TIDMARTA
RNS Number : 5227V
Artilium PLC
29 October 2014
Artilium plc
('Artilium' or the 'Company' or the 'Group')
Artilium PLC reports full year results with return to net
profit.
Artilium PLC ("Artilium" or the "Company") (AIM: ARTA), the AIM
quoted telecom software and solutions provider, is pleased to
report full year results for the year ended 30 June 2014.
Highlights
-- Net profit of EUR 0.2m (2013: a net loss of EUR 0.2m)
-- Adjusted EBITDA (11% of Sales) stable for the 2014 year EUR
1.1m (2013: adjusted EBITDA EUR 1.2m)
-- Cloud enablement and extended functionality of the "ARTA" platform
Post Period End
-- Appointment of Bart Weijermars as Chief Executive
-- Successful placing raising EUR0.6m from new and existing
shareholders to be used for investment in marketing, sales and
international distribution channels as well as for working capital
purposes
-- Growth of customer base in (Mobile) Virtual Operator Services
Commenting on the Company's results, Bart Weijermars, CEO:
"Despite continued challenging market conditions in the telecom
and software sector, I am pleased to report stable Group
performance. Our focus now is on growth and aligning our current
offerings with new business opportunities in the market.
The stable Group performance and financial results form the
basis of our next phase, in which a strong focus will be placed on
expanding the customer base for the Artilium software products. In
addition, Artilium is focused on growing its (Mobile) Virtual
Operator Services offering. With the new cloud environment these
services can be delivered across Europe in a cost effective manner.
An overhaul of the commercial organization as well as new sales
initiatives are starting to re-ignite growth.
Careful product expansion with a broader range of services
offered to customers is part of the strategy to deliver a total
solution to our customers who are increasingly focused on
maximizing their focus on marketing and sales."
The annual report can be viewed on the Artilium website:
www.artilium.com
For further information please contact:
Artilium PLC: +32 (0)50230300
Bart Weijermars - Chief
Executive Officer
+44 (0)207 220 0500
FinnCap Ltd
Stuart Andrews
James Thompson
Joanna Weaving (corporate
broking)
Chief Executive's statement
Overview
Artilium plc ("the Group") presents a year in which it was able
to put in place the foundation for further growth while improving
its operational quality and scalability of its business. The trust
gained with our existing customers has enabled the Artilium
business unit ("Artilium") to accept increasingly larger projects
and bring them to a successful delivery. Customer relations were
improved through improved customer service processes yielding
increased customers satisfaction.
New business development was difficult in the period and this
requires a new focus and attention going forward. Artilium's
solutions show strong and stable performance and are available on a
flexible basis for our customers to grow their business. Artilium's
up-to-date platform supporting voice-over-ip and mobile-over-ip
services, location based services and extension towards loyalty and
payment services are all important growth areas and we are ready to
start harvesting that.
The performance of United Telecom reflects the difficulties
faced in the Belgian retail market as a result of fierce price
competition as well as the poor commercial performance of United
Telecom. A significant effort is required to make the shift to
substantially better performance. Cost reductions through new
supplier contracts as well as new commercial propositions will give
United Telecom a strong base for further growth in the Belgian
market.
Operations
The "ARTA" platform has again delivered a secure, predictable
and stable performance. At the same time the ARTA platform in the
Cloud allows for flexibility and scalability, both locally and
internationally. The research and development activities in Belgium
have been focussed on developing, building and testing extended
functionalities for the ARTA Software customers. These new software
versions are a good basis to offer extended functionalities to all
of the ARTA platform customers and to ensure an up-to-date service
offering in line with the newest developments in the market. The
improvement of the efficiency of the ARTA software helps our
customers in decreasing the total cost of ownership without
sacrificing on any of the functionalities or innovations that come
with the ARTA platform.
The next phase re-igniting growth
The stable Group performance, and the financial results, form
the basis of our next phase in which a strong focus is placed on
expanding the customer base for the Artilium software products as
well as growing our own customer base by expanding the (Mobile)
Virtual Operator Services. The new cloud environment enables cost
efficient delivery of services across Europe. An overhaul of the
commercial organization as well as new initiatives are starting to
re-ignite growth. Careful expansion in the range of services
offered to customers is part of the strategy to deliver a total
solution to our customers who are increasingly focussed on
maximizing their focus on marketing and sales. The Group is also
aligning its offering with new business models that are entering
the market and that offer new growth opportunities going
forward.
Market Dynamics
The Belgian market has become increasingly aggressive with the
three main operators reducing prices and aggressively pushing 4G
rollout. This has led to consolidation in the wholesale market.
With the market getting into a more stable situation we expect
renewed focus on wholesale where our ARTA platform is able to
deliver more functionality at lower costs.
Financial Results
2014 2013
Notes Eur'000 Eur'000
Continuing Operations
Revenue 4 10,150 11,240
Cost of sales (2,292) (2,977)
------------------------------------------------- ------ -------- --------
Gross profit 7,858 8,263
Other operating income 10 183 88
Administrative expenses excluding depreciations
and exchange differences (6,926) (7,134)
Adjusted EBITDA 9 1,115 1,217
Adjusted EBITDA margin 11% 11%
For reconciliation between operating profit and Adjusted EBITDA,
we refer to note 9.
Revenue
Consolidated revenue for the year ended 30 June 2014 amounted to
EUR 10,2 million (2013: EUR 11,2 million). Within Artilium NV
revenues came from professional services relating to project
management and implementation services and revenue from maintenance
and support contracts, including monthly license & subscriber
fees. Artilium NV revenue amounted to EUR 6,1 million (2013: EUR
6,1 million)
United Telecom revenues came from call charges for fixed line
and mobile. The contribution of United Telecom to the consolidated
revenue amounted to EUR 4,1 million (2013: EUR 5,0 million).
Gross margin
The Company generated a gross profit of EUR 7,9 million or 77,4%
of revenues (2013: EUR 8,3 million or 73,5% of revenues). The
contribution of Artilium business to the consolidated gross profit
amounted to EUR 5,9 million (2013: EUR5,6 million). The
contribution of United Telecom to the consolidated gross profit
amounted to EUR 2,0 million (2013: EUR 2,7 million). The gross
profit has increased relative to revenue as a result the reduction
in the use of third party hardware and software.
Adjusted EBITDA and adjusted EBITDA margin
Despite the decrease in sales within United Telecom the adjusted
EBITDA remained stable compared to prior year and amounted to EUR
1,1 million ( 2013:1,2 million)
The contribution of Artilium business to the adjusted EBITDA
amounts to EUR 0,8 million ( 2013: EUR 0,9 million).The
contribution of United Telecom to the adjusted EBITDA amounted to
EUR 0,3 million.( 2013: EUR 0,3 million ) The adjusted EBITDA
margin of the Group was 11% (2013: 11%). We refer to note 9 for a
reconciling table between adjusted EBITDA and operating result.
Bart Weijermars
Chief Executive
Notes 2014 2013
Eur'000 Eur'000
Continuing Operations
Revenue 4 10.150 11.240
Cost of sales (2.292) (2.977)
------------------------------------------------- ------ -------- ---------
Gross profit 7.858 8.263
Other operating income 10 183 88
------------------------------------------------- ------ -------- ---------
Administrative expenses before compensation
for loss of office (7.319) (8.371)
Compensation for loss of office 8 (644) (317)
------------------------------------------------- ------ -------- ---------
Administrative expenses (7,963) (8,688)
------------------------------------------------- ------ -------- ---------
Operating profit/(loss) 78 (337)
Finance costs 7 (60) (69)
Profit/(Loss) before tax 18 (406)
Tax credit 11 152 171
------------------------------------------------- ------ -------- ---------
Profit / (Loss) for the year from continuing
operations 5 170 (235)
------------------------------------------------- ------
Basic & diluted earnings per share in
euro-cents from continuing operations 12 0.08 (0,11)
------------------------------------------------- ------ -------- ---------
2014 2013
Eur'000 Eur'000
Profit / (Loss) for the year 170 (235)
------------------------------------------------- ----- ---------- --------
Other comprehensive income for the
year:
--------------------------------------------- --------- ---------- --------
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation (261) 198
------------------------------------------------- ----- ---------- --------
Total comprehensive (Loss) for the
year attributable to owners of the
parent (91) (37)
------------------------------------------------- ----- ---------- --------
Notes 2014 2013
Eur'000 Eur'000
Non-current assets
Goodwill 13 13,726 13,726
Intangible assets 14 1,823 2,375
Property, plant and equipment 15 240 99
Deferred tax assets 19 270 270
16,059 16,470
-------------------- ------ --------- ---------
Current assets
Inventories 17 43 27
Trade and other receivables 18 2,348 2,946
Other deposit 21 - 500
Cash and cash equivalents 564 2,462
----------------------------------------------------- ------ ---------
2,955 5,935
-------------------- ------ --------- ---------
Total assets 19,014 22,405
----------------------------------------------------- ------ --------- ---------
Non-current liabilities
Deferred tax liabilities 19 497 657
Long term provisions 23 - 16
497 673
-------------------- ------ --------- ---------
Current liabilities
Trade and other payables 20 4,090 7,428
Bank loans 22 150 142
4,240 7,570
-------------------- ------ --------- ---------
Total liabilities 4,737 8,243
----------------------------------------------------- ------ --------- ---------
2014 2013
Notes Eur'000 Eur'000
Equity attributable to owners of
the parent
Share capital 14,181 14,060
Share premium account 46,586 46,501
Merger relief reserve 1,488 1,488
Capital redemption reserve 6,503 6,503
Share-based payment reserve 24 3,246 3,246
Translation reserve (2,080) (1,819)
Own shares (2,336) (2,336)
Retained deficit (53,311) (53,481)
Total equity 14,277 14,162
--------------------------------------------- ------ ------ --------- ---------
Total liabilities and equity 19,014 22,405
--------------------------------------------- ------ ------ --------- ---------
Consolidated statement of changes in equity year ended 30 June
2014
Share Merger Capital Share-based
premium relief redemption payment Translation Own Retained
Share capital account reserve reserve reserve reserve shares deficit Total
Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
Balance at 1
July 2012 12.249 45.233 1.488 6.503 3.246 (2.017) (2.336) (53.246) 11.120
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Nominal value
of shares
issued 1.811 - - - - - - - 1.811
Premium
arising on
issue of
placement
shares - 1.268 - - - - - - 1.268
Transaction
with owners 1.811 1.268 - - - - - - 3.079
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Loss for the
period - - - - - - - (235) (235)
Other
comprehensive
income for
the period - - - - - 198 - 198
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Total
comprehensive
income /
(loss) for
the period - - - - - 198 - (235) (37)
------------------- ----------------
Balance at 1
July 2013 14.060 46.501 1.488 6.503 3.246 (1.819) (2.336) (53.481) 14.162
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Nominal value
of shares
issued 121 - - - - - - - 121
Premium
arising on
issue of
placement
shares - 85 - - - - - - 85
Transaction
with owners 121 85 - - - - - - 206
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Profit for the
period - - - - - - - 170 170
Other
comprehensive
income /
(loss) for
the period - - - - - (261) - (261)
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Total
comprehensive
income /
(loss) for
the period - - - - - (261) - 170 (91)
-------------------
Balance at 30
June 2014 14.181 46.586 1.488 6.503 3.246 (2.080) (2.336) (53.311) 14.277
--------------- ------------------------ ---------------- -------------------- ------------------- ------------------- ------------------- ------------- ---------------- --------
Consolidated cash flow statement year ended 30 June 2014
Notes 2014 2013
Eur'000 Eur'000
Net cashflow from operating activities 27 (1,665) 2,310
Investing activities
Purchases of intangible fixed assets 14 - (335)
Purchases of property, plant and equipment 15 (207) (40)
Proceeds from disposal of property,
plant and equipment 9 -
Net cashflow from investing activities (198) (375)
-------------------------------------------- --------------- -------- --------
Financing activities
Proceeds on issue of shares - 233
New borrowings/loans received 22 150 142
Interest paid (43) (72)
Borrowings/loans repayment 22 (142) (459)
Net cashflow from financing activities (35) (156)
-------------------------------------------- --------------- -------- --------
Net movement in cash and cash equivalents (1,898) 1,779
Cash and cash equivalents at beginning
of year 2,462 683
Cash and cash equivalents at end of
year 564 2,462
-------------------------------------------- --------------- -------- --------
Notes to the consolidated financial statements year ended 30
June 2014
1. General information
Artilium plc is a Company incorporated in the United Kingdom.
The address of the registered office is given on page 1 of the
annual report. The nature of the Group's operations and its
principal activities are set out in the Directors' report on pages
6 to 13 of the annual report. The Group's principal place of
business is Belgium. The ultimate parent Company of the Group is
Artilium plc.
The consolidated financial statements were authorized for issue
by the Board of Directors on 28 October 2014.
Standards adopted early by the Group
The Group has not adopted any standards or interpretations early
in either the current or the preceding financial year.
Statement of compliance
The consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
which have been endorsed by the EU. These include International
Financial Reporting Standards (IFRS) and the related
interpretations effective at the reporting date and adopted by the
EU.
New and amended standards and interpretations
Standards and interpretations effective in the current period
but with no significant impact
Standards issued during the year are listed below. This listing
of standards and interpretations issued are those that the Group
reasonably expects to have an material impact on disclosures,
financial position or performance when applied or at a future
date.
IFRS 13 Fair value measurement
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance on how
to measure fair value under IFRS when fair value is required or
permitted. The Group does not consider there to be a material
effect on the Group for the current year. This standard becomes
effective for annual periods beginning on or after 1 January
2013.
There were no other new standards, amendments of standards and
interpretations that became mandatorily effective in the current
year which have an effect on the Group.
Functional and presentation currency
The individual financial statements of each Group Company within
the group are presented in the currency of the primary economic
environment in which it operates (its functional currency).The
consolidated financial statements are presented in EUR in order to
reflect the economic substance the Group operates in (see also
accounting policies - Note 2). These financial statements are
presented in round thousand Euro's
2. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with
IFRSs adopted by the European Union (EU) and the Companies Act 2006
that applies to companies reporting under IFRS as adopted by the EU
and IFRIC interpretations.
The financial statements have been prepared on the historical
cost basis. The principal accounting policies adopted are set out
below.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and the entities controlled by the
Company (its subsidiaries) made up to 30 June each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
The results of the subsidiaries acquired are included in the
consolidated income statement from the effective date of
acquisition.
Where necessary, adjustments are made to the financial
statements of the subsidiary to bring the accounting policies used
into line with those used by the Group.
Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The consideration of the acquisition is
measured at the aggregate of the fair values, at the date of
exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of
the acquiree. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition
under IFRS 3R Business Combinations are recognised at their fair
value at the acquisition date
Goodwill arising from a business combination is determined as
the difference between (I) the consideration transferred plus the
amount of any non-controlling interest plus the fair value of any
previously held equity interest in the acquiree, and (II) the net
of the acquisition-date fair values identifiable assets acquired
and liabilities assumed. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceeds the cost of
the business combination, the excess is recognised immediately in
profit or loss. Expenses incurred as part of a business combination
are immediately expensed to the income statement.
Non-controlling interests are initially measured at the
non-controlling proportionate share in the recognised amounts of
the acquiree's identifiable assets, liabilities and contingent
liabilities.
Goodwill
Goodwill that arises from the acquisition of subsidiaries is
presented as part of the non-current assets on the statement of
financial position. Goodwill is initially recognised as an asset
measured at cost. We refer to the accounting policies about
business combinations for further guidance.
Goodwill is not amortized but tested for impairment. For the
purpose of this impairment testing, goodwill is allocated to the
Group's cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in
a subsequent period. On disposal of a subsidiary the attributable
amount of goodwill is included in the determination of the profit
or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes.
Revenue from platform services comes from the sale of
proprietary software, professional services, the re-sale of third
party hardware and software, and after sale maintenance
contracts.
Where the outcome of a contract can be estimated reliably,
revenue and costs related to the sale of proprietary software and
professional services are recognised by reference to the stage of
completion on the contract activity at the balance sheet date. This
is measured by the proportion that contract costs incurred for work
performed to date bear to the estimated total contract costs.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense
immediately.
Sale of third party hardware and software is recognised when the
goods are delivered and title has passed.
Maintenance revenue is recognised proportionally over the
support term included in the platform contract.
Revenue from the sale of software licences is recognised when
the following criteria are met:
-- persuasive evidence of an arrangement exists;
-- delivery has occurred;
-- the vendor's fee is fixed or determinable; and
-- collectability is probable.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the
remaining balance of the liability.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into
an operating lease are also spread on a straight line basis over
the lease term.
Foreign currencies
The individual financial statements of each Group Company are
presented in Euro, being the currency of the primary economic
environment in which it operates (its functional currency), except
for the parent Company and Artilium Limited whose functional
currency is sterling. The consolidated financial statements are
presented in Euro.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in
profit or loss for the period. Exchange differences arising on the
retranslation of non-monetary items carried at fair value are
included in profit or loss for the period except for differences
arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in other
comprehensive income and recognised in the 'Translation Reserve' in
equity.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
recognised in Other Comprehensive Income and transferred to the
Group's translation reserve. Such translation differences are
recognised as income or as an expense in the period in which the
operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
Payments made to state-managed retirement benefit schemes are
dealt with as payments to defined contribution schemes where the
Group's obligations under the schemes are equivalent to those
arising in a defined contribution retirement benefit scheme.
Taxation
The tax expense represents the sum of the current and deferred
tax.
The current tax is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax
is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are
recognised on all taxable temporary differences with certain
specific exceptions and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
However deferred tax assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly in other comprehensive income or equity, in which case the
deferred tax is also dealt with in other comprehensive income or
equity, respectively.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation
of assets over their estimated useful lives, using the
straight-line method, on the following bases:
Leasehold improvements 10%
Fixtures and equipment 20%-33%
Motor vehicles 20%
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or
loss.
The Directors consider the reasonableness of the useful economic
life and residual value estimates on an annual basis.
Assets under construction
Assets under construction are recognized for all property, plant
and equipment or intangible asset which are in process of
construction. Assets under construction are measured at the amount
of cash or cash equivalents paid or the fair value of any
consideration given during the time of construction. No
depreciation is recognized during period of commissioning. Assets
under construction are impaired whenever there are indications that
an impairment loss may have occurred. When the asset is available
for use it will be transferred to its appropriate classification,
depending on the nature of asset.
Intangible assets
Acquired computer software licenses are capitalised on the basis
of the costs incurred to acquire and install the specific software.
Customer portfolio's acquired in a business combination that
qualify for separate recognition are recognised as intangible
assets at their fair values.
All intangible assets are accounted for using the cost model
whereby capitalised costs are amortised on a straight-line basis
over their estimated useful lives, as these assets are considered
finite. Residual values and useful lives are reviewed at each
reporting date. In addition, they are subject to impairment
testing. The following useful lives are applied:
Software: 3 years
Customer portfolio's: 5 years
Amortisation has been included within depreciation and
amortisation under the heading administrative expenses. Subsequent
expenditures on the maintenance of computer software are expensed
as incurred. When an intangible asset is disposed of, the gain or
loss on disposal is determined as the difference between the
proceeds and the carrying amount of the asset, and is recognised in
profit or loss within other income or other expenses.
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the smallest cash-generating
unit to which the asset belongs. An intangible asset with an
indefinite useful life is tested for impairment annually and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase. No reversal of impairment losses took place in the
year.
Software Development Costs
Development costs are capitalised as an intangible asset
included within other intangible assets, provided that the
following criteria are demonstrated:
-- the technical feasibility of completing the intangible asset
so it will be available for use or sale;
-- the intention to complete the intangible asset for use or sale;
-- the ability to use or sell the intangible asset;
-- how the intangible asset will generate future economic benefits;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
The costs are capitalised from the date that the above criteria
are satisfied and are amortised once the intangible asset has been
completed and either brought into use or released for sale. The
costs will be amortised over the expected economic life of the
intangible asset being four years, and included within
administrative expenses. If the above criteria are not demonstrated
the development costs are expensed as they are incurred. In most
cases these recognition criteria are not met.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are
derecognised from the balance sheet when the Group's contractual
rights to the cash flows expire or the Group transfers
substantially all the risks and rewards of the financial asset.
Financial liabilities are derecognised from the Group's balance
sheet when the obligation specified in the contract is discharged
or cancelled or expires.
Financial assets
All financial assets (loans and receivables, trade and other
receivables and cash and cash equivalents) are recognised and
derecognised on trade date. The purchase or sale of a financial
asset is under a contract whose terms require delivery of the
financial asset within the timeframe established by the market
concerned. The purchase or sale of a financial asset are initially
measured at fair value, plus transaction costs, except for those
financial assets classified as at fair value through profit or
loss, which are initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets 'at fair value through profit or loss'
(FVTPL) and 'loans and receivables'. The classification depends on
the nature and purpose of the financial assets and is determined at
the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt
instrument, or (where appropriate) a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at
FVTPL.
Trade and other receivables
Trade and other receivables are measured on initial recognition
at fair value, and are subsequently measured at amortised cost
using the effective interest rate method. A provision for
impairment is made where there is objective evidence (including
customers with financial difficulties or in default on payments)
that amounts will not be recovered in accordance with original
terms of the agreement. A provision for impairment is established
when the carrying value of the receivable exceeds the present value
of the future cash flow discounted using the original effective
interest rate. The carrying value of the receivable is reduced
through the use of an allowance account and any impairment loss is
recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the first-in, first-out (FIFO)
method. Net realisable value is the estimated selling price in the
ordinary course of business less any applicable selling
expenses.
Financial liabilities and equity
Financial liabilities (trade and other payables and bank loans)
and equity instruments are classified according to the substance of
the contractual arrangements entered into. The Group's financial
liabilities include borrowings, trade and other payables and
derivative financial instruments. An equity instrument is any
contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments
issued by the Company are recorded at the proceeds received, net of
direct issue costs.
Borrowings
Interest-bearing loans and overdrafts are recorded initially at
their fair value, net of direct transaction costs. Such instruments
are subsequently carried at their amortised cost and finance
charges, including premiums payable on settlement or redemption,
are recognised in the income statement over the term of the
instrument using an effective rate of interest.
Trade and other payables
Trade and other payables are initially measured at fair value,
and are subsequently measured at amortised cost, using the
effective interest rate method. The effective interest method is a
method of calculating the amortised cost of a financial liability
and of allocating the interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the
financial liability, or, where appropriate, a shorter period.
Derivatives
Derivative financial assets and liabilities are measured
initially at fair value, and carried subsequently at fair value
with gains or losses recognised in profit or loss.
Operating loss
Operating loss is stated after charging restructuring costs but
before investment revenues and finance costs.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
Share-based payments
Share-based payments are measured at their fair value at the
date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight line
basis over the vesting period, based on the Group's estimate of the
shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is measured by use of the Black-Scholes model. The
expected life of the model has been adjusted based on management's
best estimate, for the effects of non-transfer ability, exercise
restrictions, and behavioural considerations.
Equity
Equity reserves comprise:
Share capital
Share capital represents the nominal value of shares that have
been issued.
Share premium account
Share premium includes any premiums received on issue of share
capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income
tax benefits.
Merger relief reserve
The merger relief reserve includes any premium on issue of share
capital as part or all of the consideration in a business
combination, where more than 90% of the issued share capital of the
acquiree is obtained.
Capital redemption reserve
On 22 December 2005 the Company bought back all of its issued
deferred share capital comprising 900,447 shares with a nominal
value of GBP4,99 each for a total consideration of 1 pence. The
effect of this transaction was to reduce issued share capital by
EUR6,503,000 and create a capital redemption reserve of the same
amount.
Share-based payment reserve
The share-based payment transaction reserve is used to recognise
the value of equity-settled share-based payment transactions
provided to the Directors, including key management personnel, as
part of their remuneration. Refer to Note 6 for further
details.
Translation reserve
The foreign-currency translation reserve is used to record
exchange differences arising from the translation of Sterling GBP
for Artilium plc and Artilium Limited to the presentation currency
of Euro.
Own shares
The own share reserve represents the cost of shares in Artilium
plc purchased and held by the Artilium plc Employee Benefit Trust
to satisfy options and share awards under the Group's Employee
Share Schemes.
3. Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies,
which are described in Note 2, management has made the following
judgements that have the most significant effect on the amounts
recognised in the financial statements (apart from those involving
estimations, which are dealt with below).
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised is
based on an assessment of the probability of the Group's future
taxable income against which the deferred tax assets can be
utilised. In addition, significant judgement is required in
assessing the impact of any legal or economic limits or
uncertainties in various tax jurisdictions.
Going concern
The directors have adopted the going concern basis in preparing
the consolidated financial statements, having carried out a going
concern review. Given the nature of the Group and the way in which
business is managed. Cashflow forecasts have been prepared for both
of the Group's two trading companies, Artilium NV and United
Telecom NV. These forecasts are considered in conjunction for the
directors to satisfy themselves that the going concern assumption
is appropriate. We refer to note 13 goodwill.
United Telecom NV
The directors have prepared and reviewed cash flow forecasts
from the date of the accounts approval to end of December 2015. Due
to the nature of the Company's customer base, contracted income and
cost base the directors do not consider there to be a material
uncertainty in relation to the amount of revenue that the company
will generate, or costs that it will incur. This is supported by
the historic experience of forecasting within the United Telecom NV
business.
Artilium NV
A worst-case scenario cashflow forecast (which represents a
significant downgrade compared to internal budgets and targets) has
been prepared from the date of the accounts approval to end of
December 2015. In carrying out the review the Directors have had to
make significant assumptions about the revenue that will be
generated to end of December 2015.
The Group has now secured 82% (EUR5,2m) of its expected revenue
per the worst case scenario forecast, the remaining revenue for the
forecast period is a combination of expected recurring revenue
included within concluded contracts and proposals to existing and
new customers based on the directors' assessment of the likelihood
of winning these on a project by project basis, revenue has only
been included in the forecasts where the directors are at least 80%
certain that the revenue will be secured. Therefore the directors
would like to highlight that 18% (EUR1.1m) of forecast revenue per
the worst case scenario is not committed or contracted.
However the directors consider that the assumptions made are
appropriate and are satisfied that the Group is a going concern.
The directors monitor the cash position of the business on a
regular basis and consider the various sources of finance available
to the Group, the directors would seek to access these sources of
finance as necessary.
Functional currency of parent Company
Management consider that the parent Company operates its own
distinct management function, rather than being an extension of the
operation of Artilium NV. The parent Company incurs expenses
principally in Sterling, and funding raised by the Company to fund
the Group's operations is primarily generated in Sterling.
Management therefore consider the functional currency of the parent
Company to be Sterling.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the balance sheet date, that have a
risk of causing an adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed
below.
Carrying value of long-term assets
The Directors have carried out impairment tests on the carrying
value of the Group's intangible assets and goodwill and concluded
that these assets are not impaired. In arriving at this conclusion
the Directors have used value-in-use calculations and made
assumptions about revenue in the near and longer term.
Allowance for doubtful debts
The Directors have carried out an assessment on the
recoverability of trade receivables and concluded on a value of the
provision required. In arriving at this conclusion the Directors
have used their knowledge of their customer base, the market
condition and the age of the outstanding receivables.
4. Segmental information
An analysis of the Group's result is as follows:
Artilium United Telecom Eliminations Total
2014 2013 2014 2013 2014 2013 2014 2013
Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
-------- -------- -------- -------- -------- -------- -------- --------
Revenue for provision
of services from
external customers 6.094 6.104 4.055 5.164 - - 10.150 11.268
Inter-segment
revenue 8 28 - - (8) - - (28)-
Total revenue 6.102 6.132 4.055 5.164 (8) - 10.150 11.240
Recurring adjusted
EBITDA 782 911 150 218 - - 932 1.129
Non-Recurring
adjusted EBITDA - - 183 88 - - 183 88
Total adjusted
EBITDA 782 911 333 306 - - 1.115 1.217
Depreciations,
amortizations
and impairments (42) (212) (579) (823) - - (621) (1.035)
Recurring EBIT 740 699 (246) (517) - - 494 182
Non-recurring
items (644) (252) - (65) - - (644) (317)
Compensation
for loss of office (644) (252) - (65) (644) (317)
EBIT 96 447 (246) (582) - - (150) (135)
Interest expense (45) (26) (15) (43) - (60) (69)
Other finance
expense including
exchange differences 229 (202) - - 229 (202)
Income tax benefit (12) 7 163 164 - - 151 171
Segment profit/(loss) 268 226 (98) (461) - - 170 (235)
----------------------- -------- -------- -------- -------- -------- -------- -------- --------
An analysis of the Group's assets and liabilities is as
follows:
Artilium United Telecom Total
2014 2013 2014 2013 2014 2013
------- ------- -------- ------- ------- -------
Total segment assets 12.580 15.154 6.434 7.251 19.014 22.405
Total segment liabilities 2.757 4.890 1.980 3.353 4.737 8.243
--------------------------- ------- ------- -------- ------- ------- -------
Segment reporting
The Group identifies two reportable segments with different
economic characteristics. The two reportable segments reflect the
level at which the Group's Chief Operating Decision Maker ("CODM")
review the financial performance of the business and make decisions
about the allocation of resources and other operational matters.
The reportable segments are equal to the operating segments.
The two reportable segments "Artilium" and "United Telecom"
correspond with the two trading activities of the Group.
Artilium provides advanced mobile telecommunications software to
network operators and enablers (managed services providers, systems
integrators etc). Its core product is its ARTA Mobile Applications
Platform which enables network operators to open networks to third
party developers and launch new services which feature elements
from the telecoms and web environments.
The business of United Telecom consists of rendering telecom
services to the Belgium corporate and consumer market as well as
the development and sale of advanced "carrier grade" shared
services for telecom service providers (including fixed, mobile and
VOIP).
In line with Group's internal reporting framework and management
structure, the key strategic and operating decisions are made by
the Board of Directors which is considered to be the CODM. The CODM
reviews on a regular basis following financial key data of the
segment:
Revenue;
Recurring EBITDA = Operating result before depreciation,
amortization, impairment of assets and non-recurring expenses;
Recurring EBIT = Operating result before interests and taxes
less non-recurring expenses;
Non-recurring items;
Segment profit/loss.
The accounting principles of the operating segments are the same
as those described in note 2.
All assets and liabilities of the Group are allocated to the
operating segments. Segment assets and liabilities are presented
before intersegment balances. Intersegment sales and transfers are
registered at arm's length as if the sales and transfers were
executed with third parties.
There are no other material non-cash items in the current or
prior year than those disclosure within the table above.
Geographical information
The Group revenue and location of non-current assets on a
geographical segment is derived primarily in mainland Europe and
analysis by geographical destination is as follows:
2014 2013
Revenues Non-current Revenues Non-current
assets assets
Eur'000 Eur'000 Eur'000 Eur'000
Belgium 9,451 5,488 10,652 5,744
UK - 10,571 5 10,726
Holland 643 - 480 -
France - - 33 -
Germany 32 - 44 -
Luxembourg 1 - 1 -
India 15 - 17 -
Hong Kong 8 - 8 -
Total revenue 10,150 16,059 11,240 16,470
--------------- --------- ------------ --------- ------------
Information about major customers
32% of the consolidated revenue is generated by sales to an
external customer within the segment "Artilium" (36% at 30 June
2013). There are no other sales to single external customers
exceeding 10% of the consolidated revenue.
5. Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
2014 2013
Eur'000 Eur'000
Net foreign exchange (gains)/losses (229) 185
Operating lease rentals - land
and buildings & other 545 630
Depreciation of property, plant
and equipment 57 84
Amortisation of intangible
assets 552 719
Staff costs 3,833 3,923
Employee benefits 54 48
Fees paid to auditors 114 114
------------------------------------- -------- --------
Reconciliation of operating profit/ (loss) before loss of office
is provided below:
2014 2013
Eur'000 Eur'000
Operating profit/ (loss) 78 (337)
Compensation for loss of office 644 317
Operating Profit (loss) before
compensation for loss of office 722 (20)
---------------------------------- -------- --------
A detailed analysis of auditors' remuneration on a worldwide
basis is provided below:
2014 2013
Eur'000 Eur'000
- Fees payable to the Company's auditors
for the audit of the Company and consolidated
annual accounts 56 45
- the audit of the Company's subsidiaries
pursuant to legislation 34 45
Total audit fees 90 90
------------------------------------------------ -------- --------
- Tax services - -
- Other services (*) 28 24
Total non-audit fees 28 24
------------------------------------------------ -------- --------
(*) Other services are comprised of the auditor's review of the
half-yearly annual report.
6. Staff costs
The average monthly number of employees (including Executive
Directors) was:
2014 2013
Number Number
--------------------------------------
Administrative and development 55 55
-------------------------------------- -------- --------
Eur'000 Eur'000
Their aggregate remuneration
comprised:
Wages and salaries 2,958 3,077
Social security costs 738 718
Employee benefits 54 48
Other pension costs 83 81
Total included within administrative
expenses 3,833 3,924
-------------------------------------- -------- --------
Remuneration of directors and key management personnel
The remuneration of directors and key management personnel is
EUR1,0 million (2013: EUR 0,7 million). We refer to page 13 of the
annual report.
7. Finance costs
2014 2013
Eur'000 Eur'000
Interest borrowings & bank
loans 18 20
Other interest 42 49
60 69
---------------------------- -------- --------
8. Compensation for loss of office
2014 2013
Eur'000 Eur'000
Compensation for loss of
office 644 317
644 317
-------------------------- -------- --------
The compensation for loss of office for the year ended 30 June
2014 relates to severance packages for directors that were made
redundant, or have had the terms of their redundancy communicated
to them, during the course of the year ended 30 June 2014.
9. Reconciling table operating result-adjusted EBITDA
2014 2013
Eur'000 Eur'000
Operating Profit/ loss 78 (337)
Compensation for loss of office 644 317
Depreciations, amortizations and impairments 622 1.035
Exchange differences (229) 202
---------------------------------------------- -------- --------
Adjusted EBITDA 1.115 1.217
10. Other operating result
2014 2013
Eur'000 Eur'000
Other operating result 183 88
183 88
------------------------ -------- --------
The other operating result relates mainly tow write off and
correcting of balances held within the accounts receivable and
accounts payable ledger from before 2011.
11. Tax
2014 2013
Eur'000 Eur'000
Analysis of taxation credit for
the year:
Current tax:
UK tax - -
Overseas tax - -
Total current tax - -
--------------------------------------- -------- --------
Deferred tax:
Origination and reversal of temporary
differences (note 19) 152 171
Total deferred tax 152 171
--------------------------------------- -------- --------
Total taxation credit in the income
statement 152 171
--------------------------------------- -------- --------
The credit for the year can be reconciled to the loss per the
income statement as follows:
2014 2013
Eur'000 Eur'000
Gain/ (Loss) before tax from continuing
operations 18 (406)
Tax expense at the theoretical domestic
rates applicable to profits of taxable
entities in the countries concerned of
(247 %) (2013: 4%) 45 17
Effects of:
Expenses not deductible for tax purposes 59 66
Tax losses brought forward utilised in
the year (166) (714)
Tax losses carried forward unutilised
in the year 63 631
------------------------------------------ --------
Tax credit for current tax - (171)
------------------------------------------ -------- --------
Movement in deferred tax (152) (171)
------------------------------------------ -------- --------
Total taxation credit (152) (171)
------------------------------------------ -------- --------
The tax rates used for 2014 and 2013 calculations are the
product of the accounting profit of each entity multiplied by their
respective corporate tax rates.
Future
Following the UK Budget of 20 March 2013, it was announced that
the main rate of corporation tax would reduce from 23% to 21%
effective from 1 April 2014 and 20% effective from 1 April 2015.
These changes were enacted on 17 July 2013.
Consequently the Company will only recognise the impact of the
rate change which is substantively enacted at the balance sheet
date in its financial statements. The change in UK's corporate tax
rate has no effect on any recognized deferred tax asset or
liability.
12. Earnings per share
The share options in issue have a dilutive effect due to the
result for the year being a profit, and as a result diluted profit
per share is the same as basic earnings per share.
2014 2013
Eur'000 Eur'000
Profits/ (Losses)
Profits/ (Losses) from continuing operations
for the purposes of basic & diluted loss per
share being net losses attributable to equity
holders of the parent 170 (235)
No. No.
------------------------------------------------ ------------ ------------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic & diluted loss per
share 218,608,630 207,118,260
------------------------------------------------ ------------ ------------
The weighted average number of ordinary shares is calculated as
follows:
Issued ordinary shares 2014 2013
No.'000 No.'000
Start of period 207,118 145,275
Effect of shares issued in prior period 9,356 41,431
Effect of shares issued in the period 2,134 20,412
Accumulated weighted average basic and diluted
number of shares 218,608 207,118
Basic and diluted earnings per share is calculated as
follows:
Profit/ (Loss) for the year attributable to
the
equity shareholders of the Company (Eur'000) 170 (235)
Basic and diluted profit/(loss) per share (Euro
cent) 0,08 (0,11)
13. Goodwill
Eur'000
Cost
At 1 July 2012 13,726
At 30 June 2013 13,726
----------------- --------
Carrying amount
At 1 July 2013 13,726
At 30 June 2014 13,726
----------------- --------
The Directors have carried out impairment tests on the carrying
value of the Group's intangible assets and goodwill and concluded
that these assets are not impaired. In arriving at this conclusion
the Directors have used value-in-use calculations and made
assumptions about revenue in the near and longer term.
Allocation of goodwill to cash-generating units
For the purpose of impairment testing the Group as a whole is
considered as two cash-generating units because of the way it is
structured, managed and measured by management. The Group tests
goodwill and other intangible assets annually for impairment or
more frequently if there are indications that it might be impaired.
If the recoverable amount of the cash-generating unit is less than
the carrying amount of the unit, the impairment loss is allocated
to reduce the carrying amount of any goodwill. The cash generating
units are Artilium NV and United Telecom NV.
Artilium NV
Cash flows for the impairment tests have been forecast for five
years and a terminal value has been calculated for the years beyond
that. The terminal value is based on the average over the five year
net cash flow forecast to perpetuity using a pre-tax discount rate
of 18,57 % (2013: 18,57%), which is appropriate for the Company.
The discount rate would need to increase to more than 23,5% for the
goodwill to be impaired. The growth rate factor used in perpetuity
in the discounted cash flow model is estimated to be 2.5%
(2013:2,5%) in line with long-term forecasts for economic growth
expected in Belgium as this is the company's principal market. The
sales growth rate used during the five year forecast is estimated
to be 3%-5% (2012:3%-11%) based on management's best estimate of
the market opportunities and there existing pipeline opportunities.
Based on these assumptions the recoverable amount exceeds the
carrying amount by EUR3,6 million (2013: 3,5 million). If the net
present value of forecast future cash flows decreased by 25% the
recoverable amount will be less than the carrying amount.
The Group's cost base is forecasted to increase at the rate of
3% (2013:3%) per year for the five year forecast period. This is
based on management's historic experience of cost increases, and
the forecasted increases in revenue.
The Directors consider that the assumptions made are appropriate
and are satisfied that the Group's non-current assets are not
impaired.
United Telecom NV
The goodwill arising on acquisition of United Telecom on 27 June
2012 amounts EUR 3,155 million and was also tested for impairment.
Cash flows for the acquired business, for the purpose of impairment
test, have been forecasted for five years and a terminal value has
been calculated for the years beyond that. The terminal value is
based on the average over the five year net cash-flow forecast for
perpetuity using a pre-tax discount rate of 22,67% which is
appropriate for the company. The discount rate would need to
increase to more than 26,3% for the goodwill to be impaired. The
growth rate factor used in perpetuity in the discounted cash flow
model is estimated to be 2,5% in line with long-term forecasts for
economic growth expected in Belgium as this is the company's
principal market. The sales growth rate used during the five year
forecast is estimated to be 3% - 11% based on management's best
estimate of the market opportunities. Based on these assumptions
the recoverable amount exceeds the carrying amount of the goodwill
and identified intangible assets by EUR 1 million. If the net
present value of forecast future cash flows decreased by 15 % the
recoverable amount will be less than the carrying amount.
14. Other intangible assets
Assets under Telecommunications Customer Other Total
construction software platform portfolio software
Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
Cost
At 1 July
2012 - 5,040 2,554 30 5.040
Additions
during the
year 325 - 175 10 510
-------------- -------------- ------------------- ----------- ---------- --------
At 30 June
2013 325 5,040 2,729 40 8,134
Additions
during the
year - - - 40 40
Transfer (40) - - - (40)
At 30 June
2014 285 5,040 2,729 80 8,134
-------------- -------------- ------------------- ----------- ---------- --------
Amortisation
At 1 July
2012 - 5,040 - - 5,040
Charge in
period - - 703 16 719
-------------- -------------- ------------------- ----------- ---------- --------
At 30 June
2013 - 5,040 703 16 5,759
Charge in
period - - 527 25 552
At 30 June
2014 - 5,040 1,230 41 6,311
-------------- -------------- ------------------- ----------- ---------- --------
Carrying
amount
At 30 June
2014 285 - 1,499 39 1,823
-------------- -------------- ------------------- ----------- ---------- --------
At 30 June
2013 325 - 2,026 24 2,375
-------------- -------------- ------------------- ----------- ---------- --------
At 1 July
2012 - - 2,554 30 2,584
-------------- -------------- ------------------- ----------- ---------- --------
See Note 13 for intangible impairment testing.
15. Property, Plant and Equipment
Fixtures
Leasehold and Motor
improvements equipment vehicles Total
Eur'000 Eur'000 Eur'000 Eur'000
Cost
At 1 July 2012 73 1,093 40 1,206
Additions - 40 - 40
Disposals - (742) - (742)
At 30 June 2013 73 391 40 504
Additions - 207 - 207
Disposals - (17) (40) (57)
At 30 June 2013 73 581 - 654
-------------------------- ------------------------- ---------- ------------- --------
Accumulated depreciation
At 1 July 2012 45 975 37 1,057
Disposals - (742) - (742)
Charge for the year 7 77 3 87
Exchange difference - 3 - 3
At 30 June 2013 52 313 40 405
Disposals - (8) (40) (48)
Charge for the year 2 55 - 57
At 30 June 2014 54 360 - 414
-------------------------- ------------------------- ---------- ------------- --------
Carrying amount
At 30 June 2014 19 221 - 240
At 30 June 2013 21 78 - 99
-------------------------- ------------------------- ---------- ------------- --------
At 1 July 2012 28 118 - 146
-------------------------- ------------------------- ---------- ------------- --------
There were no impairment charges for the 2014 and 2013 financial
years.
16. Subsidiaries
Details of the Company's subsidiaries at 30 June 2014 are as
follows:
Place of Proportion Method used Principal
incorporation of ownership to account activity
ownership interest for investment
(or registration) and voting
and operation power held
Artilium N.V Belgium 100% Acquisition Telecom
accounting
United Telecom N.V Belgium 100% Acquisition Telecom
accounting
Artilium UK Limited UK 100% Acquisition Telecom
(formerly Trisent accounting
Communications Limited)
Artilium Trustee Company UK 100% Acquisition Telecom
Limited accounting
------------------------- ------------------- -------------- ---------------- ----------
Unless otherwise stated all ownership relates to ordinary share
capital.
17. Inventories
Inventories consist of mobile simcards for resale to clients.
The value of the inventories of EUR 43,000
(2013: EUR 27,000) is based on the cost of purchase excluding
VAT.
18. Trade and other receivables
2014 2013
Eur'000 Eur'000
Amounts receivable for the sale
of goods and services 3,068 3,652
Allowance for doubtful debts (1,182) (1,224)
--------------------------------- -------- --------
1,886 2,428
Other receivables 156 214
Prepayments and accrued income 306 304
2,348 2,946
--------------------------------- -------- --------
Amounts receivable for the sale of goods are all denominated in
Euros.
The Directors consider that the carrying amount of trade and
other receivables above approximates to their fair value. The
average credit period taken on sales of goods is 68 days (2013: 78
days). No interest is charged on the receivables.
Included within trade and other receivables is an amount of
EUR245,000 (2013: EUR443,000) in respect of amounts that were past
due at 30 June, but not impaired. The Group believes that the
balances are ultimately recoverable based on a review of past
payment history and the credit quality of those customers.
The ageing analysis of past due but not impaired receivables are
shown below:
2014 2013
Eur'000 Eur'000
Up to three months 245 443
Up to three months acquired by business - -
combination
245 443
----------------------------------------- -------- --------
The Group holds no collateral against these receivables at the
balance sheet date.
As at 30 June 2014, EUR1,182,000 of trade receivables were
impaired (2013: EUR1,224,000). This allowance is specific and has
been determined by reference to the age of the debt or where
amounts are in dispute on a customer by customer basis. To the
extent they have not been specifically provided against, the trade
receivables are considered to be of sound credit rating. The ageing
analysis of the allowance for doubtful debts is as follows:
2014 2013
Eur'000 Eur'000
Up to three months - -
Up to six months - -
Up to six months acquired by - -
business combination
Older than 6 months 1,182 1,224
1,182 1,224
------------------------------ -------- --------
Movement in the Group's allowance for doubtful debt is as
follows:
2014 2013
Eur'000 Eur'000
Opening balance as at 1 July 1,224 1,110
Usage for allowance for doubtful (110) -
debt
Receivables provided for during
the year 68 118
Exchange differences - (4)
Closing balance as at 30 June 1,182 1,224
---------------------------------- -------- --------
The Group holds no collateral against these receivables at the
balance sheet date.
19. Deferred tax
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
Total
Eur'000
At 1 July 2012 (558)
Acquired through business
combination 171
------------------------------ -------- --------
At 30 June 2013 (387)
Credit to income statement 160
At 30 June 2014 (227)
------------------------------ -------- --------
2014 2013
Eur'000 Eur'000
Deferred tax liability (497) (657)
------------------------------ -------- --------
Total deferred tax liability (497) (657)
------------------------------ -------- --------
Deferred tax asset 270 270
------------------------------ -------- --------
Total deferred tax asset 270 270
(227) (387)
------------------------------ -------- --------
At the balance sheet date, the Group has UK unused tax losses of
EUR16,685,000 (2013: EUR16,848,000). No deferred tax asset has been
recognised in respect of these items due to insufficient evidence
of future appropriate profits in the immediate future in the UK.
The value of the deferred tax asset not recognized on the tax
losses is EUR3,504,000 (2013: EUR 4,001,000).
At the balance sheet date, the Group has Belgium tax losses
carried forward of EUR10,073,000 (2013: EUR10,555,000). No deferred
tax asset (except for the United Telecom tax losses carried
forward) has been recognised in respect of this due to insufficient
evidence of future appropriate profits in the immediate future. The
value of the deferred tax asset not recognized on the tax losses is
EUR3,424,000 (2013: EUR3,588,000).
The deferred tax asset on available tax losses of United Telecom
NV of EUR270,000 remained unchanged. Deferred tax liabilities of
EUR493,000 (2013: EUR657,000) relate to intangible assets (customer
portfolio) through a business combination in 2012 (United
Telecom).
20. Trade and other payables
2014 2013
Eur'000 Eur'000
Trade payables 1,404 2,750
Accruals 903 459
Other payables 881 1,080
Deferred income 902 3,139
4,090 7,428
----------------- -------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 112 days (2013: 133
days).
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
21. Other deposit
The other deposit amount related to a bank guarantee for KPN,
signed on 23 January 2011, for a blocked account with Rabobank for
EUR 500,000.
22. Bank Loans
2014 2013
Eur'000 Eur'000
Due within one year 150 142
150 142
--------------------- -------- --------
The different bank loans are mainly secured on the trade
receivables of the Group. The two unsecured loans with a principal
of EUR100,000 each are repayable in 12 months on a monthly basis.
Interest rates are fixed at 2,85 % ( 2013: 3,10%) and are market
conforming. The carrying amount approximates fair values because of
the short maturity of these loans.
23. Provisions
Restructing Settlement
early
termination Total
Warranty
provision
Eur'000 Eur'000 Eur'000 Eur'000
At 1 July 2012 21 18 60 99
Additions - - 16 16
Utilisation of provision (21) (18) (60) (99)
At 30 June 2013 - - 16 16
-------------------------- ----------- ------------ ------------- --------
Utilisation of provision - - (16) (16)
At 30 June 2014 - - - -
-------------------------- ----------- ------------ ------------- --------
The provision for early termination EUR16,000 (2013:EUR0)
related to the remaining outstanding severance payment regarding
employees of Artilium NV dismissed in the course of year ended 30
June 2013.
24. Share capital
2014 2013
Eur'000 Eur'000
Fully paid ordinary shares:
Authorised:
300,000,002 (2013: 300,000,002)
ordinary shares of 5p each 18,523 18,523
----------------------------------- --------- ---------
Issued and fully paid:
218,925,385 (2013: 216,474,437)
ordinary shares of 5p each 14,181 14,060
----------------------------------- --------- ---------
Deferred ordinary shares:
Authorised:
900,447 (2013: 900,447) deferred
ordinary shares of GBP4,99 each 6,503 6,503
----------------------------------- --------- ---------
2014 2013
No. '000 No. '000
----------------------------------- --------- ---------
Fully paid ordinary shares:
Balance at beginning of financial
year 216,474 186,706
Issued during the year 2,451 29,768
Issued and fully paid: 218,925 216,474
----------------------------------- --------- ---------
Fully paid ordinary shares carry one vote per share and carry
the rights to dividends.
The Company has issued 2,450,948 ordinary shares at a price of
8,12p during the financial year following the conversion of certain
loan notes (194,117 shares), in payment to directors, key personnel
and service providers of the Company (2,256,831 shares).
25. Own Shares
Own shares
Eur'000
Balance at 1 July 2013 (2,336)
Balance at 30 June 2014 (2,336)
------------------------- -----------
The own shares reserve represents the cost of shares in Artilium
plc purchased and held by the Artilium plc Employee Benefit Trust
to satisfy options and share awards under the Group's Employee
Share Schemes (see Note 26). 3,000,000 Series 2 warrants were
purchased by the Trust at a price of 10p per warrant in December
2006. These warrants were then exercised at a price of 75p and
converted into ordinary 5p shares by the Trust.
26. Share-based payments
Share-based Share-based
payment reserve payment reserve
2014 2013
Eur'000 Eur'000
Balance at 1 July 3,246 3,246
Balance at 30 June 3,246 3,246
-------------------- ----------------- -----------------
The Company has the following share plans in place.
Unapproved share option plan: Awards are made to employees with
the exercise price based on the market price of the Company's
shares at the date of the award. These awards have a three year
vesting period and a five year exercise period. The performance
criteria are at the discretion of the Remuneration Committee.
Awards were made to key management on 24 June 2010, with the
exercise price determined by the Remuneration Committee and varying
on each vesting date. No new options were granted under this
version of the plan in 2014 and no options remained unsettled or
forfeited at year end.
The amount accounted for in the income statement for the year
ended 30 June 2014 amounts to EURnil (2013: EURnil).
27. Notes to the cash flow statement
2014 2013
Eur'000 Eur'000
Loss from continuing operations before
tax 18 (406)
Adjustments for:
Depreciation of property, plant and
equipment 57 84
Amortisation of intangible assets 552 544
Impairment on trade receivables (42) 114
Decrease in provisions (16) (83)
Finance Costs 43 69
Unrealized exchange differences (269) 185
Consideration for third party services
paid in shares - 194
Operating cash flows before movements
in working capital 343 701
-------------------------------------------- -------- -------------------
(Increase)/decrease in receivables 640 (579)
(Increase)/decrease in inventory (16) (10)
Increase/(decrease) in payables (2,632) 2,198
-------------------------------------------- -------- -------------------
Cash used by operations (1,665) 2,310
-------------------------------------------- -------- -------------------
Income taxes paid - -
-------------------------------------------- -------- -------------------
Net cash outflow from operating activities (1,665) 2,310
-------------------------------------------- -------- -------------------
28. Contingent liabilities
At 30 June 2014 the Group had a dispute with a former director
of the Company relating to his exit-conditions. The Company
considers that it has a strong defence and does not consider the
liability to be of a material nature.
29. Operating lease arrangements
2014 2013
Eur'000 Eur'000
Minimum lease payments under
operating leases recognised
as an expense for the year
Land & buildings 152 246
Company cars 393 384
545 630
------------------------------ -------- --------
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Land & buildings 2014 2013
Eur'000 Eur'000
Within one year 104 172
In the second to fifth years
inclusive 196 242
301 414
------------------------------ -------- --------
Company cars 2014 2013
Eur'000 Eur'000
Within one year 393 384
In the second to fifth years
inclusive 786 768
1,152 1,152
------------------------------ -------- --------
Operating lease payments represent rentals payable by the Group
for certain of its office properties. Leases are negotiated for an
average term of 8 years and rentals are fixed for an average of 3
years. The Group does not have an option to acquire the leased
properties at expiry of the lease term.
30. Retirement benefit schemes
The Group operates defined contribution retirement benefit
schemes for all qualifying employees of Artilium NV. As for all
Belgian defined contribution pension plans, minimum guaranteed
rates of return apply on the employee and employer contributions as
from 1 January 2004. Since the guarantee is primarily provided for
by the insurance Company, the pension plan is accounted for as a
defined contribution plan.
The total cost charged to income of EUR83,000 (2013: EUR 81,000)
represents contributions payable to these schemes by the Group at
rates specified in the rules of the plans. As at 30 June 2014, all
contributions due in respect of the current reporting period had
been paid over to the scheme.
31. Events after the balance sheet date
Following shareholder approval gained at the General Meeting
held on 1 September 2014, the Company issued a total of 5,090,908
new ordinary shares including 1,272,724 ordinary shares subscribed
by directors of the Company. The proceeds from the issue of shares
will be used for investment in marketing, sales and international
distribution channels as well as for working capital purposes.
On 12 June 2014, the Board of the Company and the Directors
Willem Van Den Brink and Patrick Morley mutually agreed that Willem
Van Den Brink and Patrick Morley resign as of 1 July 2014.
Bart Weijermars was appointed as Executive Board Member as from
July 1(st) 2014.
32. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Company and its
subsidiaries and other related parties are disclosed in the
Company's separate financial statements.
33. Trading transactions
At 30 June 2012 there was a loan from Heva Invest amounted to
EUR 500,000 and a loan from Neurocontrol Europe Ltd. Inc. amounted
to EUR 315,000. Both parties are considered as related party under
IAS 24 for following reasons: (I). Heva Invest holds approximately
12% in Artilium PLC and is considered to have significant
influence, (II). by virtue of the fact that Jan-Paul Menke is a
common director of both Artilium PLC and Neurocontrol Europe Ltd.
Inc. Neurocontrol Europe Ltd. Inc. is considered to be a close
member of Jan-Paul Menke. Both loans were converted into shares
during the prior year. We refer to note 19 borrowings and note 22
share capital for more detail.
Remuneration of key management personnel
The Group has a related party relationship with key management.
Key management compensation is disclosed on page 13 of the annual
report.
Transactions with Directors and key management
Patrick Morley and Willem Van Den Brink stepped down as Board
members on 1 July 2014. In respect of their compensation for loss
of office Patrick Morley and Willem Van Den Brink will be allotted
an amount of shares during the next Board meeting.
34. Financial instruments
Categories of financial instruments
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised in respect of each class of financial asset, financial
liability and equity instrument are disclosed in the accounting
policies. The book value of the Group's financial instruments at
the year -end is shown below:
2014 2013
Notes Eur'000 Eur'000
Financial assets:
Loans and receivables:
Trade and other receivables 17 2,042 2,642
Other deposits 34 - 500
Cash and cash equivalents 564 2,462
2,606 5,604
----------------------------- ------ -------- --------
Financial liabilities:
Amortised cost:
Trade and other payables 19 3,188 4,289
Bank loans 21 150 142
3,338 4,431
----------------------------- ------ -------- --------
Financial risk management
The Group has exposure to the risks from its use of financial
instruments. These risks include credit risk, liquidity and cash
flow risk, interest rate risk and foreign currency risk.
Credit risk
The Group's credit risk is primarily attributable to its trade
receivables. The amounts presented in the balance sheet are net of
allowances for doubtful receivables. An allowance for impairment is
made where there is an identified loss event which, based on
previous experience, is evidence of a reduction in the
recoverability of the cash flows.
The Group monitors trade receivables on a regular basis to
ensure that appropriate action is taken with slow paying customers.
Many of the customers are large multinational companies which
limits the extent of the credit risk.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit-ratings assigned by
international credit-rating agencies.
Of the trade receivables balance at the end of the year,
EUR342,112 is due from KPN Group Belgium, the Group's largest
customer, EUR91,025 is due from Belgacom, EUR195,078 is due from
T-Mobile .There are no other customers who represent more than 10
per cent of the total balance of trade receivables.
The Group's maximum exposure to credit risk, gross of any
collateral held, relating to its financial assets is equivalent to
their carrying value. All financial assets have a fair value which
is equal to their carrying value.
There are no significant credit risks arising from financial
assets that are neither past due nor impaired.
Liquidity and cash flow risk
The Group is principally funded by reserves and bank loans. The
Group maintains its cash funds in bank accounts. The Group's policy
is to minimise the risk by placing funds in risk free cash
deposits.
The Group closely monitors its access to bank and other credit
facilities and available cash in comparison to its outstanding
commitments on a regular basis to ensure that it has sufficient
funds to meet the obligations of the Group as they fall due. The
Board receives regular cash flow forecasts so that management can
ensure that its obligations can be satisfied or financing is put in
place when required.
As at 30 June 2014, the Group's non-derivative financial
liabilities have contractual maturities (including interest
payments where applicable) as summarised below:
30 June 2014
Current Non-current
within 6 6 to 12 months 1 to 5 years
months
Eur'000 Eur'000 Eur'000
Bank loans 100 50 -
Trade and other payables 2,743 - -
2,843 50 -
-------------------------- --------- --------------- -------------
This compares to the maturity of the Group's non-derivative
financial liabilities in the previous reporting period as
follows:
30 June 2013
Current Non-current
within 6 6 to 12 months 1 to 5 years
months
Eur'000 Eur'000 Eur'000
Bank loans 92 50 -
Trade and other payables 3,830 - -
3922 50 -
-------------------------- --------- --------------- -------------
Interest rate risk
At 30 June 2014, the Group had bank loans and other borrowings
of EUR 150,000 (2013: EUR142,000). The Group's borrowings are at
fixed rates of interest and there is, therefore, no exposure to
movements in interest rates.
Any surplus funds are deposited in interest bearing accounts at
variable rates and are therefore exposed to movements in interest
rates. Funds are deposited on a short term basis and interest rates
are monitored by the Head of Finance. The movement in interest
rates would have an immaterial impact on the finances of the
Company.
Foreign currency risk
The Group's centre of operations is in Belgium and it is
therefore exposed to currency movements of the Euro against the
Pound Sterling. This is naturally hedged to some extent by the
expenses incurred in Belgium. The Group does not enter into any
forward exchange contracts to cover the remaining foreign exchange
risk.
Sensitivity analysis
The Group faces currency exposures on the translation of the
trading results and the net assets of the British subsidiaries. The
year end and average exchange rates used when translating the
results for the year from Pound Sterling to Euro are 1,2484 (2013:
1,1699 ) and 1,1983 (2013: 1,2125) respectively.
The following table details the sensitivity analysis of the
movements of the Pound Sterling to the Euro for the Group's
results.
2014 2013
Eur'000 Eur'000
Impact on equity
10% increase in GBP fx rate
against Euro 2,483 2,352
10% decrease in GBP fx rate
against Euro (2,483) (2,352)
----------------------------- -------- --------
Impact on profit or loss
10% increase in GBP fx rate
against Euro (41) (223)
10% decrease in GBP fx rate
against Euro 41 223
----------------------------- -------- --------
Capital management
The Group's main objective when managing capital is to protect
returns to shareholders by ensuring the Group will continue to
trade in the foreseeable future. The Group also aims to maximise
its capital structure of debt and equity so as to minimise its cost
of capital.
The Group manages its capital with regard to the risks inherent
in the business and the sector within which it operates by
monitoring its gearing ratio on a regular basis.
The Group considers its capital to include share capital, share
premium, translation reserve, retained earnings, interest in own
shares, capital redemption reserve, share-based payment reserve and
net debt as noted below.
Net debt includes short and long-term borrowings (including
overdrafts and lease obligations) net of cash and cash
equivalents.
35. Safe harbour
This financial report contains a number of non-GAAP figures,
such as adjusted EBITDA and Free cash flow. These non-GAAP figures
should not be viewed as a substitute for Artilium's GAAP
figures.
Artilium defines adjusted EBITDA as operating result before
depreciation and impairments of property, plant and equipment and
client's receivables and amortization and impairments of intangible
assets.
Artilium defines free cash flow as follows: cash flows from
operating activities minus capital expenditure. The notion is used
as standard for the health of the company, by showing the ability
of the company to generate cash to maintain the operations.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QVLFLZBFXFBZ
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