming more accustomed to
the benefits of integrated and tailored transport management solutions and
this presents a supportive market backdrop as we release new offerings to the
market and increase our sales activities.
The Group is fully focussed on its long-term strategic priorities and we
continue to successfully manage inflationary pressures and component supply
issues and expect components to become more readily available in the second
half of 2023.
We are therefore confident of an improving performance for the year ahead and
believe that our innovative solutions, strong balance sheet, leading market
position and talented team will drive positive change and deliver long-term
value to shareholders.
Nadeem Raza, Chief Executive Officer
CFO's Statement
The financial results for the twelve-month period to 31 December 2022 reflect
another period of profitable growth for Microlise despite the challenges
widely reported across all industry sectors.
Key Performance Indicators
The following key performance indicators for the 12-month period to 31
December 2022 include a comparison to the audited statutory results for the
18-months to 31 December 2021 as well as a comparison to the unaudited results
for the calendar year to 31 December 2021 (CY21).
Calendar Year Results ((1)) Statutory Results
(Audited)
Audited 12 months Unaudited 12 months Change FY21
Dec-22
Dec-21 (1)
(12 months)
18-months
%
to Dec-21
Financial Revenue 63.2 60.3 5% 88.2
Recurring Revenue 40.5 36.7 10% 54.0
Gross Profit 37.6 34.5 9% 50.5
Gross Profit Margin % 60% 57% 3% 57%
Adjusted EBITDA ((2)) 8.2 7.8 6% 11.4
Adjusted EBITDA % 13% 13% - 13%
Adjusted Profit/(loss) before tax ((3)) 2.7 2.6 3% 3.4
Profit/(loss) before tax 1.4 (0.8) 280% (0.0)
Cash and cash equivalents 16.7 13.2 27% 13.2
Non Financial ARR run rate ((4)) 42.6 38.9 10% 38.9
Number of like-for-like subscriptions ((5)) 599,000 551,000 9%
Long-term contract customer churn by value 0.4% 0.1%
1. To assist users of the accounts with understanding the underlying
business trading, the Group is presenting a set of unaudited calendar year
results on a like-for-like basis for the comparative period covering the 12
months ended 31 December 2021 (CY21).
2. Adjusted EBITDA excludes exceptional costs in relation to the IPO,
exceptional costs in relation to acquisitions, depreciation, amortisation,
share of loss of associate, interest, tax and share based payments.
3. Adjusted Profit / (loss) before taxation excludes IPO costs of
£3.4m (CY21), exceptional costs in relation to acquisitions of £0.2m (FY22),
share based payments and loss of share of associate.
4. ARR run rate change figure and % compare the annualised recurring
revenue figure for December 2022 with the annualised recurring revenue figure
for December 2021.
5. Like-for-like subscriptions change figure and % compare the
subscriptions as at 31 December 2022 with the subscriptions as at 31 December
2021
Group Results
Revenue
Total Revenue for the 12 months ended 31 December 2022 (FY22) was £63.2m, an
increase of 5% from 31 December 2021 (CY21). The Group has delivered record
levels of OEM sales which benefited both non recurring and recurring revenue
and positively impacted working capital. Recurring revenues showed strong
growth following an increase in win rate with over 250 new customers in the
FY22. Recurring SaaS revenues in the Period were £40.5m, an increase of 10%
compared to £36.7m in CY21. New customer wins, strong OEM growth, together
with growth in our existing customer's fleets resulted in 10% growth in ARR to
£42.6m as at 31 December 2022 from £38.9m on 31 December 2021. Recurring
revenues now represent 64.1% of total revenue (CY21 60.9%).
Non-recurring revenue for the 12 months ended 31 December 2022 reduced 4% to
£22.7m (CY21: £23.6m) reflecting the challenges our direct customers have
experienced with delivery lead times on new vehicles. This has impacted the
Group's ability to deploy customer projects which has resulted in lower
professional services and installation revenues in the period. These
reductions are offset by hardware revenues that have increased in the period
by 6.1% as a result of record level of OEM sales.
In addition to winning new business and deepening existing accounts, the Group
successfully maintained an extremely low rate of customer churn by value at
0.4% (CY21: 0.1%). This reflects the mission critical importance of
Microlise's software solutions in our customers' operations.
Gross Profit
Gross profit for the 12 months ended 31 December 2022 increased by 9% to
£37.6m (CY21 £34.5m) with gross margin % increasing to 60% (CY21 57%). The
Group has benefited from the increased proportion of high margin SaaS revenues
and also improved non-recurring margins despite cost inflationary pressures
and the ongoing challenges with microchip shortages resulting in premium
pricing.
Adjusted Administrative Expenses ((1))
( )
The Group has continued to invest in product development, operations, and
sales & marketing.
Adjusted administrative expenses, in the 12-month period ended 31 December
2022 increased 13% to £31.1m (CY21: £27.4m). This cost represents employee
costs, premises costs, marketing costs, research & development (net of
capitalised costs), finance charges, and other central costs.
The 6% increase in staff costs in the 12 months ended 31 December 2022 to
£25.8m (CY21: £24.3m) reflected our increase in headcount in line with our
growth as well as annual pay awards and increased commissions/bonuses
reflecting the increased new customer win rate and the Group's strong EBITDA
performance. Average headcount in the Period was 661 (CY21: 618) overall, with
31 of the increase within operations and development and a further 11 in sales
and distribution. The increase in operations includes additional engineering
resource to support the strategy of bringing more installation work in-house.
Marketing costs increased during the period by £0.7m due to the return (after
a 3 year absence) of the Microlise Transport Conference. The Group has
continued focus on international growth with targeted marketing spend in key
strategic geographies.
Administration costs increased during the period by £0.8m. This is a result
of the full year impact of costs to support the Group's listed status
including increases in audit fees, banking and broker fees. The Group is
investing further in its security posture to ensure it can continue to provide
its customers with ever increasing levels of assurance.
Capitalised research & development costs in the period were £1.8m (CY21:
£1.3m), whilst amortisation of capitalised development costs in the period
ended 31 December 2022 was £0.8m (CY21: £0.5m).
Adjusted(1) EBITDA & Profit Before Tax
The growth in revenue, alongside careful management of costs, have results in
an increase in adjusted EBITDA in the 12 months ended 31 December 2022 of 6%
to £8.2m for the year (CY21: £7.8m), with adjusted EBITDA margin being
maintained at 13% (CY20: 13%). To provide a better guide to the underlying
business performance, adjusted EBITDA excludes IPO costs and acquisition
costs.
The adjusted profit before taxation includes an amortisation charge of £2.1m
(CY21: £2.1m) as a result of business combinations. Profit before taxation in
the period increased to £2.7m (CY21: £2.6m)
EPS and Dividend
The Group made a reported profit after taxation in the period of £1.4m. In
the 18 months ended 31 December 2021 the Group reported a small loss before
tax of £5k due to exceptional costs and a taxation charge of £2.2m.
As a result, the reported basic and diluted earnings per share was 1.17p for
the 12 months period ended 31 December 2022 compared to a reported basic and
diluted loss per share of 2.09p for the 18 months period ended 31 December
2021 (FY21). The Board does not feel it appropriate at this time to commence
paying dividends and continues to invest in its growth strategy.
Group Statement of Financial Position
The Group had net assets of £73.5m at 31 December 2022 (FY21: £71.5m).
Current assets increased by £5.1m, primarily due to an increase in debtors
driven by higher revenues in the year combined with increased cash balances.
Total liabilities increased by £2.9m due to an increase in deferred income
and trade payables. The Group typically invoices for software subscriptions
monthly, quarterly, annually or for the life of the subscription in advance
which drives a strong balance sheet with significant cash balances. Revenue is
recognised in the month the service is provided with deferred income disclosed
as contract liabilities in current and non current liabilities. As at the end
of December total Trade and other payables was £46.1m (FY21: £43.1m) of this
balance £33.3m (FY21: £31.5m) is deferred income and relates to future
contracted revenue recognition.
Cashflow ((2)) & Net Cash
The Group ended the 12-month period to 31 December 2022 with cash and cash
equivalents of £16.7m, 18% higher than the Board's expectations and a 27%
increase on FY21 (FY21: £13.2m). Adjusted(2) cash flows generated from
operations(2) was £9.9m in the period, this represents a cash conversion rate
of 121% (FY21: 111%).
During the period, the Group invested a further £1m into TrakM8 by way of a
convertible loan note to assist with the working capital required to complete
their strategic refocus. Overall net cash inflow for the period was £3.5m
(FY21: £3.2m).
Banking Facility
The Group agreed a £20.0m committed revolving cash flow facility with HSBC
Bank PLC upon IPO. The Group has not utilised any of this facility to date.
The Group's gross cash of £16.7m (FY21: £13.2m) and the undrawn £20.0m
facility gives the Group £36.7m of cash, which the Directors believe provides
ample headroom for Microlise to deliver against its strategic goals. The
existing facility runs until July 2024. Given the level of headroom in the
business forecasts the board consider it appropriate to prepare the financial
statements on the going concern basis. Details of the board's going concern
assessment is provided in the basis of preparation note in the financial
statements on page 80.
Additional Notes
1. Adjusted administrative expenses and adjusted EBITDA excludes
exceptional costs in relation to the 2021 IPO and exceptional costs in
relation to acquisitions, depreciation, amortization and share based payments
charges.
2. Adjusted cash flow generated from operations adds back exceptional
costs in relation to the IPO and exceptional costs in relation to
acquisitions.
Bill Wynn, Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the twelve months period ended 31 December 2022
Year 18 month
ended period ended
31 December
31 December
2022 2021
Note £'000 £'000
Revenue 1 63,211 88,168
Cost of sales (25,577) (37,690)
Gross profit 37,634 50,478
Other operating income 3 876 1,143
Exceptional IPO related costs - (3,415)
Other administrative expenses (36,326) (47,246)
Total administrative expenses (36,326) (50,661)
3 2,184 960
Operating profit
Interest income 5 45 72
Interest expense 6 (312) (905)
Share of loss of associate net of tax 11 (478) (132)
1,439 (5)
Profit/(loss) before taxation
Taxation 7 (86) (2,213)
Profit/(loss) for the year/period 1,353 (2,218)
Other comprehensive income for the year/period
Currency translation differences 6 (71)
Total comprehensive income/(expense) for the year/period attributable to the 1,359 (2,289)
equity shareholders of Microlise Group plc
Basic earnings/(loss) per share (pence) 8 1.17 (2.09)
Diluted earnings/(loss) per share (pence) 8 1.17 (2.09)
Consolidated Statement of Financial Position
as at 31 December 2022
31 December 31 December
2022 2021
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 8,292 8,573
Intangible assets 10 75,031 75,987
Investments in associate 11 1,368 1,846
Loan to associate 11 1,000 -
Trade and other receivables 14 3,078 2,710
Total non-current assets 88,769 89,116
Current assets
Inventories 13 2,635 2,941
Trade and other receivables 14 16,760 15,143
Corporation tax recoverable 1,289 932
Cash and cash equivalents 15 16,683 13,210
Total current assets 37,367 32,226
126,136 121,342
Total assets
Current liabilities
Lease liabilities 16 (821) (717)
Trade and other payables 17 (29,183) (25,780)
Total current liabilities (30,004) (26,497)
Non current liabilities
Lease liabilities 16 (926) (994)
Trade and other payables 17 (16,898) (17,312)
Deferred tax 12 (4,840) (4,991)
Total non current liabilities (22,664) (23,297)
Total liabilities (52,668) (49,794)
Net assets 73,468 71,548
Equity
Issued share capital 20 116 116
Share premium account 17,630 17,630
Retained earnings 55,722 53,802
Total equity 73,468 71,548
Consolidated Statement of Changes in Equity
Share Capital Share Premium Account Merger Reserve Retained earnings Total Equity
£'000 £'000 £'000 £'000 £'000
At 30 June 2020 44 - 55,172 848 56,064
Comprehensive income for the 18 month period to 31 December 2021
Loss for the period - - - (2,218) (2,218)
Other comprehensive expense - - - (71) (71)
Total comprehensive expense for the period - - - (2,289) (2,289)
Share based payment (note 21) - - - 129 129
Bonus issue of shares (note 20) 55,172 - (55,172) - -
Reduction of share capital (note 20) (55,114) - - 55,114 -
Shares issued in the period (note 20) 14 17,630 - - 17,644
Total transactions with owners 72 17,630 (55,172) 55,243 17,773
116 - 53,802 71,548
At 31 December 2021 17,630
Comprehensive income for the year to 31 December 2022
Profit for the year - - - 1,353 1,353
Other comprehensive income - - - 6 6
Total comprehensive income for the year - - - 1,359 1,359
Share based payment (note 21) - - - 561 561
Total transactions with owners - - - 561 561
116 - 55,722 73,468
At 31 December 2022 17,630
Company Statement of Financial Position
as at 31 December 2022
31 December 31 December
2022 2021
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 4,838 4,940
Investments 11 79,192 79,943
Loan to associate 1,000 -
Deferred tax 12 111 -
Total non-current assets 85,141 84,883
Current assets
Trade and other receivables 14 26 253
Cash and cash equivalents 15 69 1,090
Total current assets 95 1,343
85,236 86,226
Total assets
Current liabilities
Trade and other payables 17 (17,928) (18,298)
Total current liabilities (17,928) (18,298)
Non current liabilities
Trade and other payables 17 - (1,000)
Total non current liabilities - (1,000)
Total liabilities (17,928) (19,298)
Net assets 67,308 66,928
Equity
Issued share capital 20 116 116
Share premium account 17,630 17,630
Retained earnings 49,562 49,182
Total equity 67,308 66,928
Company Statement of Changes in Equity
Share Capital Share Premium Account Merger Reserve Retained earnings Total Equity
£'000 £'000 £'000 £'000 £'000
At 30 June 2020 44 - 55,172 (595) 54,621
Comprehensive income for the 18 month period to 31 December 2021
Loss for the period - - - (5,466) (5,466)
Other comprehensive income - - - - -
Total comprehensive expense for the period - - - (5,666) (5,666)
Share based payment (note 21) 129 129
Bonus issue of shares (note 20) 55,172 - (55,172) - -
Reduction of share capital (note 20) (55,114) - - 55,114 -
Shares issued in the period (note 20) 14 17,630 - - 17,644
Total transactions with owners 72 17,630 (55,172) 55,243 17,773
116 - 49,182 66,928
At 31 December 2021 17,630
Comprehensive income for the year to 31 December 2022
Loss for the year - - - (182) (182)
Other comprehensive income - - - - -
Total comprehensive expense for the year - - - (182) (182)
Share based payment (note 21) - - - 561 561
Total transactions with owners - - -
116 - 49,561 67,307
At 31 December 2022 17,630
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
Year ended 18 month
31 December
period ended
31 December
Note 2022 2021
£'000 £'000
Cash flows from operating activities
Cash generated from operations A 9,719 9,132
Tax (paid)/received (34) 660
Net cash generated from operating activities 9,685 9,792
Cash flows from investing activities
Purchase of property, plant and equipment (979) (1,499)
Additions to intangible assets (2,080) (2,166)
Loan advanced to associate (1,000) -
Purchase of subsidiaries, deferred consideration paid (1,000) (1,000)
Interest received 45 -
Net cash used in investing activities (5,014) (4,665)
Cash flows from financing activities
Issue of share capital - 18,600
Share issue expenses paid - (956)
Interest paid (283) (676)
Lease liability payments (915) (1,219)
Repayment of bank loans - (16,975)
Repayment of other loans - (729)
Net cash generated used in financing activities (1,198) (1,955)
Net increase in cash and cash equivalents 3,473 3,172
Cash and cash equivalents at beginning of year/period 13,210 10,061
Foreign exchange losses - (23)
Cash and cash equivalents at end of year/period B 16,683 13,210
Notes to the cash flow statements
A. Cash generated from operations
The reconciliation of profit/(loss) for the period to cash generated from
operations is set out below:
Year ended 18 month
31 December
period ended
31 December
2022 2021
£'000 £'000
Profit/(loss) for the period 1,353 (2,218)
Adjustments for:
Depreciation 2,212 3,085
Amortisation 3,036 3,803
Share based payments 561 129
Foreign exchange movement - (23)
Net interest costs 267 833
Share of loss of associate 478 132
Tax charge 86 2,213
7,993 7,954
Decrease in inventories 306 663
Increase in trade and other receivables (2,545) (110)
Increase in trade and other payables 3,965 625
Cash generated from operations 9,719 9,132
B. Analysis of net funds/(debt)
At 1 January Cash flow Non-cash changes At
31 December
2022 2022
£'000 £'000 £'000 £'000
Lease liabilities (1,711) 979 (1,015) (1,747)
Liabilities arising from financing activities (1,711) 979 (1,015) (1,747)
Cash and cash equivalents 13,210 3,473 - 16,683
Net funds 11,499 4,452 (1,015) 14,936
At 1 July Cash flow Non-cash changes At
31 December
2020 2021
£'000 £'000 £'000 £'000
Bank loans (16,839) 16,975 (136) -
Other loans (729) 729 - -
Lease liabilities (1,369) 1,291 (1,633) (1,711)
Liabilities arising from financing activities (18,937) 18,995 (1,769) (1,711)
Cash and cash equivalents 10,061 3,172 (23) 13,210
Net (debt)/funds (8,876) 22,167 (1,792) 11,499
Major non cash items
£951,000 of additions to right of use assets and lease liabilities are
included in non cash movements in the year ended 31 December 2022 (2021:
£1,506,000). The remaining non cash movements relate to the unwinding of the
discount on other payables.
Summary Of Significant Accounting Policies
General information
Microlise Group plc is a holding and management services company. Its
subsidiaries are telematics businesses providing technological transport
solutions that enable customers to reduce costs and environmental impact by
maximising the efficiency of their transportation. The company is a public
limited company, traded on the Alternative Investment Market ("AIM") of the
London Stock Exchange, and incorporated and domiciled in England. The address
of the registered office is Farrington Way, Eastwood, Nottingham, NG16 3AG.
Accounting policies
A. Basis of preparation
The financial information for the year ended 31 December 2022 and the year
ended 31 December 2021 does not constitute the company's statutory accounts
for those years.
The statutory accounts for the year ended 31 December 2022 will be delivered
to the Registrar of Companies following the Company's Annual General Meeting.
The auditors' reports on the accounts for 31 December 2022 and 31 December
2021 were unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
The financial statements have been prepared in accordance with the historical
cost convention and UK International Accounting Standards ('UK IFRS'). The
stated accounting policies have been consistently applied to all periods
presented.
The parent company financial statements have been prepared under applicable
United Kingdom Accounting Standards (FRS101). The following FRS 101 disclosure
exemptions have been taken in respect of the parent company only information:
· IAS 7 Statement of cash flows;
· IFRS 7 Financial instruments disclosures; and
· IAS 24 Key management remuneration.
The financial statements including the notes are presented in thousands of
pounds sterling ('£'000'), the functional and presentation currency of the
Group, except where otherwise indicated.
The principal accounting policies adopted in preparation of the financial
statements are set out below. The policies have been consistently applied to
all periods presented, unless otherwise stated.
Judgements made by the Directors in the application of the accounting policies
that have a significant effect on the historical financial information and
estimates with significant risk of material adjustment in the next year are
discussed in note C.
Going concern
The directors have considered working capital forecasts prepared for the
period to December 2024. The Group had cash balances of £16.7m at the year
end, no borrowings and a £20m undrawn working capital facility. The Group
also has a significant recurring income base with inflationary clauses in the
main contracts.
A range of sensitivities have been run on the working capital model, and the
directors consider a scenario in which the business will face liquidity issues
is remote. As part of the sensitivity analysis the directors have considered
the impact of a reduction in turnover from their principal customer and the
impact on working capital as well as cost and supply issues that might arise
in the context of the current events in Ukraine and are satisfied that the
Group has sufficient resources to respond to reasonably foreseeable scenarios.
The Directors conclude that a scenario that would result in the need for the
Group to require additional funding to be remote.
Based on the forecasts, the Directors are satisfied that the Group can meet
its day-to-day cash flow requirements and operate within the terms of its
working capital banking facilities if required. Accordingly, the financial
statements have been prepared on a going concern basis.
B. Accounting policies
Consolidation
The consolidated financial statements include the results of Microlise Group
plc and its subsidiary undertakings. The results of the subsidiary
undertakings are included from the date that effective control passed to the
company.
On acquisition, all the subsidiary undertakings' assets and liabilities at
that date of acquisition are recorded under purchase accounting at fair value,
having regard to condition at the date of acquisition. All changes to those
assets and liabilities and the resulting gains and losses that arise after the
company gained control are included in the post-acquisition results. Sales,
profits and balances between group companies are eliminated on consolidation.
The Group has taken advantage of the exemption not to disclose transactions
between wholly owned entities in the group.
Associates
Entities in which the Group holds a participating interest and over whose
operating and financial policies the group exercises a significant influence
are treated as associates. In the Group financial statements, associates are
accounted for using the equity method.
Revenue recognition
Revenue comprises revenue recognised by the Group in respect of goods and
services supplied during the year, based on the consideration specified in a
contract, exclusive of Value Added Tax and trade discounts.
The Group enters into the sale of multi-element contracts, which combine
separate performance obligations including hardware, installation, managed
service contracts (software-as-a-service or SaaS), software licences,
professional services (which includes bespoke software development, project
management (incorporating activities including project and installation
planning, managing change control and stage boundaries and project
reporting), consultancy, training), and support and maintenance services
relating to these products. In accordance with IFRS 15, these are considered
to be distinct.
Each performance obligation is allocated a transaction price based on the
stand-alone selling prices. Where stand-alone prices are not directly
observable, they are based on expected cost plus margin.
Revenue is recognised depending upon the revenue stream to which it relates,
as follows:
· The fair value of hardware and installation revenue is recognised
at a point in time when control is transferred to the customer on despatch
and/or upon installation;
· Revenue from the SaaS arrangement is recognised over a period of
time, based on the term of the contract on a straight line basis. Revenue
recognition over time is considered appropriate based on provisions of IFRS 15
paragraph 35 as the customer simultaneously receives and consumes the benefits
provided by the Group. The contractual term for average SaaS agreements are
approximately 5 years;
· Professional services typically include implementation,
configuration, training and other similar services to create optimised
interfaces between the Group's software and customers systems. Revenue from
professional services is recognised over a period of time using the input
method as professional services are being performed, as this best depicts the
timing of how the value is transferred to the customer; and
· Support and maintenance turnover is deferred at the point of sale
and recognised in the Statement of Comprehensive Income over a period of time
of the contractual life, utilising the output method, generally on a straight
line basis as the customer simultaneously receives and consumes the benefits
provided by the Group.
Invoicing for all revenue streams is undertaken in accordance with the terms
of the agreement with the customer. When an invoice is due for payment at
the statement of financial position date but the associated performance
obligations have not been fulfilled the amounts due are recognised as trade
receivables and a contact liability is recognised for the sales value of the
performance obligations that have not been provided. If payment is received
in advance of the delivery of the associated performance obligation a contract
liability is recognised. When an invoice is not due for payment at the
statement of financial position date and the associated performance obligation
has not been fulfilled no amounts are recognised in the financial statements.
In cases where customers pay for the goods and services over an agreed period,
the fair value of the consideration is determined by discounting future
receipts using an imputed rate of interest. The difference between the fair
value and the nominal amount of the consideration is recognised as finance
income over the payment period.
Contract costs
Under IFRS 15, the Group capitalises commission fees as costs of obtaining a
contract when they are incremental and, if they are expected to be recovered,
it amortises them consistently with the pattern of revenue for the related
contract. If the expected amortisation period is one year or less, then the
commission is expensed when incurred. Contract costs are capitalised to
trade and other receivables, due within and after one year.
The Group in certain circumstances incurs costs to deliver its services and
fulfil specific contracts. These costs may include process mapping and
design, scoping and configuration. Contract fulfilment costs are divided into
costs that deliver an asset and costs that are expensed as incurred.
Under IFRS 15, the Group capitalises these contract fulfilment costs when they
directly relate to a specifically identifiable contract or anticipated
contract, will enhance or generate resources used to satisfy future
performance obligations and they are expected to be recovered. Where
capitalised, it amortises them consistently with the pattern of revenue for
the related contract.
At each reporting date, the Group determines whether or not the contract
assets are impaired by comparing the carrying amount of the asset to the
remaining amount of consideration that the Group expects to receive less the
costs that relate to providing services under the relevant contract.
Employee benefits
The Group operates a defined contribution pension scheme. Contributions are
recognised in the Statement of Comprehensive Income in the year in which they
become payable in accordance with the rules of the scheme.
Short term employee benefits including holiday pay are recognised as an
expense in the period in which the service is rendered.
Share based payment
The Group operates an equity-settled share based compensation plan in which
the Group receives services from directors and certain employees as
consideration for share options. The fair value of the services is recognised
as an expense over the estimated vesting period, determined by reference to
the fair value of the options granted.
Taxation
The taxation expense or credit comprises current and deferred tax recognised
in the profit for the financial period or in other comprehensive income or
equity if it arises from amounts recognised in other comprehensive income or
directly in equity. Current tax is provided at amounts expected to be paid (or
recovered) in respect of the taxable profits for the period using tax rates
and laws that have been enacted or substantively enacted by the reporting
date. Microlise, as a large company from 1 July 2020 for tax R&D purposes,
qualifies for the large company RDECs which are included as grant income
within other operating income.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.
Deferred tax assets and liabilities are offset only where there is a legally
enforceable right to offset and where the deferred tax balances relate to the
same taxation authority.
Exceptional items
The Group classifies certain one-off charges or credits that have a material
impact on the financial results as 'exceptional items'. These are disclosed
separately to provide further understanding of the financial performance of
the group.
Government grants
Grants are accounted under the accruals model, and grants of a revenue nature
are recognised in the Statement of Comprehensive Income in the same period as
the related expenditure. Government grants relate to the receipt of
Coronavirus Job Retention Scheme income, innovation grants and large company
research and development expenditure credits ('RDEC' s).
Foreign exchange
Transactions denominated in foreign currencies are translated into sterling at the rates ruling on the date of the transaction. Monetary assets or liabilities denominated in foreign currencies at the Statement of Financial Position date are translated at the rate ruling on that date and all translation differences are charged or credited in the Statement of Comprehensive Income.
On consolidation, the results of overseas operations are translated into
Sterling at rates approximating to those ruling when the transactions took
place. All assets and liabilities of overseas operations are translated at
the rate ruling at the reporting date. Exchange differences arising on
translating the opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in other comprehensive income.
Intangible assets
Goodwill arises on the acquisition of subsidiaries and represents the excess
of the consideration transferred over the fair value of the net assets
acquired at the acquisition date. Goodwill is stated at cost less any
accumulated impairment losses. Goodwill is allocated to cash-generating units
and is not amortised but is tested annually for impairment. In respect of
equity accounted investees, the carrying amount of goodwill is included in the
carrying amount of the investment in the investee.
Intangible assets acquired separately from a business are recognised at cost.
Intangible assets acquired as part of an acquisition are recognised separately
from goodwill if the fair value can be measured reliably on initial
recognition. Intangible assets created within the business are not recognised,
other than for qualifying development expenditure, and expenditure is charged
against profits in the year in which it is incurred.
Subsequent to initial recognition, intangible assets are stated at cost less
accumulated recognised and accumulated impairment. Intangible assets are
amortised on a straight line basis within administrative expenses over their
estimated useful lives as follows:
Asset class Amortisation period
Brands
15 years
Customer relationships 11
to 16 years
Technology assets
5 to 10 years
Software
3-5 years
Intangible assets are tested for impairment when an event that might affect
asset values has occurred. Any such impairment in carrying value is written
off to the Statement of Comprehensive Income immediately.
Research and development expenditure
An internally generated intangible asset arising from development (or the
development phase) of an internal project is recognised if, and only if, all
of the following have been demonstrated:
· It is technically feasible to complete the development such that
it will be available for use, sale or licence;
· There is an intention to complete the development;
· The method by which probable future economic benefits will be
generated is known;
· There are adequate technical, financial and other resources
required to complete the development; and
· There are reliable measures that can identify the expenditure
directly attributable to the project during its development.
The amount recognised is the expenditure incurred from the date when the
project first meets the recognition criteria listed above. Expenses
capitalised as "Technology" within intangible assets consist of employee costs
incurred on development. Where the above criteria are not met, development
expenditure is charged to the consolidated statement of comprehensive income
in the period in which it is incurred. The expected life of internally
generated intangible assets varies based on the anticipated useful life,
currently ranging from five to seven years.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and impairment losses.
Amortisation is charged on a straight-line basis over the estimated useful
life in which the intangible asset has economic benefit and is reported within
administrative expenses in the consolidated statement of comprehensive income.
Research expenditure is recognised as an expense in the period in which it is
incurred.
Research and development expenditure tax credits arise in the UK. Those
relevant to a large company for tax purposes are credited to other operating
income as a grant.
Financial assets
Financial assets, including trade and other receivables, cash and cash equivalent balances are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using the effective interest method. Cash and cash equivalents comprise cash held at bank which is available on demand.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade
receivables. The group measures loss allowances at an amount equal to
lifetime ECL, which is estimated using past experience of the group's
historical credit losses experienced over the three year period prior to the
period end. Historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the group's
customers, such as inflation rates. The gross carrying amount of a financial
asset is written off (either partially or in full) to the extent that there is
no realistic prospect of recovery.
To measure expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and aging. The
contract assets have similar risk characteristics to the trade receivables for
similar types of contracts.
The group recognises loss allowances for expected credit losses (ECLs) on
financial assets measured at amortised cost to the extent that these are
material. The group has determined that there is no material impact of ECLs
on the historical financial information.
Financial liabilities
Financial liabilities, including trade and other payables, lease liabilities
and bank borrowings are initially recognised at transaction price, unless the
arrangement constitutes a financing transaction, where the debt instrument is
measured at the present value of the future receipts discounted at a market
rate of interest. Debt instruments are subsequently carried at amortised cost,
using the effective interest rate method.
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 transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.
Borrowings are initially stated at the fair value of the consideration received after deduction of wholly attributable issue costs. Borrowings are subsequently stated at amortised cost using the effective interest method.
Right-of-use assets and lease liabilities
Under IFRS 16, leases are recognised as right-of-use assets, presented as a
separate category within property, plant and equipment included in the
consolidated statement of financial position, and with a corresponding lease
liability from the date at which the leased asset is available for use by the
Group. This has been adopted and applied on a full retrospective basis.
Assets and liabilities arising from a lease are initially measured at the
present value of the lease payments and payments to be made under the terms of
the lease. Reasonably certain extension options are also included in the
measurement of the liability. The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be readily determined,
or the incremental borrowing rate that the individual lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value to the
right-of-use asset in a similar economic environment with similar terms,
security and conditions.
Lease payments are allocated between principal, presented as a separate
category within liabilities, and finance cost. The finance cost is charged to
the statement of comprehensive income over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period. Right-of-use assets are measured at cost comprising the
amount of the initial measurement of lease liability, any lease payments made
at or before the commencement date less any lease incentives received and any
initial direct costs. Leasehold dilapidations are recognised in relation to
the estimated cost of returning a leasehold property to its original state at
the end of the lease in accordance with the lease terms.
Depreciation is charged on a straight line basis over the period of the lease
and assets are subject to impairment reviews where circumstances indicate
their value may not be recoverable of if they are not being utilised.
Payments associated with short-term leases of property, plant and equipment
and leases of low-value assets continue to be recognised on a straight-line
basis as an expense. Short-term leases are leases with a lease term of 12
months or less.
Property, plant and equipment
Property, plant and equipment assets are stated at cost less depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment assets at rates calculated to write off the cost of each asset on a straight line basis over its expected useful life, as follows:
Asset class Depreciation method rate
Freehold
property
2% straight line
Leasehold improvements Over the period of the lease
Equipment, fixtures and fittings 20-33% straight line basis
Investments
Investments in subsidiaries are stated at cost or at the fair value of shares
issued as consideration less provision for any impairment. Investments in
associates are stated at fair value through the profit and loss.
Inventories
Inventories are valued at the lower of purchase cost and net realisable value, after due regard for any slow moving items. Net realisable value is based on selling price less anticipated costs to completion and selling costs. Cost is based on the cost of purchase on a weighted average basis. Work in progress and finished goods include labour and attributable overheads.
At each reporting date, inventories are assessed for impairment. If
inventory is impaired, the carrying amount is reduced to its net realisable
value. The impairment loss is recognised immediately in the consolidated
statement of comprehensive income.
Share capital and reserves
Financial instruments issued by the company are treated as equity only to the extent that they do not meet the definition of a financial liability. The parent company's ordinary shares are classified as equity instruments.
The share premium account represents the amount by which the issue price of
shares exceeds the nominal value of the shares less any share issue expenses.
The merger reserve represents the difference between the fair value of the
shares issued as part of the consideration for Microlise Holdings Limited and
the nominal value of the shares issued.
Retained earnings comprises opening retained earnings and total comprehensive
income for the year, net of dividends paid.
New or revised accounting standards and interpretations
IFRS interpretations and amendments issued but not yet applicable by the Group
in these financial statements have been reviewed and assessed. All IFRS
effective at the reporting date of 31 December 2022 have been applied.
There are no other new standards, interpretations and amendments which are not
yet effective in these financial statements, expected to have a material
effect or to be relevant to the Group's future financial statements.
C. Critical accounting estimates and assumptions
Critical judgements in applying the accounting policies
The preparation of the financial statements under IFRS requires the use of
certain critical accounting assumptions and requires management to exercise
its judgement and to make estimates in the process of applying the Company's
and Group's accounting policies. Management bases its estimates on historical
experience and on various other assumptions that management believes to be
reasonable in the circumstances. The key estimates used in the preparation of
these financial statements that could result in a material change in the
carrying value of assets or liabilities within the next twelve months are as
follows:
Estimates and assumptions
Useful economic lives of intangible assets
The annual amortisation charge for intangible assets is sensitive to changes
in the estimated useful economic lives of the assets. The useful economic
lives and residual values are re-assessed annually. They are amended when
necessary to reflect current estimates, based on technological advancement,
future investments and economic utilisation.
There is no current indication that the Group's businesses will not continue
to trade profitably and hence the life may differ or be longer than the
estimates used to amortise intangible assets.
Capitalisation of development expenditure
Management have used their judgement in respect of the capitalisation of
development costs against the criteria in the policy. The viability of the
new technology and know-how is supported by the results of testing and by
forecasts for the overall value and margins from future sales to support the
approach taken.
Impairment of intangible assets including goodwill and investments
Investments made by the Company and intangible assets acquired in a business
combination capitalised with goodwill by the Group are subject to annual
impairment tests and other intangibles amortised over their estimated useful
lives subject to an assessment of impairment.
Subsequent impairment tests for investments and intangible assets are based on
risk adjusted future cash flows discounted using appropriate discount rates.
These future cash flows are based on forecasts which include estimated factors
and are inherently judgemental. Future events could cause the assumptions to
change which could have an adverse effect on the future results of the Group.
Further detail including sensitivities is given in note 10.
Right-of-use assets and lease liabilities
In respect of right-of-use leased assets key estimates are a combination of
the incremental borrowing rate used to discount the total cash flows and the
term of the leases where breaks or extensions fall within the Group's control.
These are used to derive both the opening asset value and lease liability as
well as the consequential depreciation and financing charges. A 1% change in
the discount rate used would increase interest charges and decreased
depreciation by approximately £10,000 a year with an immaterial impact on
assets and liabilities.
Share based payment
The fair values in respect of share based payments are estimated using a
number of inputs to an appropriate valuation models including the probability
that perforrnance conditions may be met. Further detail of the assumptions
applied is included in note 21.
Notes to the financial statements for the year ended 31 December 2022
1. Revenue and segmental analysis
Recurring revenue represents the sale of the group's full vehicle telematics
solutions, support and maintenance. Non-recurring revenue represents the
sale of hardware, installation, and professional services. Revenue is
defined as per the accounting policies.
Revenue in respect of the setup, supply of hardware and software installation
is recognised at a point in time. Professional services including project
management, managed services and support services income is recognised over
the period when services are provided.
Year 18 month
ended period ended
31 December 2022
31 December
2021
£'000 £'000
By type
Revenue recognised at a point in time 19,975 29,336
Supply of hardware and installation
19,975 29,336
Revenue recognised over time 2,721
Professional services including project management 4,817
Managed service agreement income 37,360 48,912
Other support and maintenance services 3,155 5,103
43,236 58,832
63,211 88,168
By destination:
UK 58,037 78,230
Rest of Europe 1,195 2,677
Rest of the World 3,979 7,261
Total revenue 63,211 88,168
Revenue in respect of one customer amounted to £20.9m representing 33% of the
revenue for the year (2021: £22.6m representing 26% of the revenue for the 18
month period ended 31 December 2021).
The split of the disaggregated revenue between segments is summarised below.
The chief operating decision maker ("CODM") is identified as the Board. It
continues to define all the Group's trading as operating in the telematics
market with two complementary segments. The Board as the CODM also review
the revenue streams of recurring and non-recurring revenue as part of their
internal reporting.
The directors consider the Microlise business to be one segment related to
fleet management and the separately acquired TruTac business to be a
complementary segment related to tachograph specific software and analysis
services.
Microlise TruTac Year ended Microlise TruTac 18 month
31 December
period ended
2022
31 December
2021
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 59,147 4,064 63,211 83,109 5,059 88,168
Depreciation and amortisation 4,645 603 5,248 6,197 691 6,888
Operating profit 1,559 625 2,184 178 782 960
Net interest (263) (4) (267) (824) (9) (833)
Share of associate loss (478) (478) (132) (132)
Profit/(loss) before tax 818 621 1,439 (778) 773 (5)
Segment assets 115,216 10,920 126,136 111,720 9,622 121,342
Segment liabilities (50,059) (2,609) (52,668) (48,009) (1,785) (49,794)
Additions to non-current assets 3,037 973 4,010 4,878 826 5,704
All of TruTac's revenue relates to the UK. TruTac's revenue is primarily from
managed service agreements with the exception of £562,000 of hardware revenue
in 2022 (2021: £661,000). All remaining revenue relates to the Microlise
business.
The group's non-current assets comprising investments, tangible and intangible
fixed assets and the net assets by geographical location are:
31 December 2022 31 December 2021
Non-current assets Net assets Non-current assets Net assets
£'000 £'000 £'000 £'000
United Kingdom 88,434 71,895 88,729 70,367
France 29 22 3 34
Australia 2 80 3 12
India 304 1,471 381 1,135
88,769 73,468 89,116 71,548
2. Adjusted results
In reporting financial information, the Group presents alternative performance
measures (APMs), which are not defined or specified under the requirements of
IFRS. The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide depth and understanding
to the users of the financial statements to allow for further assessment of
the underlying performance of the Group. The Group's primary results measure,
which is considered by the directors of the Group to represent the underlying
and continuing performance of the Group, is adjusted EBITDA as set out below.
EBITDA is a commonly used measure in which earnings are stated before net
finance income, tax, amortisation and depreciation as a proxy for cash
generated from trading.
The group qualifies for large company R&D tax reliefs with the RDEC
credits included in other operating income above operating profit in line with
common practice is included in the Group's calculation of EBITDA.
The measure has been adjusted in the current period by acquisition related
costs and in the prior period by IPO expenses which are considered to be
non-recurring and non-trading in nature together with the share based payment
charge as it represents a non cash item.
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Operating profit before interest and share of associate 2,184 960
Exceptional transaction and IPO costs 202 3,415
Depreciation 2,212 3,085
Amortisation of intangible assets 3,036 3,803
Share based payment 561 129
Adjusted EBITDA 8,195 11,263
3. Operating profit
The operating profit is stated after charging/(crediting):
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Auditors remuneration:
Audit of the Group and Company financial statements 251 184
Non-audit services* - 295
Depreciation of property, plant and equipment 1,316 1,858
Depreciation of right-of-use assets 896 1,227
Amortisation of intangible assets 3,036 3,803
Cost of inventory sold 14,198 20,056
Research and development costs 3,292 6,767
Foreign exchange (gains)/losses (259) 180
Acquisition evaluation costs 202 -
In other operating income:
Other Income (161) -
Government job retention scheme income - (127)
Government innovation grants (111) (96)
Research and Development Expenditure Credit (604) (920)
*The Group auditors, BDO LLP, also provided £295,000 of assurance services as
the reporting accountants for the AIM listing in the 18 months ended 31
December 2021.
The company now claims RDEC credits which are treated as other operating
income and reflected in the profit before tax.
4. Information regarding directors and employees
Employees
The aggregate remuneration of employees comprised:
Group Company
Year 18 month Year 18 month
ended period ended ended period ended
31 December
31 December
31 December
31 December
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Wages and salaries 26,636 36,630 863 636
Social security costs 2,685 3,312 88 29
Pensions 1,046 1,399 29 9
Share based payment 561 129 561 129
Total 30,928 41,470 1,541 803
Average number of employees
The average number of employees in the period/year was:
Group Company
Year 18 month Year 18 month
ended period ended ended period ended
31 December
31 December
31 December
31 December
2022 2021 2022 2021
Sales and distribution 87 76 - -
Operations and development 469 438 - -
Production and warehouse 23 22 - -
Administration 82 75 6 1
Total 661 611 6 1
The directors were previously employed and paid by a subsidiary and then
directly employed by the company
from September 2021.
Directors' remuneration
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Directors' remuneration - aggregate emoluments 904 1,074
Group pension contributions in respect of 3 24 24
(2021: 4) directors
69
Share based payment
246
1,174 1,167
306 461
Remuneration of the highest paid director
Group pension contributions 10 7
Share based payment 31
116
432 499
Full information by director is disclosed in the remuneration report.
Key management compensation
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Short term employee benefits 1,910 2,596
Post employment benefits 70 71
Share based payment 430 129
Total key management remuneration 2,410 2,796
Key management is defined as those persons having authority and responsibility
for planning, directing, and controlling the activities of the Group, directly
or indirectly, including any directors (whether executive or otherwise) of the
Group.
5. Interest receivable
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Interest receivable
Bank interest receivable 21 -
Unwinding of discount on financing transactions 24 72
45 72
6. Interest payable
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Interest payable
Interest on bank and other borrowings 248 734
Lease liability financing charges 64 72
Other interest - 99
312 905
7. Taxation on profit/(loss)
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Current taxation
UK corporation tax charge - -
Foreign tax (126) (198)
Adjustments in respect of previous periods (5) (100)
(131) (298)
Deferred taxation
Origination and reversal of timing differences (249) (645)
Charge due to change in tax rate 89 (1,416)
Adjustments in respect of previous periods 205 146
45 (1,915)
Tax charge on profit/(loss) (86) (2,213)
Factors affecting the tax charge for the year/period
The tax charge on the profit/(loss) for the year/period differs from applying
the standard rate of corporation tax in the UK of 19% (2021: 19%). The
differences are reconciled below:
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Profit/(loss) before taxation 1,437 (5)
Corporation tax at standard rate 273 (1)
Factors affecting charge for the year/period:
Disallowable expenses 168 781
Research and development allowances - 36
Other differences including capital superdeductions (93) -
Overseas tax rates 27 27
Adjustments in respect of previous periods (200) (46)
(Credit)/charge due to change in tax rate (89) 1,416
Tax charge on profit 86 2,213
In May 2021 a change in the corporation tax rate from 19% to 25% from April
2023 was substantively enacted in the Finance Act 2021 and accordingly has
been applied to deferred tax balances at 31 December 2021 and 2022.
8. Earnings per share
Year 18 month
ended period ended
31 December
31 December
2022 2021
Profit/(loss) used in calculating EPS (£'000) 1,353 (2,218)
Weighted average number of shares for basic EPS ('000) 115,946 106,266
Weighted average number of shares for diluted EPS ('000) 116,104 106,266
Basic earnings/(loss) per share (pence) 1.17 (2.09)
Diluted earnings/(loss) per share (pence) 1.17 (2.09)
There were 3,088,969 unexercised share options in place at 31 December 2022
(2021: 1,107,848) of which 1,159,383 were potentially dilutive at the year end
and are included in the weighted average for diluted EPS.
Costs relating to the IPO have resulted in a loss for the prior period
compared with a profit in the current year. The earnings per share, if
adjusted to add back these IPO costs, would be 1.13 pence for the prior 18
month period.
9. Property, plant and equipment
Group Freehold property Right-of-use property Leasehold building Improvements Right-of-use equipment Equipment, fixtures and fittings Total
£'000 £'000 £'000 £'000 £'000 £'000
Net book value
At 1 July 2020 5,347 1,089 254 264 1,682 8,636
Cost
At 1 July 2020 5,525 1,954 329 787 3,704 12,299
Additions - 1,048 - 458 1,554 3,060
Reclassification (254) - 254 -
Transfer to intangibles - - - - (27) (27)
Exchange adjustments - - (23) - (25) (48)
At 31 December 2021 5,271 3,002 306 1,245 5,460 15,284
Depreciation
At 1 July 2020 178 865 75 523 2,022 3,663
Charge for the period 153 834 99 393 1,606 3,085
Transfer to intangibles - - - - (14) (14)
Exchange adjustments - - (5) - (18) (23)
At 31 December 2021 331 1,699 169 916 3,596 6,711
Net book value
At 31 December 2021 4,940 1,303 137 329 1,864 8,573
Cost
At 1 January 2022 5,271 3,002 306 1,245 5,460 15,284
Additions - 567 - 384 979 1,930
Disposals - (1,689) - (612) (19) (2,320)
Exchange adjustments - - 2 - 2 4
At 31 December 2022 5,271 1,880 308 1,017 6,422 14,898
Depreciation
At 1 January 2022 331 1,699 169 916 3,596 6,711
Charge for the year 102 558 67 338 1,147 2,212
Disposals (1,689) - (612) (19) (2,320)
Reclassification 88 - (88) - -
Exchange adjustments - 1 1 2 3
At 31 December 2022 433 656 237 554 4,726 6,606
Net book value
At 31 December 2022 4,838 1,224 71 463 1,696 8,292
Company Freehold property
£'000
Cost
At 1 July 2020 -
Additions 4,965
At 31 December 2021 and 2022 4,965
Depreciation
At 1 July 2020 -
Charge for the period 25
At 31 December 2021 25
Charge for the year 102
At 31 December 2022 127
Net book value
At 31 December 2021 4,940
At 31 December 2022 4,838
10. Intangible assets
Goodwill Customer relationships Technology Brands Software Total
£'000 £'000 £'000 £'000 £'000 £'000
Net book value
At 1 July 2020 52,300 15,974 6,033 2,407 419 77,133
Cost
At 1 July 2020 52,300 17,780 7,552 2,711 419 80,762
Additions 478 - 1,821 - 345 2,644
Transfer from tangible assets - - - - 27 27
At 31 December 2021 52,778 17,780 9,373 2,711 791 83,433
Amortisation
At 1 July 2020 - 1,806 1,519 304 - 3,629
Charge for the period - 1,708 1,711 271 113 3,803
Transfer from tangible assets - - - - 14 14
At 31 December 2021 - 3,514 3,230 575 127 7,446
Net book value
At 31 December 2021 52,778 14,266 6,143 2,136 664 75,987
Cost
At 1 January 2022 52,778 17,780 9,373 2,711 791 83,433
Additions - - 1,780 - 300 2,080
At 31 December 2022 52,778 17,780 11,153 2,711 1,091 85,513
Amortisation
At 1 January 2022 - 3,514 3,230 575 127 7,446
Charge for the year - 1,138 1,533 181 184 3,036
At 31 December 2022 - 4,652 4,763 756 311 10,482
Net book value
At 31 December 2022 52,778 13,128 6,390 1,955 780 75,031
Goodwill considered significant in comparison to the Group's total carrying
amount of such assets has been allocated to cash generating units or groups of
cash generating units as follows:
31 31 December
December
2022 2021
£'000 £'000
Microlise 49,686 49,686
TruTac 3,092 3,092
52,778 52,778
The Group tests goodwill annually for impairment, or more frequently if events
or changes in circumstances indicate that the asset might be impaired. The
Microlise carrying value is assessed for impairment purposes by calculating
the value in use using the net present value (NPV) of future cash flows
arising from the originally acquired businesses discounted at a pre-tax rate
of 15% (2021: 11.6%) and for the TruTac business at a pre-tax rate of 15%
(2021: 11.6%).
The Microlise goodwill has been tested by reference to a 4 year management
approved plan and TruTac by reference to a 3 year plan with a 2% long term
growth rate considered applicable to the UK market applied to the terminal
period. This includes consideration of the impact of cost inflationary
pressures in the December tests and forecasts at that date and taking
account of the corresponding inflationary price terms within the group's
contracts with customers. The businesses achieved the FY22 forecasts used in
the prior year test and no impairment is indicated although they are sensitive
to forecast increases in EBITDA. The Microlise NPV exceeds carrying values by
£8.8m (2021: £19.9m) and TruTac NPV exceeds carrying values by £1.1m (2021:
£2.5m) with this reduction primarily a result of increased discount rates
being applied for equity returns. Reasonable changes in the discount rate or
terminal growth rate do not result in a risk of impairment of Microlise or
TruTac goodwill.
At 31 December 2022, the Microlise plan subject to the impairment test to
support the carrying value of goodwill, forecast £8.9m and required £7.9m of
recurring EBITDA which compares with £7m on the same basis recorded for 2022
and an expected increase to £7.6m for FY23 as a result of the growth trends
in the Microlise revenues, supported by significant investment in the
development of technology and ongoing operational efficiencies to be made
(2021: forecast £9.2m and required £7.1m of recurring EBITDA in the long
term).
The 31 December 2022 TruTac plan assessed for the impairment test to support
the carrying value of goodwill forecast £1.25m and a required £1.1m compared
to the current EBITDA of some £1.2m. The growth trends in TruTac revenues
within the forecast is a result of continued investment into the underlying
technologies, the release of new products and features as well as access to an
enlarged customer base, a benefit of being part of the Microlise Group (2021:
forecast £1.27m and required £0.95m of recurring EBITDA).
11. Investments and loan receivables
Group Associate
£'000
At 1 July 2020 1,978
Share of loss for the period (132)
At 31 December 2021 1,846
Share of loss for the year (478)
At 31 December 2022 1,368
Company Subsidiary undertakings Associate Total
£'000 £'000 £'000
At 1 July 2020 77,691 1,600 79,291
Additions 16,622 - 16,622
Increase in fair value - 650 650
Return of capital (16,620) - (16,620)
At 31 December 2021 77,693 2,250 79,943
Additions - fair value of share options held by subsidiary company employees
249 - 249
Decrease in fair value - (1,000) (1,000)
At 31 December 2022 77,942 1,250 79,192
Subsidiary undertaking Principal activity Class of % share
shares held
holding
Microlise Limited Transport management technology solutions Ordinary 100%
Microlise Holdings Limited Intermediate holding company Ordinary 100%
Microlise Midco Limited Dormant company Ordinary 100%
Microlise Engineering Limited Non trading company Ordinary 100%
TruTac Limited Transport management technology solutions Ordinary 100%
Microlise Pty Limited (Australia) Transport management technology solutions Ordinary 100%
Microlise SAS (France) Transport management technology solutions Ordinary 100%
Microlise Telematics Private Limited (India) Transport management technology solutions Ordinary 100%
TruTac Training Limited Dormant company Ordinary 100%
Trucontrol Ltd Dormant company Ordinary 100%
Trulogix Limited Dormant company Ordinary 100%
All the UK subsidiary companies are registered in England at the same
registered office as the Company. Microlise Pty Limited is registered at Level
1, 20 Albert Street, Blackburn, Victoria, 3130 Australia, Microlise SAS at Les
Hauts de la Duranne, 505 Avenue Galilee, 13290 Aix-en-Provence, France and
Microlise Telematics Private Limited at 4(th) Floor, Pride Accord, Baner Road,
Pune, 411045, India.
The Group agrees to guarantee the liabilities of Microlise Midco Limited
(01670983), Microlise Holdings Limited (06479107) and Microlise Engineering
Limited (02211125) thereby allowing them to take exemption from having an
audit under section 479A of the Companies Act 2006.
Investments in associates consist of a 20% holding in Trakm8 Holdings plc
acquired on 22 December 2018 and measured in accordance with the accounting
policy. The company is listed on AIM and at 31 December 2022 the market value
of the shareholding was £1.25m (2021: £2.25m).
The primary business of Trakm8 Holdings plc is the development, manufacture,
distribution and sale of telematics devices, services and optimisation
solutions. The principal place of business is 4 Roman Park, Roman Way,
Coleshill, Birmingham, West Midlands, B46 1HG.
The Group also has an interest of £1 in a jointly controlled not for profit
community investment company, Road to Logistics C.I.C. This had commenced
activity funded by a government grant and incurs neither a profit nor a
loss. The principal place of business is Farrington Way, Eastwood,
Nottingham, NG16 3AG.
Summarised financial information (material associates)
Trakm8 Holdings plc
Trakm8 Holdings plc has a year end of 31 March, and the summarised financial
information disclosed is based on their published annual statements to 31
March 2021 and 2022 together with interim financial statements to 30 September
2021 and 2022, prepared under IFRS.
30 September 30 September
2022
2021
£'000 £'000
Assets - non-current 26,101 25,705
Assets - current 10,834 9,558
Liability - non-current (10,190) (7,187)
Liability - current (8,616) (7,586)
Net assets (100%) 18,129 20,490
Group share of net assets (20%) 3,626 4,098
Year ended 18 months ended
30 September 30 September
2022
2021
£'000 £'000
Revenues 18,102 24,982
Loss from continuing operations (1,863) (964)
Other comprehensive income 8 1
Total comprehensive expense (1,855) (963)
The Company also advanced £1,000,000 to Trakm8 Holdings plc in September
2022. This is a loan bearing interest at 12%, repayable 14 September 2024 or
convertible at the Company's option into a fixed number of ordinary shares in
Trakm8 Holdings plc. It is considered that the fair value of the loan is
approximately £1,000,000 and the convertible element has no separate material
equity value.
Group and company
£'000
At 1 January 2022 -
Cash subscribed for loan notes 1,000
At 31 December 2022 1,000
12. Deferred tax assets and liabilities
Group Intangible assets Accelerated capital allowances Freehold property Tax losses Other Total
£'000 £'000 £'000 £'000 £'000 £'000
At 30 June 2020 (4,639) (24) - 1,840 11 (2,812)
Foreign exchange movement - - - 2 2
RDEC credit - - - - 212 212
Adjustment to goodwill - - (847) 369 - (478)
Charge for the period (829) (55) (309) (381) (341) (1,915)
At 31 December 2021 (5,468) (79) (1,156) 1,828 (116) (4,991)
RDEC credit - - - - 106 106
Credit/(charge) for the year 124 (152) 19 (303) 357 45
At 31 December 2022 (5,344) (231) (1,137) 1,525 347 (4,840)
Company
Share based payment
£'000
At 31 December 2021 -
Credit for the year 111
At 31 December 2022 111
Deferred tax has been recognised at an average rate of 25% (2021: 25%).
13. Inventories
Group 31 December 31 December
2022 2021
£'000 £'000
Raw materials and consumables 1,146 1,092
Work in progress 18 15
Finished goods and goods for resale 1,471 1,834
2,635 2,941
An impairment loss of £209,000 in respect of inventory was recorded in the
year ended 31 December 2022 (period ended 31 December 2021: £202,000).
14. Trade and other receivables
Group Company
31 December 31 December 31 December 31 December
2021
2021
2022 2022
£'000 £'000 £'000 £'000
Current
Trade receivables 13,247 11,533 - -
Provision for impairment of trade receivables (402) (303) - -
Trade receivables net 12,845 11,230 - -
Contract cost assets 1,466 1,449 - -
Amounts owed by group undertakings - - -
Other receivables 163 206 - 28
Prepayments 2,286 2,258 26 225
Total 16,760 15,143 26 253
Non-current
Trade receivables 593 344 - -
Contract cost assets 2,485 2,366 - -
Total 3,078 2,710 - -
Total 19,838 17,853 26 253
Analysis of expected credit losses is included in note 19.
The movements in Group contract related balances in the year/period are as
follows:
Year 18 month
ended period ended
31 December
31 December
2022 2021
Contract cost assets £'000 £'000
Opening balance 3,815 2,869
Amortised to income statement (1,115) (1,116)
Incurred in the period 1,252 2,062
Closing balance 3,952 3,815
15. Cash and cash equivalents
Group Company
31 December 31 December 31 December 31 December
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash at bank and in hand 16,683 13,210 69 1,090
16. Lease liabilities
Group Company
31 December 31 December 31 December 31 December
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Current 821 717 - -
Non-current 926 994 - -
Total 1,747 1,711 - -
Leases
The group has entered into lease contracts in respect of property in the
jurisdictions from which it operates, use of data centres and vehicles which
are typically for terms of 3 to 5 years. In respect of data centre contracts
there are options to extend the initial period with these factored into the
liabilities where the group plans to use these for a longer period. For
property leases, it is customary for lease contracts to be reset periodically
to market rental rates. Leases of equipment, data centre usage and vehicles
comprise only fixed payments over the lease terms.
Right of use assets, additions and amortisation are included in note 9.
Interest expenses relating to lease liabilities are included in note 6.
Other amounts relating to leases were as follows:
31 December 31 December
2022 2021
£'000 £'000
Short term lease expense 11 -
Low value lease expense - 109
Total cash outflow for leases 979 1,400
The maturity of lease liabilities at 31 December 2022 were as follows:
Property Equipment and vehicles Total
£'000 £'000 £000
Within 1 year 548 273 821
1-2 years 450 160 610
2-5 years 267 49 316
Total 1,265 482 1,747
The maturity of lease liabilities at 31 December 2021 were as follows:
Property Equipment and vehicles Total
£'000 £'000 £000
Within 1 year 513 204 717
1-2 years 389 146 535
2-5 years 394 65 459
Total 1,296 415 1,711
17. Trade and other payables
Group Company
31 December 31 December 31 December 31 December
2021
2021
2022 2022
£'000 £'000 £'000 £'000
Current
Trade payables 4,637 4,068 7 27
Taxation and social security 1,963 944 34 28
Amounts owed to group undertakings - - 16,206 16,574
Other payables 1,447 1,231 1,006 1,000
Accruals 4,316 4,222 675 669
Contract liabilities 16,820 15,315 -
Total 29,183 25,780 17,928 18,298
Non-current
Contract liabilities 16,463 16,150 - -
Deferred grant income 152 196 - -
Accruals 283 - - -
Other payables - 966 - 1,000
Total 16,898 17,312 - 1,000
Total 46,081 43,092 17,928 19,298
The carrying amounts of trade and other payables are considered to be the same
as their fair values, due to their short-term nature. Contract liabilities
relates principally to service income received in advance. The timing of
recognition of Group contract liabilities are as follows:
Less than one year 1-2 years 2-3 years 3-4 years 4-5 years Total
At 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000
Contract liabilities 16,820 8,962 4,919 1,986 596 33,283
Less than one year 1-2 years 2-3 years 3-4 years 4-5 years Total
At 31 December 2021 £'000 £'000 £'000 £'000 £'000 £'000
Contract liabilities 15,315 7,813 4,692 2,696 949 31,465
The movements in Group contract related balances in the year/period are as
follows:
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
Revenue related contract liabilities
Opening balance (31,465) (28,606)
Invoiced in the period (39,178) (50,423)
Recognised as revenue in the period 37,360 47,564
Closing balance (33,283) (31,465)
18. Financial Instruments
Financial risk management
The determination of financial risk management policies and the treasury
function is managed by the CFO. Policies are set to reduce risk as far as
possible without unduly affecting the operating effectiveness of the Group.
The Group's activities expose it to a variety of financial risks, the most
significant being credit risk, liquidity risk and interest rate risk together
with a degree of foreign currency risk as discussed below.
Categories of financial instruments
The Group has the below categories of financial instruments:
31 December 31 December
2022 2021
Recognised at amortised cost £'000 £'000
Cash and bank balances 16,683 13,210
Trade receivables - net 13,438 11,574
Other receivables 1,163 206
Total financial assets 31,284 24,990
Trade payables 4,637 4,068
Other payables 6,046 6,419
Lease liabilities 1,747 1,711
Total financial liabilities 12,430 12,198
There were no assets or liabilities at 31 December 2022 or 2021 that were
recognised and measured at fair value in the historical financial information.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss for the Group. Financial
instruments, which potentially subject the Group to concentration of credit
risk, consist primarily of cash and cash equivalents and trade accounts
receivable including accrued income.
The Group places its cash and cash equivalents with major financial
institutions, which management assesses to be of high-credit quality in order
to limit the exposure of each cash deposit to a minimal level.
Trade receivables
Trade accounts receivable are derived primarily from non-recurring hardware
sales and monthly service income and generally have 30-60 day terms. With the
exception of one large customer who accounts for 27% (2021: 31%) of the trade
receivable invoiced balance, credit risk with respect to accounts receivable
is dispersed due to the large number of customers. Collateral is not required
for accounts receivable. The credit worthiness of customers with balances in
trade receivables not yet due has been assessed as high.
The aging of past due trade receivables according to their original due date
is detailed below:
31 December 31 December
2022 2021
Past due £'000 £'000
0-60 days 3,903 3,076
60-120 days 443 186
121+ days 499 1,014
Expected credit loss provision (402) (303)
Total 4,443 3,973
A majority of the expected credit loss provision relates to balances that are
more than 120 days overdue. The expected credit loss on balances less than 120
days is immaterial. A substantial majority of the overdue debt has been
collected since the period end date with the unprovided amounts considered to
be collectible.
As at 31 December 2022 the lifetime expected loss provision for trade
receivables is as follows:
Past due Expected loss rate Gross carrying amount Loss provision £'000
£'000
0-60 days 0% 3,903 -
60-120 days 0% 443 -
121+ days 81% 499 402
Total 4,845
As at 31 December 2021 the lifetime expected loss provision for trade
receivables was as follows:
Past due Expected loss rate Gross carrying amount Loss provision £'000
£'000
0-60 days 0% 3,076 -
60-120 days 0% 186 -
121+ days 30% 1,014 303
Total 4,276 303
At each of the Statement of Financial Position dates, a portion of the trade
receivables were impaired and provided for. The movement in the provision for
trade receivables in each of the periods is as follows:
Year 18 month
ended period ended
31 December
31 December
2022 2021
£'000 £'000
At 1 July 303 154
Provision charged 99 149
At year/period end 402 303
Oher receivables are considered to bear similar risks to trade receivables or
are owed by government bodies. Hence any expected credit loss on other
financial assets is considered to be immaterial.
Liquidity risk
The Group now funds its business through equity and from cash generated from
operations and also has a £20m undrawn working capital facility available.
Details of the Group's borrowings are discussed in note 16. The Group monitors
and manages cash to mitigate any liquidity risk it may face. The following
table shows the Group's contractual maturities of financial liabilities based
on undiscounted cash flows including interest charges and the earliest date on
which the Group is obliged to make repayment:
Less than one year 1-2 years 2-5 years Total
At 31 December 2022 £'000 £'000 £'000 £'000
Trade and other payables 10,688 - - 10,688
Lease liabilities 883 648 338 1,869
Total 11,571 648 338 12,557
Less than one year 1-2 years 2-5 years Total
At 31 December 2021 £'000 £'000 £'000 £'000
Trade and other payables 9,521 1,000 - 10,521
Lease liabilities 764 858 473 2,095
Total 10,285 1,858 473 12,616
Interest rate risk
There are no borrowings or liabilities subject to variable interest rates.
Currency risk
The Group operates predominantly in the UK with sterling being its functional
currency and has a degree of exposure to foreign currency risk, with this
spread across income and expenses in Euros, US dollars and Australian dollars
for sales and purchasing operations together with an outflow only of Indian
rupees for the costs of development and operational support activity. The
impact of a 10% fluctuation in all foreign exchange rates moving in the same
direction against GBP has been assessed to be an overall impact of up to
£300,000 which would be mitigated by some matching of income and expenses.
The net exposure to the dollar [is offset by significant purchases made in
dollars and ongoing costs in Indian rupees are now being managed by the use of
forward contracts to fix the rate within the year]. The net underlying foreign
currency balances, comprising overseas assets and liabilities, cash,
receivables and payables in the UK, in the Group statement of financial
position by underlying currency at the period end were:
USD Euro AUD INR Total
£'000 £'000 £'000 £'000 £'000
At 31 December 2022 8,317 673 913 559 10,462
At 31 December 2021 3,249 460 599 1,152 5,460
Capital management
The Group's capital comprises share capital, share premium and retained
earnings. The Group's objectives when maintaining capital are:
To safeguard the entity's ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other
stakeholders and to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders equity as set out
in the consolidated statement of changes in equity. The longer-term funding
requirements for acquisitions were financed from cash reserves and term bank
debt which was fully repaid from the equity proceeds on listing. All working
capital requirements are financed from existing cash resources.
The Group sets the amount of capital it requires in proportion to risk in
conjunction with the retained earnings. The Group manages its capital
structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt.
19. Pensions
Defined contributions pension scheme
The group operates a number of defined contribution pension schemes.
Contributions totalling £223,000 (2021: £194,000) were included in payables
and due to the defined contribution scheme at the end of the year. The total
contributions are disclosed in note 3.
20. Share capital
Group and Company
Allotted, called up and fully paid At At
31 December
31 December
2022 2021
£ £
115,945,956 ordinary shares of £0.001 each 115,946 115,946
Movements in share capital have been as follows:
A ordinary B ordinary C ordinary D ordinary Total
At 1 July 2020
Number of shares 33,902 5,962 325 363 40,552
Nominal value/£'000 34 9 - 1 44
Bonus issue on 18 June 2021
Number of shares 42,673,062 7,504,477 409,083 456,915 51,043,537
Nominal value/£'000 42,673 11,633 409 457 55,172
Share capital reduction 7 July 2021
Nominal value/£'000 (42,622) (11,627) (408) (457) (55,114)
Subdivision and redesignation on 14 July 2021
Number of shares 59,461,214 (7,510,439) (409,408) (457,278) 51,084,089
Nominal value/£'000 17 (15) (1) (1) -
Issue of share capital
Number of shares 13,777,778 - - - 13,777,778
Nominal value/£'000 14 - - - 14
At 31 December 2021 and 2022
Number of £0.001 shares 115,945,956 - - - 115,945,956
Nominal value/£'000 116 - - - 116
On 18 June 2021, 51,043,537 bonus shares were issued as above utilising the
merger reserve. This was followed by a share capital reduction on 7 July 2021
reducing the nominal value from £1 for A,C and D ordinary shares and from
£1.55 for B ordinary shares to £0.002 per share with the reduction in
capital transferred to retained earnings.
On 14 July 2021, all A,B,C and D £0.002 ordinary shares were subdivided and
redesignated as £0.001 ordinary shares with equal rights.
The company listed on AIM on 22 July 2021 and issued 13,777,778 new £0.001
shares for cash at £1.35 each resulting in a share premium of £17,630,000
after deducting the issue expenses of £956,000.
All shares rank equally in respect of income and capital distributions.
21. Share based payments
The Company granted options on 22 July 2021 at an exercise price of £0.001
per share. 100,000 of the options were granted to non-executive directors and
are subject only to continuing employment or good leaver conditions. The fair
value was assessed as £1.35 per option using a Black Scholes model with a
volatility of 60% and risk free rates of 0.5%. They are exercisable three
years after grant for a period of a year. 1,007,848 options were granted to
executive employees subject to a 3 year Total Shareholder Return condition
from the date of grant of a minimum of 8% annual growth in the share price up
to an 18% return for 100% to be exercised. The fair value is assessed as
£0.88 per option based on a discounted Black Scholes pricing model with a
volatility of 60% and risk-free rates of 0.5%. The exercise period is within a
year of the 3 year return being assessed.
1,132,160 options were granted to employees on 23 May 2022 at an exercise
price of £1.45 subject to a 3 year vesting period only. The fair value was
assessed as £0.515 per option using a Black Scholes model with a volatility
of 60% and risk free rates of 2%.
The Company granted options on 28 July 2022 at an exercise price of £0.001
per share. 41,509 of the options were granted to a non-executive director and
are subject only to continuing employment or good leaver conditions. The fair
value was assessed as £1.32 per option using a Black Scholes model with a
volatility of 50% and risk free rates of 2%. They are exercisable three years
after grant for a period of a year. 973,811 options were granted to executive
employees subject to a 3 year Total Shareholder Return condition from the date
of grant of a minimum of 8% annual growth in the share price up to an 18%
return for 100% to be exercised. The fair value is assessed as £0.86 per
option based on a discounted Black Scholes pricing model with a volatility of
50% and risk-free rates of 2%.
The average vesting period is estimated at 3 years and the share based payment
charge was £561,000 (2021: £129,000 for the period).
166,359 options have lapsed and 3,088,969 of the options remain exercisable at
31 December 2022 with a weighted average vesting period of 2.2 years (2021: 3)
years and average exercise price of £0.51 (2021: £0.001).
22. Capital commitments
The Group had capital commitments contracted but not provided for of
£1,105,000 at 31 December 2022 (2021: £nil). The company had no capital
commitments (2021: £nil).
23. Related party transactions
The remuneration of key management personnel and directors is set out in note
4.
Loans have been advanced to directors of the company in prior periods. An
amount of £520,580 was owed and included in other debtors at 30 June 2020
which was fully repaid in the following period.
During the prior period, and before the Group was listed on AIM, close
relatives of directors were employed by the Group with aggregate remuneration
and benefits of £1,200,000 paid by the Group.
24. Subsequent events
On 14 March 2023, the group acquired 100% of Vita Software Limited, a leading
provider of transportation management system solutions. The acquisition is
expected to expand Microlise's suite of transport technology solutions. The
total consideration of £2.06million including £0.2m of deferred
consideration payable after one year from the date of acquisition. The
acquisition was funded from the Group's cash resources. The identifiable
assets acquired comprised of technology solutions and goodwill intangible
assets arising largely from the technology products held and the synergies
expected to arise by combining the product and service offering. The other
assets and liabilities acquired are not material to the Group. At the time
of approval of the Group financial statements the fair value of the different
acquired intangible assets is subject to formal valuations being carried out.
Acquisition costs of £60k were incurred relating to the acquisition of which
£60k was expensed in the period. Other than the acquisition costs the
acquisition was not included in the reported results for the year ended 31
December 2022.
(#_ftnref1)
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