REG - Quartix Technologies - Interim Results
31/07/2023 07:00
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RNS Number : 6285H Quartix Technologies PLC 31 July 2023
31 July 2023
Quartix Technologies plc
("Quartix", "the Group" or "the Company")
Interim Results
Quartix Technologies plc (AIM:QTX), a leading supplier of subscription-based
vehicle tracking systems, analytical software and services, is pleased to
announce its unaudited results for the half year ended 30 June 2023.
Restatement of comparatives
All comparative monetary amounts for 2022 have been restated in line with a
change in policy in the recognition of equipment, installation and carriage
costs associated with contracts with customers under IFRS 15: 'Revenue from
Contracts with Customers' (See note 1: Summary of significant accounting
policies).
Financial highlights:
· Group revenue increased by 10% to £14.6m (2022: £13.3m)
o Fleet revenue increased by 13% to £14.5m (2022: 12.8m)
o Fleet revenue represented 98.9% of total revenue (2022: 95.8%)
o Insurance revenue decreased by 70% to £0.2m (2022: 0.6m)
· Adjusted EBITDA(1) remained constant at £2.7m (2022: £2.7m)
· Operating profit decreased by 7% to £2.4m (2022: £2.6m)
· Profit before tax decreased by 7% to £2.4m (2022: £2.6m)
· Diluted earnings per share of 4.16p (2022: 4.63p)
· Free cash flow(2) decreased by 26% to £1.4m (2022: £1.9m)
· Interim dividend of 1.50p per share proposed (2022: 1.50p)
(1 ) Earnings before interest, tax, depreciation, amortisation and share
based payment expense (see note 4)
(2 ) Cash flow from operations after tax and investing activities
Principal activities and performance measures
The Group's main strategic objective is to grow its subscription base and
develop the associated annualised recurring revenue.
Annualised recurring revenue has increased by 8% year on year (see definition
in KPI table below). Annualised recurring revenue is a forward-looking key
performance measure, and it is pleasing that it grew by £2.1m on a constant
exchange rate to £28.0m at 30 June 2023, compared to 30 June 2022.
The Key Performance Indicators used by the Board to assess the performance of
the business are listed below and discussed in the Chairman's Statement.
Key Performance Indicators ("KPIs")
Period ended 30 June 2023 2022 % change
Fleet subscriptions1 (new units) 33,547 32,085 5
Fleet subscription base(2) (units) 251,787 221,800 14
Fleet customer base(3) 26,337 24,408 8
Fleet gross attrition (annualised)(4) (%) 13.5 11.6
Annualised recurring revenue(5) (£'000) 27,972 25,833 8
Fleet invoiced recurring revenue(6) (£'000) 13,788 12,342 12
Fleet revenue (£'000) 14,456 12,775 13
Price erosion(7) (%) 4.6 4.8
( )
(1) New vehicle tracking units subscriptions added to the subscription base in
6 months to 30 June before any attrition
(2) The number of vehicle tracking units subscribed to the Group's fleet
tracking services, including units waiting to be installed for which
subscription payments have started or are committed
(3) The number of customers associated with the fleet subscription base
(4) The number of new vehicle tracking unit subscriptions, less the increase
in the subscription base, expressed as a percentage of the mean subscription
base
(5) Annualised data services revenue for the subscription base at 30 June,
before deferred revenue, including revenue for units waiting to be installed
for which subscription payments have already started or are committed, with
comparative June 2022 measured at a constant exchange rate.
(6) Invoiced subscription charges before provision for deferred revenue
(7) The decrease in average subscription price of the base expressed as a
percentage of the average subscription price at 30 June, with comparative June
2022 measured at a constant exchange rate.
As discussed in the 2022 financial statements, the Group implemented a new
policy in 2022 which recognised hardware and associated installation and
carriage costs over their expected initial contract term (typically 2 years),
on a systematic basis that more accurately reflects the revenue stream
generated by them. The capitalisation and subsequent amortisation of these
incremental costs are more aligned to the core principles in IFRS 15 and make
the reported EBITDA more comparable with that reported by companies with a
similar business model.
This approach simplifies the presentation of the Group's results. Previously,
the Group included an
additional voluntary disclosure, separating customer acquisition cost, being
the investment for new
customer contracts, and Fleet telematics services, for recurring revenue and
repeat contracts with existing customers, in order to highlight the different
cost structures within the business. Following the change in accounting policy
this analysis is no longer considered necessary. However, overheads on the
face of the Consolidated Statement of Comprehensive Income have been split
between Sales & Marketing expenses and Administration expenses, with Sales
& Marketing expenses including the costs of customer acquisition being the
investment in marketing expenditure and payroll costs for the sales teams.
Richard Lilwall, Chief Executive Officer of Quartix, commented:
"The first half of 2023 saw an increase in Quartix's subscription base
globally, leading to a £2.1m growth in annualised recurring revenues to
£28.0m. This promising growth occurred despite increased liquidations and
customers downsizing their fleets causing slightly higher attrition,
highlighting the resilience of our business model.
Subscription growth was seen across all markets. In the UK, the growth was
backed by robust customer acquisition, leading to a 6% subscription increase
and a 3% rise in total revenue. European markets, especially France, exhibited
stellar performance with a noteworthy subscription surge.
A redirection of investment to European countries with stronger return on
investment meant a reduced and narrower US focus resulting in steady, if
modest, growth for the region.
Quartix introduced two valuable analytical software features; in 2022 with
EVolve and in 2023 with Quartix Check. Both products have been well-received,
and Quartix is set to amplify its efforts to upsell these offerings in H2
2023. This promising momentum and product innovation positions Quartix
optimistically for the rest of the year."
For further information, please contact:
Quartix (www.quartix.com (http://www.quartix.com)
/en-gb)
01686 806 663
Richard Lilwall, Chief Executive Officer
Emily Rees, Chief Financial Officer
finnCap (Nominated Adviser and
Broker)
020 7200 0500
Matt Goode / Seamus Fricker (Corporate Finance)
Alice Lane / Sunila de Silva (Corporate Broking)
The information communicated in this announcement is inside information for
the purposes of Article 7 of Regulation 596/2014.
Interim Financial Results Report
The Group's Interim Financial Statements for the 6 months ended 30 June 2023
are available in the "Investors" section of our website at:
www.quartix.com/en-gb/company/investors
About Quartix
Founded in 2001, Quartix is a leading supplier of subscription-based vehicle
tracking systems, software and services. The Group provides an integrated
tracking and telematics data analysis solution for fleets of commercial
vehicles and motor insurance providers which improves productivity and safety
and which lowers costs by capturing, analysing and reporting vehicle and
driver data.
Quartix is based in the UK and is listed on the AIM market of the London Stock
Exchange (AIM:QTX).
Chairman's Statement
Introduction
I am pleased to report that growth of the subscription base, both in the UK
and overseas, continued to drive an increase in annualised recurring revenues,
which increased by £2.1m, at a constant currency rate, to £28.0m at 30 June
2023. Group revenue grew by 10% during the first half of 2023.
This growth was achieved despite adverse economic headwinds impacting the
confidence, and additional fleet investment of existing customers, with
rolling UK van registrations at the beginning of 2023 matching record lows
seen during the COVID-19 pandemic. In addition, attrition has been higher at
13.5% (2022: 11.6%), primarily due to an increase in business closures and
customers downsizing their fleet sizes. Price erosion on a constant currency
basis continued to improve and was 4.6% (2022: 4.8%).
Despite these market difficulties, each geographical market registered
increases in the subscription base for the period (see table below). In the
UK, where economic challenges are more significant due to the larger
subscription base, growth was supported by a strong performance in new
customer acquisition, with 6% year-on-year subscription base growth, and an
increase in total revenue of 3% to £9.1m (2022: £8.9m).
We also recorded our highest results in Europe following accelerated
investment into the region over the past two years. Year-on-year subscription
base growth in France was excellent at 32%, and revenue increased by 25% to
€3.7m (2022: €3.0m).
Year-on-year subscription base growth in the other European territories was
also very strong at 53% respectively as our operations continue to grow in
Spain, Italy and Germany.
As part of a review on ensuring Quartix focuses on profitable growth, the
Group has redirected part of the investment and resource from our wider US
business in Q1 of 2023 to European territories that present improved returns
on investment in the shorter term. The US strategy going forward will
therefore have a narrower, field sales approach, focused specifically on
Texas. As a result the growth was more modest at 2% year on year.
Subscription Base ** New subscriptions Customers ** New Customers
United Kingdom
2023 140,991 13,223 11,378 718
2022 133,020 14,814 11,520 800
Change 7,971 (1,591) (142) (82)
France
2023 61,298 11,733 7,628 1,159
2022 46,387 8,178 6,262 1,157
Change 14,911 3,555 1,366 2
Other European Territories
2023 19,146 4,805 3,359 722
2022 12,505 3,856 2,560 740
Change 6,641 949 799 (18)
USA
2023 30,352 3,786 3,972 496
2022 29,888 5,237 4,066 723
Change 464 (1,451) (94) (227)
** Comparatives are June 2022
Quartix continues to build strong functionality into its upsell capabilities.
EVolve, launched in Q4 2022, uses fleet analytics to assess migration
opportunities to all-electric vehicle fleets. Initial upsell to existing
customers at Quartix has been good in 2023, with adopters from multiple
sectors, but as anticipated local government has been an early mover. Full
case studies on these results can be found on the Quartix website. The second,
Quartix Check, launched to the market in full in 2023, is a walk-around
vehicle condition monitoring tool. Whilst Quartix Check is in early stages,
the Board continue to focus on how best to maximise the exposure to this new
product across our customer base.
Financial Performance
Group revenue for the period increased by 10% to £14.6m (2022: £13.3m);
total fleet revenue now represents 98.9% of total revenue (2022: 95.8%).
Adjusted EBITDA remained constant at £2.7m. Both operating profit and profit
before tax for the period fell to £2.4m (restated 2022: £2.6m). Variances
on profit were driven by an exchange rate variance of £0.2m, a £0.2m
increase in the payroll costs associated with the Services cost centre after
the Jan 2023 inflationary pay rises that were awarded, rather than additional
headcount, and an increase in share based payment costs of £0.2m, which does
not affect adjusted EBITDA. Sales and marketing costs have remained flat
year-on-year on a cash basis, but have improved as a percentage of sales.
Cash flow from operations after tax and investing activities, or free cash
flow, reduced to £1.4m (2022: £1.9m), primarily due to a higher tax payment
in April 2023 following the change in accounting policy. For tax purposes the
transition to the new accounting policy in 2022 caused an exceptional decrease
in deductible costs; adding back costs already available for deduction in
prior years, which led to an increased tax charge for the year. This caused
the final instalment in April 2023 to be £0.5m higher than last year. Net
cash decreased to £3.2m at 30 June 2023 (2022: £3.9m), following the larger
tax payment of £0.6m in April. To further bolster free cash flow, one of the
key priorities for the business is improving stock days of the business in the
second half, now that pressures from the component shortages from the past
couple of years have eased.
Basic earnings per share were 4.21p (restated 2022: 4.66p). On a diluted basis
earnings per share were 4.16p (restated 2022: 4.63p).
Dividend Policy and Recommended Interim Dividend
Subject to satisfactory performance and market conditions, the Board will
consider a final dividend for the year with the aggregate of the interim and
final dividend set at approximately 50% of cash flow from operating
activities, which is calculated after taxation paid but before capital
expenditure. The Board will also consider distributing the excess of cash
balances over £2m by way of supplementary dividends. The surplus cash would
be calculated by taking the year end cash balance and deducting the proposed
regular dividend. The policy will be subject to review.
The Board has recommended an interim dividend of 1.50p (2022: 1.50p) per
share, £0.7m in aggregate. The amount is in line with the Group's stated
policy on ordinary dividend payment. This was approved by the Board on 28 July
2023. The interim dividend will be paid on 6 October 2023 to shareholders on
the register on 11 August 2023. The ex-dividend date is therefore 10 August
2023.
Governance and the Board
The Board is comprised of three Non-Executive Directors: myself, Jim Warwick,
Russell Jones and two Executive Directors: Richard Lilwall and Emily Rees
following Laura Seffino stepping down from the Board on 10 July 2023.
For further details regarding Corporate Governance and the Board, please see
the "Investors" section of our website
(www.quartix.com/en-gb/company/investors).
Outlook
Quartix's outlook for 2023 continues to be positive. Sales execution
excellence continues to be a key focus point for senior management, using
tools invested in in 2022 to drive further resource into channels and
territories that will provide a profitable return. Quartix has a strong sales
pipeline for the second half for both our core platform and EVolve.
The high levels of recurring revenue and opportunities to grow our operations
in the UK and Europe underpins our confidence for the rest of the year and
beyond, although the Board is mindful of a more uncertain economic climate in
the medium term.
Management are closely monitoring the timings for the sunsetting of the 2G
networks in the UK and European markets. Since 2023 all new units installed
are 4G compatible products, which was an operational decision to minimise the
cost of upgrading our customer's hardware in the future.
Considering the above outlook, the Group expects an accelerated financial
performance for the remainder of 2023, and its strong financial position means
the Board are confident in achieving market expectations in 2023.
Paul Boughton
Chairman
Consolidated Statement of Comprehensive Income
30 June 30 June 31 December
2023 2022 2022
Unaudited Restated Audited
Unaudited
Notes £'000 £'000 £'000
Revenue 2 14,623 13,333 27,517
Cost of sales (4,477) (3,675) (7,815)
Gross profit 10,146 9,658 19,702
Sales & Marketing expenses (3,182) (3,149) (6,429)
Administrative expenses (4,549) (3,920) (7,720)
Operating profit 2,415 2,589 5,553
Finance income receivable 9 3 8
Finance costs payable (15) (16) (31)
Profit for the period before taxation 2,409 2,576 5,530
Tax expense (373) (289) (489)
Profit for the period 2,036 2,287 5,041
Other Comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss:
Exchange difference on translating foreign operations 3 (139) (169)
Other comprehensive income for the year, net of tax 3 (139) (169)
Total comprehensive income attributable to the equity shareholders of Quartix 2,039 2,148 4,872
Technologies plc
Adjusted EBITDA 3 2,689 2,675 6,051
Earnings per ordinary share (pence) 4
Basic 4.21 4.66 10.42
Diluted 4.16 4.63 10.38
Consolidated Statement of Financial Position
Company registration number: 06395159
30 June 2023 30 June 31 December 2022
2022
Unaudited Restated Unaudited Audited
Unaudited
Assets Notes £'000 £'000 £'000
Non-current assets
Goodwill 14,029 14,029 14,029
Property, plant and equipment 786 834 845
Deferred tax asset 223 - 197
Contract cost assets 927 665 752
Total non-current assets 15,965 15,528 15,823
Current assets
Inventories 1,585 1,733 1,989
Contract cost assets 4,259 3,370 3,536
Trade and other receivables 3,730 3,485 3,692
Cash and cash equivalents 3,249 3,897 5,063
Total current assets 12,823 12,485 14,280
Total assets 28,788 28,013 30,103
Current liabilities
Trade and other payables 3,509 3,691 3,650
Provisions 147 640 543
Contract liabilities 3,870 3,476 3,499
Current tax liabilities 629 269 896
8,155 8,076 8,588
Non-current liabilities
Lease liabilities 589 609 617
Deferred tax liabilities - 485 -
589 1,094 617
Total liabilities 8,744 9,170 9,205
Net assets 20,044 18,843 20,898
Equity
Called up share capital 6 484 484 484
Share premium account 6 6,332 6,332 6,332
Equity reserve 470 373 342
Capital redemption reserve 4,663 4,663 4,663
Translation reserve (335) (308) (338)
Retained earnings 8,430 7,299 9,415
Total equity attributable to equity shareholders of Quartix Technologies plc 20,044 18,843 20,898
Consolidated Statement of Changes in Equity
Share capital Share premium account Capital redemption reserve Equity reserve Translation reserve Retained earnings Total equity
£'000 £,000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 484 6,332 4,663 380 (170) 6,394 18,083
IFRS 15 adjustment - - - - 1 1,961 1,962
Restated 31 December 2021 484 6,332 4,663 380 (169) 8,355 20,045
Shares issued - - - - - - -
Increase in equity reserve in relation to options issued - - - 40 - - 40
Adjustment for settled options - - - (3) - - (3)
Recycle of equity reserve to P&L - - - (44) - 44 -
Dividends paid - - - - - (3,387) (3,387)
Transactions with owners - - - (7) - (3,343) (3,350)
Foreign currency translation differences - - - - (139) - (139)
Profit for the period - - - - - 2,287 2,287
Total comprehensive income - - - - (139) 2,287 2,148
Balance at 30 June 2022 484 6,332 4,663 373 (308) 7,299 18,843
Shares issued - - - - - - -
Increase in equity reserve in relation to options issued - - - 53 - - 53
Adjustment for settled options - - - (82) - 85 3
Recycle of equity reserve to P&L - - - (2) - 2 -
Dividend paid - - - - - (725) (725)
Transactions with owners - - - (31) - (638) (669)
Foreign currency translation differences - - - - (30) - (30)
Profit for the period - - - - - 2,754 2,754
Total comprehensive income - - - - (30) 2,754 2,724
Balance at 31 December 2022 484 6,332 4,663 342 (338) 9,415 20,898
Increase in equity reserve in relation to options issued - - - 156 - - 156
Adjustment for exercised options - - - (28) - 28 -
Dividend paid - - - - - (3,049) (3,049)
Transactions with owners - - - 128 - (3,021) (2,893)
Foreign currency translation differences - - - - 3 - 3
Profit for the period - - - - - 2,036 2,036
Total comprehensive income - - - - 3 2,036 2,039
Balance at 30 June 2023 484 6,332 4,663 470 (335) 8,430 20,044
Consolidated Statement of Cash Flows
30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Cash generated from operations 5 2,090 1,947 4,170
Taxes paid (711) (68) (320)
Cash flow from operating activities 1,379 1,879 3,850
Investing activities
Additions to property, plant and equipment (5) (25) (68)
Interest received 8 3 8
Cash flow from investing activities 3 (22) (60)
Cash flow from operating activities after investing activities (free cash 1,382 1,857 3,790
flow)
Financing activities
Repayment of lease liabilities (82) (73) (151)
Dividend paid (3,049) (3,387) (4,112)
Cash flow from financing activities (3,131) (3,460) (4,263)
Net changes in cash and cash equivalents (1,749) (1,603) (473)
Cash and cash equivalents, beginning of period 5,062 5,414 5,414
Exchange differences on cash & cash equivalents (64) 86 122
Cash and cash equivalents, end of period 3,249 3,897 5,063
Notes to the Financial Statements (unaudited)
1 Significant accounting policies
Basis of preparation
The financial information has been prepared in accordance with recognition and
measurement principles of International accounting standards in conformity
with the requirements of the Companies Act 2006 ("IFRS (UK)") and in
accordance with those parts of the Companies Act 2006 that are relevant to
companies which report under IFRS (UK). The accounting policies adopted are
consistent with those of the financial statements for the year ended 31
December 2022, as described in those financial statements. In preparing these
interim financial statements, the Board has not sought to adopt IAS 34
"Interim financial reporting".
The figures for the six-month periods ended 30 June 2023 and 30 June 2022 have
not been audited. The monetary amounts for the six-months ended 30 June 2022
have been restated in line with a change in policy in the recognition of
equipment, installation and carriage costs associated with contracts with
customers under IFRS 15: 'Revenue from Contracts with Customers' (see Note 7).
The figures for the year ended 31 December 2022 have been extracted from, but
do not constitute, the consolidated financial statements of Quartix
Technologies plc for that year. The original financial statements for the year
ended 31 December 2022 have been delivered to the Registrar of Companies and
included an Auditors' Report, which was unqualified and did not contain a
statement under section 498(2) or section 498(3) of the Companies Act 2006.
Going concern
The consequences of the war in Ukraine and the coronavirus pandemic have
materially and adversely disrupted the global economic situation. The Company
is taking appropriate action to monitor, address and mitigate the
uncertainties and increased risks facing the Company as a result and have
taken these additional uncertainties into account in assessing the going
concern position.
The Board takes all reasonable steps to review and consider any factors that
may affect the ability of the Group to continue as a going concern. The
Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, show that the Group is able to generate
sufficient liquidity. The Group enjoys a strong income stream from its
subscription base while current liabilities include a substantial provision
for deferred revenue which is a non-cash item.
After assessing the forecasts and liquidity of the business, for the next 18
months and the longer term strategic plans, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group therefore continues to adopt
the going concern basis in preparing consolidated financial statements.
Contract Cost Assets
The Group incurs costs to fulfil it's customer contracts, which include
commission costs, equipment costs, installation costs and carriage costs
amongst other costs. Costs to fulfil a customer contract are divided into:
· costs that give rise to an asset; and
· costs that are expensed as incurred.
When determining the appropriate accounting treatment for such costs, the
Group firstly considers any other applicable standards. If those standards
preclude capitalisation of a particular costs, then an asset is not recognised
under IFRS 15.
If other standards are not applicable to costs to fulfil a customer contract,
the Group applies the following criteria which, if met, result in
capitalisation of costs that:
· directly relate to a contract;
· generate or enhance resources that will be used in satisfying (or in
continuing to satisfy)
performance obligations in the future; and
· are expected to be recovered
The Group has determined that, where the relevant criteria are met, that the
commission costs, equipment costs, installation costs and carriage costs are
likely to qualify to be capitalised as costs to fulfil a customer contract.
The Contract Cost Assets are amortised over the expected contract period on a
systematic basis that reflects the revenue stream generated by them, and this
cost is included in cost of sales. The expected contract term has been
calculated as an average of the population of new orders in the year, and this
calculation will be reviewed annually.
At each reporting date, the Group determines whether or not the Contract Cost
Assets are impaired by comparing the carrying amount of the asset with the
remaining amount of consideration that the Group expects to receive less the
costs that relate to providing services under the relevant contract.
2 Revenue
Revenues from external customers in the Group's major markets have been
identified based on the customer's geographical location and are disclosed
below.
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Geographical analysis by destination
United Kingdom 9,136 8,871 17,760
France 3,269 2,523 5,410
New European territories 527 433 1,060
United States of America 1,692 1,506 3,287
14,624 13,333 27,517
3 Adjusted earnings
before interest, tax, depreciation and amortisation (EBITDA)
30 June 2023 30 June 2022 Restated 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating profit 2,415 2,589 5,553
Depreciation on property, plant and equipment, owned 41 75 124
Depreciation on property, plant and equipment, right of use 77 65 133
EBITDA 2,533 2,729 5,810
Share-based payment expense (incl. cash settled) 156 (54) (1)
Cost of living payments - - 151
Provision for replacement of 3G units - - 91
Adjusted EBITDA 2,689 2,675 6,051
4 Earnings per share
The calculation of the basic earnings per share is based on the profits
attributable to the shareholders of Quartix Technologies plc divided by the
weighted average number of shares in issue during the period. The earnings per
share calculation relates to continuing operations of the Group.
Profits attributable to shareholders Weighted average number of shares Basic profit per share amount Fully diluted Diluted profit per share amount
weighted average number of shares
£'000 in pence in pence
Earnings per ordinary share
Period ended 30 June 2023 2,039 48,382,178 4.21 49,025,795 4.16
Period ended 30 June 2022 (restated) 2,253 48,382,436 4.66 48,628,750 4.63
Year ended 31 December 2022 5,041 48,387,354 10.42 48,599,519 10.38
Adjusted earnings per ordinary share
Year ended 31 December 2022 5,283 48,387,354 10.92 48,599,519 10.88
For diluted earnings per share, the weighted average number of ordinary shares
is adjusted to assume the conversion of all dilutive potential ordinary
shares. Dilutive potential ordinary shares are those share options where the
exercise price is less than the average market price of the Company's ordinary
shares during the period.
To illustrate the underlying earnings for the year, the table above includes
adjusted earnings per ordinary share, which for 31 December 2022 excludes the
£0.1m re-estimate of the 3G replacement unit provision and the £0.2m cost of
living payments considered to be one off.
5 Note to the cash flow statement
Cash flow adjustments and changes in working capital:
30 June 2023 30 June 2022 31 December 2022
Unaudited Restated Unaudited Audited
£'000 £'000 £'000
Profit before tax 2,409 2,577 5,530
Foreign exchange 78 (209) (256)
Depreciation 118 140 257
Interest income (8) (3) (8)
Lease interest expense 15 16 31
Loss on disposal of fixed asset - 28 29
Share based payment expense 156 38 92
Operating cash flow before movement in working capital 2,768 2,587 5,675
(Increase)/decrease in trade and other receivables (268) (331) (516)
(Increase)/decrease in contract cost assets (899) (258) (524)
Decrease/(increase) in inventories 405 (403) (659)
(Decrease)/Increase in trade and other payables (312) 81 (99)
(Decrease)/Increase in contract liabilities 396 272 293
Cash generated from operations 2,090 1,948 4,170
6 Equity
Number of ordinary shares of £0.01 each Share capital £'000 Share premium £'000
Allotted, called up and fully paid
At 1 January 2022 48,380,034 484 6,332
Shares issued 12,144 - -
At 30 June 2022 48,392,178 484 6,332
Shares issued - - -
At 31 December 2022 48,392,178 484 6,332
Shares issued - - -
At 30 June 2023 48,392,178 484 6,332
There were no shares issued in the period to 30 June 2023.
7 Explanation of change in accounting policy
relating to IFRS 15
As highlighted in note 1, in 2022 the Group changed
its accounting policy in relation to costs in obtaining customer contracts.
For many years the Company has applied a very conservative accounting policy
of immediately expensing hardware and associated installation and carriage
costs. The new policy recognises these incremental costs over their expected
contract term, on a systematic basis that more accurately reflects the revenue
stream generated by them. The capitalisation and subsequent amortisation of
the incremental costs will be more aligned to the core principles in IFRS 15
and make the reported EBITDA more comparable with that reported by companies
with a similar business model.
As at 31 December 2021, the restatement of the Group's net assets was an
increase of £1,962,000 to £20,045,000 from the inclusion of a contract cost
assets of £2,550,000 under IFRS 15, being previously recognised as equipment,
installation and carriage costs incurred at the inception of the customer
contract and now being recognised over the contractual period, net of a
deferred tax liability of £588,000.
The impact of capitalising incremental costs as per IFRS 15 on the financial
statements:
A Consolidated Statement of Financial Position
1 January 2022 As previously reported Adjustments As Restated
£'000 £000 £'000
Deferred tax assets 131 (131) -
Contract cost assets 1,185 2,550 3,735
Other assets 24,823 - 24,823
Total assets 26,139 2,419 28,558
Deferred tax liabilities - (457) (457)
Other liabilities (8,056) - (8,056)
Total liabilities (8,056) (457) (8,513)
Retained earnings 6,394 1,961 8,355
Other 11,689 1 11,690
Total Equity 18,083 1,962 20,045
30 June 2022 As previously reported Adjustments As Restated
£'000 £000 £'000
Deferred tax assets 26 (26) -
Contract cost assets 1,263 2,772 4,035
Other 23,978 - 23,978
Total assets 25,267 2,746 28,013
Deferred tax liabilities - (485) (485)
Other (8,685) - (8,685)
Total liabilities (8,685) (485) (9,170)
Retained earnings 5,081 2,218 7,299
Other 11,501 43 11,544
Total Equity 16,582 2,261 18,843
B Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022 As previously reported Adjustments As Restated
£'000 £000 £'000
Revenue 13,333 - 13,333
Cost of sales (3,855) 180 (3,675)
Other expenses (7,082) - (7,082)
Tax expense (366) 77 (289)
Net profit 2,030 257 2,287
Other comprehensive income (181) 42 (139)
Total Comprehensive income 1,849 299 2,148
Earnings per ordinary share (pence) 4.20 0.53 4.66
Diluted earnings per ordinary share (pence) 4.17 0.53 4.63
C Consolidated Statement of Cash Flows
For the year ended 30 June 2022 As previously reported Adjustments As Restated
£'000 £000 £'000
Profit 2,030 257 2,287
Adjusted for:
- tax expense 366 (77) 289
Profit before tax 2,396 180 2,576
Changes in contract cost assets (78) (180) (258)
Other (449) - (371)
Cash generated from operations 1,947 - 1,947
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