Notes to the cash flow statements

 

A. Cash generated from operations

The reconciliation of profit/(loss) for the period to cash generated from operations is set out below:

 

		Year ended 31 December	18 month period ended 31 December
		2022	2021
		£'000	£'000
Profit/(loss) for the period		1,353	(2,218)
Adjustments for:
Depreciation		2,212	3,085
Amortisation		3,036	3,803
Share based payments		561	129
Foreign exchange movement		-	(23)
Net interest costs		267	833
Share of loss of associate		478	132
Tax charge		86	2,213
		7,993	7,954
Decrease in inventories		306	663
Increase in trade and other receivables		(2,545)	(110)
Increase in trade and other payables		3,965	625
Cash generated from operations		9,719	9,132

 

 

B. Analysis of net funds/(debt)

 

 

	At 1 January	Cash flow	Non-cash changes	At 31 December
	2022			2022
	£'000	£'000	£'000	£'000
Lease liabilities	(1,711)	979	(1,015)	(1,747)
Liabilities arising from financing activities	(1,711)	979	(1,015)	(1,747)
Cash and cash equivalents	13,210	3,473	-	16,683
Net funds	11,499	4,452	(1,015)	14,936

 

 

	At 1 July	Cash flow	Non-cash changes	At 31 December
	2020			2021
	£'000	£'000	£'000	£'000
Bank loans	(16,839)	16,975	(136)	-
Other loans	(729)	729	-	-
Lease liabilities	(1,369)	1,291	(1,633)	(1,711)
Liabilities arising from financing activities	(18,937)	18,995	(1,769)	(1,711)
Cash and cash equivalents	10,061	3,172	(23)	13,210
Net (debt)/funds	(8,876)	22,167	(1,792)	11,499

 

Major non cash items

£951,000 of additions to right of use assets and lease liabilities are included in non cash movements in the year ended 31 December 2022 (2021: £1,506,000). The remaining non cash movements relate to the unwinding of the discount on other payables.

 

 

Summary Of Significant Accounting Policies

 

General information    
 
Microlise Group plc is a holding and management services company. Its subsidiaries are telematics businesses providing technological transport solutions that enable customers to reduce costs and environmental impact by maximising the efficiency of their transportation. The company is a public limited company, traded on the Alternative Investment Market ("AIM") of the London Stock Exchange, and incorporated and domiciled in England. The address of the registered office is Farrington Way, Eastwood, Nottingham, NG16 3AG.

 Accounting policies

A.         Basis of preparation

The financial information for the year ended 31 December 2022 and the year ended 31 December 2021 does not constitute the company's statutory accounts for those years.

The statutory accounts for the year ended 31 December 2022 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The auditors' reports on the accounts for 31 December 2022 and 31 December 2021 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The financial statements have been prepared in accordance with the historical cost convention and UK International Accounting Standards ('UK IFRS'). The stated accounting policies have been consistently applied to all periods presented.

The parent company financial statements have been prepared under applicable United Kingdom Accounting Standards (FRS101). The following FRS 101 disclosure exemptions have been taken in respect of the parent company only information:

·      IAS 7 Statement of cash flows;

·      IFRS 7 Financial instruments disclosures; and

·      IAS 24 Key management remuneration.

 

The financial statements including the notes are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Group, except where otherwise indicated.

 

The principal accounting policies adopted in preparation of the financial statements are set out below. The policies have been consistently applied to all periods presented, unless otherwise stated.

 

Judgements made by the Directors in the application of the accounting policies that have a significant effect on the historical financial information and estimates with significant risk of material adjustment in the next year are discussed in note C.

 

Going concern

 

The directors have considered working capital forecasts prepared for the period to December 2024. The Group had cash balances of £16.7m at the year end, no borrowings and a £20m undrawn working capital facility. The Group also has a significant recurring income base with inflationary clauses in the main contracts.

A range of sensitivities have been run on the working capital model, and the directors consider a scenario in which the business will face liquidity issues is remote. As part of the sensitivity analysis the directors have considered the impact of a reduction in turnover from their principal customer and the impact on working capital as well as cost and supply issues that might arise in the context of the current events in Ukraine and are satisfied that the Group has sufficient resources to respond to reasonably foreseeable scenarios. The Directors conclude that a scenario that would result in the need for the Group to require additional funding to be remote.

Based on the forecasts, the Directors are satisfied that the Group can meet its day-to-day cash flow requirements and operate within the terms of its working capital banking facilities if required. Accordingly, the financial statements have been prepared on a going concern basis.

 

 

B.         Accounting policies

Consolidation

The consolidated financial statements include the results of Microlise Group plc and its subsidiary undertakings. The results of the subsidiary undertakings are included from the date that effective control passed to the company.

 

On acquisition, all the subsidiary undertakings' assets and liabilities at that date of acquisition are recorded under purchase accounting at fair value, having regard to condition at the date of acquisition. All changes to those assets and liabilities and the resulting gains and losses that arise after the company gained control are included in the post-acquisition results. Sales, profits and balances between group companies are eliminated on consolidation.

 

The Group has taken advantage of the exemption not to disclose transactions between wholly owned entities in the group.

 

Associates

Entities in which the Group holds a participating interest and over whose operating and financial policies the group exercises a significant influence are treated as associates. In the Group financial statements, associates are accounted for using the equity method.

 

Revenue recognition

Revenue comprises revenue recognised by the Group in respect of goods and services supplied during the year, based on the consideration specified in a contract, exclusive of Value Added Tax and trade discounts.

 

The Group enters into the sale of multi-element contracts, which combine separate performance obligations including hardware, installation, managed service contracts (software-as-a-service or SaaS), software licences, professional services (which includes bespoke software development, project management (incorporating activities including project and installation planning, managing change control and stage boundaries and project reporting),  consultancy, training), and support and maintenance services relating to these products.  In accordance with IFRS 15, these are considered to be distinct. 

 

Each performance obligation is allocated a transaction price based on the stand-alone selling prices.  Where stand-alone prices are not directly observable, they are based on expected cost plus margin.

Revenue is recognised depending upon the revenue stream to which it relates, as follows:

·      The fair value of hardware and installation revenue is recognised at a point in time when control is transferred to the customer on despatch and/or upon installation;

·      Revenue from the SaaS arrangement is recognised over a period of time, based on the term of the contract on a straight line basis.  Revenue recognition over time is considered appropriate based on provisions of IFRS 15 paragraph 35 as the customer simultaneously receives and consumes the benefits provided by the Group.  The contractual term for average SaaS agreements are approximately 5 years;

·      Professional services typically include implementation, configuration, training and other similar services to create optimised interfaces between the Group's software and customers systems.  Revenue from professional services is recognised over a period of time using the input method as professional services are being performed, as this best depicts the timing of how the value is transferred to the customer; and  

·      Support and maintenance turnover is deferred at the point of sale and recognised in the Statement of Comprehensive Income over a period of time of the contractual life, utilising the output method, generally on a straight line basis as the customer simultaneously receives and consumes the benefits provided by the Group.

Invoicing for all revenue streams is undertaken in accordance with the terms of the agreement with the customer.  When an invoice is due for payment at the statement of financial position date but the associated performance obligations have not been fulfilled the amounts due are recognised as trade receivables and a contact liability is recognised for the sales value of the performance obligations that have not been provided.  If payment is received in advance of the delivery of the associated performance obligation a contract liability is recognised. When an invoice is not due for payment at the statement of financial position date and the associated performance obligation has not been fulfilled no amounts are recognised in the financial statements.

In cases where customers pay for the goods and services over an agreed period, the fair value of the consideration is determined by discounting future receipts using an imputed rate of interest.  The difference between the fair value and the nominal amount of the consideration is recognised as finance income over the payment period.

 

Contract costs

Under IFRS 15, the Group capitalises commission fees as costs of obtaining a contract when they are incremental and, if they are expected to be recovered, it amortises them consistently with the pattern of revenue for the related contract.  If the expected amortisation period is one year or less, then the commission is expensed when incurred.  Contract costs are capitalised to trade and other receivables, due within and after one year.

 

The Group in certain circumstances incurs costs to deliver its services and fulfil specific contracts.  These costs may include process mapping and design, scoping and configuration. Contract fulfilment costs are divided into costs that deliver an asset and costs that are expensed as incurred.

 

Under IFRS 15, the Group capitalises these contract fulfilment costs when they directly relate to a specifically identifiable contract or anticipated contract, will enhance or generate resources used to satisfy future performance obligations and they are expected to be recovered.  Where capitalised, it amortises them consistently with the pattern of revenue for the related contract. 

 

At each reporting date, the Group determines whether or not the contract assets are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Group expects to receive less the costs that relate to providing services under the relevant contract.

 

Employee benefits

The Group operates a defined contribution pension scheme. Contributions are recognised in the Statement of Comprehensive Income in the year in which they become payable in accordance with the rules of the scheme.

 

Short term employee benefits including holiday pay are recognised as an expense in the period in which the service is rendered.

 

Share based payment

The Group operates an equity-settled share based compensation plan in which the Group receives services from directors and certain employees as consideration for share options. The fair value of the services is recognised as an expense over the estimated vesting period, determined by reference to the fair value of the options granted.

 

Taxation

The taxation expense or credit comprises current and deferred tax recognised in the profit for the financial period or in other comprehensive income or equity if it arises from amounts recognised in other comprehensive income or directly in equity. Current tax is provided at amounts expected to be paid (or recovered) in respect of the taxable profits for the period using tax rates and laws that have been enacted or substantively enacted by the reporting date. Microlise, as a large company from 1 July 2020 for tax R&D purposes, qualifies for the large company RDECs which are included as grant income within other operating income. 

 

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

 

Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. 

 

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset and where the deferred tax balances relate to the same taxation authority.

 

Exceptional items

The Group classifies certain one-off charges or credits that have a material impact on the financial results as 'exceptional items'. These are disclosed separately to provide further understanding of the financial performance of the group.

 

Government grants

Grants are accounted under the accruals model, and grants of a revenue nature are recognised in the Statement of Comprehensive Income in the same period as the related expenditure.  Government grants relate to the receipt of Coronavirus Job Retention Scheme income, innovation grants and large company research and development expenditure credits ('RDEC' s).

 

Foreign exchange

Transactions denominated in foreign currencies are translated into sterling at the rates ruling on the date of the transaction. Monetary assets or liabilities denominated in foreign currencies at the Statement of Financial Position date are translated at the rate ruling on that date and all translation differences are charged or credited in the Statement of Comprehensive Income.

 

On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date.  Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.

 

Intangible assets

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the fair value of the net assets acquired at the acquisition date. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee.

 

Intangible assets acquired separately from a business are recognised at cost. Intangible assets acquired as part of an acquisition are recognised separately from goodwill if the fair value can be measured reliably on initial recognition. Intangible assets created within the business are not recognised, other than for qualifying development expenditure, and expenditure is charged against profits in the year in which it is incurred.

 

Subsequent to initial recognition, intangible assets are stated at cost less accumulated recognised and accumulated impairment. Intangible assets are amortised on a straight line basis within administrative expenses over their estimated useful lives as follows:

 

Asset class                                            Amortisation period

Brands                                                    15 years                     

Customer relationships                            11 to 16 years

Technology assets                                 5 to 10 years

Software                                               3-5 years

 

Intangible assets are tested for impairment when an event that might affect asset values has occurred. Any such impairment in carrying value is written off to the Statement of Comprehensive Income immediately.

 

Research and development expenditure

An internally generated intangible asset arising from development (or the development phase) of an internal project is recognised if, and only if, all of the following have been demonstrated:

 

·      It is technically feasible to complete the development such that it will be available for use, sale or licence;

·      There is an intention to complete the development;

·      The method by which probable future economic benefits will be generated is known;

·      There are adequate technical, financial and other resources required to complete the development; and

·      There are reliable measures that can identify the expenditure directly attributable to the project during its development.

 

The amount recognised is the expenditure incurred from the date when the project first meets the recognition criteria listed above.  Expenses capitalised as "Technology" within intangible assets consist of employee costs incurred on development. Where the above criteria are not met, development expenditure is charged to the consolidated statement of comprehensive income in the period in which it is incurred. The expected life of internally generated intangible assets varies based on the anticipated useful life, currently ranging from five to seven years.

 

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment losses. Amortisation is charged on a straight-line basis over the estimated useful life in which the intangible asset has economic benefit and is reported within administrative expenses in the consolidated statement of comprehensive income.

 

Research expenditure is recognised as an expense in the period in which it is incurred.

 

Research and development expenditure tax credits arise in the UK. Those relevant to a large company for tax purposes are credited to other operating income as a grant. 

 

Financial assets

Financial assets, including trade and other receivables, cash and cash equivalent balances are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using the effective interest method. Cash and cash equivalents comprise cash held at bank which is available on demand.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables.  The group measures loss allowances at an amount equal to lifetime ECL, which is estimated using past experience of the group's historical credit losses experienced over the three year period prior to the period end. Historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the group's customers, such as inflation rates. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.

To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging.  The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.

The group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost to the extent that these are material.  The group has determined that there is no material impact of ECLs on the historical financial information.

 

Financial liabilities

Financial liabilities, including trade and other payables, lease liabilities and bank borrowings are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

 

Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

 

Borrowings are initially stated at the fair value of the consideration received after deduction of wholly attributable issue costs. Borrowings are subsequently stated at amortised cost using the effective interest method.

 

Right-of-use assets and lease liabilities

Under IFRS 16, leases are recognised as right-of-use assets, presented as a separate category within property, plant and equipment included in the consolidated statement of financial position, and with a corresponding lease liability from the date at which the leased asset is available for use by the Group. This has been adopted and applied on a full retrospective basis.

 

Assets and liabilities arising from a lease are initially measured at the present value of the lease payments and payments to be made under the terms of the lease.  Reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, or the incremental borrowing rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

 

Lease payments are allocated between principal, presented as a separate category within liabilities, and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received and any initial direct costs. Leasehold dilapidations are recognised in relation to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms. 

 

Depreciation is charged on a straight line basis over the period of the lease and assets are subject to impairment reviews where circumstances indicate their value may not be recoverable of if they are not being utilised.

 

Payments associated with short-term leases of property, plant and equipment and leases of low-value assets continue to be recognised on a straight-line basis as an expense. Short-term leases are leases with a lease term of 12 months or less.

 

Property, plant and equipment

Property, plant and equipment assets are stated at cost less depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment assets at rates calculated to write off the cost of each asset on a straight line basis over its expected useful life, as follows:

 

Asset class                                            Depreciation method rate

Freehold property                                    2% straight line

Leasehold improvements                        Over the period of the lease

Equipment, fixtures and fittings               20-33% straight line basis

 

Investments

 

Investments in subsidiaries are stated at cost or at the fair value of shares issued as consideration less provision for any impairment. Investments in associates are stated at fair value through the profit and loss.

 

Inventories

Inventories are valued at the lower of purchase cost and net realisable value, after due regard for any slow moving items.  Net realisable value is based on selling price less anticipated costs to completion and selling costs.  Cost is based on the cost of purchase on a weighted average basis.  Work in progress and finished goods include labour and attributable overheads.

 

At each reporting date, inventories are assessed for impairment.  If inventory is impaired, the carrying amount is reduced to its net realisable value.  The impairment loss is recognised immediately in the consolidated statement of comprehensive income.

 

Share capital and reserves

Financial instruments issued by the company are treated as equity only to the extent that they do not meet the definition of a financial liability. The parent company's ordinary shares are classified as equity instruments.

 

The share premium account represents the amount by which the issue price of shares exceeds the nominal value of the shares less any share issue expenses.

 

The merger reserve represents the difference between the fair value of the shares issued as part of the consideration for Microlise Holdings Limited and the nominal value of the shares issued.

 

Retained earnings comprises opening retained earnings and total comprehensive income for the year, net of dividends paid.

 

New or revised accounting standards and interpretations

IFRS interpretations and amendments issued but not yet applicable by the Group in these financial statements have been reviewed and assessed. All IFRS effective at the reporting date of 31 December 2022 have been applied.  

 

There are no other new standards, interpretations and amendments which are not yet effective in these financial statements, expected to have a material effect or to be relevant to the Group's future financial statements.

 

C.         Critical accounting estimates and assumptions

 

Critical judgements in applying the accounting policies

The preparation of the financial statements under IFRS requires the use of certain critical accounting assumptions and requires management to exercise its judgement and to make estimates in the process of applying the Company's and Group's accounting policies. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable in the circumstances. The key estimates used in the preparation of these financial statements that could result in a material change in the carrying value of assets or liabilities within the next twelve months are as follows:

 

Estimates and assumptions

 

Useful economic lives of intangible assets

The annual amortisation charge for intangible assets is sensitive to changes in the estimated useful economic lives of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments and economic utilisation.

 

There is no current indication that the Group's businesses will not continue to trade profitably and hence the life may differ or be longer than the estimates used to amortise intangible assets.

 

Capitalisation of development expenditure

Management have used their judgement in respect of the capitalisation of development costs against the criteria in the policy.  The viability of the new technology and know-how is supported by the results of testing and by forecasts for the overall value and margins from future sales to support the approach taken. 

 

Impairment of intangible assets including goodwill and investments

Investments made by the Company and intangible assets acquired in a business combination capitalised with goodwill by the Group are subject to annual impairment tests and other intangibles amortised over their estimated useful lives subject to an assessment of impairment.

Subsequent impairment tests for investments and intangible assets are based on risk adjusted future cash flows discounted using appropriate discount rates. These future cash flows are based on forecasts which include estimated factors and are inherently judgemental. Future events could cause the assumptions to change which could have an adverse effect on the future results of the Group. Further detail including sensitivities is given in note 10.

 

Right-of-use assets and lease liabilities

In respect of right-of-use leased assets key estimates are a combination of the incremental borrowing rate used to discount the total cash flows and the term of the leases where breaks or extensions fall within the Group's control. These are used to derive both the opening asset value and lease liability as well as the consequential depreciation and financing charges. A 1% change in the discount rate used would increase interest charges and decreased depreciation by approximately £10,000 a year with an immaterial impact on assets and liabilities.

 

Share based payment

The fair values in respect of share based payments are estimated using a number of inputs to an appropriate valuation models including the probability that perforrnance conditions may be met. Further detail of the assumptions applied is included in note 21.

 

 

 

Notes to the financial statements for the year ended 31 December 2022

 

1.   Revenue and segmental analysis

 

Recurring revenue represents the sale of the group's full vehicle telematics solutions, support and maintenance.  Non-recurring revenue represents the sale of hardware, installation, and professional services.  Revenue is defined as per the accounting policies.

 

Revenue in respect of the setup, supply of hardware and software installation is recognised at a point in time. Professional services including project management, managed services and support services income is recognised over the period when services are provided.

 

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
By type
Revenue recognised at a point in time Supply of hardware and installation	19,975	29,336
	19,975	29,336
Revenue recognised over time Professional services including project management	2,721	4,817
Managed service agreement income	37,360	48,912
Other support and maintenance services	3,155	5,103
	43,236	58,832
	63,211	88,168
By destination:
UK	58,037	78,230
Rest of Europe	1,195	2,677
Rest of the World	3,979	7,261
Total revenue	63,211	88,168

 

Revenue in respect of one customer amounted to £20.9m representing 33% of the revenue for the year (2021: £22.6m representing 26% of the revenue for the 18 month period ended 31 December 2021).

 

The split of the disaggregated revenue between segments is summarised below.

 

The chief operating decision maker ("CODM") is identified as the Board.  It continues to define all the Group's trading as operating in the telematics market with two complementary segments.  The Board as the CODM also review the revenue streams of recurring and non-recurring revenue as part of their internal reporting. 

 

The directors consider the Microlise business to be one segment related to fleet management and the separately acquired TruTac business to be a complementary segment related to tachograph specific software and analysis services.

 

 

		Microlise	TruTac	Year ended 31 December 2022	Microlise	TruTac	18 month period ended 31 December 2021
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue		59,147	4,064	63,211	83,109	5,059	88,168
Depreciation and amortisation		4,645	603	5,248	6,197	691	6,888
Operating profit		1,559	625	2,184	178	782	960
Net interest		(263)	(4)	(267)	(824)	(9)	(833)
Share of associate loss		(478)		(478)	(132)		(132)
Profit/(loss) before tax		818	621	1,439	(778)	773	(5)
Segment assets		115,216	10,920	126,136	111,720	9,622	121,342
Segment liabilities		(50,059)	(2,609)	(52,668)	(48,009)	(1,785)	(49,794)
Additions to non-current assets		3,037	973	4,010	4,878	826	5,704

 

All of TruTac's revenue relates to the UK. TruTac's revenue is primarily from managed service agreements with the exception of £562,000 of hardware revenue in 2022 (2021: £661,000). All remaining revenue relates to the Microlise business.

 

The group's non-current assets comprising investments, tangible and intangible fixed assets and the net assets by geographical location are:

 

	31 December 2022		31 December 2021
	Non-current assets	Net assets	Non-current assets	Net assets
	£'000	£'000	£'000	£'000
United Kingdom	88,434	71,895	88,729	70,367
France	29	22	3	34
Australia	2	80	3	12
India	304	1,471	381	1,135
	88,769	73,468	89,116	71,548

 

 

 

 

2.   Adjusted results

In reporting financial information, the Group presents alternative performance measures (APMs), which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide depth and understanding to the users of the financial statements to allow for further assessment of the underlying performance of the Group. The Group's primary results measure, which is considered by the directors of the Group to represent the underlying and continuing performance of the Group, is adjusted EBITDA as set out below. EBITDA is a commonly used measure in which earnings are stated before net finance income, tax, amortisation and depreciation as a proxy for cash generated from trading.

 

The group qualifies for large company R&D tax reliefs with the RDEC credits included in other operating income above operating profit in line with common practice is included in the Group's calculation of EBITDA. 

 

The measure has been adjusted in the current period by acquisition related costs and in the prior period by IPO expenses which are considered to be non-recurring and non-trading in nature together with the share based payment charge as it represents a non cash item.

 

		Year ended 31 December  2022	18 month period ended 31 December  2021
		£'000	£'000
Operating profit before interest and share of associate		2,184	960
Exceptional transaction and IPO costs		202	3,415
Depreciation		2,212	3,085
Amortisation of intangible assets		3,036	3,803
Share based payment		561	129
Adjusted EBITDA		8,195	11,263

 

 

3.   Operating profit

 

The operating profit is stated after charging/(crediting):

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Auditors remuneration:
Audit of the Group and Company financial statements	251	184
Non-audit services*	-	295
Depreciation of property, plant and equipment	1,316	1,858
Depreciation of right-of-use assets	896	1,227
Amortisation of intangible assets	3,036	3,803
Cost of inventory sold	14,198	20,056
Research and development costs	3,292	6,767
Foreign exchange (gains)/losses	(259)	180
Acquisition evaluation costs	202	-
In other operating income:
Other Income	(161)	-
Government job retention scheme income	-	(127)
Government innovation grants	(111)	(96)
Research and Development Expenditure Credit	(604)	(920)

 

\* The Group auditors, BDO LLP, also provided £295,000 of assurance services as the reporting accountants for the AIM listing in the 18 months ended 31 December 2021.

The company now claims RDEC credits which are treated as other operating income and reflected in the profit before tax.

 

4.   Information regarding directors and employees

Employees

 

The aggregate remuneration of employees comprised:

	Group		Company
	Year ended 31 December 2022	18 month period ended 31 December  2021	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000	£'000	£'000
Wages and salaries	26,636	36,630	863	636
Social security costs	2,685	3,312	88	29
Pensions	1,046	1,399	29	9
Share based payment	561	129	561	129
Total	30,928	41,470	1,541	803

 

Average number of employees

The average number of employees in the period/year was:

	Group		Company
	Year ended 31 December 2022	18 month period ended 31 December  2021	Year ended 31 December 2022	18 month period ended 31 December  2021
Sales and distribution	87	76	-	-
Operations and development	469	438	-	-
Production and warehouse	23	22	-	-
Administration	82	75	6	1
Total	661	611	6	1

 

The directors were previously employed and paid by a subsidiary and then directly employed by the company

from September 2021.

Directors' remuneration

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Directors' remuneration - aggregate emoluments	904	1,074
Group pension contributions in respect of 3 (2021: 4) directors Share based payment	24	24 69
	246
	1,174	1,167
Remuneration of the highest paid director	306	461
Group pension contributions Share based payment	10	7 31
	116
	432	499

 

Full information by director is disclosed in the remuneration report.

 

 

Key management compensation

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Short term employee benefits	1,910	2,596
Post employment benefits	70	71
Share based payment	430	129
Total key management remuneration	2,410	2,796

 

Key management is defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any directors (whether executive or otherwise) of the Group.

 

 

5.   Interest receivable

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Interest receivable
Bank interest receivable	21	-
Unwinding of discount on financing transactions	24	72
	45	72

 

 

6.   Interest payable

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Interest payable
Interest on bank and other borrowings	248	734
Lease liability financing charges	64	72
Other interest	-	99
	312	905

 

 

7.   Taxation on profit/(loss)

 

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Current taxation
UK corporation tax charge	-	-
Foreign tax	(126)	(198)
Adjustments in respect of previous periods	(5)	(100)
	(131)	(298)
Deferred taxation
Origination and reversal of timing differences	(249)	(645)
Charge due to change in tax rate	89	(1,416)
Adjustments in respect of previous periods	205	146
	45	(1,915)
Tax charge on profit/(loss)	(86)	(2,213)

 

 

Factors affecting the tax charge for the year/period

The tax charge on the profit/(loss) for the year/period differs from applying the standard rate of corporation tax in the UK of 19% (2021: 19%).  The differences are reconciled below:

 

	Year ended 31 December 2022	18 month period ended 31 December  2021
	£'000	£'000
Profit/(loss) before taxation	1,437	(5)
Corporation tax at standard rate	273	(1)
Factors affecting charge for the year/period:
Disallowable expenses	168	781
Research and development allowances	-	36
Other differences including capital superdeductions	(93)	-
Overseas tax rates	27	27
Adjustments in respect of previous periods	(200)	(46)
(Credit)/charge due to change in tax rate	(89)	1,416
Tax charge on profit	86	2,213

 

In May 2021 a change in the corporation tax rate from 19% to 25% from April 2023 was substantively enacted in the Finance Act 2021 and accordingly has been applied to deferred tax balances at 31 December 2021 and 2022. 

 

 

 

8.     Earnings per share

	Year ended 31 December 2022	18 month period ended 31 December  2021
Profit/(loss) used in calculating EPS (£'000)	1,353	(2,218)
Weighted average number of shares for basic EPS ('000)	115,946	106,266
Weighted average number of shares for diluted EPS ('000)	116,104	106,266
Basic earnings/(loss) per share (pence)	1.17	(2.09)
Diluted earnings/(loss) per share (pence)	1.17	(2.09)

 

There were 3,088,969 unexercised share options in place at 31 December 2022 (2021: 1,107,848) of which 1,159,383 were potentially dilutive at the year end and are included in the weighted average for diluted EPS.

Costs relating to the IPO have resulted in a loss for the prior period compared with a profit in the current year. The earnings per share, if adjusted to add back these IPO costs, would be 1.13 pence for the prior 18 month period.

 

9.   Property, plant and equipment

 

Group	Freehold property	Right-of-use property	Leasehold building Improvements	Right-of-use equipment	Equipment, fixtures and fittings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Net book value
At 1 July 2020	5,347	1,089	254	264	1,682	8,636
Cost
At 1 July 2020	5,525	1,954	329	787	3,704	12,299
Additions	-	1,048	-	458	1,554	3,060
Reclassification	(254)	-			254	-
Transfer to intangibles	-	-	-	-	(27)	(27)
Exchange adjustments	-	-	(23)	-	(25)	(48)
At 31 December 2021	5,271	3,002	306	1,245	5,460	15,284
Depreciation
At 1 July 2020	178	865	75	523	2,022	3,663
Charge for the period	153	834	99	393	1,606	3,085
Transfer to intangibles	-	-	-	-	(14)	(14)
Exchange adjustments	-	-	(5)	-	(18)	(23)
At 31 December 2021	331	1,699	169	916	3,596	6,711
Net book value
At 31 December 2021	4,940	1,303	137	329	1,864	8,573
Cost
At 1 January 2022	5,271	3,002	306	1,245	5,460	15,284
Additions	-	567	-	384	979	1,930
Disposals	-	(1,689)	-	(612)	(19)	(2,320)
Exchange adjustments	-	-	2	-	2	4
At 31 December 2022	5,271	1,880	308	1,017	6,422	14,898
Depreciation
At 1 January 2022	331	1,699	169	916	3,596	6,711
Charge for the year	102	558	67	338	1,147	2,212
Disposals		(1,689)	-	(612)	(19)	(2,320)
Reclassification		88	-	(88)	-	-
Exchange adjustments		-	1	1	2	3
At 31 December 2022	433	656	237	554	4,726	6,606
Net book value
At 31 December 2022	4,838	1,224	71	463	1,696	8,292

 

 

Company	Freehold property
	£'000
Cost
At 1 July 2020	-
Additions	4,965
At 31 December 2021 and 2022	4,965
Depreciation
At 1 July 2020	-
Charge for the period	25
At 31 December 2021	25
Charge for the year	102
At 31 December 2022	127
Net book value
At 31 December 2021	4,940
At 31 December 2022	4,838

 

 

 

10.           Intangible assets

		Goodwill	Customer relationships	Technology	Brands	Software	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Net book value
At 1 July 2020		52,300	15,974	6,033	2,407	419	77,133
Cost
At 1 July 2020		52,300	17,780	7,552	2,711	419	80,762
Additions		478	-	1,821	-	345	2,644
Transfer from tangible assets		-	-	-	-	27	27
At 31 December 2021		52,778	17,780	9,373	2,711	791	83,433
Amortisation
At 1 July 2020		-	1,806	1,519	304	-	3,629
Charge for the period		-	1,708	1,711	271	113	3,803
Transfer from tangible assets		-	-	-	-	14	14
At 31 December 2021		-	3,514	3,230	575	127	7,446
Net book value
At 31 December 2021		52,778	14,266	6,143	2,136	664	75,987
Cost
At 1 January 2022		52,778	17,780	9,373	2,711	791	83,433
Additions		-	-	1,780	-	300	2,080
At 31 December 2022		52,778	17,780	11,153	2,711	1,091	85,513
Amortisation
At 1 January 2022		-	3,514	3,230	575	127	7,446
Charge for the year		-	1,138	1,533	181	184	3,036
At 31 December 2022		-	4,652	4,763	756	311	10,482
Net book value
At 31 December 2022		52,778	13,128	6,390	1,955	780	75,031

Goodwill considered significant in comparison to the Group's total carrying amount of such assets has been allocated to cash generating units or groups of cash generating units as follows:

		31 December	31 December
		2022	2021
		£'000	£'000
Microlise		49,686	49,686
TruTac		3,092	3,092
		52,778	52,778

 

The Group tests goodwill annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Microlise carrying value is assessed for impairment purposes by calculating the value in use using the net present value (NPV) of future cash flows arising from the originally acquired businesses discounted at a pre-tax rate of 15% (2021: 11.6%) and for the TruTac business at a pre-tax rate of 15% (2021: 11.6%).

 

The Microlise goodwill has been tested by reference to a 4 year management approved plan and TruTac by reference to a 3 year plan with a 2% long term growth rate considered applicable to the UK market applied to the terminal period. This includes consideration of the impact of cost inflationary pressures in the December  tests and forecasts at that date and taking account of the corresponding inflationary price terms within the group's contracts with customers. The businesses achieved the FY22 forecasts used in the prior year test and no impairment is indicated although they are sensitive to forecast increases in EBITDA. The Microlise NPV exceeds carrying values by £8.8m (2021: £19.9m) and TruTac NPV exceeds carrying values by £1.1m (2021: £2.5m) with this reduction primarily a result of increased discount rates being applied for equity returns.  Reasonable changes in the discount rate or terminal growth rate do not result in a risk of impairment of Microlise or TruTac goodwill.

 

At 31 December 2022, the Microlise plan subject to the impairment test to support the carrying value of goodwill, forecast £8.9m and required £7.9m of recurring EBITDA which compares with £7m on the same basis recorded for 2022 and an expected increase to £7.6m for FY23 as a result of the growth trends in the Microlise revenues, supported by significant investment in the development of  technology and ongoing operational efficiencies to be made (2021: forecast £9.2m and required £7.1m of recurring EBITDA in the long term). 

 

The 31 December 2022 TruTac plan assessed for the impairment test to support the carrying value of goodwill forecast £1.25m and a required £1.1m compared to the current EBITDA of some £1.2m. The growth trends in TruTac revenues within the forecast is a result of continued investment into the underlying technologies, the release of new products and features as well as access to an enlarged customer base, a benefit of being part of the Microlise Group (2021: forecast £1.27m and required £0.95m of recurring EBITDA).

 

11.  Investments and loan receivables

 

Group				Associate
				£'000
At 1 July 2020				1,978
Share of loss for the period				(132)
At 31 December 2021				1,846
Share of loss for the year				(478)
At 31 December 2022				1,368

 

Company		Subsidiary undertakings			Associate		Total
		£'000			£'000		£'000
At 1 July 2020		77,691			1,600		79,291
Additions		16,622			-		16,622
Increase in fair value		-			650		650
Return of capital		(16,620)			-		(16,620)
At 31 December 2021		77,693			2,250		79,943
Additions - fair value of share options held by subsidiary company employees			249			-		249
Decrease in fair value		-			(1,000)		(1,000)
At 31 December 2022		77,942			1,250		79,192

 

 

Subsidiary undertaking	Principal activity	Class of  shares held	% share  holding
Microlise Limited	Transport management technology solutions	Ordinary	100%
Microlise Holdings Limited	Intermediate holding company	Ordinary	100%
Microlise Midco Limited	Dormant company	Ordinary	100%
Microlise Engineering Limited	Non trading company	Ordinary	100%
TruTac Limited	Transport management technology solutions	Ordinary	100%
Microlise Pty Limited (Australia)	Transport management technology solutions	Ordinary	100%
Microlise SAS (France)	Transport management technology solutions	Ordinary	100%
Microlise Telematics Private Limited (India)	Transport management technology solutions	Ordinary	100%
TruTac Training Limited	Dormant company	Ordinary	100%
Trucontrol Ltd	Dormant company	Ordinary	100%
Trulogix Limited	Dormant company	Ordinary	100%

 

All the UK subsidiary companies are registered in England at the same registered office as the Company. Microlise Pty Limited is registered at Level 1, 20 Albert Street, Blackburn, Victoria, 3130 Australia, Microlise SAS at Les Hauts de la Duranne, 505 Avenue Galilee, 13290 Aix-en-Provence, France and Microlise Telematics Private Limited at 4^th Floor, Pride Accord, Baner Road, Pune, 411045, India.

 

The Group agrees to guarantee the liabilities of Microlise Midco Limited (01670983), Microlise Holdings Limited (06479107) and Microlise Engineering Limited (02211125) thereby allowing them to take exemption from having an audit under section 479A of the Companies Act 2006.

 

Investments in associates consist of a 20% holding in Trakm8 Holdings plc acquired on 22 December 2018 and measured in accordance with the accounting policy. The company is listed on AIM and at 31 December 2022 the market value of the shareholding was £1.25m (2021: £2.25m).

 

The primary business of Trakm8 Holdings plc is the development, manufacture, distribution and sale of telematics devices, services and optimisation solutions.  The principal place of business is 4 Roman Park, Roman Way, Coleshill, Birmingham, West Midlands, B46 1HG.

The Group also has an interest of £1 in a jointly controlled not for profit community investment company, Road to Logistics C.I.C. This had commenced activity funded by a government grant and incurs neither a profit nor a loss.  The principal place of business is Farrington Way, Eastwood, Nottingham, NG16 3AG.

Summarised financial information (material associates)

 

Trakm8 Holdings plc

Trakm8 Holdings plc has a year end of 31 March, and the summarised financial information disclosed is based on their published annual statements to 31 March 2021 and 2022 together with interim financial statements to 30 September 2021 and 2022, prepared under IFRS.

 

		30 September 2022	30 September 2021
		£'000	£'000
Assets - non-current		26,101	25,705
Assets - current		10,834	9,558
Liability - non-current		(10,190)	(7,187)
Liability - current		(8,616)	(7,586)
Net assets (100%)		18,129	20,490
Group share of net assets (20%)		3,626	4,098

 

		Year ended 30 September 2022	18 months ended 30 September 2021
		£'000	£'000
Revenues		18,102	24,982
Loss from continuing operations		(1,863)	(964)
Other comprehensive income		8	1
Total comprehensive expense		(1,855)	(963)

 

The Company also advanced £1,000,000 to Trakm8 Holdings plc in September 2022. This is a loan bearing interest at 12%, repayable 14 September 2024 or convertible at the Company's option into a fixed number of ordinary shares in Trakm8 Holdings plc. It is considered that the fair value of the loan is approximately £1,000,000 and the convertible element has no separate material equity value.

Group and company
				£'000
At 1 January 2022				-
Cash subscribed for loan notes				1,000
At 31 December 2022				1,000

 

12.   Deferred tax assets and liabilities

Group		Intangible assets		Accelerated capital allowances		Freehold property		Tax losses		Other		Total
		£'000		£'000		£'000		£'000		£'000		£'000
At 30 June 2020		(4,639)		(24)		-		1,840		11		(2,812)
Foreign exchange movement		-		-				-		2		2
RDEC credit		-		-		-		-		212		212
Adjustment to goodwill		-		-		(847)		369		-		(478)
Charge for the period		(829)		(55)		(309)		(381)		(341)		(1,915)
At 31 December 2021		(5,468)		(79)		(1,156)		1,828		(116)		(4,991)
RDEC credit		-		-		-		-		106		106
Credit/(charge) for the year		124		(152)		19		(303)		357		45
At 31 December 2022		(5,344)		(231)		(1,137)		1,525		347		(4,840)
Company
												Share based payment £'000
At 31 December 2021												-
Credit for the year												111
At 31 December 2022												111

 

Deferred tax has been recognised at an average rate of 25% (2021: 25%).

 

13.   Inventories

Group	31 December  2022	31 December  2021
	£'000	£'000
Raw materials and consumables	1,146	1,092
Work in progress	18	15
Finished goods and goods for resale	1,471	1,834
	2,635	2,941

 

An impairment loss of £209,000 in respect of inventory was recorded in the year ended 31 December 2022 (period ended 31 December 2021: £202,000).

 

14.   Trade and other receivables

		Group					Company
	31 December  2022		31 December 2021			31 December  2022			31 December 2021
	£'000		£'000			£'000			£'000
Current
Trade receivables	13,247		11,533			-			-
Provision for impairment of trade receivables	(402)		(303)			-			-
Trade receivables net	12,845		11,230			-			-
Contract cost assets	1,466		1,449			-			-
Amounts owed by group undertakings			-			-			-
Other receivables	163		206			-			28
Prepayments	2,286		2,258			26			225
Total	16,760		15,143			26			253
Non-current
Trade receivables	593		344			-			-
Contract cost assets	2,485		2,366			-			-
Total	3,078			2,710		-		-
Total	19,838			17,853		26		253

 

Analysis of expected credit losses is included in note 19.

 

The movements in Group contract related balances in the year/period are as follows:

	Year ended 31 December 2022		18 month period ended 31 December  2021
Contract cost assets		£'000		£'000
Opening balance		3,815		2,869
Amortised to income statement		(1,115)		(1,116)
Incurred in the period		1,252		2,062
Closing balance		3,952		3,815

 

15.   Cash and cash equivalents

	Group		Company
	31 December  2022	31 December  2021	31 December  2022	31 December  2021
	£'000	£'000	£'000	£'000
Cash at bank and in hand	16,683	13,210	69	1,090

 

 

16.   Lease liabilities

 

	Group		Company
	31 December  2022	31 December  2021	31 December  2022	31 December  2021
	£'000	£'000	£'000	£'000
Current	821	717	-	-
Non-current	926	994	-	-
Total	1,747	1,711	-	-

 

Leases

The group has entered into lease contracts in respect of property in the jurisdictions from which it operates, use of data centres and vehicles which are typically for terms of 3 to 5 years. In respect of data centre contracts there are options to extend the initial period with these factored into the liabilities where the group plans to use these for a longer period.  For property leases, it is customary for lease contracts to be reset periodically to market rental rates.  Leases of equipment, data centre usage and vehicles comprise only fixed payments over the lease terms.

 

Right of use assets, additions and amortisation are included in note 9.  Interest expenses relating to lease liabilities are included in note 6.

 

Other amounts relating to leases were as follows:

		31 December  2022	31 December  2021
		£'000	£'000
Short term lease expense		11	-
Low value lease expense		-	109
Total cash outflow for leases		979	1,400

 

 

The maturity of lease liabilities at 31 December 2022 were as follows:

 

		Property	Equipment and vehicles	Total
		£'000	£'000	£000
Within 1 year		548	273	821
1-2 years		450	160	610
2-5 years		267	49	316
Total		1,265	482	1,747

 

The maturity of lease liabilities at 31 December 2021 were as follows:

 

		Property	Equipment and vehicles	Total
		£'000	£'000	£000
Within 1 year		513	204	717
1-2 years		389	146	535
2-5 years		394	65	459
Total		1,296	415	1,711

 

 

17.   Trade and other payables

	Group		Company
	31 December  2022	31 December 2021	31 December  2022	31 December 2021
	£'000	£'000	£'000	£'000
Current
Trade payables	4,637	4,068	7	27
Taxation and social security	1,963	944	34	28
Amounts owed to group undertakings	-	-	16,206	16,574
Other payables	1,447	1,231	1,006	1,000
Accruals	4,316	4,222	675	669
Contract liabilities	16,820	15,315		-
Total	29,183	25,780	17,928	18,298
Non-current
Contract liabilities	16,463	16,150	-	-
Deferred grant income	152	196	-	-
Accruals	283	-	-	-
Other payables	-	966	-	1,000
Total	16,898	17,312	-	1,000
Total	46,081	43,092	17,928	19,298

 

The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. Contract liabilities relates principally to service income received in advance.  The timing of recognition of Group contract liabilities are as follows:

 

 

 

	Less than one year	1-2 years	2-3 years	3-4 years	4-5 years	Total
At 31 December 2022	£'000	£'000	£'000	£'000	£'000	£'000
Contract liabilities	16,820	8,962	4,919	1,986	596	33,283

 

	Less than one year	1-2 years	2-3 years	3-4 years	4-5 years	Total
At 31 December 2021	£'000	£'000	£'000	£'000	£'000	£'000
Contract liabilities	15,315	7,813	4,692	2,696	949	31,465

 

The movements in Group contract related balances in the year/period are as follows:

		Year ended 31 December 2022		18 month period ended 31 December  2021
		£'000		£'000
Revenue related contract liabilities
Opening balance		(31,465)		(28,606)
Invoiced in the period		(39,178)		(50,423)
Recognised as revenue in the period		37,360		47,564
Closing balance		(33,283)		(31,465)

 

 

18.   Financial Instruments

 

Financial risk management

 

The determination of financial risk management policies and the treasury function is managed by the CFO. Policies are set to reduce risk as far as possible without unduly affecting the operating effectiveness of the Group.

 

The Group's activities expose it to a variety of financial risks, the most significant being credit risk, liquidity risk and interest rate risk together with a degree of foreign currency risk as discussed below.

 

Categories of financial instruments

 

The Group has the below categories of financial instruments:

		31 December  2022	31 December  2021
Recognised at amortised cost		£'000	£'000
Cash and bank balances		16,683	13,210
Trade receivables - net		13,438	11,574
Other receivables		1,163	206
Total financial assets		31,284	24,990
Trade payables		4,637	4,068
Other payables		6,046	6,419
Lease liabilities		1,747	1,711
Total financial liabilities		12,430	12,198

 

There were no assets or liabilities at 31 December 2022 or 2021 that were recognised and measured at fair value in the historical financial information.

 

 

Credit risk

 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss for the Group. Financial instruments, which potentially subject the Group to concentration of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable including accrued income.

 

The Group places its cash and cash equivalents with major financial institutions, which management assesses to be of high-credit quality in order to limit the exposure of each cash deposit to a minimal level.

 

 

Trade receivables

 

Trade accounts receivable are derived primarily from non-recurring hardware sales and monthly service income and generally have 30-60 day terms. With the exception of one large customer who accounts for 27% (2021: 31%) of the trade receivable invoiced balance, credit risk with respect to accounts receivable is dispersed due to the large number of customers. Collateral is not required for accounts receivable. The credit worthiness of customers with balances in trade receivables not yet due has been assessed as high.

 

The aging of past due trade receivables according to their original due date is detailed below:

 

	31 December	31 December
	2022	2021
Past due	£'000	£'000
0-60 days	3,903	3,076
60-120 days	443	186
121+ days	499	1,014
Expected credit loss provision	(402)	(303)
Total	4,443	3,973

 

A majority of the expected credit loss provision relates to balances that are more than 120 days overdue. The expected credit loss on balances less than 120 days is immaterial. A substantial majority of the overdue debt has been collected since the period end date with the unprovided amounts considered to be collectible.

 

As at 31 December 2022 the lifetime expected loss provision for trade receivables is as follows:

 

Past due	Expected loss rate	Gross carrying amount £'000	Loss provision £'000
0-60 days	0%	3,903	-
60-120 days	0%	443	-
121+ days	81%	499	402
Total		4,845

 

As at 31 December 2021 the lifetime expected loss provision for trade receivables was as follows:

 

Past due	Expected loss rate	Gross carrying amount £'000	Loss provision £'000
0-60 days	0%	3,076	-
60-120 days	0%	186	-
121+ days	30%	1,014	303
Total		4,276	303

 

 

At each of the Statement of Financial Position dates, a portion of the trade receivables were impaired and provided for. The movement in the provision for trade receivables in each of the periods is as follows:

 

		Year ended 31 December 2022	18 month period ended 31 December  2021
		£'000	£'000
At 1 July		303	154
Provision charged		99	149
At year/period end		402	303

 

Oher receivables are considered to bear similar risks to trade receivables or are owed by government bodies. Hence any expected credit loss on other financial assets is considered to be immaterial.

 

Liquidity risk

 

The Group now funds its business through equity and from cash generated from operations and also has a £20m undrawn working capital facility available. Details of the Group's borrowings are discussed in note 16. The Group monitors and manages cash to mitigate any liquidity risk it may face. The following table shows the Group's contractual maturities of financial liabilities based on undiscounted cash flows including interest charges and the earliest date on which the Group is obliged to make repayment:

 

	Less than one year	1-2 years	2-5 years		Total
At 31 December 2022	£'000	£'000	£'000		£'000
Trade and other payables	10,688	-	-		10,688
Lease liabilities	883	648	338		1,869
Total	11,571	648	338		12,557

 

 

	Less than one year	1-2 years	2-5 years		Total
At 31 December 2021	£'000	£'000	£'000		£'000
Trade and other payables	9,521	1,000	-		10,521
Lease liabilities	764	858	473		2,095
Total	10,285	1,858	473		12,616

 

 

Interest rate risk

 

There are no borrowings or liabilities subject to variable interest rates.

 

Currency risk

 

The Group operates predominantly in the UK with sterling being its functional currency and has a degree of exposure to foreign currency risk, with this spread across income and expenses in Euros, US dollars and Australian dollars for sales and purchasing operations together with an outflow only of Indian rupees for the costs of development and operational support activity. The impact of a 10% fluctuation in all foreign exchange rates moving in the same direction against GBP has been assessed to be an overall impact of up to £300,000 which would be mitigated by some matching of income and expenses.

 

The net exposure to the dollar [is offset by significant purchases made in dollars and ongoing costs in Indian rupees are now being managed by the use of forward contracts to fix the rate within the year]. The net underlying foreign currency balances, comprising overseas assets and liabilities, cash, receivables and payables in the UK, in the Group statement of financial position by underlying currency at the period end were:

 

	USD	Euro	AUD	INR	Total
	£'000	£'000	£'000	£'000	£'000
At 31 December 2022	8,317	673	913	559	10,462
At 31 December 2021	3,249	460	599	1,152	5,460

 

Capital management

The Group's capital comprises share capital, share premium and retained earnings. The Group's objectives when maintaining capital are:

 

To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

 

The capital structure of the Group consists of shareholders equity as set out in the consolidated statement of changes in equity. The longer-term funding requirements for acquisitions were financed from cash reserves and term bank debt which was fully repaid from the equity proceeds on listing. All working capital requirements are financed from existing cash resources.

 

The Group sets the amount of capital it requires in proportion to risk in conjunction with the retained earnings. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

 

19.   Pensions

 

Defined contributions pension scheme

The group operates a number of defined contribution pension schemes.  Contributions totalling £223,000 (2021: £194,000) were included in payables and due to the defined contribution scheme at the end of the year.  The total contributions are disclosed in note 3.

 

 

20.   Share capital

Group and Company
Allotted, called up and fully paid	At 31 December	At 31 December
	2022	2021
	£	£
115,945,956 ordinary shares of £0.001 each	115,946	115,946

 

Movements in share capital have been as follows:

 

		A ordinary	B ordinary	C ordinary	D ordinary	Total
At 1 July 2020
Number of shares		33,902	5,962	325	363	40,552
Nominal value/£'000		34	9	-	1	44
Bonus issue on 18 June 2021
Number of shares		42,673,062	7,504,477	409,083	456,915	51,043,537
Nominal value/£'000		42,673	11,633	409	457	55,172
Share capital reduction 7 July 2021
Nominal value/£'000		(42,622)	(11,627)	(408)	(457)	(55,114)
Subdivision and redesignation on 14 July 2021
Number of shares		59,461,214	(7,510,439)	(409,408)	(457,278)	51,084,089
Nominal value/£'000		17	(15)	(1)	(1)	-
Issue of share capital
Number of shares		13,777,778	-	-	-	13,777,778
Nominal value/£'000		14	-	-	-	14
At 31 December 2021 and 2022
Number of £0.001 shares		115,945,956	-	-	-	115,945,956
Nominal value/£'000		116	-	-	-	116

 

On 18 June 2021, 51,043,537 bonus shares were issued as above utilising the merger reserve. This was followed by a share capital reduction on 7 July 2021 reducing the nominal value from £1 for A,C and D ordinary shares and from £1.55 for B ordinary shares to £0.002 per share with the reduction in capital transferred to retained earnings.

On 14 July 2021, all A,B,C and D £0.002 ordinary shares were subdivided and redesignated as £0.001 ordinary shares with equal rights.

 

The company listed on AIM on 22 July 2021 and issued 13,777,778 new £0.001 shares for cash at £1.35 each resulting in a share premium of £17,630,000 after deducting the issue expenses of £956,000.

 

All shares rank equally in respect of income and capital distributions.

 

 

21.   Share based payments

 

The Company granted options on 22 July 2021 at an exercise price of £0.001 per share. 100,000 of the options were granted to non-executive directors and are subject only to continuing employment or good leaver conditions. The fair value was assessed as £1.35 per option using a Black Scholes model with a volatility of 60% and risk free rates of 0.5%. They are exercisable three years after grant for a period of a year. 1,007,848 options were granted to executive employees subject to a 3 year Total Shareholder Return condition from the date of grant of a minimum of 8% annual growth in the share price up to an 18% return for 100% to be exercised. The fair value is assessed as £0.88 per option based on a discounted Black Scholes pricing model with a volatility of 60% and risk-free rates of 0.5%. The exercise period is within a year of the 3 year return being assessed.

 

1,132,160 options were granted to employees on 23 May 2022 at an exercise price of £1.45 subject to a 3 year vesting period only. The fair value was assessed as £0.515 per option using a Black Scholes model with a volatility of 60% and risk free rates of 2%.

 

The Company granted options on 28 July 2022 at an exercise price of £0.001 per share. 41,509 of the options were granted to a non-executive director and are subject only to continuing employment or good leaver conditions. The fair value was assessed as £1.32 per option using a Black Scholes model with a volatility of 50% and risk free rates of 2%. They are exercisable three years after grant for a period of a year. 973,811 options were granted to executive employees subject to a 3 year Total Shareholder Return condition from the date of grant of a minimum of 8% annual growth in the share price up to an 18% return for 100% to be exercised. The fair value is assessed as £0.86 per option based on a discounted Black Scholes pricing model with a volatility of 50% and risk-free rates of 2%.

 

The average vesting period is estimated at 3 years and the share based payment charge was £561,000 (2021: £129,000 for the period).

 

166,359 options have lapsed and 3,088,969 of the options remain exercisable at 31 December 2022 with a weighted average vesting period of 2.2 years (2021: 3) years and average exercise price of £0.51 (2021: £0.001).

 

 

22.   Capital commitments

 

The Group had capital commitments contracted but not provided for of £1,105,000 at 31 December 2022 (2021: £nil). The company had no capital commitments (2021: £nil).

 

23.   Related party transactions

The remuneration of key management personnel and directors is set out in note 4.

 

Loans have been advanced to directors of the company in prior periods. An amount of £520,580 was owed and included in other debtors at 30 June 2020 which was fully repaid in the following period.

 

During the prior period, and before the Group was listed on AIM, close relatives of directors were employed by the Group with aggregate remuneration and benefits of £1,200,000 paid by the Group.

 

24.   Subsequent events

 

On 14 March 2023, the group acquired 100% of Vita Software Limited, a leading provider of transportation management system solutions.  The acquisition is expected to expand Microlise's suite of transport technology solutions. The total consideration of £2.06million including £0.2m of deferred consideration payable after one year from the date of acquisition.  The acquisition was funded from the Group's cash resources.  The identifiable assets acquired comprised of technology solutions and goodwill intangible assets arising largely from the technology products held and the synergies expected to arise by combining the product and service offering.  The other assets and liabilities acquired are not material to the Group.  At the time of approval of the Group financial statements the fair value of the different acquired intangible assets is subject to formal valuations being carried out.

 

Acquisition costs of £60k were incurred relating to the acquisition of which £60k was expensed in the period.  Other than the acquisition costs the acquisition was not included in the reported results for the year ended 31 December 2022.