REG - Microlise Group PLC - Results for the year ended 31 December 2023
09/04/2024 07:00
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RNS Number : 7581J Microlise Group PLC 09 April 2024
9 April 2024
Microlise Group plc
("Microlise", "the Group" or "the Company")
Results for the year ended 31 December 2023
Strong performance driven by consistent strategic execution
Microlise Group plc (AIM: SAAS), a leading provider of transport management
software to fleet operators, announces its audited results for the twelve
months ended 31 December 2023.
FY23 FY22 Change
Financial Revenue £71.7m £63.2m 13%
Recurring Revenue £45.0m £40.5m 11%
Recurring revenue as % of Group revenue 63% 64% -1%
Gross Profit £43.6m £37.6m 16%
Gross Profit Margin % 61% 60% 1%
Operating Profit £2.3m £2.2m 3%
Adjusted EBITDA ((1)) £9.4m £8.2m 15%
Adjusted EBITDA % 13.1% 13.0% 0.1%
Profit before tax £2.5m £1.4m 74%
Adjusted Profit before tax ((2)) £5.6m £4.8m 17%
Adjusted Profit before tax % 7% 7% -
Basic EPS (p) 1.36p 1.17p 16%
Cash and cash equivalents £16.8m £16.7m 1%
KPIs ARR run rate ((3)) £47.7m £42.6m 12%
Number of like-for-like subscriptions ((4)) 640,000 599,000 6.8%
Long-term contract customer churn by value 0.7% 0.4% 0.3%
1. EBITDA excludes depreciation, amortisation, share of loss of
associate, interest, tax and share based payments. Adjusted EBITDA excludes,
exceptional costs in relation to acquisitions and restructuring costs,
depreciation, amortisation, share of loss of associate, interest, tax and
share based payments.
2. Adjusted Profit / (loss) before taxation excludes exceptional costs
in relation to acquisitions and restructuring costs, share based payments and
loss of share of associate.
3. ARR run rate change figure and % compare the annualised recurring
revenue figure for December 2023 with the annualised recurring revenue figure
for December 2022.
4. Like-for-like subscriptions change figure and % compare the
subscriptions as at 31 December 2023 with the subscriptions as at 31 December
2022
Financial Highlights
· The Group has driven an increase in total revenue to £71.7m (13%)
for the 12 months ended 31 December 2023 (FY22: £63.2m).
· Growth in the period was a result of continued strong demand from
Original Equipment Manufacturer (OEM) customers and increased revenue from
direct customers towards the end of the year as an improvement of new vehicle
availability in H2 enabled the Company to deliver against its record
orderbook.
· Recurring revenue +11% to £45m, ahead of market expectations,
supported by the renewal of several major customer contracts and new customer
wins (FY22: £40.5m).
· Gross profit +16% to £43.6m (FY22: £37.6m), at a gross profit
margin of 61% (FY22: 60%) due to the increased gross margin % from both
recurring and non-recurring revenues in the period.
· Adjusted EBITDA +15% to £9.4m (FY22: £8.2m), ahead of market
expectations. Adjusted EBITDA percentage has increased marginally to 13.1%
(FY22: 13.0%). Operating margins flat following the previously announced
commencement of the Group's investment programme to improve its go-to-market
and product offering and support further growth.
· Continued strong underlying cash conversion exceeding 90% reflecting
growth in subscription revenue and continued good working capital management.
· Robust balance sheet with £16.8m cash and cash equivalents (FY22:
£16.7m), £10m undrawn Revolving Credit Facility and £20m accordion facility
available until April 2027 with the option to extend.
· Maiden final ordinary dividend of 1.725 pence per share (FY22: nil)
payable on 28 June 2024 to shareholders on the register at close of business
on 7 June 2024.
Strategic and operational highlights
· Subscriptions +6.8%, driven by continued growth in our existing
customers together with new customer wins (FY22: 599,000).
· Annual recurring revenue (ARR) run rate +12% to £47.7m, of which
11.8% represented organic growth at 31 December 2023 from £42.6m on 31
December 2022.
· The Group added over 450 new customers in the period and long-term
contract customer churn rate by value remained very low at 0.7% (FY22: 0.4%)
Current Trading & Outlook
· Microlise enters FY24 with good momentum driven by consistent
strategic execution. Looking ahead, the Board expects organic growth to
improve from current levels as we move through the year supported by a healthy
orderbook and pipeline of opportunities across OEM and direct customer
divisions. Operating margins are expected to trend upwards in FY24 and beyond,
as we focus on careful management of the cost base and efficiently scaling the
Group.
· We started the new financial year in line with our expectations and
remain very confident with the opportunities we have in front of us, and in
our ability to deliver against market expectations.
· Recent acquisitions of Transportation Management System (TMS)
providers, Enterprise Software Systems and Vita Software, as well as
vulnerable road user app supplier K-Safe are trading in-line with our
expectations.
Nadeem Raza, CEO of Microlise, commented: "Microlise performed well in FY23,
delivering double digit revenue growth, increased profitability and strong
cash flows. During the period, we secured the renewal of several major
customer contracts and significant new logo wins. We are continuing to build a
resilient business to deliver sustained, efficient growth having made three
key acquisitions that have enabled us to improve and expand our product
offering.
Our focus remains on scaling our business and increasing margins through
consistently improving the efficiency of our business. With the supply chain
issues in the first half of the year now fully behind us, and with a strong
order book and healthy pipeline, we look forward to 2024 with confidence."
For further information, please contact:
Microlise Group plc C/O SEC Newgate
Nadeem Raza, CEO
Nick Wightman, CFO
Singer Capital Markets (Nominated Adviser & Broker) Tel: 020 7496 3000
Steve Pearce / James Moat / Harry Gooden
SEC Newgate (Financial PR) Tel: 020 3757 6880
Bob Huxford / Molly Gretton / Harry Handyside Email: microlise@secnewgate.co.uk (mailto:microlise@secnewgate.co.uk)
About Microlise
Established in 1982, Microlise Group Plc is a leading SaaS provider of
Transport and fleet management solutions. Its technology is designed to help
businesses improve efficiency, reduce emissions, lower costs, and increase
safety on the road.
With a range of products and services used by more than 400 enterprise clients
globally, Microlise helps companies of all shapes and sizes - across a wide
range of industries - to better manage their entire operation.
Backed by a team of experienced professionals who provide excellent customer
service, the Group has won a number of awards, including three Queens Awards
for Innovation (2019, 2020).
Headquartered in the United Kingdom, the company also has offices in France,
Australia, and India with a global staff base of more than 750 industry
professionals.
Handling over 640,000 subscriptions annually, Microlise joined the Alternative
Investment Market (AIM) in 2021, qualifying for the London Stock Exchange's
Green Economy Mark.
Chairman's Statement
Microlise has delivered another strong performance in FY23. We started the
financial year with considerable momentum, building upon the success of FY22
to achieve another record revenue year.
Revenue grew 13% to £71.7m for the 12-month period ended 31 December 2023
(FY22: £63.2m), while ARR grew 12% to £47.2m (FY22: £42.6m). Adjusted
EBITDA grew 15% during the period, ahead of market expectations. Operating
profit increased 3% to £2.3m (FY22:£2.2m).
The Group's financial performance in FY23 exceeded the Board's expectations,
driven by continued high demand from OEM customers and, towards the end of the
year, increased revenue from direct customers. This was facilitated by an
improvement in new vehicle availability in the second half of the year,
enabling the Company to deliver against its record order book.
During the first half of the year, the Company, alongside the wider transport
industry, continued to contend with global supply chain challenges, which in
turn impacted the availability of new vehicles. Throughout the second half of
the year, we saw these issues significantly diminish as the back log of demand
was fulfilled. As we enter FY24, it is reassuring to note that both these
challenges have been resolved.
We were pleased to announce the acquisitions of two Transport Management
Systems (TMS) companies during the period, Vita Software on 14 March 2023 and
Enterprise Software Systems (ESS) on 30 November 2023, which completed in
January 2024. A third acquisition of road safety company, K-Safe, completed in
December 2023 and was announced post period end in January 2024. We're already
seeing the positive impact of these acquisitions, with successful sales of
Vita software's TMS offering and a growing pipeline for the ESS and Flare
Aware (K-Safe Product) products with our existing customers.
Our strategic focus for the year will be on progressing the integration of our
recent acquisitions into the Microlise product architecture, enabling us to
ensure our customers benefit through the broader use of our comprehensive
integrated product range. In addition, we will continue to focus on driving
efficiency and enhancing profitability within the business.
At the time of the Company's IPO in 2021 the Board stated that given the cash
generative nature of the Group's activities it would, if commercially prudent
to do so, commence the payment of dividends in the medium term. Having
undertaken a review of the Group's capital allocation policy, and the
availability of resources and distributable reserves, the Board has determined
that it is now appropriate to commence the distribution of dividends to
shareholders. The Board has therefore declared a final dividend for the 2023
financial year of 1.725 pence per share and will henceforth adopt a
progressive dividend policy.
As well as returning capital to shareholders, the Board will continue to
prioritise balance sheet strength which will allow the Group to continue to
invest in its' technology platform, infrastructure and security whilst
retaining an ability to pursue selective acquisitions which accelerate the
Company's strategic development.
If approved by shareholder at May's Annual General Meeting on 22 May 2024, the
dividend will be paid on 28 June 2024 to shareholders on the register at close
of business on 7 June 2024.
Microlise has an exceptionally talented team and our progress during the year
was made possible as a result of their hard work, expertise and passion. I
would like to thank everyone for their dedication and contribution to the
ongoing success of the business. We look forward to a successful 2024.
Jon Lee, Non-Executive Chairman
CEO Statement
Microlise delivered a strong performance in FY23, outperforming both our
internal and market expectations. The supply chain issues experienced in prior
years are now firmly behind us and lead times on new vehicles are no longer
extended, such that the market has fully returned to normality. Sales to OEM
customers have been especially positive and this performance has continued
into 2024, providing confidence that the year ahead will be another record
year for OEM sales.
Microlise added 450 new customers during the year, an 80% increase over the
250 customers signed in FY22. Notable names signed during the period included
BCA/ECM, the UK's largest used vehicles business, and the retailer Woolworths
Australia.
In addition, we extended 40 contracts with existing large enterprise
customers. Examples include Sainsbury's, Cemex, Sports Direct and Bidfood. The
critical importance of our solutions to our customers' operations also
resulted in our churn rate remaining extremely low at 0.7%.
Aside from organic growth we also commenced a series of acquisitions in FY23.
Microlise expanded its offering into the Transport Management Solutions (TMS)
space with two acquisitions; Vita Software, completed in March 2023, and
Enterprise Software Solutions (ESS), announced in November 2023 and completed
post year end in January 2024. Transport Management Solutions go beyond the
vehicle to provide a suite of associated services to fleet logistics
operators, such as resource and transport costing, subcontractor management
and invoicing solutions. The TMS acquisitions have both been immediately
earnings enhancing, with the Vita TMS already resulting in the successful sale
to a new customer, Crowfoots.
In December 2023, Microlise also completed the acquisition of K-Safe, the
provider of a safety product which warns drivers that cyclists are near their
vehicle, providing them with the position of the cyclist. This innovative
solution is hugely important in helping drivers avoid common accidents caused
by a lack of visibility where bikes are concerned.
This product also takes Microlise into the last mile of delivery, a new market
for Microlise, such that our offerings now provide end-to-end coverage of the
road delivery sector from the warehouse to the consumer. K-Safe has brought
with it a number of new customers in the last mile delivery space, including
Deliveroo, JustEat and Voi and engagement with them to date has been very
positive.
Market
At the beginning of 2023, our business and that of our customers continued to
be negatively affected by global supply chain issues and chip shortages, which
in turn led to greatly extended lead times on new vehicles. By the end of the
first half of the year, the global supply chain issues and chip shortages had
greatly diminished. However, lead times on new vehicles had not improved at
this stage owing to a three-to-six-month time lag between vehicle
manufacturer's receipt of now-available components and subsequent production
of vehicles.
Throughout the second half of the year, we have experienced steady market
growth as conditions continued to improve. The time lag on new vehicles has
now all but disappeared such that the market has now returned to pre-pandemic
conditions. With a substantial backlog of orders across the logistics market,
we are now in an environment of robust and sustained growth, despite the less
certain macro-economic backdrop.
Prior supply issues also led to many smaller companies within the logistics
market entering administration and this has benefited larger companies which
have been able to consolidate these distressed businesses into their
operations. This has accelerated the growth of the larger companies, and these
are typical of Microlise's customer base. As such, Microlise now finds itself
extremely well positioned, firmly within the sweet spot of the growing
logistics market.
Customer Base
During the year we continued to focus on securing and retaining customers as a
priority. This resulted in us securing 450 new customers, an 80% increase over
2022. These included new contracts with Irish logistics company, McCulla; BCA,
the UK's largest used vehicle business; and UK nationwide logistics company
LF&E Refrigerated Transport.
Further afield, and in line with our strategic objective of geographic
expansion, significant new contracts were signed with two of Australia's
leading grocery retailers in September 2023, one of which further expanded its
engagement in December 2023. These contracts demonstrate the clear traction we
are developing in our target markets, and we are hopeful of providing updates
on further geographic growth in the near future.
In addition, we signed 40 renewals with existing customers including Tesco,
Bidfood and Pall-ex.
During the period we adapted our software solutions to enable compatibility
with certain third-party products. This has removed barriers for potential
customers who might otherwise be unable to utilise our solutions, thereby
increasing our addressable market. It is also expected that this development
will alter our revenue mix resulting in a positive effect on margins over
time.
Our low customer churn reflects the essential nature of Microlise's solutions
to its customers, the high regard in which we are held, and the loyalty of our
valued customer base.
Product Offering and M&A
Microlise's solutions help our customers make the most efficient use of their
assets, reducing fuel, the time drivers are on the road, wear and tear on
vehicles, accidents and more.
During 2023 Microlise has expanded its product set to encompass more elements
of the logistics process such that the Company offers a true end to end suite
of products from the warehouse direct to the end consumer.
In March 2023, in line with the Company's strategic growth plan, Microlise
completed its first acquisition since flotation with an initial cash payment
of £1.86m for Vita Software, a Transport Management Solutions (TMS) provider.
This expanded the Group's suite of technology solutions beyond the vehicle to
include such offerings as resource and transport costing, subcontractor
management and invoicing solutions and is applicable to fleets of any size.
Immediately earnings enhancing, the product has performed well since
acquisition and has resulted in numerous upsells and cross-sells.
Microlise complemented this with the acquisition of ESS, also a provider of
Transport Management Solutions, announced in November 2023 and completed post
year end. ESS was purchased for a maximum net consideration of £8.5m in cash,
having delivered £5.1m revenue, of which 75% is recurring, and £1m adjusted
EBITDA, in the year to 31 August 2023. This further strengthens Microlise's
TMS credentials and is expected to accelerate sales of its TMS solutions. In
December 2023, Microlise also acquired the assets of K-Safe Limited for
£0.14m, the parent company to the road safety products Flare and Flare Aware.
Flare is a multi-award-winning platform with over 3.5 million regular users of
its app. This helps leading brands such as Deliveroo and Just Eat, as well as
any individual on a two-wheeled vehicles (cyclists, motorcyclists,
e-scooters), to better understand and react to mobility risk and safety
issues.
Flare Aware is a dynamic driver hazard warning system, jointly developed with
Microlise, which utilises the data captured from the Flare mobile app user
network, to provide awareness and alerts to the drivers of vehicles when they
are near cyclists and motorcyclists using the Flare app.
K-Safe has brought Microlise into the last mile of delivery services as well
as into the two-wheel vehicle sector. The acquisition will further improve
Microlise's safety solutions while at the same time adding some of the biggest
names in consumer delivery services as customers.
Microlise's prime focus at present is on ensuring the full integration, and
interoperability of the solutions, of its latest acquisitions. However, the
Company remains alert to further acquisition opportunities, particularly
internationally, both in markets in which we already operate as well as new
geographies.
Strategic Focus
We are currently focused on the following core strategic objectives:
Bringing our three recent acquisitions into the Microlise architecture
This is progressing well with fully integrating our acquisitions will enable
us to more effectively upsell and cross-sell products and attract new
customers. This programme of work is externally named Microlise Complete, as
we continue to drive our USP of being an end-to-end integrated solution for
transport operators.
Combining all of our products into a single, seamlessly integrated product
suite
Our R&D team is currently developing our systems architecture across all
of our products to ensure each is fully integrated. This will enable data to
be shared across all products such that, for example, when driver information
is updated in one product it automatically updates in others.
In addition, it will allow for common functionality across the suite of
programmes so that, for example, there is a single login from which customers
can use, and purchase, multiple products. This will make our product suite
still more attractive to potential customers while also facilitating the sales
of more products to existing customers.
Improving margins through greater efficiencies
We have multiple initiatives underway to improve the efficiency of our
business by streamlining internal processes, allowing us to scale the business
more efficiently. Details on these initiatives are in part commercially
sensitive but our aim is to increase margins.
Continued investment into product development
We will continue to invest heavily into product development to ensure that we
remain at the forefront of our industry, bringing new, innovative solutions to
our platform that benefit our customers.
Continued investment into security measures for our blue-chip customer base
A number of our clients have come under heavy attack from Ransomware and so we
have continued to invest in replacement enterprise firewalls. We also continue
to leverage our Exposure Management Platform with Monitoring Dashboards for
Software Vulnerabilities. These attacks have not impacted Microlise directly
but their effects on our clients could cause major disruption to their
operations. Logistics companies are relied upon to deliver goods in a very
short space of time and cannot afford for their operations to be put on hold.
Therefore assurance and resilience of our business-critical systems are of
paramount importance to our customers. Of all of our strategic initiatives,
this is responsible for the largest capital spend but the outlay is necessary
to ensure we both attract and retain customers.
International Expansion
During the period, we have remained focussed on international expansion, and
we have made solid progress across a number of key geographies, particularly
in Australia and New Zealand where we signed two new contracts with leading
grocery retailers. This demonstrates the market leading nature of our products
in the region and we are therefore committing increased investment to our
sales function to ensure we further accelerate growth and capture all
available opportunities.
M&A
M&A remains a core part of our strategy and we continue to see a robust
pipeline of opportunities. We continue to assess further acquisition
opportunities, with a current focus on international business, both in new
geographies and in those in which we already operate, and will act
appropriately should they align with our immediate and long-term strategic
focus.
Microlise Transport Conference
The 2024 Microlise Transport Conference took place on 19 March at the Coventry
Building Society Arena. 1200 delegates attended the event making it the
biggest and most successful conference in our history. 14 keynote speakers
addressed the audience, including MP Guy Opperman (Minister for Roads and
Local Transport) and representatives from JCB, showcasing their hydrogen
combustion engine technology. In addition, there were four further stages at
the show featuring talks from SMEs from across the logistics industry, and
OEMs, such as DAF, Mercedes-Benz and Volvo showcasing their latest electric
vehicle offerings to delegates.
People
In August 2023 Shenny Remtulla was appointed to the senior leadership team as
Strategy and M&A Director, with responsibility for enabling and
accelerating the Company's profitable, sustainable growth.
ESG
We take great pride in the fact that our solutions help customers reduce
emissions, improve safety for their drivers, and ensure their vehicles are
driven and maintained effectively - lengthening the useful life of their
assets. Together, these benefits reduce costs to our customers but they also
improve the environment for everybody, both in terms of lowering pollutants in
the atmosphere and also in making our roads a safer place.
Microlise is committed to meeting its net zero goals and continues to improve
its ESG credentials. As such, the Company has now introduced an ESG element to
its executive team's incentive plan, ensuring all management are aligned and
encouraged in meeting Microlise's sustainability objectives.
During the first half of the year, we also completed the installation of 502
solar panels at our Nottingham HQ, with the objective of reducing the site's
annual carbon footprint by over 80 tonnes of CO2.
Everybody at Microlise has worked hard toward making the Company's net zero
goals a reality during 2023. This work will remain at the forefront of our
efforts during 2024 and we look forward to updating the market on our
continued progress going forward.
In terms of the social element of ESG, we achieved 'Great Place to Work' and
'Great Place to Work for Women' accreditations in April 2023, when we were
officially ranked 29th among large organisations for the best wellbeing
category.
We were also quoted as one of the Top 100 places to work in the UK for
recognising our commitment to improving the work experience of our employees
and their wellbeing.
Outlook
Microlise delivered a strong performance in FY23 exceeding our expectations,
despite supply chain issues remaining in the first half of the year and their
residual effects on new vehicle availability persisting into the second half.
We are now confident that these issues are fully behind us, and we have
emerged a stronger and more resilient business as a result.
We experienced record sales into OEMs in FY23 and direct business sales have
grown strongly since the latter part of the year as new vehicle availability
began to improve. These are trends we expect to continue in FY24, both in the
UK and internationally.
This growth will be complemented by the additional capabilities provided by
our recent acquisitions; the greater compatibility of our solutions with
third-party products; and the increasingly interoperable nature of our product
suite. This growth is also expected to flow through into profitability and
enhance the earnings of the Company going forward.
Nadeem Raza, Chief Executive Officer
CFO Statement
The financial results for the twelve-month period to 31 December 2023 reflect
another period of profitable growth for Microlise.
Key Performance Indicators
The following key performance indicators for the 12-month period to 31
December 2023 include a comparison to the audited statutory results for the
12-months to 31 December 2022.
FY23 FY22 Change
Financial Revenue £71.7m £63.2m 13%
Recurring Revenue £45.0m £40.5m 11%
Recurring revenue as % of Group revenue 63% 64% -1%
Gross Profit £43.6m £37.6m 16%
Gross Profit Margin % 61% 60% 1%
Operating Profit £2.3m £2.2m 3%
Adjusted EBITDA ((1)) £9.4m £8.2m 15%
Adjusted EBITDA % 13.1% 13.0% 0.1%
Profit before tax £2.5m £1.4m 74%
Adjusted Profit before tax ((2)) £5.6m £4.8m 17%
Adjusted Profit before tax % 7% 7% -
Basic EPS (p) 1.36p 1.17p 16%
Cash and cash equivalents £16.8m £16.7m 1%
KPIs ARR run rate ((3)) £47.7m £42.6m 12%
Number of like-for-like subscriptions ((4)) 640,000 599,000 6.8%
Long-term contract customer churn by value 0.7% 0.4% 0.3%
1. EBITDA excludes depreciation, amortisation, share of loss of
associate, interest, tax and share based payments. Adjusted EBITDA excludes,
exceptional costs in relation to acquisitions and restructuring costs,
depreciation, amortisation, share of loss of associate, interest, tax and
share based payments.
2. Adjusted Profit / (loss) before taxation excludes exceptional costs
in relation to acquisitions and restructuring costs, share based payments and
loss of share of associate.
3. ARR run rate change figure and % compare the annualised recurring
revenue figure for December 2023 with the annualised recurring revenue figure
for December 2022.
4. Like-for-like subscriptions change figure and % compare the
subscriptions as at 31 December 2023 with the subscriptions as at 31 December
2022
Group Results
Revenue
Total Revenue for the 12 months ended 31 December 2023 (FY23) was £71.7m, an
increase of 13% from 31 December 2022 (FY22) as a result of both record levels
of OEM((1)) sales and increased revenue from direct customers. The Group
delivered an increased win rate in the year, with over 450 new direct
customers (2022: 250) which led to strong revenue growth towards the end of
the year as an improvement of new vehicle availability in H2 enabled delivery
against many of these new customers.
Strong customer wins, record OEM sales, together with growth in our existing
customer's fleets resulted in recurring SaaS revenues growing to £45m, an
increase of 11% compared to £40.5m in FY22 and 12% growth in ARR, of which
11.8% represented organic growth, to £47.7m as at 31 December 2023 from
£42.6m on 31 December 2022. Recurring revenues represented 63% of total
revenue (FY22 64.1%).
Hardware revenue increased 10% to £19.9m (FY22: £18.0m) as a result of the
continued strong demand from OEM customers as well as the ability to deliver
direct customer orders as vehicle availability improved in H2. The strong
demand from direct customers in H2 also drove a 46% increase in services
revenue, which comprises of installation services, project management and
integration services, to £6.8m (FY22: £4.7m).
In addition to winning new business and deepening existing accounts, the Group
successfully maintained an extremely low rate of customer churn by value at
0.7% (FY22: 0.4%). This reflects the mission critical importance of
Microlise's software solutions in our customers' operations.
Gross Profit
Gross profit for the 12 months ended 31 December 2023 increased by 16% to
£43.6m (FY22 £37.6m). Gross margin % increased from 60% to 61% reflecting
margin improvements in recurring and non-recurring revenue. Non recurring
margin increased by c.2.0% driven primarily by strong performance in H2 due to
increased revenues from direct customers as vehicle availability improved.
Recurring margin also saw a c.2.0% increase as a result of increased
subscription revenues coupled with effective cost management and efficiency
programmes.
Administrative Expenses
( )
The Group has continued to invest in product and development, operations, and
sales & marketing.
Administrative expenses before exceptional administrative charges,
amortisation relating to acquisitions and share based payment charges, in the
12-month period ended 31 December 2023 increased 16% to £35.1m (FY22:
£30.3m).
Staff costs in the 12 months ended 31 December 2023 increased 16% to £30m
(FY22: £25.8m) reflecting our increase in headcount in line with our growth,
the impact of the acquisitions of Vita Software and K-Safe, as well as annual
pay awards and increased commissions/bonuses reflecting the increased new
customer win rate and the Group's strong EBITDA performance. Average headcount
in the Period was 715 (FY22: 661) overall, with 31 of the increase within
operations, product and development reflecting our continued focus on the
product roadmap, platform integration, enhanced user experience and enhanced
security measures. A further 10 staff were added in sales & marketing
including increases in staff numbers in Australia and France to drive growth
in these regions. The increase in operations includes additional engineering
resource to support the strategy of bringing more installation work in-house
which supports our margin enhancement strategy.
Marketing costs increased during the period by £0.1m to £1.1m as the Group
has continued to focus on growth with targeted marketing spend in key
strategic geographies. This includes an increased number of exhibitions
globally, the implementation of global prospecting tools and the product
launch of Microlise TMS (Vita software).
Administration costs increased during the period by a net £0.1m as the Group
continues to invest significantly in its internal business systems to drive
efficiencies and improvements in its security posture, this increased level of
spend is offset by reduced spend in other areas.
Capitalised development costs in the period were £2.5m (FY22: £1.8m),
reflecting the ongoing levels of investment into the product portfolio, whilst
amortisation of capitalised development costs in the period ended 31 December
2023 was £1.2m (FY22: £0.8m).
EBITDA((2)) & Profit Before Tax
The growth in revenue and gross margin has enabled the Group to deliver an
adjusted EBITDA ahead of market expectations at £9.4m in the 12 months ended
31 December 2023, an increase of 15% (FY22: £8.2m). Adjusted EBITDA margin
increased to 13.1% (FY22: 13.0%) as a result of the Group's investment
programme to improve its go-to-market and product offering and support further
growth. To provide a better guide to the underlying business performance,
adjusted EBITDA excludes exceptional costs in relation to acquisitions and
restructuring costs, depreciation, amortisation, share of loss of associate,
interest, tax and share based payments.
The adjusted profit before taxation excludes exceptional costs in relation to
acquisitions and restructuring costs, amortisation charges of £2.2m as a
result of business combinations (FY22: £2.1m), share of loss of associate and
share based payments. Adjusted profit before taxation for the 12 months ended
31 December 2023 increased 17% to £5.6m (FY22: £4.8m). Reported profit
before taxation in the period increased 74% to £2.5m (FY22: £1.4m).
Exceptional Costs
During FY23 the Group incurred a number of one-off charges relating to
acquisition fees and subsequent restructuring. These are disclosed separately
in note 2 of the financial statements to provide a better guide to the
underlying financial performance of the Group. The total of these charges in
the period ended 31 December 2023 was £0.4m (FY22: £0.2m).
Taxation
The tax charge in the 12 months ended 31 December 2023 increased to £0.9m
(FY22: £0.1m). The principal factor driving this increase is deferred tax
charges that relate to the reassessment of the likelihood of future deductions
from the exercise of share options. Underlying deferred tax charges relate to
the utilisation of accelerated allowances together with losses brought forward
to reduce UK corporation tax for the 12 months, offset by the deferred tax
credit relating to the amortisation of intangible assets. Due to these factors
the effective tax rate for the period of 37% (FY22: 6%) which is higher than
the main rate of corporation tax of 25%. For future periods we expect the
effective rate to align with more closely with the main corporation tax rate.
From 1 July 2020, Microlise has been classified as a large company for tax
research and development purposes and benefits from the Research and
Development Expenditure Credit scheme (RDEC) with any benefit being reflected
as grant income within other operating income. In the period ended 31 December
2023 the pre tax value of the credit was £0.6m (FY22: £0.6m)
EPS and Dividend
The Group reported an increase in profit after taxation in the period of 17%
to £1.6m (FY22: £1.4m). As a result, the reported basic earnings per share
for the 12 month period ended 31 December 2023 was 1.359p (FY22: 1.167p) and
diluted earnings per share was 1.358p for the 12 months period ended 31
December 2023 (FY22: 1.165). For further information on earnings per share,
please refer to note 8 of the financial statements.
The Group is pleased to announce the introduction of its dividend policy and
proposes a full year dividend of 1.72 pence per share that will be payable on
28 June 2024 to shareholders on the register at close of business on 7 June
2024.
Group Statement of Financial Position
The Group had net assets of £75.7m at 31 December 2023 (FY22: £73.5m).
Intangible assets increased by £1.2m reflecting the £2.4m of acquired
intangible assets and goodwill resulting from the acquisition of Vita Software
Limited, capitalised development costs less amortisation charges. Current
assets increased by £4.2m, primarily due to an increase in debtors driven by
higher revenues in the year combined with the timing of several large receipts
which have been received in full post period end. Total liabilities increased
by £2.9m due to an increase in deferred income and trade payables. The Group
typically invoices for software subscriptions monthly, quarterly, annually or
for the life of the subscription in advance which drives a strong balance
sheet with significant cash balances. Revenue is recognised in the month the
service is provided with deferred income disclosed as contract liabilities in
current and non current liabilities. As at the end of December 2023 total
Trade and other payables was £48.3m (FY22: £46.1m) of this balance £34.5m
(FY22: £33.3m) is deferred income and relates to future contracted revenue
recognition.
Adjusted Cashflow((3)) & Net Cash
The Group ended the 12-month period to 31 December 2023 with cash and cash
equivalents of £16.8m, a small increase on FY22 (FY22: £16.7m). This was
partly due to the timing of several large receipts totalling £1.2m, which
have been received in full post period end. Adjusted cash flows generated from
operations ((5)) remains healthy at £9.3m in the period (FY22: £9.9m), this
represents a cash conversion rate((4)) of 98% (FY22: 121%). Reported cash
flows generated from operations in the period was £8.8m (FY22: £9.7m)
During the period, the Group increased investment into product and development
as well as plant, property and equipment, particularly IT infrastructure to
support ongoing advancements in both customer and internal business systems as
well as security.
Banking Facility
The Group has renewed its facility with HSBC with an agreed £10.0m committed
revolving cash flow facility and a £20m accordion. The Group has not utilised
any of this facility to date. The Group's gross cash of £16.8m (FY22:
£16.7m) and the undrawn £10.0m facility gives the Group £26.8m of cash,
which the Directors believe provides ample headroom for Microlise to deliver
against its strategic goals. Given the level of headroom in the business
forecasts the board consider it appropriate to prepare the financial
statements on the going concern basis. Details of the board's going concern
assessment is provided in the basis of preparation note in the financial
statements on page 98.
Additional Notes
1. OEM is an abbreviation for Original Equipment Manufacturers
2. Adjusted EBITDA excludes, exceptional costs in relation to
acquisitions and restructuring costs, depreciation, amortisation, share of
profit or loss of associate, interest, tax and share based payments.
3. Adjusted cash flow generated from operations adds back
exceptional costs in relation to acquisitions and restructuring costs
4. Cash conversion is calculated by dividing adjusted cash flow
generated from operations by adjusted EBITDA.
Nick Wightman, Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Year Year
ended ended
31 December
31 December
2023 2022
Note £'000 £'000
Revenue 1 71,716 63,211
Cost of sales (28,132) (25,577)
Gross profit 43,584 37,634
Other operating income 3 973 876
Administrative expenses (42,302) (36,326)
Operating profit 3 2,255 2,184
Interest income 5 360 45
Interest expense 6 (333) (312)
Share of profit/(loss) of associate net of tax 11 225 (478)
2,507 1,439
Profit before taxation
Taxation 7 (931) (86)
Profit for the year 1,576 1,353
Other comprehensive (expense)/ income for the year/period
Currency translation differences (102) 6
Total comprehensive income for the year attributable to the equity 1,474 1,359
shareholders of Microlise Group plc
Basic earnings per share (pence) 8 1.36 1.17
Diluted earnings per share (pence) 8 1.36 1.17
Consolidated Statement of Financial Position
as at 31 December 2023
31 December 31 December
2023 2022
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 8,947 8,292
Intangible assets 10 76,228 75,031
Investments in associate 11 1,593 1,368
Loan to associate 11 - 1,000
Trade and other receivables 14 2,841 3,078
Total non-current assets 89,609 88,769
Current assets
Inventories 13 3,348 2,635
Loan to associate 11 1,000 -
Trade and other receivables 14 18,757 16,760
Corporation tax recoverable 1,665 1,289
Cash and cash equivalents 15 16,800 16,683
Total current assets 41,570 37,367
131,179 126,136
Total assets
Current liabilities
Lease liabilities 16 (907) (821)
Trade and other payables 17 (32,630) (29,183)
Total current liabilities (33,537) (30,004)
Non current liabilities
Lease liabilities 16 (646) (926)
Trade and other payables 17 (15,701) (16,898)
Deferred tax 12 (5,622) (4,840)
Total non current liabilities (21,969) (22,664)
Total liabilities (55,506) (52,668)
Net assets 75,673 73,468
Equity
Issued share capital 20 116 116
Share premium account 17,630 17,630
Retained earnings 57,927 55,722
Total equity 75,673 73,468
Group Chief Financial Officer
Microlise Group plc Registered number 11553192
Consolidated Statement of Changes in Equity
Share Capital Share Premium Account Retained earnings Total Equity
£'000 £'000 £'000 £'000
At 31 December 2021 116 17,630 53,802 71,548
Comprehensive income for the year ended 31 December 2022
Profit for the year - - 1,353 1,353
Other comprehensive income - - 6 6
Total comprehensive income for the year - - 1,359 1,359
Share based payment (note 21) - - 561 561
Total transactions with owners - - 561 561
116 55,722 73,468
At 31 December 2022 17,630
Comprehensive income for the year ended 31 December 2023
Profit for the year - - 1,576 1,576
Other comprehensive expense - - (102) (102)
Total comprehensive income for the year - - 1,474 1,474
Share based payment (note 21) - - 731 731
Total transactions with owners - - 731 731
116 57,927 75,673
At 31 December 2023 17,630
Company Statement of Financial Position
as at 31 December 2023
31 December 31 December
2023 2022
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 4,736 4,838
Investments 11 83,005 79,192
Loan to associate 11 - 1,000
Deferred tax 12 1 111
Total non-current assets 87,742 85,141
Current assets
Loan to associate 11 1,000 -
Trade and other receivables 14 158 26
Cash and cash equivalents 15 86 69
Total current assets 1,244 95
88,986 85,236
Total assets
Current liabilities
Trade and other payables 17 (15,434) (17,928)
Total current liabilities (15,434) (17,928)
Total liabilities (15,434) (17,928)
Net assets 73,552 67,308
Equity
Issued share capital 20 116 116
Share premium account 17,630 17,630
Retained earnings 55,806 49,562
Total equity 73,552 67,308
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
profit for the parent Company for the year was £5,529,000 (2022: loss of
£182,000).
Group Chief Financial Officer
Microlise Group plc Registered number 11553192
Company Statement of Changes in Equity
Share Capital Share Premium Account Retained earnings Total Equity
£'000 £'000 £'000 £'000
At 31 December 2021 116 49,183 66,929
17,630
Comprehensive expense for the year to 31 December 2022
Loss for the year - - (182) (182)
Other comprehensive income - - - -
Total comprehensive expense for the year - - (182) (182)
Share based payment (note 21) - - 561 561
Total transactions with owners - - 561 561
116 49,562 67,308
At 31 December 2022 17,630
Comprehensive income for the year to 31 December 2023
Profit for the year - - 5,529 5,529
Other comprehensive income - - - -
Total comprehensive income for the year - - 5,529 5,529
Share based payment (note 21) - - 715 715
Total transactions with owners - - 715 715
116 55,806 73,552
At 31 December 2023 17,630
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Year ended Year ended
31 December
31 December
Note 2023 2022
£'000 £'000
Cash flows from operating activities
Cash generated from operations A 8,906 9,719
Tax paid (144) (34)
Net cash generated from operating activities 8,762 9,685
Cash flows from investing activities
Purchase of property, plant and equipment (2,195) (979)
Proceeds from disposals of tangible fixed assets 54 -
Additions to intangible assets (2,543) (2,080)
Loan advanced to associate - (1,000)
Purchase of subsidiary net of cash acquired (1,966) -
Purchase of businesses deferred consideration paid (1,000) (1,000)
Interest received 360 45
Net cash used in investing activities (7,290) (5,014)
Cash flows from financing activities
Interest paid (283) (283)
Lease liability payments (1,056) (915)
Net cash used in financing activities (1,339) (1,198)
Net increase in cash and cash equivalents 133 3,473
Cash and cash equivalents at beginning of year 16,683 13,210
Foreign exchange losses (16) -
Cash and cash equivalents at end of year B 16,800 16,683
The notes on pages X to X 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:
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Profit for the year 1,576 1,353
Adjustments for:
Depreciation 2,585 2,212
Amortisation 3,492 3,036
Profit on disposal of tangible fixed assets (19) -
Share based payments 731 561
Foreign exchange movements (65) -
Net interest costs (27) 267
Share of (profit)/loss of associate (225) 478
Tax charge 931 86
8,979 7,993
(Increase)/decrease in inventories (713) 306
Increase in trade and other receivables (2,315) (2,545)
Increase in trade and other payables 2,955 3,965
Cash generated from operations 8,906 9,719
B. Analysis of net funds
At 1 January Cash flow Non-cash changes At
31 December
2023 2023
£'000 £'000 £'000 £'000
Lease liabilities (1,747) 1,163 (969) (1,553)
Liabilities arising from financing activities (1,747) 1,163 (969) (1,553)
Cash and cash equivalents 16,683 133 (16) 16,800
Net funds 14,936 1,296 (985) 15,247
At 1 January Cash flow Non-cash changes At
31 December
2022 2022
£'000 £'000 £'000 £'000
Lease liabilities (1,711) 979 (1,015) (1,747)
Liabilities arising from financing activities (1,711) 979 (1,015) (1,747)
Cash and cash equivalents 13,210 3,473 - 16,683
Net funds 11,499 4,452 (1,015) 14,936
Major non cash items
£862,000 of additions to right of use assets and lease liabilities are
included in non cash movements in the year ended 31 December 2023 (2022:
£951,000).
Summary of Significant Accounting Policies
General information
Microlise Group plc is a holding and management services company. Its
subsidiaries are telematics businesses providing technological transport
solutions that enable customers to reduce costs and environmental impact by
maximising the efficiency of their transportation. The company is a public
limited company, traded on the Alternative Investment Market ("AIM") of the
London Stock Exchange, and incorporated and domiciled in England. The
address of the registered office is Farrington Way, Eastwood, Nottingham, NG16
3AG.
Accounting policies
A. Basis of preparation
The consolidated financial statements have been prepared in accordance with
the historical cost convention and UK adopted International Accounting
Standards ('UK IFRS'). The stated accounting policies have been consistently
applied to all periods presented.
The parent company financial statements have been prepared under applicable
United Kingdom Accounting Standards (FRS101). The following FRS 101 disclosure
exemptions have been taken in respect of the parent company only information:
· IAS 7 Statement of cash flows;
· IFRS 7 Financial instruments disclosures; and
· IAS 24 Key management remuneration.
The financial statements including the notes are presented in thousands of
pounds sterling ('£'000'), the functional and presentation currency of the
Group, except where otherwise indicated.
The principal accounting policies adopted in preparation of the financial
statements are set out below. The policies have been consistently applied to
all periods presented, unless otherwise stated.
Judgements made by the Directors in the application of the accounting policies
that have a significant effect on the historical financial information and
estimates with significant risk of material adjustment in the next year are
discussed in note C.
Going concern
The directors have considered working capital forecasts prepared for the
period to December 2025. The Group had cash balances of £16.8m at the year
end, of which a net £6.2m was utilised to make an acquisition in January, no
borrowings and a £20m undrawn working capital facility which is not forecast
to be utilised. The current working capital facility term was due to run to
July 2024. On the 5(th) April 2024, a replacement facility has been agreed
with HSBC, with £10.0m committed revolving cash flow facility and a £20m
accordion on more favourable terms, which is available until 5(th) April 2027.
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 international conflicts 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, Trakm8 Holdings
plc is accounted for as an associate using the equity method. The initial
investment was accounted for at cost and the subsequent share of associate
profits or losses reported in the Statement of Comprehensive Income and are
added to or deducted from the carrying value of the investment.
Revenue recognition
Revenue comprises revenue recognised by the Group in respect of goods and
services supplied during the year, based on the consideration specified in a
contract, exclusive of Value Added Tax and trade discounts.
The Group enters into the sale of multi-element contracts, which combine
separate performance obligations including hardware, installation, managed
service contracts (software-as-a-service or SaaS), software licences,
professional services (which includes bespoke software development, project
management (incorporating activities including project and installation
planning, managing change control and stage boundaries and project
reporting), consultancy, training), and support and maintenance services
relating to these products. In accordance with IFRS 15, these are considered
to be distinct.
Each performance obligation is allocated a transaction price based on the
stand-alone selling prices. Where stand-alone prices are not directly
observable, they are based on expected cost plus margin.
Revenue is recognised depending upon the revenue stream to which it relates,
as follows:
· The fair value of hardware and installation revenue is recognised at
a point in time when control is transferred to the customer on despatch and/or
upon installation;
· Revenue from the SaaS arrangement is recognised over a period of
time, based on the term of the contract on a straight line basis. Revenue
recognition over time is considered appropriate based on provisions of IFRS 15
paragraph 35 as the customer simultaneously receives and consumes the benefits
provided by the Group. The contractual term for average SaaS agreements are
approximately 5 years;
· Professional services typically include implementation,
configuration, training and other similar services to create optimised
interfaces between the Group's software and customers systems. Revenue from
professional services is recognised over a period of time using the input
method as professional services are being performed, as this best depicts the
timing of how the value is transferred to the customer; and
· Support and maintenance turnover is deferred at the point of sale and
recognised in the Statement of Comprehensive Income over a period of time of
the contractual life, utilising the output method, generally on a straight
line basis as the customer simultaneously receives and consumes the benefits
provided by the Group.
Invoicing for all revenue streams is undertaken in accordance with the terms
of the agreement with the customer. When an invoice is due for payment at
the statement of financial position date but the associated performance
obligations have not been fulfilled the amounts due are recognised as trade
receivables and a contact liability is recognised for the sales value of the
performance obligations that have not been provided. If payment is received
in advance of the delivery of the associated performance obligation a contract
liability is recognised. When an invoice is not due for payment at the
statement of financial position date and the associated performance obligation
has not been fulfilled no amounts are recognised in the financial statements.
In cases where customers pay for the goods and services over an agreed period,
the fair value of the consideration is determined by discounting future
receipts using an imputed rate of interest. The difference between the fair
value and the nominal amount of the consideration is recognised as finance
income over the payment period.
Contract costs
Under IFRS 15, the Group capitalises commission fees as costs of obtaining a
contract when they are incremental and, if they are expected to be recovered,
it amortises them consistently with the pattern of revenue for the related
contract. If the expected amortisation period is one year or less, then the
commission is expensed when incurred. Contract costs are capitalised to
trade and other receivables, due within and after one year.
The Group in certain circumstances incurs costs to deliver its services and
fulfil specific contracts. These costs may include process mapping and
design, scoping and configuration. Contract fulfilment costs are divided into
costs that deliver an asset and costs that are expensed as incurred.
Under IFRS 15, the Group capitalises these contract fulfilment costs when they
directly relate to a specifically identifiable contract or anticipated
contract, will enhance or generate resources used to satisfy future
performance obligations and they are expected to be recovered. Where
capitalised, it amortises them consistently with the pattern of revenue for
the related contract.
At each reporting date, the Group determines whether or not the contract
assets are impaired by comparing the carrying amount of the asset to the
remaining amount of consideration that the Group expects to receive less the
costs that relate to providing services under the relevant contract.
Employee benefits
The Group operates a defined contribution pension scheme. Contributions are
recognised in the Statement of Comprehensive Income in the year in which they
become payable in accordance with the rules of the scheme.
Short term employee benefits including holiday pay are recognised as an
expense in the period in which the service is rendered.
Share based payment
The Group operates an equity-settled share based compensation plan in which
the Group receives services from directors and certain employees as
consideration for share options. The fair value of the services is recognised
as an expense over the estimated vesting period, determined by reference to
the fair value of the options granted.
Taxation
The taxation expense or credit comprises current and deferred tax recognised
in the profit for the financial period or in other comprehensive income or
equity if it arises from amounts recognised in other comprehensive income or
directly in equity. Current tax is provided at amounts expected to be paid (or
recovered) in respect of the taxable profits for the period using tax rates
and laws that have been enacted or substantively enacted by the reporting
date. Microlise, as a large company from 1 July 2020 for tax R&D purposes,
qualifies for the large company RDECs which are included as grant income
within other operating income.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.
Deferred tax assets and liabilities are offset only where there is a legally
enforceable right to offset and where the deferred tax balances relate to the
same taxation authority.
Exceptional items
The Group classifies certain one-off charges or credits that have a material
impact on the financial results as 'exceptional items'. These are disclosed
separately to provide further understanding of the financial performance of
the group.
Government grants
Grants are accounted under the accruals model, and grants of a revenue nature
are recognised in the Statement of Comprehensive Income in the same period as
the related expenditure. Government grants relate to 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 13 years
Software
3-5 years
Intangible assets are tested for impairment when an event that might affect asset values has occurred. Any such impairment in carrying value is written off to the Statement of Comprehensive Income immediately.
Research and development expenditure
An internally generated intangible asset arising from development (or the
development phase) of an internal project is recognised if, and only if, all
of the following have been demonstrated:
· It is technically feasible to complete the development such that it
will be available for use, sale or licence;
· There is an intention to complete the development;
· The method by which probable future economic benefits will be
generated is known;
· There are adequate technical, financial and other resources required
to complete the development; and
· There are reliable measures that can identify the expenditure
directly attributable to the project during its development.
The amount recognised is the expenditure incurred from the date when the
project first meets the recognition criteria listed above. Expenses
capitalised as "Technology" within intangible assets consist of employee costs
incurred on development. Where the above criteria are not met, development
expenditure is charged to the consolidated statement of comprehensive income
in the period in which it is incurred. The expected life of internally
generated intangible assets varies based on the anticipated useful life,
currently ranging from five to seven years.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and impairment losses.
Amortisation is charged on a straight-line basis over the estimated useful
life in which the intangible asset has economic benefit and is reported within
administrative expenses in the consolidated statement of comprehensive income.
Research expenditure is recognised as an expense in the period in which it is
incurred.
Research and development expenditure tax credits arise in the UK. Those
relevant to a large company for tax purposes are credited to other operating
income as a grant.
Financial assets
Financial assets, including trade and other receivables, cash and cash equivalent balances are initially recognised at transaction price. 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
Certain new standards, amendments and interpretations to existing standards
have been published that are mandatory for accounting periods beginning on or
after 1 January 2024 and which the Group has chosen not to adopt early. These
include the following standards which may be relevant to the Group:
- Amendment to IAS 1 regarding the classification of liabilities being based
on an entity's rights at the end of a reporting period and disclosure in
respect of post period end covenants that have to be met in the 12 months post
period end;
- IAS 7/IFRS 7 amendments in respect of supplier finance arrangements and
disclosures that allow an investor to understand the nature of these;
- IFRS 16 Amendments to clarify how a seller-lessee subsequently measures sale
and leaseback transactions.
As a result of initial review of the new standards, interpretations and
amendments which are not yet effective in these financial statements, none are
expected to have a material effect on the Company or Group's future financial
statements. All IFRS effective at the reporting date of 31 December 2023 have
been applied.
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 judgements and 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:
Fair values and intangible assets on acquisition of a business
Fair values have been applied on the acquisition of subsidiaries which involve
a degree of judgement and estimation in particular in the identification and
evaluation of intangible assets. The values are derived from the business cash
flow forecasts and assumptions based on experience and factors relevant to the
nature of the business activity.
Useful economic lives of intangible assets
The annual amortisation charge for intangible assets is sensitive to changes
in the estimated useful economic lives of the assets. The useful economic
lives and residual values are re-assessed annually. They are amended when
necessary to reflect current estimates, based on technological advancement,
future investments and economic utilisation.
There is no current indication that the Group's businesses will not continue
to trade profitably and hence the life may differ or be longer than the
estimates used to amortise intangible assets.
Capitalisation of development expenditure
Management have used their judgement in respect of the capitalisation of
development costs against the criteria in the policy. The viability of the
new technology and know-how is supported by the results of testing and by
forecasts for the overall value and margins from future sales to support the
approach taken.
Impairment of intangible assets including goodwill and investments
Investments made by the Company and intangible assets acquired in a business
combination capitalised with goodwill by the Group are subject to annual
impairment tests and other intangibles amortised over their estimated useful
lives subject to an assessment of impairment.
Subsequent impairment tests for investments and intangible assets are based on
risk adjusted future cash flows discounted using appropriate discount rates.
These future cash flows are based on forecasts which include estimated factors
and are inherently judgemental. Future events could cause the assumptions to
change which could have an adverse effect on the future results of the Group.
Further detail including sensitivities is given in note 10.
Right-of-use assets and lease liabilities
In respect of right-of-use leased assets key estimates are a combination of
the incremental borrowing rate used to discount the total cash flows and the
term of the leases where breaks or extensions fall within the Group's control.
These are used to derive both the opening asset value and lease liability as
well as the consequential depreciation and financing charges. A 1% change in
the discount rate used would increase interest charges and decreased
depreciation by approximately £10,000 a year with an immaterial impact on
assets and liabilities.
Share based payment
The fair values in respect of share based payments are estimated using a
number of inputs to an appropriate valuation models including the probability
that perforrnance conditions may be met. Further detail of the assumptions
applied is included in note 21.
Notes to the financial statements for the year ended 31 December 2023
1. Revenue and segmental analysis
Recurring revenue represents the sale of the group's full vehicle telematics
solutions, support and maintenance. Non-recurring revenue represents the
sale of hardware, installation, and professional services. Revenue is
defined as per the accounting policies.
Revenue in respect of the setup, supply of hardware and software installation
is recognised at a point in time. Professional services including project
management, managed services and support services income is recognised over
the period when services are provided.
Year ended Year ended
31 December 2023
31 December
2022
£'000 £'000
By type
Revenue recognised at a point in time 23,707 19,975
Supply of hardware and installation
23,707 19,975
Revenue recognised over time 2,987 2,721
Professional services including project management
Managed service agreement income 41,614 37,360
Other support and maintenance services 3,408 3,155
48,009 43,236
71,716 63,211
By destination:
UK 65,670 58,037
Rest of Europe 1,514 1,195
Rest of the World 4,532 3,979
Total revenue 71,716 63,211
Revenue in respect of one customer amounted to £23.1m representing 32% of the
revenue for the year (2022: £20.9m representing 33% of the revenue).
The split of the disaggregated revenue between segments is summarised below.
The chief operating decision maker ("CODM") is identified as the Board. It
continues to define all the Group's trading as operating in the telematics
market with two complementary segments. The Board as the CODM also review
the revenue streams of recurring and non-recurring revenue as part of their
internal reporting.
The directors consider the Microlise business to be one segment related to
fleet management and the separately acquired TruTac business to be a
complementary segment related to tachograph specific software and analysis
services.
Microlise TruTac Year ended Microlise TruTac Year ended
31 December
31 December
2023 2022
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 66,526 5,190 71,716 59,147 4,064 63,211
Depreciation and amortisation 5,369 708 6,077 4,645 603 5,248
Operating profit 1,278 977 2,255 1,559 625 2,184
Net interest (15) 42 27 (263) (4) (267)
Share of associate profit/(loss) 225 - 225 (478) - (478)
Profit before tax 1,488 1,019 2,507 818 621 1,439
Segment assets 118,805 12,374 131,179 115,216 10,920 126,136
Segment liabilities (52,327) (3,179) (55,506) (50,059) (2,609) (52,668)
Additions to non-current assets 7,573 430 8,003 3,037 973 4,010
All of TruTac's revenue relates to the UK. TruTac's revenue is primarily from
managed service agreements with the exception of £659,000 of hardware revenue
in 2023 (2022: £562,000). All remaining revenue relates to the Microlise
business.
The group's non-current assets comprising investments, tangible and intangible
fixed assets and the net assets by geographical location are:
31 December 2023 31 December 2022
Non-current assets Net assets Non-current assets Net assets
£'000 £'000 £'000 £'000
United Kingdom 89,316 73,787 88,434 71,895
France 15 25 29 22
Australia 7 150 2 80
India 271 1,711 304 1,471
89,609 75,673 88,769 73,468
2. Adjusted results
In reporting financial information, the Group presents alternative performance
measures (APMs), which are not defined or specified under the requirements of
IFRS. The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide depth and understanding
to the users of the financial statements to allow for further assessment of
the underlying performance of the Group. The Group's primary results measure,
which is considered by the directors of the Group to represent the underlying
and continuing performance of the Group, is adjusted EBITDA as set out below.
EBITDA is a commonly used measure in which earnings are stated before net
finance income, tax, amortisation and depreciation as a proxy for cash
generated from trading.
The group qualifies for large company R&D tax reliefs with the RDEC
credits included in other operating income above operating profit in line with
common practice is included in the Group's calculation of EBITDA.
The measure has been adjusted by acquisition related costs which are
considered to be non-recurring and non-trading in nature together with the
share based payment charge as it represents a non cash item.
Year Year ended
31 December
ended
31 December 2022
2023
£'000 £'000
Operating profit before interest and share of associate 2,255 2,184
Exceptional transaction and subsequent restructuring costs 374 202
Depreciation 2,585 2,212
Amortisation of intangible assets 3,492 3,036
Share based payment 731 561
Adjusted EBITDA 9,437 8,195
3. Operating profit
The operating profit is stated after charging/(crediting):
Year Year
ended ended
31 December
31 December
2023 2022
£'000 £'000
Auditors remuneration:
Audit of the Group and Company financial statements 279 251
Depreciation of property, plant and equipment 1,553 1,316
Profit on disposal of tangible fixed assets (19) -
Depreciation of right-of-use assets 1,032 896
Amortisation of intangible assets 3,492 3,036
Cost of inventory sold 15,520 14,198
Research and development costs 2,021 3,292
Foreign exchange losses/(gains) 211 (259)
Acquisition evaluation costs 196 202
In other operating income:
Other income (158) (161)
Government innovation grants (170) (111)
Research and Development Expenditure Credit (645) (604)
The Group claims RDEC credits which are treated as other operating income and
reflected in the profit before tax.
4. Information regarding directors and employees
Employees
The aggregate remuneration of employees comprised:
Group Company
Year ended Year ended Year ended Year ended
31 December
31 December
31 December
31 December
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Wages and salaries 31,353 26,636 864 863
Social security costs 3,071 2,685 108 88
Pensions 1,149 1,046 25 29
Share based payment 731 561 334 561
Total 36,304 30,928 1,331 1,541
Average number of employees
The average number of employees in the year was:
Group Company
Year ended Year ended Year ended Year ended
31 December
31 December
31 December
31 December
2023 2022 2023 2022
Sales and distribution 101 87 - -
Operations and development 528 492 - -
Administration 86 82 6 6
Total 715 661 6 6
Directors' remuneration
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Directors' remuneration - aggregate emoluments 852 749
Group pension contributions in respect of 4 23 24
(2022: 3) directors
246
Share based payment
334
1,209 1,019
Remuneration of the highest paid director 393 306
Group pension contributions 11 10
Share based payment 116
162
566 432
Full information by director is disclosed in the remuneration report.
Key management compensation
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Short term employee benefits 2,346 1,910
Post employment benefits 71 70
Share based payment 559 430
Total key management remuneration 2,976 2,410
Key management is defined as those persons having authority and responsibility
for planning, directing, and controlling the activities of the Group, directly
or indirectly, including any directors (whether executive or otherwise) of the
Group.
5. Interest receivable
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Interest receivable
Bank interest receivable 240 21
Loan interest receivable 120 -
Unwinding of discount on financing transactions - 24
360 45
6. Interest payable
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Interest payable
Interest on bank and other borrowings 220 248
Lease liability financing charges 107 64
Other interest 6 -
333 312
7. Taxation on profit
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Current taxation
UK corporation tax charge 104 -
Foreign tax 135 126
Adjustments in respect of previous periods 8 5
247 131
Deferred taxation
Origination and reversal of timing differences 732 249
Credit due to change in tax rate - (89)
Adjustments in respect of previous periods (48) (205)
684 (45)
Tax charge on profit 931 86
Factors affecting the tax charge for the year
The tax charge on the profit for the year differs from applying the average
standard rate of corporation tax in the UK of 23.5% (2022: 19%). The
differences are reconciled below:
Year ended Year ended
31 December
31 December
2023 2022
£'000 £'000
Profit before taxation 2,507 1,439
Corporation tax at standard rate 589 273
Factors affecting charge for the year:
Disallowable expenses 235 168
Share of associate profit not taxed (53) -
Reassessment of share option related deferred tax 172 -
Other differences including capital superdeductions (26) (93)
Overseas tax rates (15) 27
Adjustments in respect of previous periods (40) (200)
Differing corporate and deferred tax rates 69 -
Credit due to change in tax rate - (89)
Tax charge on profit 931 86
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 2022 and 2023.
8. Earnings per share
Year ended Year ended
31 December
31 December
2023 2022
Profit used in calculating EPS (£'000) 1,576 1,353
Weighted average number of shares for basic EPS ('000) 115,946 115,946
Weighted average number of shares for diluted EPS ('000) 116,087 116,104
Basic earnings per share (pence) 1.36 1.17
Diluted earnings per share (pence) 1.36 1.17
There were 3,701,954 unexercised share options in place at 31 December 2023
(2022: 3,088,969) of which 141,509 (2022: 1,159,383) were potentially dilutive
in respect of the year and are included in the weighted average for diluted
EPS.
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 January 2022 4,940 1,303 137 329 1,864 8,573
Cost
At 1 January 2022 5,271 3,002 306 1,245 5,460 15,284
Additions - 567 - 384 979 1,930
Disposals - (1,689) - (612) (19) (2,320)
Exchange adjustments - - 2 - 2 4
At 31 December 2022 5,271 1,880 308 1,017 6,422 14,898
Depreciation
At 1 January 2022 331 1,699 169 916 3,596 6,711
Charge for the year 102 558 67 338 1,147 2,212
Disposals - (1,689) - (612) (19) (2,320)
Reclassification from intangible assets - 88 - (88) - -
Exchange adjustments - - 1 - 2 3
At 31 December 2022 433 656 237 554 4,726 6,606
Net book value
At 31 December 2022 4,838 1,224 71 463 1,696 8,292
Cost
At 1 January 2023 5,271 1,880 308 1,017 6,422 14,898
Additions - 176 - 686 2,219 3,081
Acquisitions - - - - 14 14
Disposals - - - - (1,712) (1,712)
Reclassification from intangible assets - - - - 246 246
Exchange adjustments - - (19) - (31) (50)
At 31 December 2023 5,271 2,056 289 1,703 7,158 16,477
Depreciation
At 1 January 2023 433 656 237 554 4,726 6,606
Charge for the year 102 673 52 359 1,399 2,585
Disposals - - - - (1,653) (1,653)
Reclassification from intangible assets - - - - 27 27
Exchange adjustments - - (14) - (21) (35)
At 31 December 2023 535 1,329 275 913 4,478 7,530
Net book value
At 31 December 2023 4,736 727 14 790 2,680 8,947
Company Freehold property
£'000
Cost
At 31 December 2022 and 2023 4,965
Accumulated depreciation
At 31 December 2022 127
Charge for the year 102
At 31 December 2023 229
Net book value
At 31 December 2022 4,838
At 31 December 2023 4,736
10. Intangible assets
Technology - business combinations Total business combination assets
Developed technology
Goodwill Brands Software Total
Customer relationships
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net book value
At 1 January 2022 52,778 14,266 4,096 2,136 73,276 2,047 664 75,987
Cost
At 1 January 2022 52,778 17,780 6,422 2,711 79,691 2,951 791 83,433
Additions - - - - - 1,780 300 2,080
At 31 December 2022 52,778 17,780 6,422 2,711 79,691 4,731 1,091 85,513
Amortisation
At 1 January 2022 - 3,514 2,326 575 6,415 904 127 7,446
Charge for the year - 1,138 773 181 2,092 760 184 3,036
At 31 December 2022 - 4,652 3,099 756 8,507 1,664 311 10,482
Net book value
At 31 December 2022 52,778 13,128 3,323 1,955 71,184 3,067 780 75,031
Cost
At 1 January 2023 52,778 17,780 6,422 2,711 79,691 4,731 1,091 85,513
Additions - - - - - 2,523 20 2,543
Acquisitions (note 24) 1,513 406 446 - 2,365 - - 2,365
Reclassification to property, plant & equiment - - - - - - (246) (246)
Exchange adjustments - - - - - - (1) (1)
At 31 December 2023 54,291 18,186 6,868 2,711 82,056 7,254 864 90,174
Amortisation
At 1 January 2023 - 4,652 3,099 756 8,507 1,664 311 10,482
Charge for the year - 1,185 818 181 2,184 1,152 156 3,492
Reclassification to property, plant & equiment - - - - - - (27) (27)
Exchange adjustments - - - - - - (1) (1)
At 31 December 2023 - 5,837 3,917 937 10,691 2,816 439 13,946
Net book value
At 31 December 2023 54,291 12,349 2,951 1,774 71,365 4,438 425 76,228
Goodwill considered significant in comparison to the Group's total carrying
amount of such assets has been allocated to cash generating units or groups of
cash generating units as follows:
31 31 December
December
2023 2022
£'000 £'000
Microlise 51,199 49,686
TruTac 3,092 3,092
54,291 52,778
The Group tests goodwill annually for impairment, or more frequently if events
or changes in circumstances indicate that the asset might be impaired. The
acquired Vita Software business has been hived across and fully integrated
into the Microlise business, forming part of that cash generating unit. 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 17% (2022: 15%) and for the TruTac business at a pre-tax rate of 17% (2022:
15%).
The Microlise goodwill has been tested by reference to a 3 year management
approved plan and TruTac by reference to a 3 year plan with a 2% long term
growth rate considered applicable to the UK market applied to the terminal
period. This includes consideration of the impact of cost inflationary
pressures in the December tests and forecasts at that date and taking
account of the corresponding inflationary price terms within the group's
contracts with customers. The businesses achieved the FY23 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
£5m (2022: £8.8m) and TruTac NPV exceeds carrying values by £8.6m (2022:
£1.1m) with this increase reflecting an increase in overall growth over the
forecast period. 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 2023, the Microlise plan subject to the impairment test to
support the carrying value of goodwill, forecast over £11.5m and a required
£11m of recurring EBITDA which compares with £7.8m on the same basis
recorded for 2023 and an expected increase to over £9.7m for FY25 as a result
of the growth trends in the Microlise revenues, supported by significant
investment in the development of technology (2022: forecast £8.9m and
required £7.9m of recurring EBITDA in the long term).
The 31 December 2023 TruTac plan assessed for the impairment test to support
the carrying value of goodwill forecast over £2m and a required £1.4m
compared to the current EBITDA of some £1.5m. 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 (2022: forecast £1.25m and required £1.1m of recurring EBITDA).
11. Investments and loan receivables
Group Associate
£'000
At 1 January 2022 1,846
Share of loss for the year (478)
At 31 December 2022 1,368
Share of profit for the year 225
At 31 December 2023 1,593
Company Subsidiary undertakings Associate Total
£'000 £'000 £'000
At 1 January 2022 77,693 2,250 79,943
Additions - fair value of share options held by subsidiary company employees 249 - 249
Decrease in fair value - (1,000) (1,000)
At 31 December 2022 77,942 1,250 79,192
Additions (note 24) 3,132 - 3,132
Additions - fair value of share options held by subsidiary company employees 381 - 381
Increase in fair value - 300 300
At 31 December 2023 81,455 1,550 83,005
Subsidiary undertaking Principal activity Class of % share
shares held
holding
Microlise Limited Transport management technology solutions Ordinary 100%
Microlise Holdings Limited Intermediate holding company Ordinary 100%
Microlise Midco Limited Dormant company Ordinary 100%
Microlise Engineering Limited Non trading company Ordinary 100%
TruTac Limited Transport management technology solutions Ordinary 100%
Microlise Pty Limited (Australia) Transport management technology solutions Ordinary 100%
Microlise SAS (France) Transport management technology solutions Ordinary 100%
Microlise Telematics Private Limited (India) Transport management technology solutions Ordinary 100%
Microlise India Private Ltd Non trading company Ordinary 100%
Vita Software Limited Transport management technology solutions Ordinary 100%
TruTac Training Limited Dormant company (Dissolved 6February 2024) Ordinary 100%
Trucontrol Ltd Dormant company (Dissolved 6February 2024) Ordinary 100%
Trulogix Limited Dormant company (Dissolved 6February 2024) 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,
Microlise Telematics Private Limited and Microlise India 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), Microlise Engineering
Limited (02211125), TruTac Limited (02521511) and Vita Software Limited
(08230638) 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 2023 the market value
of the shareholding was £1.55m (2022: £1.25m).
The primary business of Trakm8 Holdings plc is the development, manufacture,
distribution and sale of telematics devices, services and optimisation
solutions. The principal place of business is 4 Roman Park, Roman Way,
Coleshill, Birmingham, West Midlands, B46 1HG.
The Group also has an interest of £1 in a jointly controlled not for profit
community investment company, Road to Logistics C.I.C. This had commenced
activity funded by a government grant and incurs neither a profit nor a
loss. The principal place of business is Market Chambers, 2b Market Place,
Shifnal, Shropshire, England, TF11 9AZ.
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 2022 and 2023 together with interim financial statements to 30 September
2022 and 2023, prepared under IFRS.
30 September 30 September
2023
2022
£'000 £'000
Assets - non-current 26,516 26,101
Assets - current 10,910 10,834
Liability - non-current (14,936) (10,190)
Liability - current (3,255) (8,616)
Net assets (100%) 19,235 18,129
Group share of book net assets (20%) 3,847 3,626
The differing carrying value above reflects the equity accounting policy
applied.
Year ended Year ended
30 September 30 September
2023
2022
£'000 £'000
Revenues 19,722 18,102
Profit/(loss) from continuing operations 1,103 (1,863)
Other comprehensive (expense)/income (8) 8
Total comprehensive income/(expense) 1,095 (1,855)
Group and company
£'000
At 1 January 2022 -
Cash subscribed for loan notes 1,000
At 31 December 2022 and 2023 1,000
12. Deferred tax assets and liabilities
Group Intangible assets Accelerated capital allowances Freehold property Tax losses Other Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 (5,468) (79) (1,156) 1,828 (116) (4,991)
RDEC credit - - - - 106 106
Credit/(charge) for the year 124 (152) 19 (303) 357 45
At 31 December 2022 (5,344) (231) (1,137) 1,525 347 (4,840)
On acquisition (172) (4) - - - (176)
RDEC credit - - - - 84 84
Foreign exchange movement - - - - (6) (6)
Credit/(charge) for the year 182 (240) 24 (641) (9) (684)
At 31 December 2023 (5,334) (475) (1,113) 884 416 (5,622)
Company
Share based payment
£'000
At 31 December 2022 111
Charge for the year (111)
At 31 December 2023 -
Deferred tax has been recognised at an average rate of 25% (2022: 25%).
13. Inventories
Group 31 December 31 December
2023 2022
£'000 £'000
Raw materials and consumables 1,331 1,146
Work in progress 28 18
Finished goods and goods for resale 1,989 1,471
3,348 2,635
An impairment release of £425,000 in respect of inventory was recorded in the
year ended 31 December 2023 (2022: charge of £209,000).
14. Trade and other receivables
Group Company
31 December 31 December 31 December 31 December
2022
2022
2023 2023
£'000 £'000 £'000 £'000
Current
Trade receivables 15,288 13,247 - -
Provision for impairment of trade receivables (457) (402) - -
Trade receivables net 14,831 12,845 - -
Contract cost assets 1,431 1,466 - -
Other receivables 222 163 - -
Prepayments 2,273 2,286 158 26
Total 18,757 16,760 158 26
Non-current
Trade receivables 353 593 - -
Contract cost assets 2,488 2,485 - -
Total 2,841 3,078 - -
Total 21,598 19,838 158 26
Analysis of expected credit losses is included in note 18.
The movements in Group contract related balances in the year are as follows:
Year Year
ended ended
31 December
31 December
2023 2022
Contract cost assets £'000 £'000
Opening balance 3,952 3,815
Amortised to income statement (1,774) (1,115)
Incurred in the year 1,741 1,252
Closing balance 3,919 3,952
15. Cash and cash equivalents
Group Company
31 December 31 December 31 December 31 December
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Cash at bank and in hand 16,800 16,683 86 69
16. Lease liabilities
Group Company
31 December 31 December 31 December 31 December
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current 907 821 - -
Non-current 646 926 - -
Total 1,553 1,747 - -
Leases
The group has entered into lease contracts in respect of property in the
jurisdictions from which it operates, use of data centres and vehicles which
are typically for terms of 3 to 5 years. In respect of data centre contracts
there are options to extend the initial period with these factored into the
liabilities where the group plans to use these for a longer period. For
property leases, it is customary for lease contracts to be reset periodically
to market rental rates. Leases of equipment, data centre usage and vehicles
comprise only fixed payments over the lease terms.
Right of use assets, additions and amortisation are included in note 9.
Interest expenses relating to lease liabilities are included in note 6.
Other amounts relating to leases were as follows:
31 December 31 December
2023 2022
£'000 £'000
Short term lease expense 46 11
Total cash outflow for leases 1,163 979
The maturity of lease liabilities at 31 December 2023 were as follows:
Property Equipment and vehicles Total
£'000 £'000 £000
Within 1 year 711 196 907
1-2 years 370 85 455
2-5 years 174 17 191
Total 1,255 298 1,553
The maturity of lease liabilities at 31 December 2022 were as follows:
Property Equipment and vehicles Total
£'000 £'000 £000
Within 1 year 548 273 821
1-2 years 450 160 610
2-5 years 267 49 316
Total 1,265 482 1,747
17. Trade and other payables
Group Company
31 December 31 December 31 December 31 December
2022
2022
2023 2023
£'000 £'000 £'000 £'000
Current
Trade payables 6,372 4,637 63 7
Taxation and social security 2,612 1,963 33 34
Amounts owed to group undertakings - 14,231 16,206
Other payables 556 1,447 205 1,006
Accruals 4,195 4,316 902 675
Contract liabilities 18,895 16,820 - -
Total 32,630 29,183 15,434 17,928
Non-current
Contract liabilities 15,587 16,463 - -
Deferred grant income 114 152 - -
Accruals - 283 - -
Total 15,701 16,898 - -
Total 48,331 46,081 15,434 17,928
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 2023 £'000 £'000 £'000 £'000 £'000 £'000
Contract liabilities 19,448 9,134 4,112 1,364 424 34,482
Less than one year 1-2 years 2-3 years 3-4 years 4-5 years Total
At 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000
Contract liabilities 16,820 8,962 4,919 1,986 596 33,283
The movements in Group contract related balances in the year are as follows:
Year Year ended
31 December
ended
31 December 2022
2023
£'000 £'000
Revenue related contract liabilities
Opening balance (33,283) (31,465)
Invoiced in the year (42,813) (39,178)
Recognised as revenue in the year 41,614 37,360
Closing balance (34,482) (33,283)
18. Financial Instruments
Financial risk management
The determination of financial risk management policies and the treasury
function is managed by the CFO. Policies are set to reduce risk as far as
possible without unduly affecting the operating effectiveness of the Group.
The Group's activities expose it to a variety of financial risks, the most
significant being credit risk, liquidity risk and interest rate risk together
with a degree of foreign currency risk as discussed below.
Categories of financial instruments
The Group has the below categories of financial instruments:
31 December 31 December
2023 2022
Recognised at amortised cost £'000 £'000
Cash and bank balances 16,800 16,683
Trade receivables - net 15,184 13,438
Other receivables 1,222 1,163
Total financial assets 33,206 31,284
Trade payables 6,372 4,637
Other payables 4,751 6,046
Lease liabilities 1,553 1,747
Total financial liabilities 12,676 12,430
There were no assets or liabilities at 31 December 2023 or 2022 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 24% (2022: 27%) of the trade
receivable invoiced balance, credit risk with respect to accounts receivable
is dispersed due to the large number of customers. Collateral is not required
for accounts receivable. The credit worthiness of customers with balances in
trade receivables not yet due has been assessed as high.
The aging of past due trade receivables according to their original due date
is detailed below:
31 December 31 December
2023 2022
Past due £'000 £'000
0-60 days 5,202 3,903
60-120 days 833 443
121+ days 1,000 499
Expected credit loss provision (457) (402)
Total 6,578 4,443
A majority of the expected credit loss provision relates to balances that are
more than 120 days overdue. The expected credit loss on balances less than 120
days is immaterial. A substantial majority of the overdue debt has been
collected since the period end date with the unprovided amounts considered to
be collectible.
As at 31 December 2023 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% 5,202 -
60-120 days 0% 833 -
121+ days 46% 1,000 457
Total 7% 7,035 457
As at 31 December 2022 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% 3,903 -
60-120 days 0% 443 -
121+ days 81% 499 402
Total 8% 4,845 402
At each of the Statement of Financial Position dates, a portion of the trade
receivables were impaired and provided for. The movement in the provision for
trade receivables in each of the periods is as follows:
Year Year
ended period ended
31 December
31 December
2023 2022
£'000 £'000
At 1 January 402 303
Provision charged 55 99
At year end 457 402
Oher receivables are considered to bear similar risks to trade receivables or
are owed by government bodies. Hence any expected credit loss on other
financial assets is considered to be immaterial.
Liquidity risk
The Group now funds its business through equity and from cash generated from
operations and also has a £20m undrawn working capital facility available.
Details of the Group's borrowings are discussed in note 16. The Group monitors
and manages cash to mitigate any liquidity risk it may face. The following
table shows the Group's contractual maturities of financial liabilities based
on undiscounted cash flows including interest charges and the earliest date on
which the Group is obliged to make repayment:
Less than one year 1-2 years 2-5 years Total
At 31 December 2023 £'000 £'000 £'000 £'000
Trade and other payables 11,123 - - 11,123
Lease liabilities 1,021 521 193 1,735
Total 12,144 521 193 12,858
Less than one year 1-2 years 2-5 years Total
At 31 December 2022 £'000 £'000 £'000 £'000
Trade and other payables 10,688 - - 10,688
Lease liabilities 883 648 338 1,869
Total 11,571 648 338 12,557
Interest rate risk
There are no borrowings or liabilities subject to variable interest rates.
Currency risk
The Group operates predominantly in the UK with sterling being its functional
currency and has a degree of exposure to foreign currency risk, with this
spread across income and expenses in Euros, US dollars and Australian dollars
for sales and purchasing operations together with an outflow only of Indian
rupees for the costs of development and operational support activity. The
impact of a 10% fluctuation in all foreign exchange rates moving in the same
direction against GBP has been assessed to be an overall impact of up to
£300,000 which would be mitigated by some matching of income and expenses.
The net exposure to the dollar is offset by significant purchases made in
dollars. 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 2023 4,608 710 183 18 5,519
At 31 December 2022 8,317 673 913 559 10,462
Capital management
The Group's capital comprises share capital, share premium and retained
earnings. The Group's objectives when maintaining capital are:
To safeguard the entity's ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other
stakeholders and to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders equity as set out
in the consolidated statement of changes in equity. The longer-term funding
requirements for acquisitions were financed from cash reserves and term bank
debt which was fully repaid from the equity proceeds on listing. All working
capital requirements are financed from existing cash resources.
The Group sets the amount of capital it requires in proportion to risk in
conjunction with the retained earnings. The Group manages its capital
structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt.
19. Pensions
Defined contributions pension scheme
The group operates a number of defined contribution pension schemes.
Contributions totalling £278,000 (2022: £223,000) were included in payables
and due to the defined contribution scheme at the end of the year. The total
contributions are disclosed in note 4.
20. Share capital
Group and Company
Allotted, called up and fully paid At At
31 December
31 December
2023 2022
£ £
115,945,956 ordinary shares of £0.001 each 115,946 115,946
All shares rank equally in respect of income and capital distributions.
21. Share based payments
Options Weighted average exercise price Number
At 1 January 2023 £0.51 3,088,969
Granted in the year £0.001 1,049,226
Lapsed in the year £0.21 (436,221)
At 31 December 2023 £0.38 3,701,974
The Company granted options on 22 July 2021 at an exercise price of £0.001
per share. 100,000 of the options were granted to non-executive directors and
are subject only to continuing employment or good leaver conditions. The fair
value was assessed as £1.35 per option using a Black Scholes model with a
volatility of 60% and risk free rates of 0.5%. They are exercisable three
years after grant for a period of a year. 1,007,848 options were granted to
executive employees subject to a 3 year Total Shareholder Return condition
from the date of grant of a minimum of 8% annual growth in the share price up
to an 18% return for 100% to be exercised. The fair value is assessed as
£0.88 per option based on a discounted Black Scholes pricing model with a
volatility of 60% and risk-free rates of 0.5%. The exercise period is within a
year of the 3 year return being assessed.
1,132,160 options were granted to employees on 23 May 2022 at an exercise
price of £1.45 subject to a 3 year vesting period only. The fair value was
assessed as £0.515 per option using a Black Scholes model with a volatility
of 60% and risk free rates of 2%.
The Company granted options on 28 July 2022 at an exercise price of £0.001
per share. 41,509 of the options were granted to a non-executive director and
are subject only to continuing employment or good leaver conditions. The fair
value was assessed as £1.32 per option using a Black Scholes model with a
volatility of 50% and risk free rates of 2%. They are exercisable three years
after grant for a period of a year. 973,811 options were granted to executive
employees subject to a 3 year Total Shareholder Return condition from the date
of grant of a minimum of 8% annual growth in the share price up to an 18%
return for 100% to be exercised. The fair value is assessed as £0.86 per
option based on a discounted Black Scholes pricing model with a volatility of
50% and risk-free rates of 2%.
The Company granted 1,049,226 options on 22 December 2023 to executive
employees at an exercise price of £0.001 per share. They are exercisable from
31 December 2025 with 10% subject to carbon reduction targets and 90% subject
to a 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 of the carbon reduction target options has been
assessed at an average fair value of £0.17 per option using a Black Scholes
model and the TSR options at £0.88 using a Monte Carlo model, both applying a
volatility of 45%, risk free rates of 3.58% and a dividend yield of 1.93%
The average vesting period for all options is estimated at 3 years and the
share based payment charge was £731,000 for the year (2022: £561,000). The
weighted average vesting period is 1.7 years (2022: 2.2 years).
22. Capital commitments
The Group had capital commitments contracted but not provided for of £119,000
at 31 December 2023 (2022: £1,105,000). The company had no capital
commitments (2022: £nil).
23. Related party transactions
The remuneration of key management personnel and directors is set out in note
4 and transactions with the associate in note 11.
24. Business combinations
On 13 March 2023, the Group acquired the entire share capital of Vita Software
Limited, a provider of fleet logistics services for consideration of
£3,123,000. The goodwill arising of £1,513,000 is attributable to the
workforce, synergies 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 £283,000 in respect of the technology and
£406,000 of customer relationships together with the related deferred
taxation liability of £172,000.
The Vita software business has been transferred and integrated into Microlise
Limited and as such it is not possible to separately identify the post
acquisition results.
Had Vita been consolidated from 1 January 2023 it would have contributed
another £104,000 of revenue and a further profit before tax of £60,000 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 - 689 689
Property, plant and equipment 14 - 14
Cash and cash equivalents 1,120 - 1,120
Receivables 94 - 94
Payables (45) - (45)
Corporation tax (86) - (86)
Deferred taxation liability (4) (172) (176)
Net assets acquired 1,610
Goodwill 1,513
3,123
Consideration satisfied by:
Cash 2,923
Deferred consideration (payable March 2024) 200
3,123
The Group incurred acquisition related costs of £0.1m 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.
The Group also acquired another small business in the year comprising only
intangible assets of £163,000.
25. Subsequent events
On 10 January 2024, the group acquired 100% of Enterprise Software Systems
Limited, a leading provider of transportation management system solutions.
The acquisition is expected to further expand Microlise's suite of transport
technology solutions. The total consideration of £11.4m includes £0.85m of
deferred consideration payable six months from the date of acquisition. The
acquisition was funded from the Group's cash resources and the identifiable
assets acquired included £4.4m cash of which £3.5m is considered to be
excess cash. Synergies are expected to arise by combining the management of
operations and providing a broader service offering to all Group customers.
The draft initial fair value of the assets and liabilities acquired are as
follows:
Fair value
£'000
Intangible assets - customer, tradename, technology 3,708
Property, plant and equipment 998
Cash and cash equivalents 4,373
Receivables 1,032
Payables (3,044)
Lease liabilities (500)
Corporation tax (124)
Deferred taxation liability (1,017)
Net assets acquired 5,426
Goodwill 6,010
11,436
Consideration satisfied by:
Cash 10,586
Deferred consideration 850
11,436
Acquisition costs of £0.2m were incurred relating to the acquisition and
expensed in the year ended 31 December 2023. Other than the acquisition
costs the acquisition was not included in the reported results for the year
ended 31 December 2023.
26. Statutory financial statements
The financial information for the year ended 31 December 2023 contained in
this preliminary announcement has been audited and was approved by the Board
on 8 April 2024. The financial information in this statement does not
constitute the Company's statutory financial statements for the years ended 31
December 2023 or 2022 within the meaning of section 435 of the Companies Act
2006. The financial information for 2023 and 2022 is derived from the
statutory financial statements for 2022, which have been delivered to the
Registrar of Companies, and 2023, which will be delivered to the Registrar of
Companies and issued to shareholders in April 2024. The auditors have reported
on the 2023 and 2022 financial statements; their report was unqualified and
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report.
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