REG - Microlise Group PLC - Final Results
12/04/2022 07:00
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RNS Number : 0385I Microlise Group PLC 12 April 2022
12 April 2022
MICROLISE GROUP PLC
("Microlise", the Company or "the Group")
Final Results for the 18 months ended 31 December 2021
Resilient performance in line with market expectations
Microlise Group plc (AIM: SAAS), a leading provider of transport management
software to fleet operators, announces its results for the 18 months ended 31
December 2021.
Financial Highlights
£'m unless otherwise stated
Statutory Results (Audited) Calendar Year Results (1) (Unaudited)
FY21 18-months to Dec-21 FY20 12 months to Jun-20 12 months to Dec-21 12 months to Dec-20 Change (12 months) %
Financial
Revenue 88.2 50.0 60.3 51.6 17%
Recurring Revenue 54.0 32.0 36.7 33.5 9%
Gross Profit 50.5 28.4 34.5 30.1 14%
Gross Profit Margin % 57% 57% 57% 58% (1)%
Adjusted EBITDA (2) 11.3 5.7 7.8 6.3 24%
Adjusted EBITDA % 13% 11% 13% 12% 6%
Profit/(loss) before tax (0.0) 0.7 (0.8) 1.3 (160)%
Adjusted Profit/(loss) before tax (3) 3.4 0.7 2.6 1.3 104%
Net Cash (4) 13.2 7.6 13.2 8.0 65%
Short term borrowings 0.0 (2.4) 0.0 (2.5) (100)%
Cash and cash equivalents 13.2 10.1 13.2 10.5 26%
Non Financial
ARR run rate (5) 38.9 29.7 38.9 35.7 9%
Number of like-for-like subscriptions (6) 551,000 502,000 10%
Long-term contract customer churn by value 0.1% 0.5% (80)%
(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 with the current reporting period covering the 12 months
ended 31 December 2021 (CY21) and the comparative period covering the 12
months ended 31 December 2020 (CY20).
(2) Adjusted EBITDA excludes exceptional costs in relation to the IPO,
depreciation, amortisation, share of loss of associate, interest, and tax
(3) Adjusted Profit / (loss) before taxation excludes IPO costs of £3.4m
(4) Net cash is cash and cash equivalents less short-term borrowings
(5) ARR Run rate change figure and % compare the annualised recurring revenue
figure for December 2021 with the annualised recurring
revenue figure for December 2020
(6) Like-for-like subscriptions change figure and % compare the subscriptions
as at 31 December 2021 with the subscriptions as at 31 December
2020
· Strong progress across the Group has driven an increase in revenue to
£88.2m for the 18 months ended 31 December 2021 (12 months ended 30 June
2020: £50.0m)
· On a comparable calendar year basis, revenue for the 12 months ended
31 December 2021 (CY21) has increased 17% to £60.3m (12 months ended 31
December 2020 (CY20): £51.6m)
· Recurring revenue (+9% to £36.7m) for the 12 months ended 31
December 2021 (CY21), supported by the renewal of several major customer
contracts and new customer wins (CY20: £33.5m)
· Increased gross profit (+14% to £34.5m) for the 12 months ended 31
December 2021 (CY21), at a gross profit margin of 57% (CY20: £30.1m at a
margin of 58%)
· Adjusted profit before tax (+104% to £2.6m); for the 12 months ended
31 December 2021 (CY21), with margin up 1.8% pts to 4.3% (CY20: 2.5%)
· Loss before tax of £0.8m for the 12 months ended 31 December 2021
(CY21) compared with a profit before tax of £1.3m for the 12 months ended
31 December 2021 (CY21)
· Net cash of £13.2m and a renewed £20m undrawn Revolving Credit
Facility
· Growth in subscriptions (+10% annual increase to 551,000) driven by
continued growth in our existing customers together with new customer wins,
despite COVID-19 and component shortage headwinds (CY20: 502,000),
· Annual recurring revenue (ARR) run rate of £38.9m at period end,
growing 9% in last 12 months.
· The Group added over 65 new customers in the last 12 months ended 31
December 2021 (CY21) and long-term contract customer churn rate by value
remained very low at 0.1%.
Current Trading and Outlook
· Microlise has entered FY22 with a strong order book and significant
demand for both existing and new solutions, leading to a strong sales pipeline
· The board is confident of delivering a performance for the full year
in line with current market expectations, given a strong start to trading in
the first quarter.
· Well-funded to continue to invest in our growth opportunities. In
addition, the Group is actively reviewing opportunities that would add
expertise, particularly within new product development as well as entering new
geographies and markets where we see exciting opportunities.
Nadeem Raza, CEO of Microlise, said: "The eighteen-month period to 31 December
2021 was one of considerable achievement for the Group. We strengthened our
business through the growth of our global customer base; the renewal of
several major customer contracts, including a new 5-year contract with our
largest customer JCB; the launch of new products; ongoing recruitment and team
expansion; and the completion of a successful IPO in July 2021 to fund the
acceleration of our growth strategy. Whilst we have been dealing with chip
shortages for the past 18 months, the industry opinion is that from Q3 2022,
the situation will improve and return to pre-pandemic levels by Q3 2023, which
will enable us to meet our customer demand"
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 PR) Tel: 020 3757 6880
Bob Huxford / Isabelle Smurfit / Max Richardson Email: microlise@secnewgate.co.uk
About Microlise
Microlise 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 customers.
Chairman's Statement
The Company successfully floated on the London Stock Exchange's AIM market in
July 2021, raising £61.2m, of which £42.6m was for selling shareholders and
£18.6m was new growth capital for the Company. Our strategy and team and the
benefits we deliver to customers and stakeholders was well received and we
secured strong support from institutional investors.
The past twenty-four months have been a tremendously difficult time for many
people, both personally and professionally, and our thoughts are with those
who have been negatively impacted by the effects of the Covid-19 pandemic. The
transport and logistics sector that we serve has seen some of the more
significant challenges over this period, such as driver shortages, lack of new
vehicle supply and rising fuel costs. I am glad to say our solutions, ranging
from fleet telematics to planning and optimisation, that integrate our
hardware devices and SAAS software, have helped our customers make the most
productive use of their vehicle fleet, fuel and drivers over this time.
As a business, Microlise is committed to driving the road transport industry
forward, and empowering operators to work as smartly, efficiently, and
sustainably as possible. We have successfully positioned ourselves as a
technology company that supports customers to secure improved sustainability
outcomes nationally and internationally. This has been achieved in a number of
territories, for example delivering transport software solution and hardware
to Carlsberg across Europe and the UK.
Financial Performance
The resilience of the Group due to solid levels of recurring revenues and high
levels of customer retention, was evident throughout the Period. We are
pleased to report the business delivered successfully against management
expectations for the year, achieving its revenue, profit, and cash targets,
including revenue growth of 17% and adjusted EBITDA growth of 24% for the
12-month period ended 31 December (CY21) over CY20 (the 12-month period to 31
December 2020).
Our People
Collaboration has always been central to our working environment, but the past
Period has been pivotal for our diverse workplace culture and strategy as we
reimagined how and where we work within a different context. As COVID-19
reached pandemic status, 90% of our global workforce shifted to remote work,
while continuing to meet the needs of our clients and communities.
We believe that our staff and culture are critical to our success. We have
invested further in the development of our staff across all levels, through
training, and our employee engagement programmes. This has resulted in higher
employee satisfaction scores than ever before, and in our India office,
achieving 'Great Place to Work' accreditation. We firmly believe that having
enthusiastic and engaged staff drives improved performance and higher service
levels to our customers.
Governance
From its earliest days, Microlise has been run with a keen eye on supporting
expansion, ensuring depth of management and the capacity to deal with
operational change. The Group has strong fundamentals and business oversight,
two factors which left us well placed to support our customers to the standard
they have come to expect when we transitioned to remote working.
As Chairman, I am responsible for leading the Board and ensuring it is focused
on strategic matters and that the highest governance standards are in place.
As part of our continuing commitment to strengthen our Governance, we were
delighted to welcome Lucy Sharman-Munday as an independent Non-Executive
Director, who joined the Board in February 2022, and will be the Chair of the
Audit Committee going forward.
With over 16 years of experience in the technology sector, Lucy brings a
strong knowledge of finance in software companies and a complementary skill
set to the Board.
Looking Ahead
The transport management and supply chain sector is becoming more complex,
more demanding, more regulated, and more competitive than ever. There is an
increasing need for optimisation, scalability, security, compliance, and
improved environmental outcomes. The need to deliver excellent customer
service at a competitive price, and to rapidly scale up or down as consumer
patterns dictate, are all challenges being faced by fleet operators across the
globe. These factors are driving demand for end-to-end transport management
technologies that manage and counter these challenges. In many ways, the
Covid-19 pandemic amplified and accelerated this trend.
It is clear that Microlise, thanks to its proven and expanding product
portfolio, is in a strong position to capitalise on these growth opportunities
within its established and growing markets. We continue to invest heavily in
R&D, both in the UK and India, to expand our product range and capability,
including enhancing our products to maximise their benefits as our customers
transition to alternative fuels and electric vehicles. We also invest in
expanding our geographic presence to enable us to deliver our product range to
a wider set of customers. We will also look at selective acquisitions to help
accelerate our strategy where appropriate.
The year ahead will not be without its challenges as the world emerges from
the disruption of Covid-19 and the crisis in Ukraine and we look to overcome
hardware component shortages where they occur.
However, despite short-term challenges, our year has started off positively
and we are confident of reaching our FY22 targets. Beyond FY22 the future
looks more buoyant, as our customers are already seeing an increase in
projected demand, which we anticipate will result in increased order volume
across the Microlise product set.
On a final note, I would like to pay a particular tribute to our staff who, in
the face of very challenging circumstances, have enabled us to continue to
deliver on our commitments to customers worldwide and make progress on our
broader objectives. Their positive attitude, commitment & support are what
drives our success.
Jon Lee, Non-Executive Chairman
CEO's Statement
The eighteen-month period to 31 December 2021 was one of considerable
achievement for the Group. We strengthened our business through the growth of
our global customer base; the renewal of several major customer contracts,
including a new 5-year contract with our largest customer JCB; the launch of
new products; ongoing recruitment and team expansion; and the completion of a
successful IPO to fund the acceleration of our growth
strategy.
This was all set against a challenging backdrop for the transport and
logistics industry caused by the Covid-19 pandemic, Brexit disruptions and
driver and microchip shortages. The impact of Covid-19 on the Group varied
across the Period. Initially we saw delays to customer site 'go-lives', and we
supported many of our customers through challenging periods of peaks and
troughs of workload. Later in the Period we had to adapt to driver shortages
as well as the ongoing global microchip crisis. The Group provided free
support to frontline health workers and also provided additional product
capability where customers needed to scale up at speed.
Financial Performance
Notwithstanding the current uncertainty in the wider environment, in
particular the significant challenges presented by the global microchip
shortage and other supply chain issues, we remain confident for FY22 and
beyond.
We continue to see strong fundamentals in terms of revenue and growth with a
10% increase in subscriptions, a churn rate of 0.1% and a 9% increase in ARR
run rate for the 12-month period ended 31 December 2021.
Ukraine Crisis
We have watched in horror as the conflict in the Ukraine and its developing
humanitarian crisis has unfolded. From a business perspective, we have
reviewed customer and supplier risk resulting from this global disruption as
well as the likely consequence of the numerous sanctions that have been
imposed. We are confident that the direct business impact is not significant
at this time, and we will continue to review the risks as the situation
develops. We are also providing support to our staff who have family or
friends that are impacted by the conflict. We are exploring how we can support
the humanitarian effort through monetary donations, free use of our products
and services for logistics support, as well as by sponsoring individuals to
come to the UK.
A Growing Customer Base
For over 30 years we have been working closely alongside our customers to
shape our offering, ensuring it meets their needs and helps to promote an
efficient, safe, cost-effective, sustainable and compliant environment.
We have a strong track record of building long term relationships with our
customers and growing our engagement over time, through product expansion
across new functions and geographies. Overall customer churn remained low
during the Period at less than 0.1%. This strong performance reflects the
Company's continued success in maintaining these long-term relationships with
customers through our award-winning technology platforms.
During CY21 we added over 65 new customers, and the Company grew vehicle
subscriptions by 10% to a total of 551,000 at the Period end.
The Group also increased investment in sales and product development to
capture the growing opportunity in international markets, such as France and
Australia. We have seen an increase in demand across all regions, as COVID
restrictions have been lifted. Our largest customer in Australia has also
renewed their contract for a further 5 years.
An Expanded Offering
In order to maintain our market leading position as provider of the
best-in-class solution, we released a number of new products during the
Period. These were specifically targeted at our customers' needs and have
already generated new customer orders and helped to increase recurring
revenues from existing customers.
Most notably, we launched our new Planning & Optimisation software only
module which delivers faster, more flexible, and more accurate route planning
to operators, reducing driver hours and mileage and thereby reducing costs and
emissions. Through TruTac we also launched TruFleet, the Earned Recognition
DVSA approved fleet management software that helps transport managers to plan,
organise and control day-to-day fleet and Operator Licence management.
People
We continued to recruit during the period under review with average staff
numbers rising from 551 to 611. This has broadened Microlise's capabilities
and will enable us to better meet the many opportunities we see ahead.
Recruitment occurred across the business but with particular emphasis on
strengthening our Operations and Development teams. The Board was also
strengthened post-period end through the appointment of Lucy Sharman-Munday as
an independent Non-Executive Director and chair of the Audit Committee.
Successful IPO
A key event in the Period was our admission to trading on the AIM market of
the London Stock Exchange, which provided us with the funds to accelerate our
growth strategy and the enhanced profile and credibility that PLC status
brings. We welcome all of our new shareholders and look forward to growing
with them in the years ahead.
Strategic Focus for The Year Ahead
The Group has a clear and singular focus on growth, and we continue to work to
advance our strategic ambitions, by building on our strengths and adapting to
changes in the business environment.
Internally we are accelerating our development capacity to expand our product
portfolio and ensure our solution remains best-in-class and continues to meet
our clients' evolving needs. We are also investing in the data mining
capability of our sales and customer service teams, to maximise enterprise
level opportunities for customer expansion and cross sales.
We maintain a laser focus on strengthening our position in the UK and adjacent
markets. Having already secured the majority of large fleets (over 500
vehicles) in the UK as customers, we now see an opportunity for many small and
medium sized businesses to benefit from our solutions. We have therefore
invested in growing our sales team, focusing on fleets in the 50 to 500
vehicle space. This is already resulting in good growth in orders and our
sales pipeline. We are also actively assessing a number of potential
acquisition targets to broaden the value proposition offered to both large and
SME fleets.
We see major opportunities to make a significant impact in the adjacent
markets of France, Australia, and New Zealand and, with Covid-19 restrictions
easing, these opportunities are currently growing. We have therefore expanded
our sales and consultancy teams in these regions in the aim of capitalising
upon this growth. To exploit opportunities in adjacent markets, we have also
established a New Markets team to work on the incubation of new products and
services that will enable us to better evaluate new markets.
Selective M&A
We continue to actively assess acquisition opportunities, particularly where
they could add clear technological capability or international market growth.
Outlook
Our purpose is to improve efficiencies, increase safety, and reduce emissions
for our clients. Our solutions deliver this through reduced mileage and fuel
consumption, improved driver performance, fewer accidents, elimination of
paperwork and delivery of an enhanced customer experience.
These solutions are becoming ever more important as, in my view, the most
impactful companies in the post-pandemic world will be ran by good corporate
citizens, who maintain a strategic focus on Environmental, Social and
Governance (ESG) matters, complemented by strong financial performance.
Microlise is beginning to build its formal ESG credentials but already has a
solid track record in this field and a culture of questioning how things might
be done better.
I am incredibly proud of everything the Group has achieved to date, and
particularly in the support we have given our customers during this tumultuous
period. However, we are still very much at the start of our journey.
Increasing regulation, stricter environmental targets and changing consumer
demand means that transport technology requirements are becoming more complex.
As the world recalibrates, we see a clear and growing need for our scalable
and sustainable products.
We continue to invest in our future growth, which is underpinned by long-term
structural drivers. Despite the short-term market disruption caused by the
ongoing global microchip shortage, Microlise has entered FY22 with a strong
order book and significant demand for both existing and new solutions, leading
to excellent pipeline visibility. Whilst we have been dealing with chip
shortages for past 18 months, the industry opinion is that from Q3 2022, the
situation will improve and return to pre-pandemic levels by Q3 2023. However,
the Group's management will continue to implement and execute its plans to
mitigate the impact. Trading in the first quarter of the current year is in
line with Board expectations and we are confident of delivering a performance
for the full year in line with market expectations.
Nadeem Raza, Chief Executive Officer
CFO's Statement
The financial results for the eighteen-month period to 31 December 2021
reflect another period of profitable growth (before exceptional IPO costs) for
Microlise despite the challenges widely reported across all industry
sectors.
Key Performance Indicators
The following key performance indicators for the 18-month period to 31
December 2021 also include the calendar year to 31 December 2021 and calendar
year to 31 December 2020.
£'m unless otherwise stated
Statutory Results (Audited) Calendar Year Results (1) (Unaudited)
FY21 18-months to Dec-21 FY20 12 months to Jun-20 12 months to Dec-21 12 months to Dec-20 Change (12 months) %
Financial
Revenue 88.2 50.0 60.3 51.6 17%
Recurring Revenue 54.0 32.0 36.7 33.5 9%
Gross Profit 50.5 28.4 34.5 30.1 14%
Gross Profit Margin % 57% 57% 57% 58% (1)%
Adjusted EBITDA (2) 11.3 5.7 7.8 6.3 24%
Adjusted EBITDA % 13% 11% 13% 12% 6%
Profit/(loss) before tax (0.0) 0.7 (0.8) 1.3 (160)%
Adjusted Profit/(loss) before tax (3) 3.4 0.7 2.6 1.3 104%
Net Cash (4) 13.2 7.6 13.2 8.0 65%
Short term borrowings 0.0 (2.4) 0.0 (2.5) (100)%
Cash and cash equivalents 13.2 10.1 13.2 10.5 26%
Non Financial
ARR run rate (5) 38.9 29.7 38.9 35.7 9%
Number of like-for-like subscriptions (6) 551,000 502,000 10%
Long-term contract customer churn by value 0.1% 0.5% (80)%
(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 with the current reporting period
covering the 12 months ended 31 December 2021 (CY21) and the comparative
period covering the 12 months ended 31 December 2020 (CY20).
(2) Adjusted EBITDA excludes exceptional costs in relation to the IPO,
depreciation, amortisation, share of loss of associate, interest, and tax
(3) Adjusted Profit / (loss) before taxation excludes IPO costs of £3.4m
(4) Net cash is cash and cash equivalents less short-term borrowings, and
lease liabilities
(5) ARR Run rate change figure and % compare the annualised recurring revenue
figure for December 2021 with the annualised recurring
revenue figure for December 2020
(6) Like-for-like subscriptions change figure and % compare the subscriptions
as at 31 December 2021 with the subscriptions as at 31 December
2020
Group Results
Revenue
Total Revenue for the period was £88.2m. Revenue for the 12 months ended 31
December 2021 was £60.3m, an increase of 17% from CY20. Both recurring and
non-recurring revenues showed strong growth following an increase in win rate
with 65 new customers in the CY21. Recurring SAAS revenues in the Period were
£54.0m, with recurring revenues in the 12 months ended 31 December 2021 of
£36.7m, an increase of 9% compared to £33.5m in CY20. New customer wins,
together with growth in our existing customer's fleets resulted in 9% growth
in ARR to £38.9m as at 31 December 2021 from £35.7m on 31 December 2020.
Non-recurring revenue for the period was £34.2m. Non-recurring revenue for
the 12 months ended 31 December 2021 grew particularly strongly with an
increase of 31% to £23.6m (CY20: £18.1m) as a result of the installation of
hardware units for new customers and a bounce back in hardware and
installation revenues from OEM customers that closed their factories for
approximately three months in the comparative period due to the pandemic.
In addition to winning new business and deepening existing accounts, the Group
successfully maintained an extremely low rate of customer churn by value at
0.1% (CY20: 0.5%). This reflects the mission critical importance of
Microlise's software solutions in our customers' operations.
Gross Profit
Gross profit for the period was £50.5m. In the 12 months ended 31 December
2021 gross profit grew 14% to £34.5m (CY20: £30.1m) with a slight reduction
in gross margin % from 58% in CY20 to 57% in CY21. The reduction in gross
margins was driven by further investment in our data centres and associated
costs which we expect to see coming through as benefits in later years.
Non-recurring gross margin increased to 30% from 24% in CY20 notwithstanding
having to pay premium pricing on certain electronic components due to supply
shortages.
Operating Expenses
Despite the global uncertainties caused by the COVID-19 pandemic, the Group
has continued to invest in product development, operations, and sales &
marketing. Operating expenses in the period were £40.4m. Operating expenses
in the 12-month period ended 31 December 2021 increased 11% to £27.4m (CY20:
£24.7m). This cost represents employee costs, premises costs, marketing
costs, research & development (net of capitalised costs), finance charges,
and administration costs.
The 11% increase in staff costs in the 12 months ended 31 December 2021 to
£24.3m (CY20: £21.8m) reflected our increase in headcount in line with our
growth as well as standard annual pay awards and increased commissions/
bonuses reflecting the increased new customer win rate and the Group's strong
EBITDA performance. The increase also included an average headcount increase
in operations due to the strategy of bringing more installation work in-house.
Average headcount in the Period was 611 and 618 in the 12 months ended 31
December 2021 (CY20: 586) overall, with 23 of the increase within Operations
and development.
Capitalised research & development costs in the period were £1.8m and in
the 12 months ended 31 December 2021 was £1.3m (CY20: £0.5m), whilst
amortisation of capitalised development costs in the period was £0.6m and in
the 12 months ended 31 December 2021 was £0.5m (CY20: £0.2m).
Adjusted EBITDA and Adjusted Profit Before Tax
The adjusted EBITDA in the Period was £11.3m. The growth in revenue and
control of costs have resulted in a significant increase in adjusted EBITDA in
the 12 months ended 31 December 2021 by 24% to £7.8m (CY20: £6.3m) for the
year, with EBITDA margin improving to 13% (CY20: 12%). To provide a better
guide to the underlying business performance, adjusted EBITDA excludes IPO
costs.
The adjusted profit before taxation in the period was £3.4m. In the 12 months
ended 31 December 2021 the profit before taxation was up 104% to £2.6m (CY20:
profit of £1.3m).
EPS and Dividend
The Group made a reported loss after taxation in the period of £2.2m (in the
year ended 30 June 2020: profit of £1.4m) due to exceptional costs and a
taxation charge of £2.2m (in the year ended 30 June 2020: credit of £0.7m).
The significant taxation charge movement is due primarily to:
1. the change in the Group's R&D claim status which, as a consequence,
reports the R&D tax credit as other operating income in the period
(£0.9m), rather than a tax credit, as in the year ended 30 June 2020
(£1.1m).
2. the change in corporation tax from 19% to 25% from April 2023. This has
resulted in a recalculation of deferred taxation balances in the period of
£1.4m in FY21 (in the year ended 30 June 2020: £0.3m)
As a result, the reported basic and diluted loss per share was 2.09p for the
18 months period ended 31 December 2021 (FY21) (12 months ended 30 June 2020
(FY20): 1.40p profit per share).
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 £72.0m at 31 December 2021 (30 June 2020:
£56.1m). The movement in net assets reflects the £17.6m net proceeds raised
at IPO.
Current assets increased by £2.5m, primarily due to an increase in debtors
driven by higher revenues in the year and the timing of significant receipts,
combined with the net proceeds from new shares issued during the IPO. Total
liabilities reduced by £16.4m due to repayment of Group borrowings, offset by
an increase in deferred income.
Cashflow and Net Cash
The Group ended the 18-month period to 31 December 2021 with net cash of
£13.2m (30 June 2020: net cash of £7.6m) ahead of than the Board's
expectations. During FY20, the Group made use of a number of COVID-19 linked
schemes in order to manage its working capital, including the deferral of VAT
and PAYE in the UK.
As a result, £3.3m of cash outflow was deferred from FY20 to FY21 with a
further £0.2m deferred to FY22 in line with agreed payment plans. Stripping
out the impact of these schemes, the underlying net cash inflow for the period
was £6.4m (30 June 2020: £1.3m inflow).
Overall net cash inflow for the period was £3.2m (30 June 2020: inflow of
£4.8m).
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 £13.2m and the undrawn £20.0m facility gives the
Group £33.2m of cash, which the Directors believe is sufficient to support
the Group's existing growth plans as set out at IPO.
Bill Wynn, Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the eighteen month period ended 31 December 2021
18 month Year ended
30 June
period ended
31 December
2021 2020
Note £'000 £'000
Revenue 1 88,168 49,999
Cost of sales (37,690) (21,559)
Gross profit 50,478 28,440
Other operating income 3 1,143 537
Exceptional IPO related costs (3,415) -
Other administrative expenses (47,246) (27,771)
Total administrative expenses (50,661) (27,771)
3 960 1,206
Operating profit
Interest income 5 72 285
Interest expense 6 (905) (708)
Share of loss of associate net of tax 11 (132) (73)
(5) 710
(Loss)/profit before taxation
Taxation 7 (2,213) 719
(Loss)/profit for the period/year (2,218) 1,429
Other comprehensive income for the period/year
Currency translation differences (71) 19
Total comprehensive income for the period/year attributable to the equity (2,289) 1,448
shareholders of Microlise Group plc
Basic and diluted (loss)/earnings per share (pence) 8 (2.09) 1.40
The notes on pages 25 to 44 form part of these financial statements.
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 2019 44 - 55,172 (600) 54,616
Comprehensive income for the year to 30 June 2020
Profit for the year - - - 1,429 1,429
Other comprehensive income - - - 19 19
Total comprehensive income for the year - - - 1,448 1,448
44 55,172 848 56,064
At 30 June 2020 -
Comprehensive income for the 18 month period to 31 December 2021
Profit for the period - - - (2,218) (2,218)
Other comprehensive income - - - (71) (71)
Total comprehensive income for the period - - - (2,289) (2,289)
Share based payment (note 22) - - - 129 129
Bonus issue of shares (note 21) 55,172 - (55,172) - -
Reduction of share capital (note 21) (55,114) - - 55,114 -
Shares issued in the period (note 21) 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
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 2019 44 - 55,172 5 55,221
Comprehensive expense for the year to 30 June 2020
Loss for the year - - - (600) (600)
Other comprehensive income - - - - -
Total comprehensive expense for the year - - - (600) (600)
44 55,172 (595) 54,621
At 30 June 2020 -
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 - - - (5,466) (5,466)
Share based payment (note 22) 129 129
Bonus issue of shares (note 21) 55,172 - (55,172) - -
Reduction of share capital (note 21) (55,114) - - 55,114 -
Shares issued in the period (note 21) 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
Consolidated Statement of Financial Position
as at 31 December 2021
31 December 30 June
2021 2020
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 8,573 8,636
Intangible assets 10 75,987 77,133
Investments in associate 11 1,846 1,978
Deferred tax 12 - 1,307
Trade and other receivables 14 2,710 3,465
Total non-current assets 89,116 92,519
Current assets
Inventories 13 2,941 3,604
Trade and other receivables 14 15,143 15,126
Corporation tax recoverable 932 988
Cash and cash equivalents 15 13,210 10,061
Total current assets 32,226 29,779
121,342 122,298
Total assets
Current liabilities
Lease liabilities 17 (717) (787)
Borrowings 16 - (2,445)
Trade and other payables 18 (25,780) (25,393)
Total current liabilities (26,497) (28,625)
Non current liabilities
Lease liabilities 17 (994) (582)
Borrowings 16 - (15,129)
Trade and other payables 18 (17,312) (17,779)
Deferred tax 12 (4,991) (4,119)
Total non current liabilities (23,297) (37,609)
Total liabilities (49,794) (66,234)
Net assets 71,548 56,064
Equity
Issued share capital 21 116 44
Share premium account 17,630 -
Merger reserve - 55,172
Retained earnings 53,802 848
Total equity 71,548 56,064
The notes on pages 25 to 44 form part of these financial statements.
The financial statements were approved and authorised for issue by the Board
and were signed on its behalf 11(th) April 2022
Group Chief Financial Officer
Microlise Group plc Registered number 11553192
Company Statement of Financial Position
as at 31 December 2021
31 December 30 June
2021 2020
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 4,940 -
Investments 11 79,943 79,291
Total non-current assets 84,883 79,291
Current assets
Trade and other receivables 14 253 3,575
Cash and cash equivalents 15 1,090 5,055
Total current assets 1,343 8,630
86,226 87,921
Total assets
Current liabilities
Borrowings 16 - (1,895)
Trade and other payables 18 (18,298) (14,456)
Total current liabilities (18,298) (16,351)
Non current liabilities
Borrowings 16 - (14,949)
Trade and other payables 18 (1,000) (2,000)
Total non current liabilities (1,000) (16,949)
Total liabilities (19,298) (33,300)
Net assets 66,928 54,621
Equity
Issued share capital 21 116 44
Share premium account 17,630 -
Merger reserve - 55,172
Retained earnings 49,182 (595)
Total equity 66,928 54,621
The Company has elected to take the exemption under section 408 of the
Companies Act not to present the parent Company profit and loss account. The
loss for the parent Company for the 18 month period was £5,466,000 (2020:
loss of £600,000).
The notes on pages 25 to 44 form part of these financial statements.
The financial statements were approved and authorised for issue by the Board
and were signed on its behalf 11(th) April 2022
Group Chief Financial Officer
Microlise Group plc Registered number 11553192
Consolidated Statement of Cash Flows
for the 18 month period ended 31 December 2021
18 month Year ended
30 June
period ended
31 December
Note 2021 2020
£'000 £'000
Cash flows from operating activities
Cash generated from operations A 9,132 8,913
Tax received 660 1,820
Net cash generated from operating activities 9,792 10,733
Cash flows from investing activities
Purchase of property, plant and equipment (1,499) (1,235)
Additions to intangible assets (2,166) (778)
Purchase of subsidiaries, net of cash acquired 24 (1,000) (3,087)
Interest received - 108
Net cash used in investing activities (4,665) (4,992)
Cash flows from financing activities
Issue of share capital 18,600 -
Share issue expenses paid (956) -
Interest paid (676) (650)
Lease liability payments (1,219) (803)
Receipt of bank loans - 2,500
Repayment of bank loans (16,975) (1,219)
Repayment of other loans (729) (802)
Net cash generated used in financing activities (1,955) (974)
Net increase in cash and cash equivalents 3,172 4,767
Cash and cash equivalents at beginning of period/year 10,061 5,287
Foreign exchange (losses)/gains (23) 7
Cash and cash equivalents at end of period/year B 13,210 10,061
The notes on pages 25 to 44 form part of these financial statements.
Notes to the cash flow statements
A. Cash generated from operations
The reconciliation of profit for the period to cash generated from operations
is set out below:
18 month Year ended
30 June
period ended
31 December
2021 2020
£'000 £'000
(Loss)/profit for the period (2,218) 1,429
Adjustments for:
Depreciation 3,085 2,176
Amortisation 3,803 2,151
Loss on disposal of fixed assets - 30
Share based payments 129 -
Foreign exchange loss (23) -
Net interest costs 833 423
Share of loss of associate 132 73
Tax charge/(credit) 2,213 (719)
7,954 5,563
Decrease/(increase) in inventories 663 (1,087)
(Increase)/decrease in trade and other receivables (110) 713
Increase in trade and other payables 625 3,724
Cash generated from operations 9,132 8,913
Major non cash items
£1,506,000 of additions to right of use assets and lease liabilities
represent non cash movements in the period ended 31 December 2021 (2020:
£266,000).
B. Analysis of net debt
At 1 July Cash flow On Non-cash changes At
30 June
acquisition
2019 2020
£'000 £'000 £'000 £'000 £'000
Bank loans (15,529) (1,281) - (29) (16,839)
Other loans (1,531) 802 - - (729)
Lease liabilities (1,758) 866 (148) (329) (1,369)
Liabilities arising from financing activities (18,818) 387 (358) (18,937)
(148)
Cash and cash equivalents 5,287 4,767 - 7 10,061
Net debt (13,531) 5,154 (148) (351) (8,876)
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 (8,876) 22,167 (1,792) 11,499
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, 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 statements have been prepared in accordance with the historical
cost convention and International Accounting Standards in conformity with the
requirements of the Companies Act 2006. The stated accounting policies have
been consistently applied to all periods presented. Microlise Group plc
prepared and published its consolidated financial statements for the year
ended 30 June 2020 under UK GAAP. During 2021, in connection with an Initial
Public Offering (IPO), it published listing documents containing IFRS
consolidated financial information for the period from incorporation to 30
June 2020 including a reconciliation of transitional adjustments. The IFRS
financial information included in the listing documents included an unreserved
statement of compliance with IFRS.
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;
· IAS 24 Key management remuneration.
These are the first period of statutory financial statements prepared under
FRS 101 for the company. FRS101 has been applied with a transition date
effective from the incorporation of the company on 5 September 2018, with no
adoption exemptions applied and with no transition adjustments arising.
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 2023.The Group had cash balances of £13.2m at the period
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;
· 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.
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. The tax credit also includes the benefit of enhanced SME research and
development allowances. Microlise, as a large company from 1 July 2020 for tax
R&D purposes, no longer qualifies for these and the large company RDECs
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;
· 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 with any associated tax in the tax charge and the benefit of
the enhanced SME allowances are included in the tax credit for the period.
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 2021 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
Fair values and intangible assets on acquisition of a business
Fair values are applied on the acquisition of a subsidiary which involve a
degree of judgement and estimation in particular in the identification and
evaluation of intangible assets. The most significant valuation related to
brands, technology and customer relationship assets which have been valued
using a relief from royalty method for brand and technology and an excess
earnings method for customers using cash flow forecasts derived from business
plans and assumptions based on experience and factors relevant to the nature
of the business activity.
The determination of the fair values attributed to acquired assets and
liabilities requires estimates to be made about the outcome of future events,
including the condition of acquired assets, the ongoing value to the business
of intangible assets and the recoverability of other assets. For
liabilities, an assessment is required to identify any unrecorded liabilities
or disputed amounts to determine whether liabilities should be recognised at
the point of acquisition.
More detail on the intangible assets recognised are included in note 10, and
business combinations are included in note 24.
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 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.
Notes to the financial statements for the 18 month period ended 31 December
2021
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.
18 month Year ended
30 June
period ended
31 December 2020
2021
£'000 £'000
By type
Revenue recognised at a point in time 29,336 15,398
Supply of hardware and installation
29,336 15,398
Revenue recognised over time 4,817 2,605
Professional services including project management
Managed service agreement income 48,911 28,003
Other support and maintenance services 5,104 3,993
58,832 34,601
88,168 49,999
By destination:
UK 78,230 44,765
Rest of Europe 2,677 1,405
Rest of the World 7,261 3,829
Total revenue 88,168 49,999
Revenue in respect of one customer amounted to £22.6m representing 26% of the
revenue for the 18 month period ended 31 December 2021 (year ended 30 June
2020: £13.4m and 27%).
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 18 month Microlise Trutac Year ended
30 June
period ended
31 December 2020
2021 Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 83,109 5,059 88,168 49,276 723 49,999
Depreciation and amortisation 6,197 691 6,888 4,227 100 4,327
Operating (loss)/profit 178 782 960 1,141 65 1,206
Net interest (824) (9) (833) (423) - (423)
Share of associate loss (132) (132) (73) - (73)
(Loss)/profit before tax (778) 773 (5) 645 65 710
Segment assets 111,720 9,622 121,342 116,636 5,662 122,298
Segment liabilities (48,009) (1,785) (49,794) (64,256) (1,978) (66,234)
Additions to non-current assets 4,878 826 5,704 2,114 165 2,279
All of Trutac's revenue relates to the UK. Trutac's revenue is primarily from
managed service agreements with the exception of £661,000 of hardware revenue
in 2021. 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 2021 30 June 2020
Non-current assets Net assets Non-current assets Net assets
£'000 £'000 £'000 £'000
United Kingdom 88,729 70,367 91,837 54,593
France 3 34 18 152
Australia 3 12 2 460
India 381 1,135 662 859
89,116 71,548 92,519 56,064
2. Adjusted results
The Group's primary results measure, which is considered by the directors of
the Group to better 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, amortisation and
depreciation as a proxy for cash generated from trading.
The group now qualifies for large company R&D tax reliefs with the
£920,000 RDEC credit included in other operating income above operating
profit for the period ended 30 June 2021 and in line with common practice is
included in the Group's calculation of EBITDA.
The measure has been adjusted in the current period by the IPO expenses and in
the prior period by acquisition costs expensed under IFRS which are considered
to be non-recurring and non-trading in nature.
Year ended
30 June
18 month
2020
period ended
31 December
2021
£'000 £'000
Operating profit before interest and share of associate 960 1,206
Exceptional IPO costs (2020: acquisition expenses) 3,415 138
Depreciation 3,085 2,176
Amortisation of intangible assets 3,803 2,151
Adjusted EBITDA 11,263 5,671
3. Operating profit
The operating profit is stated after charging/(crediting):
18 month
period ended Year ended
31 December
30 June
2021 2020
£'000 £'000
Auditors remuneration:
Audit of the Group and Company financial statements 184 40
Non-audit services* 295 52
Depreciation of property, plant and equipment 1,858 1,363
Depreciation of right-of-use assets 1,227 813
Amortisation of intangible assets 3,803 2,151
Cost of inventory sold 20,056 10,986
Research and development costs 6,767 5,379
Foreign exchange losses 180 22
In other operating income:
Government job retention scheme income (127) (537)
Government innovation grants (96) -
Research and Development Expenditure Credit (920) -
*The 2021 Group auditors, BDO LLP, also provided £295,000 of assurance
services as the reporting accountants for the AIM listing. The prior auditors
for 2020, Cooper Parry Group Limited, provided tax services.
The group previously qualified for SME research and development allowances and
as a result the prior year tax credit benefitted from these. 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
18 month 18 month
period ended Year ended period ended Year ended
31 December
30 June
31 December
30 June
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Wages and salaries 36,630 19,175 636 -
Social security costs 3,312 1,872 29 -
Pensions 1,399 777 9 -
Share based payment 129 - 129 -
Total 41,470 21,824 803 -
Average number of employees
The average number of employees in the period/year was:
Group Company
18 month 18 month
period ended Year ended period ended Year ended
31 December
30 June
31 December
30 June
2021 2020 2021 2020
Sales and distribution 76 71 - -
Operations and development 438 379 - -
Production and warehouse 22 24 - -
Administration 75 77 1 -
Total 611 551 1 -
The directors were previously employed and paid by a subsidiary and then with
5 directly employed by the company
from September 2021.
Directors' remuneration
18 month Year ended
30 June
period ended
31 December 2020
2021
£'000 £'000
Directors' remuneration - aggregate emoluments 1,074 610
Group pension contributions in respect of 4 24 12
(2020:3) directors
69
Share based payment
1,167 622
461
Remuneration of the highest paid director 273
Group pension contributions 7 4
Share based payment 31
499 277
Key management compensation
18 month
period ended Year ended
31 December
30 June
2021 2020
£'000 £'000
Short term employee benefits 2,596 641
Post employment benefits 71 86
Share based payment 129 -
Total key management remuneration 2,796 727
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 which has been more clearly defined in the period for the key management
roles (2020: directors only).
5. Interest receivable
18 month
period ended Year ended
31 December
30 June
2021 2020
£'000 £'000
Interest receivable
Bank interest receivable - 86
Other interest receivable - 22
Unwinding of discount on financing transactions 72 177
72 285
6. Interest payable
18 month
period ended Year ended
31 December
30 June
2021 2020
£'000 £'000
Interest payable
Interest on bank and other borrowings 734 622
Lease liability financing charges 72 63
Other interest 99 23
905 708
7. Taxation on profit
18 month
period ended Year ended
31 December
30 June
2021 2020
£'000 £'000
Current taxation
UK corporation tax (charge)/credit - 982
Foreign tax (198) -
Adjustments in respect of previous periods (100) 65
(298) 1,047
Deferred taxation
Origination and reversal of timing differences (645) (5)
Charge due to change in tax rate (1,416) (323)
Adjustments in respect of previous periods 146 -
(1,915) (328)
Tax (charge)/credit on (loss)/profit (2,213) 719
Factors affecting the tax charge/(credit) for the period
The tax charge/(credit) on the (loss)/profit for the period differs from
applying the standard rate of corporation tax in the UK of 19% (2020: 19%).
The differences are reconciled below:
18 month
period ended Year ended
31 December
30 June
2021 2020
£'000 £'000
(Loss)/profit before taxation (5) 710
Corporation tax at standard rate (1) 135
Factors affecting charge for the period/year:
Disallowable expenses 781 55
Income not taxed - (59)
Research and development allowances 36 (1,359)
Reduced rate on surrender of R&D losses for tax credit - 305
Other timing differences - (54)
Overseas tax rates 27 -
Adjustments in respect of previous periods (46) (65)
Charge/(credit) due to change in tax rate 1,416 323
Tax charge/(credit) on profit 2,213 (719)
In March 2020, the Chancellor of the Exchequer announced that the tax rate
from 1 April 2020 remained at 19% rather than the previously enacted reduction
to 17%.
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. The rate of 25%
(2020: 19%) is accordingly applied to applicable UK deferred taxation
balances.
8. Earnings per share
18 month
period ended Year ended
31 December
30 June
2021 2020
(Loss)/profit used in calculating EPS (£'000) (2,218) 1,429
Weighted average number of shares for basic EPS ('000) 106,266 102,168
Weighted average number of shares for diluted EPS ('000) 106,266 102,168
Basic and diluted earnings per share (pence) (2.09) 1.40
1,107,848 share options were granted on 21 July 2021 which are potentially
dilutive to a profit.
The comparative number of shares has been restated to reflect bonus issues and
sub-divisions subsequently made, consistent with 2021. Costs relating to the
IPO have resulted in a loss for the current period compared with a profit in
the prior period, Adjusting for this factor, the earnings per share would be
1.13 pence for the current period (2020: 1.40 pence for the 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 2019 5,449 1,332 377 420 1,586 9,164
Cost
At 1 July 2019 5,525 1,676 384 651 2,429 10,665
Acquisitions (note 24) - 148 - 17 165
Additions - 130 - 136 1,235 1,501
Disposals - - (30) - - (30)
Exchange adjustments - - (25) - 23 (2)
At 30 June 2020 5,525 1,954 329 787 3,704 12,299
Depreciation
At 1 July 2019 76 344 7 231 843 1,501
Charge for the year 102 521 68 292 1,193 2,176
Disposals - - - - - -
Exchange adjustments - - - - (14) (14)
At 30 June 2020 178 865 75 523 2,022 3,663
Net book value
At 30 June 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
Company Freehold property
£'000
Cost
At 1 July 2020 -
Additions 4,965
At 31 December 2021 4,965
Depreciation
At 1 July 2020 -
Charge for the period 25
At 31 December 2021 25
Net book value
At 30 June 2019 and 2020 -
At 31 December 2021 4,940
The property was transferred from a subsidiary company by a dividend in
specie.
10. Intangible assets
Goodwill Customer relationships Technology Brands Software Total
£'000 £'000 £'000 £'000 £'000 £'000
Net book value
At 1 July 2019 49,208 15,126 4,775 2,415 - 71,524
Cost
At 1 July 2019 49,208 15,893 5,355 2,546 - 73,002
Additions - - 359 - 419 778
Acquisitions (note 24) 3,092 1,887 1,838 165 - 6,982
At 30 June 2020 52,300 17,780 7,552 2,711 419 80,762
Amortisation
At 1 July 2019 - 767 580 131 - 1,478
Charge for the year - 1,039 939 173 - 2,151
At 30 June 2020 - 1,806 1,519 304 - 3,629
Net book value
At 30 June 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
The £478,000 of additions to the goodwill in respect of Microlise relate to
recognition of additional deferred tax liabilities that arise on consolidation
only and which had previously been omitted.
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 December 30 June
2021 2020
£'000 £'000
Microlise 49,686 49,208
Trutac 3,092 3,092
52,778 52,300
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 11.6% (2020: 11.2%) and for the Trutac business at a pre-tax rate of 11.6%
(2020: 12.4%).
The Microlise goodwill has been tested by reference to a 4 year management
approved plan and Trutac by reference to a 4 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 2021 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 FY21 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
£19.9m (2020: £2.65m) and Trutac NPV exceeds carrying values by
£2.5m (2020: £0.75m). 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 2021, the Microlise plan subject to the impairment test to
support the carrying value of goodwill, forecast £9.2m and required £7.1m of
recurring EBITDA which compares with £6.8m recorded for 2021 and an expected
increase to £7m for FY22 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 (30 June 2020:
forecast £8.34m and required £8.0m of recurring EBITDA in the long term).
The 31 December 2021 Trutac plan assessed for the impairment test to support
the carrying value of goodwill forecast £1.27m and a required £0.95m
compared to the current EBITDA of some £1.0m. 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 (30 June 2020: forecast £1.23m and required £1.1m of recurring
EBITDA).
11. Investments
Group Associate
£'000
At 1 July 2019 2,051
Share of loss for the period (73)
At 30 June 2020 1,978
Share of loss for the period (132)
At 31 December 2021 1,846
Company Subsidiary undertakings Associate Total
£'000 £'000 £'000
At 1 July 2019 70,583 2,200 72,783
Additions 7,108 - 7,108
Decrease in fair value - (600) (600)
At 30 June 2020 77,691 1,600 79,291
Additions 16,622 - 16,622
Increase in fair value - 650 650
Return of capital (16,621) - (16,621)
At 31 December 2021 77,692 2,250 79,942
Subsidiary undertaking Principal activity Class of % share
shares held
holding
Microlise Limited Telematics services Ordinary 100%
Microlise Holdings Limited Intermediate holding company Ordinary 100%
Microlise Midco Limited Dormant company Ordinary 100%
Microlise Engineering Limited Dormant company Ordinary 100%
Trutac Limited Telematics services Ordinary 100%
Microlise Pty Limited (Australia) Telematics services Ordinary 100%
Microlise SAS (France) Telematics services Ordinary 100%
Microlise Telematics Private Limited (India) Telematics services 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 2021 the market value
of the shareholding was £2.25m (30 June 2020: £1.6m).
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 2020 and 2021 together with interim financial statements to 30 September
2021, prepared under IFRS.
30 September 31 March
2021
2020
£'000 £'000
Assets - non-current 25,705 25,759
Assets - current 9,558 12,425
Liability - non-current (7,187) (9,017)
Liability - current (7,586) (7,988)
Net assets (100%) 20,490 21,179
Group share of net assets (20%) 4,098 4,236
18 months ended Year ended
30 September 31 March
2021
2020
£'000 £'000
Revenues 24,982 19,550
Loss from continuing operations (964) (1,093)
Other comprehensive income 1 (7)
Total comprehensive expense (963) (1,100)
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 2019 (3,784) 37 - 1,483 20 (2,244)
Arising on acquisition (740) - - 500 - (240)
Credit/(charge) for the year (115) (61) - (143) (9) (328)
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)
Deferred tax has been recognised at an average rate of 25% (2020: 19%).
The deferred tax is presented as:
31 December 30 June
2020
2021
£'000 £'000
Asset - non-current - 1,307
Liability - non-current (4,991) (4,119)
Total (4,991) (2,812)
13. Inventories
Group 31 December 30 June
2020
2021
£'000 £'000
Raw materials and consumables 1,092 1,816
Work in progress 15 32
Finished goods and goods for resale 1,834 1,756
2,941 3,604
An impairment loss of £202,000 in respect of inventory was recorded in the
period ended 31 December 2021 (year ended 30 June 2020: £120,000).
14. Trade and other receivables
Group Company
31 December 30 June 31 December 30 June
2020
2020
2021 2021
£'000 £'000 £'000 £'000
Current
Trade receivables 11,533 11,093 - -
Provision for impairment of trade receivables (303) (154) - --
Trade receivables net 11,230 10,939 - -
Contract cost assets 1,449 717 -
Amounts owed by group undertakings - - - 3,450
Other receivables 206 1,416 28 50
Prepayments 2,258 2,054 225 75
Total 15,143 15,126 253 3,575
Non-current
Trade receivables 344 1,313 - -
Contract cost assets 2,366 2,152 - -
Total 2,710 3,465 - -
Total 17,853 18,591 253 3,575
Analysis of expected credit losses is included in note 19.
The movements in Group contract related balances in the period/year are as
follows:
18 month Year ended
period ended 30 June
2020
31 December 2021
Contract cost assets £'000 £'000
Opening balance 2,869 2,553
Amortised to income statement (1,116) (686)
Incurred in the period 2,062 1,002
Closing balance 3,815 2,869
15. Cash and cash equivalents
Group Company
31 December 30 June 31 December 30 June
2020
2020
2021 2021
£'000 £'000 £'000 £'000
Cash at bank and in hand 13,210 10,061 1,090 5,055
16. Borrowings
Group Company
31 December 30 June 31 December 30 June
2020
2020
2021 2021
Current £'000 £'000 £'000 £'000
Bank loans - 1,895 - 1,895
Other loans - 550 - -
- 2,445 - 1,895
Non-current
Bank loans - 14,950 - 14,949
Other loans - 179 - -
- 15,129 - 14,949
Total - 17,574 - 16,844
Bank loans were secured by fixed and floating charges over the assets of the
group and bore interest at rates of 1.75% to 2.7% over LIBOR. The loan
liabilities were stated net of unamortised loan issue costs as at 30 June 2020
of £136,000 which has been fully amortised on full repayment of the loans in
2021.
Other loans were used to finance specific trading arrangements, had a term of
4 years and bore interest at 15%. They were repaid during the period.
17. Lease liabilities
Group Company
31 December 30 June 31 December 30 June
2020
2020
2021 2021
£'000 £'000 £'000 £'000
Current 717 787 - -
Non-current 994 582 - -
Total 1,711 1,369 - -
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 30 June
2020
2021
£'000 £'000
Short term lease expense - 7
Low value lease expense 109 30
Total cash outflow for leases 1,400 903
The maturity of lease liabilities at 30 June 2020 were as follows:
Property Equipment and vehicles Total
£'000 £'000 £000
Within 1 year 599 188 787
1-2 years 368 61 429
2-5 years 153 - 153
Total 1,120 249 1,369
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
18. Trade and other payables
Group Company
31 December 30 June 31 December 30 June
2020
2020
2021 2021
£'000 £'000 £'000 £'000
Current
Trade payables 4,068 3,024 27 -
Taxation and social security 944 4,799 28 -
Amounts owed to group undertakings - - 16,574 13,456
Other payables 1,231 1,986 1,000 1,000
Accruals 4,222 2,883 669 -
Contract liabilities 15,315 12,701 - -
Total 25,780 25,393 18,298 14,456
Non-current
Contract liabilities 16,150 15,905 - -
Deferred grant income 196 - - -
Other payables 966 1,874 1,000 2,000
Total 17,312 17,779 1,000 2,000
Total 43,092 43,172 19,298 16,456
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 2021 £'000 £'000 £'000 £'000 £'000 £'000
Contract liabilities 15,315 7,813 4,692 2,696 949 31,465
Less than one year 1-2 years 2-3 years 3-4 years 4-5 years Total
At 30 June 2020 £'000 £'000 £'000 £'000 £'000 £'000
Contract liabilities 12,701 7,853 4,969 2,542 541 28,606
The movements in Group contract related balances in the period/year are as
follows:
Year ended 30 June 2020
18 month
period ended
31 December 2021
£'000 £'000
Revenue related contract liabilities
Opening balance (28,606) (27,163)
Invoiced in the period (50,423) (26,527)
Recognised as revenue in the period 47,564 25,084
Closing balance (31,465) (28,606)
19. 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 30 June
2020
2021
Recognised at amortised cost £'000 £'000
Cash and bank balances 13,210 10,061
Trade receivables - net 11,574 13,229
Other receivables 206 1,416
Total financial assets 24,990 24,706
Trade payables 4,068 3,024
Other payables 6,419 6,742
Bank loans - 16,845
Other loans - 729
Lease liabilities 1,711 1,369
Total financial liabilities 12,198 28,709
There were no assets or liabilities at 31 December 2021 or 30 June 2020 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 31% (2020: 14%) 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 30 June
2021 2020
Past due £'000 £'000
0-60 days 3,076 1,770
60-120 days 186 654
121+ days 1,014 779
Expected credit loss provision (303) (154)
Total 3,973 3,049
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 30 June 2020 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% 1,770 -
60-120 days 2% 654 13
121+ days 18% 799 141
Total 3,223 154
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:
18 month period ended Year ended
31 December 30 June
2021 2020
£'000 £'000
At 1 July 154 79
Provision charged 149 93
Receivables written off in the period/year - (18)
At period/year end 303 154
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 More than 5 years Total
At 31 December 2021 £'000 £'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 - 12,606
Less than one year 1-2 years 2-5 years More than 5 years Total
At 30 June 2020 £'000 £'000 £'000 £'000 £'000
Trade and other payables 9,766 - - - 9,766
Bank loans 2,351 2,561 12,372 922 18,206
Other loans 631 179 - - 810
Lease liabilities 783 507 176 - 1,466
Total 13,531 3,247 12,548 922 30,248
Interest rate risk
The bank loans were subject to interest at rates of 1.75 to 2.7% over LIBOR. A
0.5% increase in interest rates would therefore have had an impact of an
increase in finance costs of approximately £85,000 in the last year.
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 has reduced and ongoing costs in Indian rupees
are now being managed by the use of forward contracts to fix the rate within
the next 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 2021 3,249 460 599 1,152 5,460
At 30 June 2020 963 285 460 859 2,567
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.
20. Pensions
Defined contributions pension scheme
The group operates a number of defined contribution pension schemes.
Contributions totalling £194,000 (2020: £140,000) 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.
21. Share capital
Group and Company
Allotted, called up and fully paid At At
31 December
30 June
2021 2020
£ £
115,945,956 ordinary shares of £0.001 each 115,946 -
33,902 A ordinary shares of £1 each - 33,902
5,962 B ordinary shares of £1.55 each - 9,241
325 C ordinary shares of £1.00 each - 325
363 D ordinary shares of £1.00 each - 363
115,946 43,831
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
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.
22. Share based payments
The Company granted options on 22 July 2021 over 1,107,848 shares 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 is
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 Monte Carlo 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.
The average vesting period is estimated at 3.5 years and the share based
payment charge was £129,000 for the period (2020: £nil).
All options remain exercisable at 31 December 2021 with a weighted average
vesting period of 3 years.
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 the year ended 30
June 2020, £1,440,000 was advanced to directors and repayments were made of
£941,000. Interest of £21,580 was charged and the balance of £520,580 owed
is included in other debtors at 30 June 2020. This was fully repaid in the
following period.
During the period, and prior to the Group being 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. Business combinations
FY20 acquisition
On 9 March 2020, the Group acquired the entire share capital of Trutac
Limited, a provider of tachograph logistics and analysis software services for
consideration of £6,790,000. The acquisition strengthens the group's presence
in the HGV and PSV sectors and complements existing services. The goodwill
arising of £3,092,000 is attributable to the workforce and expected future
growth in customers and earnings. The transaction has been accounted for under
the purchase method of accounting. The principal adjustments relate to
£165,000 in respect of the brand and £1,887,000 of customer relationships
together with the related deferred taxation liability of £390,000. The
deferred tax liability was partly offset by recognition of an asset in respect
of losses carried forward of £151,000. The revenue accounting policy was
also aligned with the Group resulting in additional contract liabilities of
£823,000 and a right of use asset and equal lease liabilities of £201,000
recorded under IFRS 16.
Trutac has contributed £723,000 of revenue and recorded a profit of £113,000
included in the consolidated income statement from 10 March 2020 to 30 June
2020 (excluding acquisition expenses and amortisation of intangible assets
arising on consolidation).
Had Trutac been consolidated from 1 July 2019 it would have contributed
another £2,200,000 of revenue and a further profit before tax of £395,000 to
the year (excluding acquisition expenses and amortisation of intangible assets
arising on consolidation).
Book value Fair value adjustments Fair value
£'000 £'000 £'000
Intangible assets 1,818 2,072 3,890
Property, plant and equipment 17 148 165
Inventories 56 - 56
Cash and cash equivalents 813 - 813
Receivables 641 - 641
Payables (657) (823) (1,480)
Lease liabilities - (148) (148)
Deferred taxation liability - (239) (239)
Net assets acquired 3,698
Goodwill 3,092
6,790
Consideration satisfied by:
Cash 3,940
Deferred consideration 3,000
Discounted for 3 year payment period (150)
6,790
The Group incurred acquisition related costs of £138,000 related to stamp
duty, legal and professional fees. These costs have been included in
administrative expenses in the group's consolidated statement of comprehensive
income.
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