9 April 2024
Microlise Group plc
("Microlise", "the Group" or "the Company")
Results for the year ended 31 December 2023
Strong performance driven by consistent strategic execution
Microlise Group plc (AIM: SAAS), a leading provider of transport management software to fleet operators, announces its audited results for the twelve months ended 31 December 2023.
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| FY23 | FY22 | Change |
| Financial | Revenue | £71.7m | £63.2m | 13% |
| Recurring Revenue | £45.0m | £40.5m | 11% | |
| Recurring revenue as % of Group revenue | 63% | 64% | -1% | |
| Gross Profit | £43.6m | £37.6m | 16% | |
| Gross Profit Margin % | 61% | 60% | 1% | |
| Operating Profit | £2.3m | £2.2m | 3% | |
| Adjusted EBITDA (1) | £9.4m | £8.2m | 15% | |
| Adjusted EBITDA % | 13.1% | 13.0% | 0.1% | |
| Profit before tax | £2.5m | £1.4m | 74% | |
| Adjusted Profit before tax (2) | £5.6m | £4.8m | 17% | |
| Adjusted Profit before tax % | 7% | 7% | - | |
| Basic EPS (p) | 1.36p | 1.17p | 16% | |
| Cash and cash equivalents | £16.8m | £16.7m | 1% | |
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| KPIs | ARR run rate (3) | £47.7m | £42.6m | 12% |
| Number of like-for-like subscriptions (4) | 640,000 | 599,000 | 6.8% | |
| Long-term contract customer churn by value | 0.7% | 0.4% | 0.3% | |
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| 1. EBITDA excludes depreciation, amortisation, share of loss of associate, interest, tax and share based payments. Adjusted EBITDA excludes, exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of loss of associate, interest, tax and share based payments.
2. Adjusted Profit / (loss) before taxation excludes exceptional costs in relation to acquisitions and restructuring costs, share based payments and loss of share of associate.
3. ARR run rate change figure and % compare the annualised recurring revenue figure for December 2023 with the annualised recurring revenue figure for December 2022.
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| 4. Like-for-like subscriptions change figure and % compare the subscriptions as at 31 December 2023 with the subscriptions as at 31 December 2022 | ||||
Financial Highlights
· The Group has driven an increase in total revenue to £71.7m (13%) for the 12 months ended 31 December 2023 (FY22: £63.2m).
· Growth in the period was a result of continued strong demand from Original Equipment Manufacturer (OEM) customers and increased revenue from direct customers towards the end of the year as an improvement of new vehicle availability in H2 enabled the Company to deliver against its record orderbook.
· Recurring revenue +11% to £45m, ahead of market expectations, supported by the renewal of several major customer contracts and new customer wins (FY22: £40.5m).
· Gross profit +16% to £43.6m (FY22: £37.6m), at a gross profit margin of 61% (FY22: 60%) due to the increased gross margin % from both recurring and non-recurring revenues in the period.
· Adjusted EBITDA +15% to £9.4m (FY22: £8.2m), ahead of market expectations. Adjusted EBITDA percentage has increased marginally to 13.1% (FY22: 13.0%). Operating margins flat following the previously announced commencement of the Group's investment programme to improve its go-to-market and product offering and support further growth.
· Continued strong underlying cash conversion exceeding 90% reflecting growth in subscription revenue and continued good working capital management.
· Robust balance sheet with £16.8m cash and cash equivalents (FY22: £16.7m), £10m undrawn Revolving Credit Facility and £20m accordion facility available until April 2027 with the option to extend.
· Maiden final ordinary dividend of 1.725 pence per share (FY22: nil) payable on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.
Strategic and operational highlights
· Subscriptions +6.8%, driven by continued growth in our existing customers together with new customer wins (FY22: 599,000).
· Annual recurring revenue (ARR) run rate +12% to £47.7m, of which 11.8% represented organic growth at 31 December 2023 from £42.6m on 31 December 2022.
· The Group added over 450 new customers in the period and long-term contract customer churn rate by value remained very low at 0.7% (FY22: 0.4%)
Current Trading & Outlook
· Microlise enters FY24 with good momentum driven by consistent strategic execution. Looking ahead, the Board expects organic growth to improve from current levels as we move through the year supported by a healthy orderbook and pipeline of opportunities across OEM and direct customer divisions. Operating margins are expected to trend upwards in FY24 and beyond, as we focus on careful management of the cost base and efficiently scaling the Group.
· We started the new financial year in line with our expectations and remain very confident with the opportunities we have in front of us, and in our ability to deliver against market expectations.
· Recent acquisitions of Transportation Management System (TMS) providers, Enterprise Software Systems and Vita Software, as well as vulnerable road user app supplier K-Safe are trading in-line with our expectations.
Nadeem Raza, CEO of Microlise, commented: "Microlise performed well in FY23, delivering double digit revenue growth, increased profitability and strong cash flows. During the period, we secured the renewal of several major customer contracts and significant new logo wins. We are continuing to build a resilient business to deliver sustained, efficient growth having made three key acquisitions that have enabled us to improve and expand our product offering.
Our focus remains on scaling our business and increasing margins through consistently improving the efficiency of our business. With the supply chain issues in the first half of the year now fully behind us, and with a strong order book and healthy pipeline, we look forward to 2024 with confidence."
For further information, please contact:
| Microlise Group plc Nadeem Raza, CEO Nick Wightman, CFO
| C/O SEC Newgate |
| Singer Capital Markets (Nominated Adviser & Broker) Steve Pearce / James Moat / Harry Gooden
| Tel: 020 7496 3000 |
| SEC Newgate (Financial PR) Bob Huxford / Molly Gretton / Harry Handyside
| Tel: 020 3757 6880 Email: microlise@secnewgate.co.uk |
About Microlise
Established in 1982, Microlise Group Plc is a leading SaaS provider of Transport and fleet management solutions. Its technology is designed to help businesses improve efficiency, reduce emissions, lower costs, and increase safety on the road.
With a range of products and services used by more than 400 enterprise clients globally, Microlise helps companies of all shapes and sizes - across a wide range of industries - to better manage their entire operation.
Backed by a team of experienced professionals who provide excellent customer service, the Group has won a number of awards, including three Queens Awards for Innovation (2019, 2020).
Headquartered in the United Kingdom, the company also has offices in France, Australia, and India with a global staff base of more than 750 industry professionals.
Handling over 640,000 subscriptions annually, Microlise joined the Alternative Investment Market (AIM) in 2021, qualifying for the London Stock Exchange's Green Economy Mark.
Chairman's Statement
Microlise has delivered another strong performance in FY23. We started the financial year with considerable momentum, building upon the success of FY22 to achieve another record revenue year.
Revenue grew 13% to £71.7m for the 12-month period ended 31 December 2023 (FY22: £63.2m), while ARR grew 12% to £47.2m (FY22: £42.6m). Adjusted EBITDA grew 15% during the period, ahead of market expectations. Operating profit increased 3% to £2.3m (FY22:£2.2m).
The Group's financial performance in FY23 exceeded the Board's expectations, driven by continued high demand from OEM customers and, towards the end of the year, increased revenue from direct customers. This was facilitated by an improvement in new vehicle availability in the second half of the year, enabling the Company to deliver against its record order book.
During the first half of the year, the Company, alongside the wider transport industry, continued to contend with global supply chain challenges, which in turn impacted the availability of new vehicles. Throughout the second half of the year, we saw these issues significantly diminish as the back log of demand was fulfilled. As we enter FY24, it is reassuring to note that both these challenges have been resolved.
We were pleased to announce the acquisitions of two Transport Management Systems (TMS) companies during the period, Vita Software on 14 March 2023 and Enterprise Software Systems (ESS) on 30 November 2023, which completed in January 2024. A third acquisition of road safety company, K-Safe, completed in December 2023 and was announced post period end in January 2024. We're already seeing the positive impact of these acquisitions, with successful sales of Vita software's TMS offering and a growing pipeline for the ESS and Flare Aware (K-Safe Product) products with our existing customers.
Our strategic focus for the year will be on progressing the integration of our recent acquisitions into the Microlise product architecture, enabling us to ensure our customers benefit through the broader use of our comprehensive integrated product range. In addition, we will continue to focus on driving efficiency and enhancing profitability within the business.
At the time of the Company's IPO in 2021 the Board stated that given the cash generative nature of the Group's activities it would, if commercially prudent to do so, commence the payment of dividends in the medium term. Having undertaken a review of the Group's capital allocation policy, and the availability of resources and distributable reserves, the Board has determined that it is now appropriate to commence the distribution of dividends to shareholders. The Board has therefore declared a final dividend for the 2023 financial year of 1.725 pence per share and will henceforth adopt a progressive dividend policy.
As well as returning capital to shareholders, the Board will continue to prioritise balance sheet strength which will allow the Group to continue to invest in its' technology platform, infrastructure and security whilst retaining an ability to pursue selective acquisitions which accelerate the Company's strategic development.
If approved by shareholder at May's Annual General Meeting on 22 May 2024, the dividend will be paid on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.
Microlise has an exceptionally talented team and our progress during the year was made possible as a result of their hard work, expertise and passion. I would like to thank everyone for their dedication and contribution to the ongoing success of the business. We look forward to a successful 2024.
Jon Lee, Non-Executive Chairman
CEO Statement
Microlise delivered a strong performance in FY23, outperforming both our internal and market expectations. The supply chain issues experienced in prior years are now firmly behind us and lead times on new vehicles are no longer extended, such that the market has fully returned to normality. Sales to OEM customers have been especially positive and this performance has continued into 2024, providing confidence that the year ahead will be another record year for OEM sales.
Microlise added 450 new customers during the year, an 80% increase over the 250 customers signed in FY22. Notable names signed during the period included BCA/ECM, the UK's largest used vehicles business, and the retailer Woolworths Australia.
In addition, we extended 40 contracts with existing large enterprise customers. Examples include Sainsbury's, Cemex, Sports Direct and Bidfood. The critical importance of our solutions to our customers' operations also resulted in our churn rate remaining extremely low at 0.7%.
Aside from organic growth we also commenced a series of acquisitions in FY23. Microlise expanded its offering into the Transport Management Solutions (TMS) space with two acquisitions; Vita Software, completed in March 2023, and Enterprise Software Solutions (ESS), announced in November 2023 and completed post year end in January 2024. Transport Management Solutions go beyond the vehicle to provide a suite of associated services to fleet logistics operators, such as resource and transport costing, subcontractor management and invoicing solutions. The TMS acquisitions have both been immediately earnings enhancing, with the Vita TMS already resulting in the successful sale to a new customer, Crowfoots.
In December 2023, Microlise also completed the acquisition of K-Safe, the provider of a safety product which warns drivers that cyclists are near their vehicle, providing them with the position of the cyclist. This innovative solution is hugely important in helping drivers avoid common accidents caused by a lack of visibility where bikes are concerned.
This product also takes Microlise into the last mile of delivery, a new market for Microlise, such that our offerings now provide end-to-end coverage of the road delivery sector from the warehouse to the consumer. K-Safe has brought with it a number of new customers in the last mile delivery space, including Deliveroo, JustEat and Voi and engagement with them to date has been very positive.
Market
At the beginning of 2023, our business and that of our customers continued to be negatively affected by global supply chain issues and chip shortages, which in turn led to greatly extended lead times on new vehicles. By the end of the first half of the year, the global supply chain issues and chip shortages had greatly diminished. However, lead times on new vehicles had not improved at this stage owing to a three-to-six-month time lag between vehicle manufacturer's receipt of now-available components and subsequent production of vehicles.
Throughout the second half of the year, we have experienced steady market growth as conditions continued to improve. The time lag on new vehicles has now all but disappeared such that the market has now returned to pre-pandemic conditions. With a substantial backlog of orders across the logistics market, we are now in an environment of robust and sustained growth, despite the less certain macro-economic backdrop.
Prior supply issues also led to many smaller companies within the logistics market entering administration and this has benefited larger companies which have been able to consolidate these distressed businesses into their operations. This has accelerated the growth of the larger companies, and these are typical of Microlise's customer base. As such, Microlise now finds itself extremely well positioned, firmly within the sweet spot of the growing logistics market.
Customer Base
During the year we continued to focus on securing and retaining customers as a priority. This resulted in us securing 450 new customers, an 80% increase over 2022. These included new contracts with Irish logistics company, McCulla; BCA, the UK's largest used vehicle business; and UK nationwide logistics company LF&E Refrigerated Transport.
Further afield, and in line with our strategic objective of geographic expansion, significant new contracts were signed with two of Australia's leading grocery retailers in September 2023, one of which further expanded its engagement in December 2023. These contracts demonstrate the clear traction we are developing in our target markets, and we are hopeful of providing updates on further geographic growth in the near future.
In addition, we signed 40 renewals with existing customers including Tesco, Bidfood and Pall-ex.
During the period we adapted our software solutions to enable compatibility with certain third-party products. This has removed barriers for potential customers who might otherwise be unable to utilise our solutions, thereby increasing our addressable market. It is also expected that this development will alter our revenue mix resulting in a positive effect on margins over time.
Our low customer churn reflects the essential nature of Microlise's solutions to its customers, the high regard in which we are held, and the loyalty of our valued customer base.
Product Offering and M&A
Microlise's solutions help our customers make the most efficient use of their assets, reducing fuel, the time drivers are on the road, wear and tear on vehicles, accidents and more.
During 2023 Microlise has expanded its product set to encompass more elements of the logistics process such that the Company offers a true end to end suite of products from the warehouse direct to the end consumer.
In March 2023, in line with the Company's strategic growth plan, Microlise completed its first acquisition since flotation with an initial cash payment of £1.86m for Vita Software, a Transport Management Solutions (TMS) provider. This expanded the Group's suite of technology solutions beyond the vehicle to include such offerings as resource and transport costing, subcontractor management and invoicing solutions and is applicable to fleets of any size. Immediately earnings enhancing, the product has performed well since acquisition and has resulted in numerous upsells and cross-sells.
Microlise complemented this with the acquisition of ESS, also a provider of Transport Management Solutions, announced in November 2023 and completed post year end. ESS was purchased for a maximum net consideration of £8.5m in cash, having delivered £5.1m revenue, of which 75% is recurring, and £1m adjusted EBITDA, in the year to 31 August 2023. This further strengthens Microlise's TMS credentials and is expected to accelerate sales of its TMS solutions. In December 2023, Microlise also acquired the assets of K-Safe Limited for £0.14m, the parent company to the road safety products Flare and Flare Aware. Flare is a multi-award-winning platform with over 3.5 million regular users of its app. This helps leading brands such as Deliveroo and Just Eat, as well as any individual on a two-wheeled vehicles (cyclists, motorcyclists, e-scooters), to better understand and react to mobility risk and safety issues.
Flare Aware is a dynamic driver hazard warning system, jointly developed with Microlise, which utilises the data captured from the Flare mobile app user network, to provide awareness and alerts to the drivers of vehicles when they are near cyclists and motorcyclists using the Flare app.
K-Safe has brought Microlise into the last mile of delivery services as well as into the two-wheel vehicle sector. The acquisition will further improve Microlise's safety solutions while at the same time adding some of the biggest names in consumer delivery services as customers.
Microlise's prime focus at present is on ensuring the full integration, and interoperability of the solutions, of its latest acquisitions. However, the Company remains alert to further acquisition opportunities, particularly internationally, both in markets in which we already operate as well as new geographies.
Strategic Focus
We are currently focused on the following core strategic objectives:
Bringing our three recent acquisitions into the Microlise architecture
This is progressing well with fully integrating our acquisitions will enable us to more effectively upsell and cross-sell products and attract new customers. This programme of work is externally named Microlise Complete, as we continue to drive our USP of being an end-to-end integrated solution for transport operators.
Combining all of our products into a single, seamlessly integrated product suite
Our R&D team is currently developing our systems architecture across all of our products to ensure each is fully integrated. This will enable data to be shared across all products such that, for example, when driver information is updated in one product it automatically updates in others.
In addition, it will allow for common functionality across the suite of programmes so that, for example, there is a single login from which customers can use, and purchase, multiple products. This will make our product suite still more attractive to potential customers while also facilitating the sales of more products to existing customers.
Improving margins through greater efficiencies
We have multiple initiatives underway to improve the efficiency of our business by streamlining internal processes, allowing us to scale the business more efficiently. Details on these initiatives are in part commercially sensitive but our aim is to increase margins.
Continued investment into product development
We will continue to invest heavily into product development to ensure that we remain at the forefront of our industry, bringing new, innovative solutions to our platform that benefit our customers.
Continued investment into security measures for our blue-chip customer base
A number of our clients have come under heavy attack from Ransomware and so we have continued to invest in replacement enterprise firewalls. We also continue to leverage our Exposure Management Platform with Monitoring Dashboards for Software Vulnerabilities. These attacks have not impacted Microlise directly but their effects on our clients could cause major disruption to their operations. Logistics companies are relied upon to deliver goods in a very short space of time and cannot afford for their operations to be put on hold. Therefore assurance and resilience of our business-critical systems are of paramount importance to our customers. Of all of our strategic initiatives, this is responsible for the largest capital spend but the outlay is necessary to ensure we both attract and retain customers.
International Expansion
During the period, we have remained focussed on international expansion, and we have made solid progress across a number of key geographies, particularly in Australia and New Zealand where we signed two new contracts with leading grocery retailers. This demonstrates the market leading nature of our products in the region and we are therefore committing increased investment to our sales function to ensure we further accelerate growth and capture all available opportunities.
M&A
M&A remains a core part of our strategy and we continue to see a robust pipeline of opportunities. We continue to assess further acquisition opportunities, with a current focus on international business, both in new geographies and in those in which we already operate, and will act appropriately should they align with our immediate and long-term strategic focus.
Microlise Transport Conference
The 2024 Microlise Transport Conference took place on 19 March at the Coventry Building Society Arena. 1200 delegates attended the event making it the biggest and most successful conference in our history. 14 keynote speakers addressed the audience, including MP Guy Opperman (Minister for Roads and Local Transport) and representatives from JCB, showcasing their hydrogen combustion engine technology. In addition, there were four further stages at the show featuring talks from SMEs from across the logistics industry, and OEMs, such as DAF, Mercedes-Benz and Volvo showcasing their latest electric vehicle offerings to delegates.
People
In August 2023 Shenny Remtulla was appointed to the senior leadership team as Strategy and M&A Director, with responsibility for enabling and accelerating the Company's profitable, sustainable growth.
ESG
We take great pride in the fact that our solutions help customers reduce emissions, improve safety for their drivers, and ensure their vehicles are driven and maintained effectively - lengthening the useful life of their assets. Together, these benefits reduce costs to our customers but they also improve the environment for everybody, both in terms of lowering pollutants in the atmosphere and also in making our roads a safer place.
Microlise is committed to meeting its net zero goals and continues to improve its ESG credentials. As such, the Company has now introduced an ESG element to its executive team's incentive plan, ensuring all management are aligned and encouraged in meeting Microlise's sustainability objectives.
During the first half of the year, we also completed the installation of 502 solar panels at our Nottingham HQ, with the objective of reducing the site's annual carbon footprint by over 80 tonnes of CO2.
Everybody at Microlise has worked hard toward making the Company's net zero goals a reality during 2023. This work will remain at the forefront of our efforts during 2024 and we look forward to updating the market on our continued progress going forward.
In terms of the social element of ESG, we achieved 'Great Place to Work' and 'Great Place to Work for Women' accreditations in April 2023, when we were officially ranked 29th among large organisations for the best wellbeing category.
We were also quoted as one of the Top 100 places to work in the UK for recognising our commitment to improving the work experience of our employees and their wellbeing.
Outlook
Microlise delivered a strong performance in FY23 exceeding our expectations, despite supply chain issues remaining in the first half of the year and their residual effects on new vehicle availability persisting into the second half. We are now confident that these issues are fully behind us, and we have emerged a stronger and more resilient business as a result.
We experienced record sales into OEMs in FY23 and direct business sales have grown strongly since the latter part of the year as new vehicle availability began to improve. These are trends we expect to continue in FY24, both in the UK and internationally.
This growth will be complemented by the additional capabilities provided by our recent acquisitions; the greater compatibility of our solutions with third-party products; and the increasingly interoperable nature of our product suite. This growth is also expected to flow through into profitability and enhance the earnings of the Company going forward.
Nadeem Raza, Chief Executive Officer
CFO Statement
The financial results for the twelve-month period to 31 December 2023 reflect another period of profitable growth for Microlise.
Key Performance Indicators
The following key performance indicators for the 12-month period to 31 December 2023 include a comparison to the audited statutory results for the 12-months to 31 December 2022.
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| FY23 | FY22 | Change |
| Financial | Revenue | £71.7m | £63.2m | 13% |
| Recurring Revenue | £45.0m | £40.5m | 11% | |
| Recurring revenue as % of Group revenue | 63% | 64% | -1% | |
| Gross Profit | £43.6m | £37.6m | 16% | |
| Gross Profit Margin % | 61% | 60% | 1% | |
| Operating Profit | £2.3m | £2.2m | 3% | |
| Adjusted EBITDA (1) | £9.4m | £8.2m | 15% | |
| Adjusted EBITDA % | 13.1% | 13.0% | 0.1% | |
| Profit before tax | £2.5m | £1.4m | 74% | |
| Adjusted Profit before tax (2) | £5.6m | £4.8m | 17% | |
| Adjusted Profit before tax % | 7% | 7% | - | |
| Basic EPS (p) | 1.36p | 1.17p | 16% | |
| Cash and cash equivalents | £16.8m | £16.7m | 1% | |
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| KPIs | ARR run rate (3) | £47.7m | £42.6m | 12% |
| Number of like-for-like subscriptions (4) | 640,000 | 599,000 | 6.8% | |
| Long-term contract customer churn by value | 0.7% | 0.4% | 0.3% | |
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| 1. EBITDA excludes depreciation, amortisation, share of loss of associate, interest, tax and share based payments. Adjusted EBITDA excludes, exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of loss of associate, interest, tax and share based payments.
2. Adjusted Profit / (loss) before taxation excludes exceptional costs in relation to acquisitions and restructuring costs, share based payments and loss of share of associate.
3. ARR run rate change figure and % compare the annualised recurring revenue figure for December 2023 with the annualised recurring revenue figure for December 2022.
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| 4. Like-for-like subscriptions change figure and % compare the subscriptions as at 31 December 2023 with the subscriptions as at 31 December 2022 | ||||
Group Results
Revenue
Total Revenue for the 12 months ended 31 December 2023 (FY23) was £71.7m, an increase of 13% from 31 December 2022 (FY22) as a result of both record levels of OEM(1) sales and increased revenue from direct customers. The Group delivered an increased win rate in the year, with over 450 new direct customers (2022: 250) which led to strong revenue growth towards the end of the year as an improvement of new vehicle availability in H2 enabled delivery against many of these new customers.
Strong customer wins, record OEM sales, together with growth in our existing customer's fleets resulted in recurring SaaS revenues growing to £45m, an increase of 11% compared to £40.5m in FY22 and 12% growth in ARR, of which 11.8% represented organic growth, to £47.7m as at 31 December 2023 from £42.6m on 31 December 2022. Recurring revenues represented 63% of total revenue (FY22 64.1%).
Hardware revenue increased 10% to £19.9m (FY22: £18.0m) as a result of the continued strong demand from OEM customers as well as the ability to deliver direct customer orders as vehicle availability improved in H2. The strong demand from direct customers in H2 also drove a 46% increase in services revenue, which comprises of installation services, project management and integration services, to £6.8m (FY22: £4.7m).
In addition to winning new business and deepening existing accounts, the Group successfully maintained an extremely low rate of customer churn by value at 0.7% (FY22: 0.4%). This reflects the mission critical importance of Microlise's software solutions in our customers' operations.
Gross Profit
Gross profit for the 12 months ended 31 December 2023 increased by 16% to £43.6m (FY22 £37.6m). Gross margin % increased from 60% to 61% reflecting margin improvements in recurring and non-recurring revenue. Non recurring margin increased by c.2.0% driven primarily by strong performance in H2 due to increased revenues from direct customers as vehicle availability improved. Recurring margin also saw a c.2.0% increase as a result of increased subscription revenues coupled with effective cost management and efficiency programmes.
Administrative Expenses
The Group has continued to invest in product and development, operations, and sales & marketing.
Administrative expenses before exceptional administrative charges, amortisation relating to acquisitions and share based payment charges, in the 12-month period ended 31 December 2023 increased 16% to £35.1m (FY22: £30.3m).
Staff costs in the 12 months ended 31 December 2023 increased 16% to £30m (FY22: £25.8m) reflecting our increase in headcount in line with our growth, the impact of the acquisitions of Vita Software and K-Safe, as well as annual pay awards and increased commissions/bonuses reflecting the increased new customer win rate and the Group's strong EBITDA performance. Average headcount in the Period was 715 (FY22: 661) overall, with 31 of the increase within operations, product and development reflecting our continued focus on the product roadmap, platform integration, enhanced user experience and enhanced security measures. A further 10 staff were added in sales & marketing including increases in staff numbers in Australia and France to drive growth in these regions. The increase in operations includes additional engineering resource to support the strategy of bringing more installation work in-house which supports our margin enhancement strategy.
Marketing costs increased during the period by £0.1m to £1.1m as the Group has continued to focus on growth with targeted marketing spend in key strategic geographies. This includes an increased number of exhibitions globally, the implementation of global prospecting tools and the product launch of Microlise TMS (Vita software).
Administration costs increased during the period by a net £0.1m as the Group continues to invest significantly in its internal business systems to drive efficiencies and improvements in its security posture, this increased level of spend is offset by reduced spend in other areas.
Capitalised development costs in the period were £2.5m (FY22: £1.8m), reflecting the ongoing levels of investment into the product portfolio, whilst amortisation of capitalised development costs in the period ended 31 December 2023 was £1.2m (FY22: £0.8m).
EBITDA(2) & Profit Before Tax
The growth in revenue and gross margin has enabled the Group to deliver an adjusted EBITDA ahead of market expectations at £9.4m in the 12 months ended 31 December 2023, an increase of 15% (FY22: £8.2m). Adjusted EBITDA margin increased to 13.1% (FY22: 13.0%) as a result of the Group's investment programme to improve its go-to-market and product offering and support further growth. To provide a better guide to the underlying business performance, adjusted EBITDA excludes exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of loss of associate, interest, tax and share based payments.
The adjusted profit before taxation excludes exceptional costs in relation to acquisitions and restructuring costs, amortisation charges of £2.2m as a result of business combinations (FY22: £2.1m), share of loss of associate and share based payments. Adjusted profit before taxation for the 12 months ended 31 December 2023 increased 17% to £5.6m (FY22: £4.8m). Reported profit before taxation in the period increased 74% to £2.5m (FY22: £1.4m).
Exceptional Costs
During FY23 the Group incurred a number of one-off charges relating to acquisition fees and subsequent restructuring. These are disclosed separately in note 2 of the financial statements to provide a better guide to the underlying financial performance of the Group. The total of these charges in the period ended 31 December 2023 was £0.4m (FY22: £0.2m).
Taxation
The tax charge in the 12 months ended 31 December 2023 increased to £0.9m (FY22: £0.1m). The principal factor driving this increase is deferred tax charges that relate to the reassessment of the likelihood of future deductions from the exercise of share options. Underlying deferred tax charges relate to the utilisation of accelerated allowances together with losses brought forward to reduce UK corporation tax for the 12 months, offset by the deferred tax credit relating to the amortisation of intangible assets. Due to these factors the effective tax rate for the period of 37% (FY22: 6%) which is higher than the main rate of corporation tax of 25%. For future periods we expect the effective rate to align with more closely with the main corporation tax rate.
From 1 July 2020, Microlise has been classified as a large company for tax research and development purposes and benefits from the Research and Development Expenditure Credit scheme (RDEC) with any benefit being reflected as grant income within other operating income. In the period ended 31 December 2023 the pre tax value of the credit was £0.6m (FY22: £0.6m)
EPS and Dividend
The Group reported an increase in profit after taxation in the period of 17% to £1.6m (FY22: £1.4m). As a result, the reported basic earnings per share for the 12 month period ended 31 December 2023 was 1.359p (FY22: 1.167p) and diluted earnings per share was 1.358p for the 12 months period ended 31 December 2023 (FY22: 1.165). For further information on earnings per share, please refer to note 8 of the financial statements.
The Group is pleased to announce the introduction of its dividend policy and proposes a full year dividend of 1.72 pence per share that will be payable on 28 June 2024 to shareholders on the register at close of business on 7 June 2024.
Group Statement of Financial Position
The Group had net assets of £75.7m at 31 December 2023 (FY22: £73.5m). Intangible assets increased by £1.2m reflecting the £2.4m of acquired intangible assets and goodwill resulting from the acquisition of Vita Software Limited, capitalised development costs less amortisation charges. Current assets increased by £4.2m, primarily due to an increase in debtors driven by higher revenues in the year combined with the timing of several large receipts which have been received in full post period end. Total liabilities increased by £2.9m due to an increase in deferred income and trade payables. The Group typically invoices for software subscriptions monthly, quarterly, annually or for the life of the subscription in advance which drives a strong balance sheet with significant cash balances. Revenue is recognised in the month the service is provided with deferred income disclosed as contract liabilities in current and non current liabilities. As at the end of December 2023 total Trade and other payables was £48.3m (FY22: £46.1m) of this balance £34.5m (FY22: £33.3m) is deferred income and relates to future contracted revenue recognition.
Adjusted Cashflow(3) & Net Cash
The Group ended the 12-month period to 31 December 2023 with cash and cash equivalents of £16.8m, a small increase on FY22 (FY22: £16.7m). This was partly due to the timing of several large receipts totalling £1.2m, which have been received in full post period end. Adjusted cash flows generated from operations (5) remains healthy at £9.3m in the period (FY22: £9.9m), this represents a cash conversion rate(4) of 98% (FY22: 121%). Reported cash flows generated from operations in the period was £8.8m (FY22: £9.7m)
During the period, the Group increased investment into product and development as well as plant, property and equipment, particularly IT infrastructure to support ongoing advancements in both customer and internal business systems as well as security.
Banking Facility
The Group has renewed its facility with HSBC with an agreed £10.0m committed revolving cash flow facility and a £20m accordion. The Group has not utilised any of this facility to date. The Group's gross cash of £16.8m (FY22: £16.7m) and the undrawn £10.0m facility gives the Group £26.8m of cash, which the Directors believe provides ample headroom for Microlise to deliver against its strategic goals. Given the level of headroom in the business forecasts the board consider it appropriate to prepare the financial statements on the going concern basis. Details of the board's going concern assessment is provided in the basis of preparation note in the financial statements on page 98.
Additional Notes
1. OEM is an abbreviation for Original Equipment Manufacturers
2. Adjusted EBITDA excludes, exceptional costs in relation to acquisitions and restructuring costs, depreciation, amortisation, share of profit or loss of associate, interest, tax and share based payments.
3. Adjusted cash flow generated from operations adds back exceptional costs in relation to acquisitions and restructuring costs
4. Cash conversion is calculated by dividing adjusted cash flow generated from operations by adjusted EBITDA.
Nick Wightman, Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
| | | Year ended | Year ended |
| | | 2023 | 2022 |
| | Note | £'000 | £'000 |
| Revenue | 1 | 71,716 | 63,211 |
| Cost of sales | | (28,132) | (25,577) |
| Gross profit | | 43,584 | 37,634 |
| Other operating income | 3 | 973 | 876 |
| Administrative expenses | | (42,302) | (36,326) |
| Operating profit | 3 | 2,255 | 2,184 |
| | | | |
| Interest income | 5 | 360 | 45 |
| Interest expense | 6 | (333) | (312) |
| Share of profit/(loss) of associate net of tax | 11 | 225 | (478) |
|
Profit before taxation
| | 2,507 | 1,439 |
| Taxation | 7 | (931) | (86) |
| | | | |
| Profit for the year | | 1,576 | 1,353 |
|
| | | |
| Other comprehensive (expense)/ income for the year/period | | | |
| Currency translation differences | | (102) | 6 |
| | | | |
| Total comprehensive income for the year attributable to the equity shareholders of Microlise Group plc | | 1,474 | 1,359 |
|
| | | |
| Basic earnings per share (pence) | 8 | 1.36 | 1.17 |
| Diluted earnings per share (pence) | 8 | 1.36 | 1.17 |
|
| | | |
|
| | | |
Consolidated Statement of Financial Position
as at 31 December 2023
| | | 31 December | 31 December |
| | | 2023 | 2022 |
| | Note | £'000 | £'000 |
| Assets | | | |
| Non-current assets | | | |
| Property, plant and equipment | 9 | 8,947 | 8,292 |
| Intangible assets | 10 | 76,228 | 75,031 |
| Investments in associate | 11 | 1,593 | 1,368 |
| Loan to associate | 11 | - | 1,000 |
| Trade and other receivables | 14 | 2,841 | 3,078 |
| Total non-current assets |
| 89,609 | 88,769 |
|
| | | |
| Current assets | | | |
| Inventories | 13 | 3,348 | 2,635 |
| Loan to associate | 11 | 1,000 | - |
| Trade and other receivables | 14 | 18,757 | 16,760 |
| Corporation tax recoverable | | 1,665 | 1,289 |
| Cash and cash equivalents | 15 | 16,800 | 16,683 |
| Total current assets | | 41,570 | 37,367 |
|
Total assets | | 131,179 | 126,136 |
|
| | | |
| Current liabilities | | | |
| Lease liabilities | 16 | (907) | (821) |
| Trade and other payables | 17 | (32,630) | (29,183) |
| Total current liabilities | | (33,537) | (30,004) |
|
| | | |
| Non current liabilities | | | |
| Lease liabilities | 16 | (646) | (926) |
| Trade and other payables | 17 | (15,701) | (16,898) |
| Deferred tax | 12 | (5,622) | (4,840) |
| Total non current liabilities | | (21,969) | (22,664) |
|
| | | |
| Total liabilities | | (55,506) | (52,668) |
|
| | | |
| Net assets | | 75,673 | 73,468 |
|
| | | |
| Equity | | | |
| Issued share capital | 20 | 116 | 116 |
| Share premium account | | 17,630 | 17,630 |
| Retained earnings | | 57,927 | 55,722 |
| Total equity | | 75,673 | 73,468 |
Group Chief Financial Officer
Microlise Group plc Registered number 11553192
Consolidated Statement of Changes in Equity
| | Share Capital | Share Premium Account | Retained earnings | Total Equity |
| | £'000 | £'000 | £'000 | £'000 |
| At 31 December 2021 | 116 | 17,630 | 53,802 | 71,548 |
| Comprehensive income for the year ended 31 December 2022 | |
| | |
| Profit for the year | - | - | 1,353 | 1,353 |
| Other comprehensive income | - | - | 6 | 6 |
| Total comprehensive income for the year | - | - | 1,359 | 1,359 |
| | |
| | |
| Share based payment (note 21) | - | - | 561 | 561 |
| Total transactions with owners | - | - | 561 | 561 |
|
At 31 December 2022 | 116 |
17,630 | 55,722 | 73,468 |
|
|
| | | |
| Comprehensive income for the year ended 31 December 2023 |
| | | |
| Profit for the year | - | - | 1,576 | 1,576 |
| Other comprehensive expense | - | - | (102) | (102) |
| Total comprehensive income for the year | - | - | 1,474 | 1,474 |
| | | | | |
| Share based payment (note 21) | - | - | 731 | 731 |
| Total transactions with owners | - | - | 731 | 731 |
|
At 31 December 2023 | 116 |
17,630 | 57,927 | 75,673 |
| | | | | |
Company Statement of Financial Position
as at 31 December 2023
| | | 31 December | 31 December |
| | | 2023 | 2022 |
| | Note | £'000 | £'000 |
| Assets | | | |
| Non-current assets | | | |
| Property, plant and equipment | 9 | 4,736 | 4,838 |
| Investments | 11 | 83,005 | 79,192 |
| Loan to associate | 11 | - | 1,000 |
| Deferred tax | 12 | 1 | 111 |
| Total non-current assets |
| 87,742 | 85,141 |
|
| | | |
| Current assets | | | |
| Loan to associate | 11 | 1,000 | - |
| Trade and other receivables | 14 | 158 | 26 |
| Cash and cash equivalents | 15 | 86 | 69 |
| Total current assets | | 1,244 | 95 |
|
Total assets | | 88,986 | 85,236 |
|
| | | |
| Current liabilities | | | |
| Trade and other payables | 17 | (15,434) | (17,928) |
| Total current liabilities | | (15,434) | (17,928) |
|
| | | |
|
| | | |
| Total liabilities | | (15,434) | (17,928) |
|
| | | |
| Net assets | | 73,552 | 67,308 |
|
| | | |
| Equity | | | |
| Issued share capital | 20 | 116 | 116 |
| Share premium account | | 17,630 | 17,630 |
| Retained earnings | | 55,806 | 49,562 |
| Total equity | | 73,552 | 67,308 |
The Company has elected to take the exemption under section 408 of the Companies Act not to present the parent Company profit and loss account. The profit for the parent Company for the year was £5,529,000 (2022: loss of £182,000).
Group Chief Financial Officer
Microlise Group plc Registered number 11553192
Company Statement of Changes in Equity
| | Share Capital | Share Premium Account | Retained earnings | Total Equity |
| | £'000 | £'000 | £'000 | £'000 |
| At 31 December 2021 | 116 |
17,630 | 49,183 | 66,929 |
| Comprehensive expense for the year to 31 December 2022 | | | | |
| Loss for the year | - | - | (182) | (182) |
| Other comprehensive income | - | - | - | - |
| Total comprehensive expense for the year | - | - | (182) | (182) |
| | | | | |
| Share based payment (note 21) | - | - | 561 | 561 |
| Total transactions with owners | - | - | 561 | 561 |
|
At 31 December 2022 | 116 |
17,630 | 49,562 | 67,308 |
|
|
| | | |
| Comprehensive income for the year to 31 December 2023 |
| | | |
| Profit for the year | - | - | 5,529 | 5,529 |
| Other comprehensive income | - | - | - | - |
| Total comprehensive income for the year | - | - | 5,529 | 5,529 |
| | | | | |
| Share based payment (note 21) | - | - | 715 | 715 |
| Total transactions with owners | - | - | 715 | 715 |
|
At 31 December 2023 | 116 |
17,630 | 55,806 | 73,552 |
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
|
|
| Year ended | Year ended |
|
| Note | 2023 | 2022 |
|
|
| £'000 | £'000 |
| Cash flows from operating activities |
| | |
| Cash generated from operations | A | 8,906 | 9,719 |
| Tax paid | | (144) | (34) |
| Net cash generated from operating activities |
| 8,762 | 9,685 |
|
|
| | |
| Cash flows from investing activities |
| | |
| Purchase of property, plant and equipment | | (2,195) | (979) |
| Proceeds from disposals of tangible fixed assets | | 54 | - |
| Additions to intangible assets | | (2,543) | (2,080) |
| Loan advanced to associate | | - | (1,000) |
| Purchase of subsidiary net of cash acquired | | (1,966) | - |
| Purchase of businesses deferred consideration paid | | (1,000) | (1,000) |
| Interest received | | 360 | 45 |
| Net cash used in investing activities |
| (7,290) | (5,014) |
|
|
| | |
| Cash flows from financing activities |
| | |
| Interest paid | | (283) | (283) |
| Lease liability payments | | (1,056) | (915) |
| Net cash used in financing activities |
| (1,339) | (1,198) |
|
|
| | |
| Net increase in cash and cash equivalents |
| 133 | 3,473 |
| Cash and cash equivalents at beginning of year | | 16,683 | 13,210 |
| Foreign exchange losses | | (16) | - |
| Cash and cash equivalents at end of year | B | 16,800 | 16,683 |
The notes on pages X to X form part of these financial statements.
Notes to the cash flow statements
A. Cash generated from operations
The reconciliation of profit for the period to cash generated from operations is set out below:
|
|
| Year ended | Year ended |
|
|
| 2023 | 2022 |
|
|
| £'000 | £'000 |
| Profit for the year | | 1,576 | 1,353 |
| Adjustments for: | | | |
| Depreciation | | 2,585 | 2,212 |
| Amortisation | | 3,492 | 3,036 |
| Profit on disposal of tangible fixed assets | | (19) | - |
| Share based payments | | 731 | 561 |
| Foreign exchange movements | | (65) | - |
| Net interest costs | | (27) | 267 |
| Share of (profit)/loss of associate | | (225) | 478 |
| Tax charge | | 931 | 86 |
|
|
| 8,979 | 7,993 |
|
|
| |
|
| (Increase)/decrease in inventories | | (713) | 306 |
| Increase in trade and other receivables | | (2,315) | (2,545) |
| Increase in trade and other payables | | 2,955 | 3,965 |
| Cash generated from operations |
| 8,906 | 9,719 |
B. Analysis of net funds
|
| At 1 January | Cash flow | Non-cash changes | At |
|
| 2023 |
|
| 2023 |
|
| £'000 | £'000 | £'000 | £'000 |
| | | | | |
| Lease liabilities | (1,747) | 1,163 | (969) | (1,553) |
| Liabilities arising from financing activities | (1,747) | 1,163 | (969) | (1,553) |
| | | | | |
| Cash and cash equivalents | 16,683 | 133 | (16) | 16,800 |
| Net funds | 14,936 | 1,296 | (985) | 15,247 |
|
| At 1 January | Cash flow | Non-cash changes | At |
|
| 2022 |
|
| 2022 |
|
| £'000 | £'000 | £'000 | £'000 |
| | | | | |
| Lease liabilities | (1,711) | 979 | (1,015) | (1,747) |
| Liabilities arising from financing activities | (1,711) | 979 | (1,015) | (1,747) |
| | | | | |
| Cash and cash equivalents | 13,210 | 3,473 | - | 16,683 |
| Net funds | 11,499 | 4,452 | (1,015) | 14,936 |
Major non cash items
£862,000 of additions to right of use assets and lease liabilities are included in non cash movements in the year ended 31 December 2023 (2022: £951,000).
Summary of Significant Accounting Policies
General information
Microlise Group plc is a holding and management services company. Its subsidiaries are telematics businesses providing technological transport solutions that enable customers to reduce costs and environmental impact by maximising the efficiency of their transportation. The company is a public limited company, traded on the Alternative Investment Market ("AIM") of the London Stock Exchange, and incorporated and domiciled in England. The address of the registered office is Farrington Way, Eastwood, Nottingham, NG16 3AG.
Accounting policies
A. Basis of preparation
The consolidated financial statements have been prepared in accordance with the historical cost convention and UK adopted International Accounting Standards ('UK IFRS'). The stated accounting policies have been consistently applied to all periods presented.
The parent company financial statements have been prepared under applicable United Kingdom Accounting Standards (FRS101). The following FRS 101 disclosure exemptions have been taken in respect of the parent company only information:
· IAS 7 Statement of cash flows;
· IFRS 7 Financial instruments disclosures; and
· IAS 24 Key management remuneration.
The financial statements including the notes are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Group, except where otherwise indicated.
The principal accounting policies adopted in preparation of the financial statements are set out below. The policies have been consistently applied to all periods presented, unless otherwise stated.
Judgements made by the Directors in the application of the accounting policies that have a significant effect on the historical financial information and estimates with significant risk of material adjustment in the next year are discussed in note C.
Going concern
The directors have considered working capital forecasts prepared for the period to December 2025. The Group had cash balances of £16.8m at the year end, of which a net £6.2m was utilised to make an acquisition in January, no borrowings and a £20m undrawn working capital facility which is not forecast to be utilised. The current working capital facility term was due to run to July 2024. On the 5th April 2024, a replacement facility has been agreed with HSBC, with £10.0m committed revolving cash flow facility and a £20m accordion on more favourable terms, which is available until 5th April 2027. The Group also has a significant recurring income base with inflationary clauses in the main contracts.
A range of sensitivities have been run on the working capital model, and the directors consider a scenario in which the business will face liquidity issues is remote. As part of the sensitivity analysis the directors have considered the impact of a reduction in turnover from their principal customer and the impact on working capital as well as cost and supply issues that might arise in the context of the current international conflicts and are satisfied that the Group has sufficient resources to respond to reasonably foreseeable scenarios. The Directors conclude that a scenario that would result in the need for the Group to require additional funding to be remote.
Based on the forecasts, the Directors are satisfied that the Group can meet its day-to-day cash flow requirements and operate within the terms of its working capital banking facilities if required. Accordingly, the financial statements have been prepared on a going concern basis.
B. Accounting policies
Consolidation
The consolidated financial statements include the results of Microlise Group plc and its subsidiary undertakings. The results of the subsidiary undertakings are included from the date that effective control passed to the company.
On acquisition, all the subsidiary undertakings' assets and liabilities at that date of acquisition are recorded under purchase accounting at fair value, having regard to condition at the date of acquisition. All changes to those assets and liabilities and the resulting gains and losses that arise after the company gained control are included in the post-acquisition results. Sales, profits and balances between group companies are eliminated on consolidation.
The Group has taken advantage of the exemption not to disclose transactions between wholly owned entities in the group.
Associates
Entities in which the Group holds a participating interest and over whose operating and financial policies the group exercises a significant influence are treated as associates. In the Group financial statements, Trakm8 Holdings plc is accounted for as an associate using the equity method. The initial investment was accounted for at cost and the subsequent share of associate profits or losses reported in the Statement of Comprehensive Income and are added to or deducted from the carrying value of the investment.
Revenue recognition
Revenue comprises revenue recognised by the Group in respect of goods and services supplied during the year, based on the consideration specified in a contract, exclusive of Value Added Tax and trade discounts.
The Group enters into the sale of multi-element contracts, which combine separate performance obligations including hardware, installation, managed service contracts (software-as-a-service or SaaS), software licences, professional services (which includes bespoke software development, project management (incorporating activities including project and installation planning, managing change control and stage boundaries and project reporting), consultancy, training), and support and maintenance services relating to these products. In accordance with IFRS 15, these are considered to be distinct.
Each performance obligation is allocated a transaction price based on the stand-alone selling prices. Where stand-alone prices are not directly observable, they are based on expected cost plus margin.
Revenue is recognised depending upon the revenue stream to which it relates, as follows:
· The fair value of hardware and installation revenue is recognised at a point in time when control is transferred to the customer on despatch and/or upon installation;
· Revenue from the SaaS arrangement is recognised over a period of time, based on the term of the contract on a straight line basis. Revenue recognition over time is considered appropriate based on provisions of IFRS 15 paragraph 35 as the customer simultaneously receives and consumes the benefits provided by the Group. The contractual term for average SaaS agreements are approximately 5 years;
· Professional services typically include implementation, configuration, training and other similar services to create optimised interfaces between the Group's software and customers systems. Revenue from professional services is recognised over a period of time using the input method as professional services are being performed, as this best depicts the timing of how the value is transferred to the customer; and
· Support and maintenance turnover is deferred at the point of sale and recognised in the Statement of Comprehensive Income over a period of time of the contractual life, utilising the output method, generally on a straight line basis as the customer simultaneously receives and consumes the benefits provided by the Group.
Invoicing for all revenue streams is undertaken in accordance with the terms of the agreement with the customer. When an invoice is due for payment at the statement of financial position date but the associated performance obligations have not been fulfilled the amounts due are recognised as trade receivables and a contact liability is recognised for the sales value of the performance obligations that have not been provided. If payment is received in advance of the delivery of the associated performance obligation a contract liability is recognised. When an invoice is not due for payment at the statement of financial position date and the associated performance obligation has not been fulfilled no amounts are recognised in the financial statements.
In cases where customers pay for the goods and services over an agreed period, the fair value of the consideration is determined by discounting future receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognised as finance income over the payment period.
Contract costs
Under IFRS 15, the Group capitalises commission fees as costs of obtaining a contract when they are incremental and, if they are expected to be recovered, it amortises them consistently with the pattern of revenue for the related contract. If the expected amortisation period is one year or less, then the commission is expensed when incurred. Contract costs are capitalised to trade and other receivables, due within and after one year.
The Group in certain circumstances incurs costs to deliver its services and fulfil specific contracts. These costs may include process mapping and design, scoping and configuration. Contract fulfilment costs are divided into costs that deliver an asset and costs that are expensed as incurred.
Under IFRS 15, the Group capitalises these contract fulfilment costs when they directly relate to a specifically identifiable contract or anticipated contract, will enhance or generate resources used to satisfy future performance obligations and they are expected to be recovered. Where capitalised, it amortises them consistently with the pattern of revenue for the related contract.
At each reporting date, the Group determines whether or not the contract assets are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Group expects to receive less the costs that relate to providing services under the relevant contract.
Employee benefits
The Group operates a defined contribution pension scheme. Contributions are recognised in the Statement of Comprehensive Income in the year in which they become payable in accordance with the rules of the scheme.
Short term employee benefits including holiday pay are recognised as an expense in the period in which the service is rendered.
Share based payment
The Group operates an equity-settled share based compensation plan in which the Group receives services from directors and certain employees as consideration for share options. The fair value of the services is recognised as an expense over the estimated vesting period, determined by reference to the fair value of the options granted.
Taxation
The taxation expense or credit comprises current and deferred tax recognised in the profit for the financial period or in other comprehensive income or equity if it arises from amounts recognised in other comprehensive income or directly in equity. Current tax is provided at amounts expected to be paid (or recovered) in respect of the taxable profits for the period using tax rates and laws that have been enacted or substantively enacted by the reporting date. Microlise, as a large company from 1 July 2020 for tax R&D purposes, qualifies for the large company RDECs which are included as grant income within other operating income.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset and where the deferred tax balances relate to the same taxation authority.
Exceptional items
The Group classifies certain one-off charges or credits that have a material impact on the financial results as 'exceptional items'. These are disclosed separately to provide further understanding of the financial performance of the group.
Government grants
Grants are accounted under the accruals model, and grants of a revenue nature are recognised in the Statement of Comprehensive Income in the same period as the related expenditure. Government grants relate to innovation grants and large company research and development expenditure credits ('RDEC' s).
Foreign exchange
Transactions denominated in foreign currencies are translated into sterling at the rates ruling on the date of the transaction. Monetary assets or liabilities denominated in foreign currencies at the Statement of Financial Position date are translated at the rate ruling on that date and all translation differences are charged or credited in the Statement of Comprehensive Income.
On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
Intangible assets
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the fair value of the net assets acquired at the acquisition date. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee.
Intangible assets acquired separately from a business are recognised at cost. Intangible assets acquired as part of an acquisition are recognised separately from goodwill if the fair value can be measured reliably on initial recognition. Intangible assets created within the business are not recognised, other than for qualifying development expenditure, and expenditure is charged against profits in the year in which it is incurred.
Subsequent to initial recognition, intangible assets are stated at cost less accumulated recognised and accumulated impairment. Intangible assets are amortised on a straight line basis within administrative expenses over their estimated useful lives as follows:
Asset class Amortisation period
Brands 15 years
Customer relationships 11 to 16 years
Technology assets 5 to 13 years
Software 3-5 years
Intangible assets are tested for impairment when an event that might affect asset values has occurred. Any such impairment in carrying value is written off to the Statement of Comprehensive Income immediately.
Research and development expenditure
An internally generated intangible asset arising from development (or the development phase) of an internal project is recognised if, and only if, all of the following have been demonstrated:
· It is technically feasible to complete the development such that it will be available for use, sale or licence;
· There is an intention to complete the development;
· The method by which probable future economic benefits will be generated is known;
· There are adequate technical, financial and other resources required to complete the development; and
· There are reliable measures that can identify the expenditure directly attributable to the project during its development.
The amount recognised is the expenditure incurred from the date when the project first meets the recognition criteria listed above. Expenses capitalised as "Technology" within intangible assets consist of employee costs incurred on development. Where the above criteria are not met, development expenditure is charged to the consolidated statement of comprehensive income in the period in which it is incurred. The expected life of internally generated intangible assets varies based on the anticipated useful life, currently ranging from five to seven years.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment losses. Amortisation is charged on a straight-line basis over the estimated useful life in which the intangible asset has economic benefit and is reported within administrative expenses in the consolidated statement of comprehensive income.
Research expenditure is recognised as an expense in the period in which it is incurred.
Research and development expenditure tax credits arise in the UK. Those relevant to a large company for tax purposes are credited to other operating income as a grant.
Financial assets
Financial assets, including trade and other receivables, cash and cash equivalent balances are initially recognised at transaction price. Such assets are subsequently carried at amortised cost using the effective interest method. Cash and cash equivalents comprise cash held at bank which is available on demand.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. The group measures loss allowances at an amount equal to lifetime ECL, which is estimated using past experience of the group's historical credit losses experienced over the three year period prior to the period end. Historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the group's customers, such as inflation rates. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.
The group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost to the extent that these are material. The group has determined that there is no material impact of ECLs on the historical financial information.
Financial liabilities
Financial liabilities, including trade and other payables, lease liabilities and bank borrowings are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.
Borrowings are initially stated at the fair value of the consideration received after deduction of wholly attributable issue costs. Borrowings are subsequently stated at amortised cost using the effective interest method.
Right-of-use assets and lease liabilities
Under IFRS 16, leases are recognised as right-of-use assets, presented as a separate category within property, plant and equipment included in the consolidated statement of financial position, and with a corresponding lease liability from the date at which the leased asset is available for use by the Group. This has been adopted and applied on a full retrospective basis.
Assets and liabilities arising from a lease are initially measured at the present value of the lease payments and payments to be made under the terms of the lease. Reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, or the incremental borrowing rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal, presented as a separate category within liabilities, and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received and any initial direct costs. Leasehold dilapidations are recognised in relation to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms.
Depreciation is charged on a straight line basis over the period of the lease and assets are subject to impairment reviews where circumstances indicate their value may not be recoverable of if they are not being utilised.
Payments associated with short-term leases of property, plant and equipment and leases of low-value assets continue to be recognised on a straight-line basis as an expense. Short-term leases are leases with a lease term of 12 months or less.
Property, plant and equipment
Property, plant and equipment assets are stated at cost less depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment assets at rates calculated to write off the cost of each asset on a straight line basis over its expected useful life, as follows:
Asset class Depreciation method rate
Freehold property 2% straight line
Leasehold improvements Over the period of the lease
Equipment, fixtures and fittings 20-33% straight line basis
Investments
Investments in subsidiaries are stated at cost or at the fair value of shares issued as consideration less provision for any impairment. Investments in associates are stated at fair value through the profit and loss.
Inventories
Inventories are valued at the lower of purchase cost and net realisable value, after due regard for any slow moving items. Net realisable value is based on selling price less anticipated costs to completion and selling costs. Cost is based on the cost of purchase on a weighted average basis. Work in progress and finished goods include labour and attributable overheads.
At each reporting date, inventories are assessed for impairment. If inventory is impaired, the carrying amount is reduced to its net realisable value. The impairment loss is recognised immediately in the consolidated statement of comprehensive income.
Share capital and reserves
Financial instruments issued by the company are treated as equity only to the extent that they do not meet the definition of a financial liability. The parent company's ordinary shares are classified as equity instruments.
The share premium account represents the amount by which the issue price of shares exceeds the nominal value of the shares less any share issue expenses.
The merger reserve represents the difference between the fair value of the shares issued as part of the consideration for Microlise Holdings Limited and the nominal value of the shares issued.
Retained earnings comprises opening retained earnings and total comprehensive income for the year, net of dividends paid.
New or revised accounting standards and interpretations
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for accounting periods beginning on or after 1 January 2024 and which the Group has chosen not to adopt early. These include the following standards which may be relevant to the Group:
- Amendment to IAS 1 regarding the classification of liabilities being based on an entity's rights at the end of a reporting period and disclosure in respect of post period end covenants that have to be met in the 12 months post period end;
- IAS 7/IFRS 7 amendments in respect of supplier finance arrangements and disclosures that allow an investor to understand the nature of these;
- IFRS 16 Amendments to clarify how a seller-lessee subsequently measures sale and leaseback transactions.
As a result of initial review of the new standards, interpretations and amendments which are not yet effective in these financial statements, none are expected to have a material effect on the Company or Group's future financial statements. All IFRS effective at the reporting date of 31 December 2023 have been applied.
C. Critical accounting estimates and assumptions
Critical judgements in applying the accounting policies
The preparation of the financial statements under IFRS requires the use of certain critical accounting assumptions and requires management to exercise its judgement and to make estimates in the process of applying the Company's and Group's accounting policies. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable in the circumstances. The key judgements and estimates used in the preparation of these financial statements that could result in a material change in the carrying value of assets or liabilities within the next twelve months are as follows:
Fair values and intangible assets on acquisition of a business
Fair values have been applied on the acquisition of subsidiaries which involve a degree of judgement and estimation in particular in the identification and evaluation of intangible assets. The values are derived from the business cash flow forecasts and assumptions based on experience and factors relevant to the nature of the business activity.
Useful economic lives of intangible assets
The annual amortisation charge for intangible assets is sensitive to changes in the estimated useful economic lives of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments and economic utilisation.
There is no current indication that the Group's businesses will not continue to trade profitably and hence the life may differ or be longer than the estimates used to amortise intangible assets.
Capitalisation of development expenditure
Management have used their judgement in respect of the capitalisation of development costs against the criteria in the policy. The viability of the new technology and know-how is supported by the results of testing and by forecasts for the overall value and margins from future sales to support the approach taken.
Impairment of intangible assets including goodwill and investments
Investments made by the Company and intangible assets acquired in a business combination capitalised with goodwill by the Group are subject to annual impairment tests and other intangibles amortised over their estimated useful lives subject to an assessment of impairment.
Subsequent impairment tests for investments and intangible assets are based on risk adjusted future cash flows discounted using appropriate discount rates. These future cash flows are based on forecasts which include estimated factors and are inherently judgemental. Future events could cause the assumptions to change which could have an adverse effect on the future results of the Group. Further detail including sensitivities is given in note 10.
Right-of-use assets and lease liabilities
In respect of right-of-use leased assets key estimates are a combination of the incremental borrowing rate used to discount the total cash flows and the term of the leases where breaks or extensions fall within the Group's control. These are used to derive both the opening asset value and lease liability as well as the consequential depreciation and financing charges. A 1% change in the discount rate used would increase interest charges and decreased depreciation by approximately £10,000 a year with an immaterial impact on assets and liabilities.
Share based payment
The fair values in respect of share based payments are estimated using a number of inputs to an appropriate valuation models including the probability that perforrnance conditions may be met. Further detail of the assumptions applied is included in note 21.
Notes to the financial statements for the year ended 31 December 2023
1. Revenue and segmental analysis
Recurring revenue represents the sale of the group's full vehicle telematics solutions, support and maintenance. Non-recurring revenue represents the sale of hardware, installation, and professional services. Revenue is defined as per the accounting policies.
Revenue in respect of the setup, supply of hardware and software installation is recognised at a point in time. Professional services including project management, managed services and support services income is recognised over the period when services are provided.
|
| Year ended | Year ended 2022 |
|
| £'000 | £'000 |
| By type | | |
| Revenue recognised at a point in time Supply of hardware and installation | 23,707 | 19,975 |
| | 23,707 | 19,975 |
|
Revenue recognised over time Professional services including project management |
2,987 |
2,721 |
| Managed service agreement income | 41,614 | 37,360 |
| Other support and maintenance services | 3,408 | 3,155 |
| | 48,009 | 43,236 |
| | 71,716 | 63,211 |
| By destination: | | |
| UK | 65,670 | 58,037 |
| Rest of Europe | 1,514 | 1,195 |
| Rest of the World | 4,532 | 3,979 |
| Total revenue | 71,716 | 63,211 |
Revenue in respect of one customer amounted to £23.1m representing 32% of the revenue for the year (2022: £20.9m representing 33% of the revenue).
The split of the disaggregated revenue between segments is summarised below.
The chief operating decision maker ("CODM") is identified as the Board. It continues to define all the Group's trading as operating in the telematics market with two complementary segments. The Board as the CODM also review the revenue streams of recurring and non-recurring revenue as part of their internal reporting.
The directors consider the Microlise business to be one segment related to fleet management and the separately acquired TruTac business to be a complementary segment related to tachograph specific software and analysis services.
|
|
| Microlise | TruTac | Year ended 2023 | Microlise | TruTac | Year ended 2022 |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Revenue | | 66,526 | 5,190 | 71,716 | 59,147 | 4,064 | 63,211 |
| | |
|
|
| | |
|
| Depreciation and amortisation | | 5,369 | 708 | 6,077 | 4,645 | 603 | 5,248 |
| | |
|
|
| | |
|
| Operating profit | | 1,278 | 977 | 2,255 | 1,559 | 625 | 2,184 |
| Net interest | | (15) | 42 | 27 | (263) | (4) | (267) |
| Share of associate profit/(loss) | | 225 | - | 225 | (478) | - | (478) |
| Profit before tax |
| 1,488 | 1,019 | 2,507 | 818 | 621 | 1,439 |
|
|
|
|
|
|
|
|
|
| Segment assets |
| 118,805 | 12,374 | 131,179 | 115,216 | 10,920 | 126,136 |
| Segment liabilities |
| (52,327) | (3,179) | (55,506) | (50,059) | (2,609) | (52,668) |
| Additions to non-current assets |
| 7,573 | 430 | 8,003 | 3,037 | 973 | 4,010 |
All of TruTac's revenue relates to the UK. TruTac's revenue is primarily from managed service agreements with the exception of £659,000 of hardware revenue in 2023 (2022: £562,000). All remaining revenue relates to the Microlise business.
The group's non-current assets comprising investments, tangible and intangible fixed assets and the net assets by geographical location are:
| | 31 December 2023 | 31 December 2022 | ||
|
| Non-current assets | Net assets | Non-current assets | Net assets |
|
| £'000 | £'000 | £'000 | £'000 |
|
| | | | |
| United Kingdom | 89,316 | 73,787 | 88,434 | 71,895 |
| France | 15 | 25 | 29 | 22 |
| Australia | 7 | 150 | 2 | 80 |
| India | 271 | 1,711 | 304 | 1,471 |
| | 89,609 | 75,673 | 88,769 | 73,468 |
2. Adjusted results
In reporting financial information, the Group presents alternative performance measures (APMs), which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide depth and understanding to the users of the financial statements to allow for further assessment of the underlying performance of the Group. The Group's primary results measure, which is considered by the directors of the Group to represent the underlying and continuing performance of the Group, is adjusted EBITDA as set out below. EBITDA is a commonly used measure in which earnings are stated before net finance income, tax, amortisation and depreciation as a proxy for cash generated from trading.
The group qualifies for large company R&D tax reliefs with the RDEC credits included in other operating income above operating profit in line with common practice is included in the Group's calculation of EBITDA.
The measure has been adjusted by acquisition related costs which are considered to be non-recurring and non-trading in nature together with the share based payment charge as it represents a non cash item.
|
|
| Year ended 2023 | Year ended 2022 |
|
|
| £'000 | £'000 |
| | | | |
| Operating profit before interest and share of associate | | 2,255 | 2,184 |
| Exceptional transaction and subsequent restructuring costs | | 374 | 202 |
| Depreciation | | 2,585 | 2,212 |
| Amortisation of intangible assets | | 3,492 | 3,036 |
| Share based payment | | 731 | 561 |
| Adjusted EBITDA |
| 9,437 | 8,195 |
3. Operating profit
The operating profit is stated after charging/(crediting):
|
| Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Auditors remuneration: | | |
| Audit of the Group and Company financial statements | 279 | 251 |
| Depreciation of property, plant and equipment | 1,553 | 1,316 |
| Profit on disposal of tangible fixed assets | (19) | - |
| Depreciation of right-of-use assets | 1,032 | 896 |
| Amortisation of intangible assets | 3,492 | 3,036 |
| Cost of inventory sold | 15,520 | 14,198 |
| Research and development costs | 2,021 | 3,292 |
| Foreign exchange losses/(gains) | 211 | (259) |
| Acquisition evaluation costs | 196 | 202 |
| | | |
| In other operating income: Other income |
(158) |
(161) |
| Government innovation grants | (170) | (111) |
| Research and Development Expenditure Credit | (645) | (604) |
The Group claims RDEC credits which are treated as other operating income and reflected in the profit before tax.
4. Information regarding directors and employees
Employees
The aggregate remuneration of employees comprised:
|
| Group |
| Company |
|
|
| Year ended 2023 | Year ended 2022 | Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 | £'000 | £'000 |
| Wages and salaries | 31,353 | 26,636 | 864 | 863 |
| Social security costs | 3,071 | 2,685 | 108 | 88 |
| Pensions | 1,149 | 1,046 | 25 | 29 |
| Share based payment | 731 | 561 | 334 | 561 |
| Total | 36,304 | 30,928 | 1,331 | 1,541 |
Average number of employees
The average number of employees in the year was:
| | Group |
| Company |
|
| | Year ended 2023 | Year ended 2022 | Year ended 2023 | Year ended 2022 |
| Sales and distribution | 101 | 87 | - | - |
| Operations and development | 528 | 492 | - | - |
| Administration | 86 | 82 | 6 | 6 |
| Total | 715 | 661 | 6 | 6 |
Directors' remuneration
|
| Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Directors' remuneration - aggregate emoluments | 852 | 749 |
| Group pension contributions in respect of 4 Share based payment | 23 | 24 246 |
| 334 | ||
| | 1,209 | 1,019 |
| Remuneration of the highest paid director | 393 | 306 |
| Group pension contributions Share based payment | 11 | 10 116 |
| 162 | ||
| | 566 | 432 |
Full information by director is disclosed in the remuneration report.
Key management compensation
| | Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Short term employee benefits | 2,346 | 1,910 |
| Post employment benefits | 71 | 70 |
| Share based payment | 559 | 430 |
| Total key management remuneration | 2,976 | 2,410 |
Key management is defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any directors (whether executive or otherwise) of the Group.
5. Interest receivable
|
| Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Interest receivable | | |
| Bank interest receivable | 240 | 21 |
| Loan interest receivable | 120 | - |
| Unwinding of discount on financing transactions | - | 24 |
| | 360 | 45 |
6. Interest payable
|
| Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Interest payable | | |
| Interest on bank and other borrowings | 220 | 248 |
| Lease liability financing charges | 107 | 64 |
| Other interest | 6 | - |
|
| 333 | 312 |
7. Taxation on profit
|
| Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Current taxation | | |
| UK corporation tax charge | 104 | - |
| Foreign tax | 135 | 126 |
| Adjustments in respect of previous periods | 8 | 5 |
|
| 247 | 131 |
| Deferred taxation | | |
| Origination and reversal of timing differences | 732 | 249 |
| Credit due to change in tax rate | - | (89) |
| Adjustments in respect of previous periods | (48) | (205) |
|
| 684 | (45) |
| Tax charge on profit | 931 | 86 |
Factors affecting the tax charge for the year
The tax charge on the profit for the year differs from applying the average standard rate of corporation tax in the UK of 23.5% (2022: 19%). The differences are reconciled below:
|
| Year ended 2023 | Year ended 2022 |
|
| £'000 | £'000 |
| Profit before taxation | 2,507 | 1,439 |
|
| | |
| Corporation tax at standard rate | 589 | 273 |
| Factors affecting charge for the year: | | |
| Disallowable expenses | 235 | 168 |
| Share of associate profit not taxed | (53) | - |
| Reassessment of share option related deferred tax | 172 | - |
| Other differences including capital superdeductions | (26) | (93) |
| Overseas tax rates | (15) | 27 |
| Adjustments in respect of previous periods | (40) | (200) |
| Differing corporate and deferred tax rates | 69 | - |
| Credit due to change in tax rate | - | (89) |
| Tax charge on profit | 931 | 86 |
In May 2021 a change in the corporation tax rate from 19% to 25% from April 2023 was substantively enacted in the Finance Act 2021 and accordingly has been applied to deferred tax balances at 31 December 2022 and 2023.
8. Earnings per share
|
| Year ended 2023 | Year ended 2022 |
| Profit used in calculating EPS (£'000) | 1,576 | 1,353 |
| Weighted average number of shares for basic EPS ('000) | 115,946 | 115,946 |
| Weighted average number of shares for diluted EPS ('000) | 116,087 | 116,104 |
| Basic earnings per share (pence) | 1.36 | 1.17 |
| Diluted earnings per share (pence) | 1.36 | 1.17 |
There were 3,701,954 unexercised share options in place at 31 December 2023 (2022: 3,088,969) of which 141,509 (2022: 1,159,383) were potentially dilutive in respect of the year and are included in the weighted average for diluted EPS.
9. Property, plant and equipment
| Group | Freehold property | Right-of-use property | Leasehold building Improvements | Right-of-use equipment | Equipment, fixtures and fittings | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | |
| Net book value | | | | | | |
| At 1 January 2022 | 4,940 | 1,303 | 137 | 329 | 1,864 | 8,573 |
|
| | | | | | |
| Cost | | | | | | |
| At 1 January 2022 | 5,271 | 3,002 | 306 | 1,245 | 5,460 | 15,284 |
| Additions | - | 567 | - | 384 | 979 | 1,930 |
| Disposals | - | (1,689) | - | (612) | (19) | (2,320) |
| Exchange adjustments | - | - | 2 | - | 2 | 4 |
| At 31 December 2022 | 5,271 | 1,880 | 308 | 1,017 | 6,422 | 14,898 |
|
| | | | | | |
| Depreciation | | | | | | |
| At 1 January 2022 | 331 | 1,699 | 169 | 916 | 3,596 | 6,711 |
| Charge for the year | 102 | 558 | 67 | 338 | 1,147 | 2,212 |
| Disposals | - | (1,689) | - | (612) | (19) | (2,320) |
| Reclassification from intangible assets | - | 88 | - | (88) | - | - |
| Exchange adjustments | - | - | 1 | - | 2 | 3 |
| At 31 December 2022 | 433 | 656 | 237 | 554 | 4,726 | 6,606 |
|
| | | | | | |
| Net book value | | | | | | |
| At 31 December 2022 | 4,838 | 1,224 | 71 | 463 | 1,696 | 8,292 |
|
|
|
|
| | | |
| Cost |
|
|
| | | |
| At 1 January 2023 | 5,271 | 1,880 | 308 | 1,017 | 6,422 | 14,898 |
| Additions | - | 176 | - | 686 | 2,219 | 3,081 |
| Acquisitions | - | - | - | - | 14 | 14 |
| Disposals | - | - | - | - | (1,712) | (1,712) |
| Reclassification from intangible assets | - | - | - | - | 246 | 246 |
| Exchange adjustments | - | - | (19) | - | (31) | (50) |
| At 31 December 2023 | 5,271 | 2,056 | 289 | 1,703 | 7,158 | 16,477 |
| | | | | | | |
| Depreciation | | | | | | |
| At 1 January 2023 | 433 | 656 | 237 | 554 | 4,726 | 6,606 |
| Charge for the year | 102 | 673 | 52 | 359 | 1,399 | 2,585 |
| Disposals | - | - | - | - | (1,653) | (1,653) |
| Reclassification from intangible assets | - | - | - | - | 27 | 27 |
| Exchange adjustments | - | - | (14) | - | (21) | (35) |
| At 31 December 2023 | 535 | 1,329 | 275 | 913 | 4,478 | 7,530 |
| | | | | | | |
| Net book value | | | | | | |
| At 31 December 2023 | 4,736 | 727 | 14 | 790 | 2,680 | 8,947 |
| Company | Freehold property |
| | £'000 |
| Cost | |
| At 31 December 2022 and 2023 | 4,965 |
|
| |
| Accumulated depreciation | |
| At 31 December 2022 | 127 |
| Charge for the year | 102 |
| At 31 December 2023 | 229 |
|
| |
| Net book value | |
| At 31 December 2022 | 4,838 |
| At 31 December 2023 | 4,736 |
10. Intangible assets
| |
|
Goodwill |
Customer relationships |
Technology - business combinations |
Brands |
|
Developed technology |
Software |
Total | ||||||||||
| |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Net book value |
|
|
| | | | | | | ||||||||||
| At 1 January 2022 |
| 52,778 | 14,266 | 4,096 | 2,136 | 73,276 | 2,047 | 664 | 75,987 | ||||||||||
|
|
|
|
| | |
| | |
| ||||||||||
| Cost |
|
|
| | |
| | |
| ||||||||||
| At 1 January 2022 | | 52,778 | 17,780 | 6,422 | 2,711 | 79,691 | 2,951 | 791 | 83,433 | ||||||||||
| Additions | | - | - | - | - | - | 1,780 | 300 | 2,080 | ||||||||||
| At 31 December 2022 | | 52,778 | 17,780 | 6,422 | 2,711 | 79,691 | 4,731 | 1,091 | 85,513 | ||||||||||
| | | | | | |
| | |
| ||||||||||
| Amortisation | | | | | |
| | |
| ||||||||||
| At 1 January 2022 | | - | 3,514 | 2,326 | 575 | 6,415 | 904 | 127 | 7,446 | ||||||||||
| Charge for the year | | - | 1,138 | 773 | 181 | 2,092 | 760 | 184 | 3,036 | ||||||||||
| At 31 December 2022 | | - | 4,652 | 3,099 | 756 | 8,507 | 1,664 | 311 | 10,482 | ||||||||||
| | | | | | |
| | |
| ||||||||||
| Net book value | | | | | |
| | |
| ||||||||||
| At 31 December 2022 | | 52,778 | 13,128 | 3,323 | 1,955 | 71,184 | 3,067 | 780 | 75,031 | ||||||||||
| | | | | | |
| | |
| ||||||||||
| Cost | | | | | |
| | |
| ||||||||||
| At 1 January 2023 | | 52,778 | 17,780 | 6,422 | 2,711 | 79,691 | 4,731 | 1,091 | 85,513 | ||||||||||
| Additions | | - | - | - | - | - | 2,523 | 20 | 2,543 | ||||||||||
| Acquisitions (note 24) | | 1,513 | 406 | 446 | - | 2,365 | - | - | 2,365 | ||||||||||
| Reclassification to property, plant & equiment | | - | - | - | - | - | - | (246) | (246) | ||||||||||
| Exchange adjustments | | - | - | - | - | - | - | (1) | (1) | ||||||||||
| At 31 December 2023 | | 54,291 | 18,186 | 6,868 | 2,711 | 82,056 | 7,254 | 864 | 90,174 | ||||||||||
| | | | | | |
| | |
| ||||||||||
| Amortisation | | | | | |
| | |
| ||||||||||
| At 1 January 2023 | | - | 4,652 | 3,099 | 756 | 8,507 | 1,664 | 311 | 10,482 | ||||||||||
| Charge for the year | | - | 1,185 | 818 | 181 | 2,184 | 1,152 | 156 | 3,492 | ||||||||||
| Reclassification to property, plant & equiment | | - | - | - | - | - | - | (27) | (27) | ||||||||||
| Exchange adjustments | | - | - | - | - | - | - | (1) | (1) | ||||||||||
| At 31 December 2023 | | - | 5,837 | 3,917 | 937 | 10,691 | 2,816 | 439 | 13,946 | ||||||||||
| | | | | | |
| | |
| ||||||||||
| Net book value | | | | | |
| | |
| ||||||||||
| At 31 December 2023 | | 54,291 | 12,349 | 2,951 | 1,774 | 71,365 | 4,438 | 425 | 76,228 | ||||||||||
| | | | | | | | | | |
| |||||||||
Goodwill considered significant in comparison to the Group's total carrying amount of such assets has been allocated to cash generating units or groups of cash generating units as follows:
| | | 31 December | 31 December |
| | | 2023 | 2022 |
| | | £'000 | £'000 |
| | | | |
| Microlise | | 51,199 | 49,686 |
| TruTac | | 3,092 | 3,092 |
| | | 54,291 | 52,778 |
The Group tests goodwill annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The acquired Vita Software business has been hived across and fully integrated into the Microlise business, forming part of that cash generating unit. The Microlise carrying value is assessed for impairment purposes by calculating the value in use using the net present value (NPV) of future cash flows arising from the originally acquired businesses discounted at a pre-tax rate of 17% (2022: 15%) and for the TruTac business at a pre-tax rate of 17% (2022: 15%).
The Microlise goodwill has been tested by reference to a 3 year management approved plan and TruTac by reference to a 3 year plan with a 2% long term growth rate considered applicable to the UK market applied to the terminal period. This includes consideration of the impact of cost inflationary pressures in the December tests and forecasts at that date and taking account of the corresponding inflationary price terms within the group's contracts with customers. The businesses achieved the FY23 forecasts used in the prior year test and no impairment is indicated although they are sensitive to forecast increases in EBITDA. The Microlise NPV exceeds carrying values by £5m (2022: £8.8m) and TruTac NPV exceeds carrying values by £8.6m (2022: £1.1m) with this increase reflecting an increase in overall growth over the forecast period. Reasonable changes in the discount rate or terminal growth rate do not result in a risk of impairment of Microlise or TruTac goodwill.
At 31 December 2023, the Microlise plan subject to the impairment test to support the carrying value of goodwill, forecast over £11.5m and a required £11m of recurring EBITDA which compares with £7.8m on the same basis recorded for 2023 and an expected increase to over £9.7m for FY25 as a result of the growth trends in the Microlise revenues, supported by significant investment in the development of technology (2022: forecast £8.9m and required £7.9m of recurring EBITDA in the long term).
The 31 December 2023 TruTac plan assessed for the impairment test to support the carrying value of goodwill forecast over £2m and a required £1.4m compared to the current EBITDA of some £1.5m. The growth trends in TruTac revenues within the forecast is a result of continued investment into the underlying technologies, the release of new products and features as well as access to an enlarged customer base, a benefit of being part of the Microlise Group (2022: forecast £1.25m and required £1.1m of recurring EBITDA).
11. Investments and loan receivables
| Group |
|
|
| Associate |
|
|
|
|
| £'000 |
| At 1 January 2022 | | | | 1,846 |
| Share of loss for the year | | | | (478) |
| At 31 December 2022 | | | | 1,368 |
| Share of profit for the year | | | | 225 |
| At 31 December 2023 |
|
|
| 1,593 |
| Company |
| Subsidiary undertakings |
| Associate | Total | ||||
|
|
| £'000 |
| £'000 | £'000 | ||||
| At 1 January 2022 | | 77,693 | | 2,250 | 79,943 | ||||
| Additions - fair value of share options held by subsidiary company employees | | 249 | | - | 249 | ||||
| Decrease in fair value | | - | | (1,000) | (1,000) | ||||
| At 31 December 2022 | | 77,942 | | 1,250 | 79,192 | ||||
| Additions (note 24) | | 3,132 | | - | 3,132 |
| |||
| Additions - fair value of share options held by subsidiary company employees | | 381 | | - | 381 |
| |||
| Increase in fair value | | - | | 300 | 300 | ||||
| At 31 December 2023 |
| 81,455 |
| 1,550 | 83,005 | ||||
| Subsidiary undertaking | Principal activity | Class of | % share |
| Microlise Limited | Transport management technology solutions | Ordinary | 100% |
| Microlise Holdings Limited | Intermediate holding company | Ordinary | 100% |
| Microlise Midco Limited | Dormant company | Ordinary | 100% |
| Microlise Engineering Limited | Non trading company | Ordinary | 100% |
| TruTac Limited | Transport management technology solutions | Ordinary | 100% |
| Microlise Pty Limited (Australia)
| Transport management technology solutions | Ordinary | 100% |
| Microlise SAS (France) | Transport management technology solutions | Ordinary | 100% |
| Microlise Telematics Private Limited (India)
| Transport management technology solutions | Ordinary | 100% |
| Microlise India Private Ltd | Non trading company | Ordinary | 100% |
| Vita Software Limited | Transport management technology solutions | Ordinary | 100% |
| TruTac Training Limited
| Dormant company (Dissolved 6February 2024) | Ordinary | 100% |
| Trucontrol Ltd
| Dormant company (Dissolved 6February 2024) | Ordinary | 100% |
| Trulogix Limited | Dormant company (Dissolved 6February 2024) | Ordinary | 100% |
All the UK subsidiary companies are registered in England at the same registered office as the Company. Microlise Pty Limited is registered at Level 1, 20 Albert Street, Blackburn, Victoria, 3130 Australia, Microlise SAS at Les Hauts de la Duranne, 505 Avenue Galilee, 13290 Aix-en-Provence, France, Microlise Telematics Private Limited and Microlise India Private Limited at 4th Floor, Pride Accord, Baner Road, Pune, 411045, India.
The Group agrees to guarantee the liabilities of Microlise Midco Limited (01670983), Microlise Holdings Limited (06479107), Microlise Engineering Limited (02211125), TruTac Limited (02521511) and Vita Software Limited (08230638) thereby allowing them to take exemption from having an audit under section 479A of the Companies Act 2006.
Investments in associates consist of a 20% holding in Trakm8 Holdings plc acquired on 22 December 2018 and measured in accordance with the accounting policy. The company is listed on AIM and at 31 December 2023 the market value of the shareholding was £1.55m (2022: £1.25m).
The primary business of Trakm8 Holdings plc is the development, manufacture, distribution and sale of telematics devices, services and optimisation solutions. The principal place of business is 4 Roman Park, Roman Way, Coleshill, Birmingham, West Midlands, B46 1HG.
The Group also has an interest of £1 in a jointly controlled not for profit community investment company, Road to Logistics C.I.C. This had commenced activity funded by a government grant and incurs neither a profit nor a loss. The principal place of business is Market Chambers, 2b Market Place, Shifnal, Shropshire, England, TF11 9AZ.
Summarised financial information (material associates)
Trakm8 Holdings plc
Trakm8 Holdings plc has a year end of 31 March, and the summarised financial information disclosed is based on their published annual statements to 31 March 2022 and 2023 together with interim financial statements to 30 September 2022 and 2023, prepared under IFRS.
| | | 30 September | 30 September |
| | | £'000 | £'000 |
| Assets - non-current | | 26,516 | 26,101 |
| Assets - current | | 10,910 | 10,834 |
| Liability - non-current | | (14,936) | (10,190) |
| Liability - current | | (3,255) | (8,616) |
| Net assets (100%) |
| 19,235 | 18,129 |
| Group share of book net assets (20%) |
| 3,847 | 3,626 |
The differing carrying value above reflects the equity accounting policy applied.
| | | Year ended 30 September | Year ended 30 September | |
| | | £'000 | £'000 | |
| Revenues | | 19,722 | 18,102 | |
| Profit/(loss) from continuing operations | | 1,103 | (1,863) | |
| Other comprehensive (expense)/income | | (8) | 8 | |
| Total comprehensive income/(expense) | | 1,095 | (1,855) | |
|
Group and company |
|
|
|
|
|
|
|
|
| £'000 |
| At 1 January 2022 | | | | - |
| Cash subscribed for loan notes | | | | 1,000 |
| At 31 December 2022 and 2023 | | | | 1,000 |
12. Deferred tax assets and liabilities
|
|
|
|
|
|
|
|
| ||||||
| Group | Intangible assets
| Accelerated capital allowances | Freehold property | Tax losses | Other | Total | |||||||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||
| At 1 January 2022 | (5,468) | (79) | (1,156) | 1,828 | (116) | (4,991) | |||||||
| RDEC credit | - | - | - | - | 106 | 106 | |||||||
| Credit/(charge) for the year | 124 | (152) | 19 | (303) | 357 | 45 | |||||||
| At 31 December 2022 | (5,344) | (231) | (1,137) | 1,525 | 347 | (4,840) | |||||||
| On acquisition | (172) | (4) | - | - | - | (176) | |||||||
| RDEC credit | - | - | - | - | 84 | 84 | |||||||
| Foreign exchange movement | - | - | - | - | (6) | (6) | |||||||
| Credit/(charge) for the year | 182 | (240) | 24 | (641) | (9) | (684) | |||||||
| At 31 December 2023 | (5,334) | (475) | (1,113) | 884 | 416 | (5,622) | |||||||
|
Company |
|
|
|
|
|
| |||||||
|
|
|
|
|
|
| Share based payment £'000 | |||||||
| At 31 December 2022 | | | | | | 111 | |||||||
| Charge for the year | | | | | | (111) | |||||||
| At 31 December 2023 |
|
|
|
|
| - | |||||||
Deferred tax has been recognised at an average rate of 25% (2022: 25%).
13. Inventories
| Group | 31 December 2023 | 31 December 2022 |
|
| £'000 | £'000 |
| Raw materials and consumables | 1,331 | 1,146 |
| Work in progress | 28 | 18 |
| Finished goods and goods for resale | 1,989 | 1,471 |
|
| 3,348 | 2,635 |
An impairment release of £425,000 in respect of inventory was recorded in the year ended 31 December 2023 (2022: charge of £209,000).
14. Trade and other receivables
|
| Group |
| Company |
| ||||||||
|
| 31 December 2023 | 31 December | 31 December 2023 | 31 December |
| |||||||
|
| £'000 | £'000 | £'000 | £'000 |
| |||||||
| Current | | | | |
| |||||||
| Trade receivables | 15,288 | 13,247 | - | - |
| |||||||
| Provision for impairment of trade receivables | (457) | (402) | - | - |
| |||||||
| Trade receivables net | 14,831 | 12,845 | - | - |
| |||||||
| Contract cost assets | 1,431 | 1,466 | - | - |
| |||||||
| Other receivables | 222 | 163 | - | - |
| |||||||
| Prepayments | 2,273 | 2,286 | 158 | 26 |
| |||||||
| Total | 18,757 | 16,760 | 158 | 26 |
| |||||||
|
Non-current |
|
|
|
|
| |||||||
| Trade receivables | 353 | 593 | - | - |
| |||||||
| Contract cost assets | 2,488 | 2,485 | - | - |
| |||||||
| Total | 2,841 | 3,078 | - | - |
| |||||||
|
| |
| |
|
| |||||||
| Total | 21,598 | 19,838 | 158 | 26 |
| |||||||
Analysis of expected credit losses is included in note 18.
The movements in Group contract related balances in the year are as follows:
|
| Year ended 2023 | Year ended 2022 |
| |||
| Contract cost assets |
| £'000 |
| £'000 |
| |
| Opening balance | | 3,952 | | 3,815 |
| |
| Amortised to income statement | | (1,774) | | (1,115) |
| |
| Incurred in the year | | 1,741 | | 1,252 |
| |
| Closing balance |
| 3,919 |
| 3,952 |
| |
| |
|
|
|
| ||
15. Cash and cash equivalents
|
| Group |
| Company |
|
|
| 31 December 2023 | 31 December 2022 | 31 December 2023 | 31 December 2022 |
|
| £'000 | £'000 | £'000 | £'000 |
| Cash at bank and in hand | 16,800 | 16,683 | 86 | 69 |
16. Lease liabilities
|
| Group |
| Company |
|
|
| 31 December 2023 | 31 December 2022 | 31 December 2023 | 31 December 2022 |
|
| £'000 | £'000 | £'000 | £'000 |
| Current | 907 | 821 | - | - |
| Non-current | 646 | 926 | - | - |
| Total | 1,553 | 1,747 | - | - |
Leases
The group has entered into lease contracts in respect of property in the jurisdictions from which it operates, use of data centres and vehicles which are typically for terms of 3 to 5 years. In respect of data centre contracts there are options to extend the initial period with these factored into the liabilities where the group plans to use these for a longer period. For property leases, it is customary for lease contracts to be reset periodically to market rental rates. Leases of equipment, data centre usage and vehicles comprise only fixed payments over the lease terms.
Right of use assets, additions and amortisation are included in note 9. Interest expenses relating to lease liabilities are included in note 6.
Other amounts relating to leases were as follows:
| | | 31 December 2023 | 31 December 2022 |
| | | £'000 | £'000 |
| Short term lease expense | | 46 | 11 |
| Total cash outflow for leases | | 1,163 | 979 |
The maturity of lease liabilities at 31 December 2023 were as follows:
| | | Property | Equipment and vehicles | Total |
| | | £'000 | £'000 | £000 |
| Within 1 year | | 711 | 196 | 907 |
| 1-2 years | | 370 | 85 | 455 |
| 2-5 years | | 174 | 17 | 191 |
| Total | | 1,255 | 298 | 1,553 |
The maturity of lease liabilities at 31 December 2022 were as follows:
| | | Property | Equipment and vehicles | Total |
| | | £'000 | £'000 | £000 |
| Within 1 year | | 548 | 273 | 821 |
| 1-2 years | | 450 | 160 | 610 |
| 2-5 years | | 267 | 49 | 316 |
| Total | | 1,265 | 482 | 1,747 |
17. Trade and other payables
|
| Group |
| Company |
|
|
| 31 December 2023 | 31 December | 31 December 2023 | 31 December |
|
| £'000 | £'000 | £'000 | £'000 |
| Current | | | | |
| Trade payables | 6,372 | 4,637 | 63 | 7 |
| Taxation and social security | 2,612 | 1,963 | 33 | 34 |
| Amounts owed to group undertakings | | - | 14,231 | 16,206 |
| Other payables | 556 | 1,447 | 205 | 1,006 |
| Accruals | 4,195 | 4,316 | 902 | 675 |
| Contract liabilities | 18,895 | 16,820 | - | - |
| Total | 32,630 | 29,183 | 15,434 | 17,928 |
|
|
|
|
|
|
| Non-current |
|
|
|
|
| Contract liabilities | 15,587 | 16,463 | - | - |
| Deferred grant income | 114 | 152 | - | - |
| Accruals | - | 283 | - | - |
| Total | 15,701 | 16,898 | - | - |
|
|
|
|
|
|
| Total | 48,331 | 46,081 | 15,434 | 17,928 |
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. Contract liabilities relates principally to service income received in advance. The timing of recognition of Group contract liabilities are as follows:
| | Less than one year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | Total |
|
| At 31 December 2023 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Contract liabilities | 19,448 | 9,134 | 4,112 | 1,364 | 424 | 34,482 | |
| | Less than one year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | Total |
| At 31 December 2022 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Contract liabilities | 16,820 | 8,962 | 4,919 | 1,986 | 596 | 33,283 |
The movements in Group contract related balances in the year are as follows:
| | | Year ended 2023 | | Year ended 2022 |
|
|
| £'000 | | £'000 |
| Revenue related contract liabilities |
|
| | |
| Opening balance | | (33,283) | | (31,465) |
| Invoiced in the year | | (42,813) | | (39,178) |
| Recognised as revenue in the year | | 41,614 | | 37,360 |
| Closing balance | | (34,482) | | (33,283) |
| | | | | |
18. Financial Instruments
Financial risk management
The determination of financial risk management policies and the treasury function is managed by the CFO. Policies are set to reduce risk as far as possible without unduly affecting the operating effectiveness of the Group.
The Group's activities expose it to a variety of financial risks, the most significant being credit risk, liquidity risk and interest rate risk together with a degree of foreign currency risk as discussed below.
Categories of financial instruments
The Group has the below categories of financial instruments:
|
|
| 31 December 2023 | 31 December 2022 |
| Recognised at amortised cost | | £'000 | £'000 |
| Cash and bank balances | | 16,800 | 16,683 |
| Trade receivables - net | | 15,184 | 13,438 |
| Other receivables | | 1,222 | 1,163 |
| Total financial assets |
| 33,206 | 31,284 |
| | | | |
| Trade payables | | 6,372 | 4,637 |
| Other payables | | 4,751 | 6,046 |
| Lease liabilities | | 1,553 | 1,747 |
| Total financial liabilities |
| 12,676 | 12,430 |
There were no assets or liabilities at 31 December 2023 or 2022 that were recognised and measured at fair value in the historical financial information.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss for the Group. Financial instruments, which potentially subject the Group to concentration of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable including accrued income.
The Group places its cash and cash equivalents with major financial institutions, which management assesses to be of high-credit quality in order to limit the exposure of each cash deposit to a minimal level.
Trade receivables
Trade accounts receivable are derived primarily from non-recurring hardware sales and monthly service income and generally have 30-60 day terms. With the exception of one large customer who accounts for 24% (2022: 27%) of the trade receivable invoiced balance, credit risk with respect to accounts receivable is dispersed due to the large number of customers. Collateral is not required for accounts receivable. The credit worthiness of customers with balances in trade receivables not yet due has been assessed as high.
The aging of past due trade receivables according to their original due date is detailed below:
| | 31 December | 31 December |
| | 2023 | 2022 |
| Past due | £'000 | £'000 |
| 0-60 days | 5,202 | 3,903 |
| 60-120 days | 833 | 443 |
| 121+ days | 1,000 | 499 |
| Expected credit loss provision | (457) | (402) |
| Total | 6,578 | 4,443 |
A majority of the expected credit loss provision relates to balances that are more than 120 days overdue. The expected credit loss on balances less than 120 days is immaterial. A substantial majority of the overdue debt has been collected since the period end date with the unprovided amounts considered to be collectible.
As at 31 December 2023 the lifetime expected loss provision for trade receivables is as follows:
| Past due | Expected loss rate | Gross carrying amount £'000 | Loss provision £'000 |
| 0-60 days | 0% | 5,202 | - |
| 60-120 days | 0% | 833 | - |
| 121+ days | 46% | 1,000 | 457 |
| Total | 7% | 7,035 | 457 |
As at 31 December 2022 the lifetime expected loss provision for trade receivables was as follows:
| Past due | Expected loss rate | Gross carrying amount £'000 | Loss provision £'000 |
| 0-60 days | 0% | 3,903 | - |
| 60-120 days | 0% | 443 | - |
| 121+ days | 81% | 499 | 402 |
| Total | 8% | 4,845 | 402 |
At each of the Statement of Financial Position dates, a portion of the trade receivables were impaired and provided for. The movement in the provision for trade receivables in each of the periods is as follows:
| |
| Year ended 2023 | Year period ended 2022 |
| |
| £'000 | £'000 |
| At 1 January | | 402 | 303 |
| Provision charged | | 55 | 99 |
| | | | |
| At year end |
| 457 | 402 |
Oher receivables are considered to bear similar risks to trade receivables or are owed by government bodies. Hence any expected credit loss on other financial assets is considered to be immaterial.
Liquidity risk
The Group now funds its business through equity and from cash generated from operations and also has a £20m undrawn working capital facility available. Details of the Group's borrowings are discussed in note 16. The Group monitors and manages cash to mitigate any liquidity risk it may face. The following table shows the Group's contractual maturities of financial liabilities based on undiscounted cash flows including interest charges and the earliest date on which the Group is obliged to make repayment:
| | Less than one year | 1-2 years | 2-5 years |
| Total |
| At 31 December 2023 | £'000 | £'000 | £'000 |
| £'000 |
| Trade and other payables | 11,123 | - | - | | 11,123 |
| Lease liabilities | 1,021 | 521 | 193 | | 1,735 |
| Total | 12,144 | 521 | 193 |
| 12,858 |
| | Less than one year | 1-2 years | 2-5 years |
| Total |
| At 31 December 2022 | £'000 | £'000 | £'000 |
| £'000 |
| Trade and other payables | 10,688 | - | - | | 10,688 |
| Lease liabilities | 883 | 648 | 338 | | 1,869 |
| Total | 11,571 | 648 | 338 |
| 12,557 |
Interest rate risk
There are no borrowings or liabilities subject to variable interest rates.
Currency risk
The Group operates predominantly in the UK with sterling being its functional currency and has a degree of exposure to foreign currency risk, with this spread across income and expenses in Euros, US dollars and Australian dollars for sales and purchasing operations together with an outflow only of Indian rupees for the costs of development and operational support activity. The impact of a 10% fluctuation in all foreign exchange rates moving in the same direction against GBP has been assessed to be an overall impact of up to £300,000 which would be mitigated by some matching of income and expenses.
The net exposure to the dollar is offset by significant purchases made in dollars. The net underlying foreign currency balances, comprising overseas assets and liabilities, cash, receivables and payables in the UK, in the Group statement of financial position by underlying currency at the period end were:
| | USD | Euro | AUD | INR | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| At 31 December 2023 | 4,608 | 710 | 183 | 18 | 5,519 |
| At 31 December 2022 | 8,317 | 673 | 913 | 559 | 10,462 |
Capital management
The Group's capital comprises share capital, share premium and retained earnings. The Group's objectives when maintaining capital are:
To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders equity as set out in the consolidated statement of changes in equity. The longer-term funding requirements for acquisitions were financed from cash reserves and term bank debt which was fully repaid from the equity proceeds on listing. All working capital requirements are financed from existing cash resources.
The Group sets the amount of capital it requires in proportion to risk in conjunction with the retained earnings. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
19. Pensions
Defined contributions pension scheme
The group operates a number of defined contribution pension schemes. Contributions totalling £278,000 (2022: £223,000) were included in payables and due to the defined contribution scheme at the end of the year. The total contributions are disclosed in note 4.
20. Share capital
|
Group and Company |
|
|
| Allotted, called up and fully paid | At | At 31 December |
|
| 2023 | 2022 |
| | £ | £ |
| 115,945,956 ordinary shares of £0.001 each | 115,946 | 115,946 |
All shares rank equally in respect of income and capital distributions.
21. Share based payments
| |
|
|
| Options | Weighted average exercise price | Number |
| At 1 January 2023 | £0.51 | 3,088,969 |
| Granted in the year | £0.001 | 1,049,226 |
| Lapsed in the year | £0.21 | (436,221) |
| At 31 December 2023 | £0.38 | 3,701,974 |
The Company granted options on 22 July 2021 at an exercise price of £0.001 per share. 100,000 of the options were granted to non-executive directors and are subject only to continuing employment or good leaver conditions. The fair value was assessed as £1.35 per option using a Black Scholes model with a volatility of 60% and risk free rates of 0.5%. They are exercisable three years after grant for a period of a year. 1,007,848 options were granted to executive employees subject to a 3 year Total Shareholder Return condition from the date of grant of a minimum of 8% annual growth in the share price up to an 18% return for 100% to be exercised. The fair value is assessed as £0.88 per option based on a discounted Black Scholes pricing model with a volatility of 60% and risk-free rates of 0.5%. The exercise period is within a year of the 3 year return being assessed.
1,132,160 options were granted to employees on 23 May 2022 at an exercise price of £1.45 subject to a 3 year vesting period only. The fair value was assessed as £0.515 per option using a Black Scholes model with a volatility of 60% and risk free rates of 2%.
The Company granted options on 28 July 2022 at an exercise price of £0.001 per share. 41,509 of the options were granted to a non-executive director and are subject only to continuing employment or good leaver conditions. The fair value was assessed as £1.32 per option using a Black Scholes model with a volatility of 50% and risk free rates of 2%. They are exercisable three years after grant for a period of a year. 973,811 options were granted to executive employees subject to a 3 year Total Shareholder Return condition from the date of grant of a minimum of 8% annual growth in the share price up to an 18% return for 100% to be exercised. The fair value is assessed as £0.86 per option based on a discounted Black Scholes pricing model with a volatility of 50% and risk-free rates of 2%.
The Company granted 1,049,226 options on 22 December 2023 to executive employees at an exercise price of £0.001 per share. They are exercisable from 31 December 2025 with 10% subject to carbon reduction targets and 90% subject to a Total Shareholder Return condition from the date of grant of a minimum of 8% annual growth in the share price up to an 18% return for 100% to be exercised. The fair value of the carbon reduction target options has been assessed at an average fair value of £0.17 per option using a Black Scholes model and the TSR options at £0.88 using a Monte Carlo model, both applying a volatility of 45%, risk free rates of 3.58% and a dividend yield of 1.93%
The average vesting period for all options is estimated at 3 years and the share based payment charge was £731,000 for the year (2022: £561,000). The weighted average vesting period is 1.7 years (2022: 2.2 years).
22. Capital commitments
The Group had capital commitments contracted but not provided for of £119,000 at 31 December 2023 (2022: £1,105,000). The company had no capital commitments (2022: £nil).
23. Related party transactions
The remuneration of key management personnel and directors is set out in note 4 and transactions with the associate in note 11.
24. Business combinations
On 13 March 2023, the Group acquired the entire share capital of Vita Software Limited, a provider of fleet logistics services for consideration of £3,123,000. The goodwill arising of £1,513,000 is attributable to the workforce, synergies and expected future growth in customers and earnings. The transaction has been accounted for under the purchase method of accounting. The principal adjustments relate to £283,000 in respect of the technology and £406,000 of customer relationships together with the related deferred taxation liability of £172,000.
The Vita software business has been transferred and integrated into Microlise Limited and as such it is not possible to separately identify the post acquisition results.
Had Vita been consolidated from 1 January 2023 it would have contributed another £104,000 of revenue and a further profit before tax of £60,000 to the year (excluding acquisition expenses and amortisation of intangible assets arising on consolidation).
|
| |
| Book value | Fair value adjustments |
|
| |
|
| £'000 | £'000 | £'000 |
Intangible assets | | | - | 689 | 689 |
| Property, plant and equipment | | | 14 | - | 14 |
| Cash and cash equivalents | | | 1,120 | - | 1,120 |
| Receivables | | | 94 | - | 94 |
| Payables | | | (45) | - | (45) |
| Corporation tax | | | (86) | - | (86) |
| Deferred taxation liability | | | (4) | (172) | (176) |
| Net assets acquired | | |
|
| 1,610 |
| Goodwill | | |
| | 1,513 |
| | | |
| | 3,123 |
| Consideration satisfied by: | | | | | |
| Cash | | | | | 2,923 |
| Deferred consideration (payable March 2024) | | | | | 200 |
| |
|
|
|
| 3,123 |
The Group incurred acquisition related costs of £0.1m related to stamp duty, legal and professional fees. These costs have been included in administrative expenses in the group's consolidated statement of comprehensive income.
The Group also acquired another small business in the year comprising only intangible assets of £163,000.
25. Subsequent events
On 10 January 2024, the group acquired 100% of Enterprise Software Systems Limited, a leading provider of transportation management system solutions. The acquisition is expected to further expand Microlise's suite of transport technology solutions. The total consideration of £11.4m includes £0.85m of deferred consideration payable six months from the date of acquisition. The acquisition was funded from the Group's cash resources and the identifiable assets acquired included £4.4m cash of which £3.5m is considered to be excess cash. Synergies are expected to arise by combining the management of operations and providing a broader service offering to all Group customers. The draft initial fair value of the assets and liabilities acquired are as follows:
|
| |
|
| |
| £'000 |
Intangible assets - customer, tradename, technology | | 3,708 |
| Property, plant and equipment | | 998 |
| Cash and cash equivalents | | 4,373 |
| Receivables | | 1,032 |
| Payables | | (3,044) |
| Lease liabilities | | (500) |
| Corporation tax | | (124) |
| Deferred taxation liability | | (1,017) |
| Net assets acquired | | 5,426 |
| Goodwill | | 6,010 |
| | | 11,436 |
| Consideration satisfied by: | | |
| Cash | | 10,586 |
| Deferred consideration | | 850 |
| |
| 11,436 |
Acquisition costs of £0.2m were incurred relating to the acquisition and expensed in the year ended 31 December 2023. Other than the acquisition costs the acquisition was not included in the reported results for the year ended 31 December 2023.
26. Statutory financial statements
The financial information for the year ended 31 December 2023 contained in this preliminary announcement has been audited and was approved by the Board on 8 April 2024. The financial information in this statement does not constitute the Company's statutory financial statements for the years ended 31 December 2023 or 2022 within the meaning of section 435 of the Companies Act 2006. The financial information for 2023 and 2022 is derived from the statutory financial statements for 2022, which have been delivered to the Registrar of Companies, and 2023, which will be delivered to the Registrar of Companies and issued to shareholders in April 2024. The auditors have reported on the 2023 and 2022 financial statements; their report was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report.
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