TIDMARTA
RNS Number : 7784D
Artilium PLC
29 October 2015
Artilium plc
('Artilium' or the 'Company' or the 'Group')
Artilium PLC reports full year results for the year ended 30
June 2015
Artilium PLC ("Artilium" or the "Company") (AIM: ARTA), the AIM
quoted telecom software and solutions provider, reports full year
results for the year ended 30 June 2015.
Highlights
-- Transitional year which prepares the Group for new momentum
and growth
-- Adjusted positive EBITDA of EUR35k (2014: adjusted EBITDA
EUR1.1m)
-- Successful acquisition of Speak Up Belgium BVBA
Post Period End
-- Successful acquisitions of Talking Sense Networks, *bliep and
Comsys
-- Growth of customer base in (Mobile) Virtual Operator
Services
-- Outlook is positive with strong growth of revenues and
operational income
Commenting on the Company's results, Bart Weijermars, CEO:
"Last year was a transitional year in which we improved the
underlying fundamentals of our business operations. Overall we were
able to reduce the administrative costs of the business, invest in
new product development, and secure a number of new MVNO contracts
that will start generating business in the period ahead. The
investment in improving the fundamentals of the Group performance,
and the recent acquisitions, form the basis of our next phase in
which we expect to grow our customer base and revenues from our
software products as well as growing our own customer base by
expanding the (Mobile) Virtual Operator Services. The investments
in commercial activities as well as new product initiatives are
starting to materialise. The Group is also integrating the newly
acquired businesses in order to capture the synergies available and
realize the full growth opportunities."
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
finnCap Ltd
Jonny Franklin-Adams & Scott
Mathieson (corporate finance)
Joanna Weaving (corporate broking) +44 20 7220 0500
Chief Executive's Statement
Overview
Artilium plc ("the Group") presents a transitional year in which
it improved the underlying fundamentals of its existing business.
In our own retail business we reduced prices in order to stay
competitive and in our software business we have focussed on
building new opportunities together with our existing customers.
Overall we were able to reduce the administrative costs of the
business, invest in new product development, and secured a number
of new MVNO contracts that will start generating business in the
period ahead. The trust of our existing customers has enabled the
Artilium business unit ("Artilium") to deliver a number of
successful projects for its main customers. Customer satisfaction
further improved thanks to additional focus on delivery for our
main customers.
New business development remained difficult and lead times are
significant. Additional resources and attention will be put in this
area 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 M2M 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. We have chosen to reduce our revenues in the short
term to enable our MVNO customers to start investing in their
business and customers. This will create more sustainable revenues
for United Telecom going forward. The significant effort undertaken
in the last year to improve the commercial performance of United
Telecom is starting to pay off. We are now returning to growth in
our retail business again. Additional cost reductions through new
supplier contracts are enabling this profitably in the coming
period.
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. With the move of offices in the last year we have
also significantly upgraded our own IT infrastructure as well as a
completely new test environment which enables us to deliver an even
higher quality of new software releases. New functionalities have
been delivered to our customers 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 platform.
The next phase: reaping the benefits of past investments and the
recent acquisitions to create significant growth
The investment in improving the fundamentals of the Group
performance, and the recent acquisitions, form the basis of our
next phase in which a strong focus is placed on growing the
customer base and revenues for the Artilium software products as
well as growing our own customer base by expanding the (Mobile)
Virtual Operator Services. The investments in 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 marketing
and sales. The Group is also integrating the recently acquired
businesses in order to capture the synergies available and maximise
the growth opportunity.
Market Dynamics
The Belgian market has become increasingly aggressive with the
three main operators reducing prices and aggressively pushing 4G.
In addition Telenet is pushing for the acquisition of BASE. The
effects this will have on the wholesale market are unclear at this
point as the regulator is looking into this. We still see
significant interest of new parties to enter the market as long as
current conditions prevail.
Outlook
The recent acquisitions of Talking Sense Networks, *bliep and
Comsys will aid the further growth of the Company. New products and
customers will enable cross- and upselling to existing customers
and expedite the internationalization of the Group. In addition we
see positive developments in our own retail business which will add
to further growth. The outlook for the rest of the year to June
2016 is positive with strong growth in revenue and income expected.
We will continue to build our business through integration,
selective acquisitions and continued investment in the organic
growth of our businesses.
Financial Results
2015 2014
Notes Eur'000 Eur'000
Continuing Operations
Revenue 4 7,651 10,150
Cost of sales (1,882) (2,292)
----------------------------------------- ------ -------- --------
Gross profit 5,769 7,858
Other operating income 10 73 183
Administrative expenses excluding
depreciations and exchange differences (5,807) (6,926)
Adjusted EBITDA 9 35 1,115
Adjusted EBITDA margin 0,5% 11%
For reconciliation between operating profit, net result and
Adjusted EBITDA, we refer to note 9.
Revenue
Consolidated revenue for the year ended 30 June 2015 amounted to
EUR 7,7 million (2014: EUR 10,2 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 4,3 million (2014: 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 3,4 million (2014: EUR 4,1 million).
Gross profit
The Company generated a gross profit of EUR 5,8 million or 75,4%
of revenues (2014: EUR 7,9 million or 77,4% of revenues).
The contribution of Artilium business to the consolidated gross
profit amounted to EUR 4,1 million (2014: EUR5,9 million). The
contribution of United Telecom to the consolidated gross profit
amounted to EUR 1,7 million (2014: EUR 2,0 million).
Adjusted EBITDA and adjusted EBITDA margin
The adjusted EBITDA margin of the Group was 0,5% (2014: 11%). We
refer to note 9 for a reconciling table between adjusted EBITDA and
operating result.
Bart Weijermars
Chief Executive
Notes 2015 2014
Eur'000 Eur'000
Continuing Operations
Revenue 4 7.651 10.150
Cost of sales (1.882) (2.292)
------------------------------------ ------ -------- --------
Gross profit 5.769 7.858
Other operating income 10 73 183
------------------------------------ ------ -------- --------
Administrative expenses before
redundancy costs and compensation
for loss of office (6.234) (7.319)
Redundancy costs/Compensation
for loss of office 8 (327) (644)
------------------------------------ ------ -------- --------
Administrative expenses (6.561) (7.963)
------------------------------------ ------ -------- --------
Operating (loss) / profit (719) 78
Finance costs 7 (49) (60)
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(Loss) / profit before tax (768) 18
Tax credit 11 152 152
------------------------------------ ------ -------- --------
(Loss) / profit for the year
from continuing operations 5 (616) 170
------------------------------------ ------
Basic & diluted (loss) / earnings
per share in euro-cents from
continuing operations 12 (0.27) 0.08
------------------------------------ ------ -------- --------
Notes 2015 2014
Eur'000 Eur'000
Non-current assets
Goodwill 13 13,726 13,726
Intangible assets 14 1,805 1,823
Property, plant and
equipment 15 354 240
Deferred tax assets 19 270 270
16,155 16,059
----------------------------- ------ -------- --------
Current assets
Inventories 17 38 43
Trade and other receivables 18 5,263 2,348
Cash and cash equivalents 735 564
------------------------------ ------ --------
6,035 2,955
----------------------------- ------ -------- --------
Total assets 22,191 19,014
------------------------------ ------ -------- --------
Non-current liabilities
Deferred tax liabilities 19 495 497
Bank loans 21 60 -
555 497
----------------------------- ------ -------- --------
Current liabilities
Trade and other payables 20 6,577 4,090
Bank loans 21 255 150
6,832 4,240
----------------------------- ------ -------- --------
Total liabilities 7,387 4,737
------------------------------ ------ -------- --------
2015 2014
Notes Eur'000 Eur'000
Equity attributable to owners
of the parent
Share capital 15,415 14,181
Share premium account 46,748 46,586
Merger relief reserve 1,488 1,488
Capital redemption reserve 6,503 6,503
Share-based payment reserve(*) 24 - 3,246
Translation reserve (2,333) (2,080)
Own shares (2,336) (2,336)
Retained deficit (50,681) (53,311)
Total equity 14,804 14,277
--------------------------------- ------ --------- ---------
Total liabilities and equity 22,191 19,014
--------------------------------- ------ --------- ---------
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 and Financial Statements. The nature of the Group's
operations and its principal activities are set out in the
Strategic Report and Directors' report on pages 7 to 10 of the
Annual Report and Financial Statements. 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 29 October 2015.
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.
New and amended standards and interpretations
Standards and interpretations effective in the current period
but with no significant impact
Standards that became effective during the year are listed
below:
- IFRS 10, IFRS 12 and IAS 27 Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27
- IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
- IAS 36 Recoverable Amount Disclosures for Non - Financial Assets - Amendments to IAS 36
- IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39
- IFRIC 21 Levies
This standards and interpretations listed above did not have a
material impact when applied to the disclosures, financial position
or performance of the Group as per the financial statements of the
Group.
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 when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
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.
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.
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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 assets 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
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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.
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.
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.
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
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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, cash flow 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 2016. 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 cash flow 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 2016. In carrying out the review the Directors have had to
make significant assumptions about the revenue that will be
generated to end of December 2016.
The Group has now secured 64% (EUR3,2m) 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 36% (EUR1,8m) 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:
United
Artilium Telecom Total
2015 2014 2015 2014 2015 2014
Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
-------- -------- -------- -------- -------- --------
Revenue 4,276 6,094 3,374 4,055 7,650 10,150
Adjusted EBITDA (93) 782 128 333 35 1.115
Depreciation,
amortization
and impairments (67) (42) (504) (579) (571) (621)
Recurring
EBIT (160) 740 (376) (246) (536) 494
Non-recurring
items (267) (644) (60) - (327) (644)
Redundancy
costs/Compensation
for loss of
office (267) (644) (60) - (327) (644)
EBIT (427) 96 (436) (246) (863) (150)
Interest expense (44) (45) (4) (15) (48) (60)
Other finance
expense including
exchange differences 143 229 - - 143 229
Income tax
benefit (8) (12) 160 163 152 151
Segment (loss)
/ profit (336) 268 (280) (98) (616) 170
----------------------- -------- -------- -------- -------- -------- --------
We refer to note 9 for reconciliation of the operating result
and net result to the adjusted EBITDA and to note 35 for the
definition of the adjusted EBITDA.
We refer to paragraph 'Principal activities' within the
strategic report for the revenue by type.
An analysis of the Group's assets and liabilities is as
follows:
Artilium United Telecom Total
2015 2014 2015 2014 2015 2014
------- ------- -------- ------- ------- -------
Total segment assets 16,012 12,580 6,179 6,434 22,191 19,014
Total segment liabilities 5,550 2,757 1,837 1,980 7,387 4,737
--------------------------- ------- ------- -------- ------- ------- -------
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")
reviews the financial performance of the business and makes
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 adjusted 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.
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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:
2015 2014
Revenues Non-current Revenues Non-current
assets assets
Eur'000 Eur'000 Eur'000 Eur'000
Belgium 6,950 5,584 9,451 5,488
UK - 10,571 - 10,571
Holland 635 - 643 -
France - - - -
Germany 16 - 32 -
Luxembourg - - 1 -
India 3 - 15 -
Hong Kong 8 - 8 -
Total 7,651 16,155 10,150 16,059
------------ --------- ------------ --------- ------------
Information about major customers
25% of the consolidated revenue is generated by sales to an
external customer within the segment "Artilium" (32% at 30 June
2014). There are no other sales to single external customers
exceeding 10% of the consolidated revenue.
5. Profit for the year
(Loss) Profit for the year has been arrived at after
charging/(crediting):
2015 2014
Eur'000 Eur'000
Net foreign exchange
(gains)/losses (143) (229)
Operating lease rentals
- land and buildings
& other 533 545
Depreciation of property,
plant and equipment 55 57
Amortisation of intangible
assets 541 552
Staff costs 3,708 3,833
Employee benefits 72 54
Fees paid to auditors 114 114
----------------------------- -------- --------
Reconciliation of operating (loss) / profit before redundancy
costs and compensation for loss of office is provided below:
2015 2014
Eur'000 Eur'000
Operating (loss) / profit (719) 78
Redundancy costs/Compensation
for loss of office 327 644
Operating (loss) / profit
before redundancy costs
and compensation for
loss of office (392) 722
-------------------------------- -------- --------
A detailed analysis of auditors' remuneration on a worldwide
basis is provided below:
2015 2014
Eur'000 Eur'000
- Fees payable to the Company's
auditors for the audit of the Company
and consolidated annual accounts 64 56
- the audit of the Company's subsidiaries
pursuant to legislation 38 34
Total audit fees 102 90
-------------------------------------------- -------- --------
- Tax services - -
- Other services (*) 31 28
Total non-audit fees 31 28
-------------------------------------------- -------- --------
(*) 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:
2015 2014
Number Number
--------------------------------
Administrative and development 57 55
--------------------------------- -------- --------
Eur'000 Eur'000
Their aggregate remuneration
comprised:
Wages and salaries 2,753 2,958
Social security costs 768 738
Employee benefits 72 54
Other pension costs 95 83
Total included within
administrative expenses 3,688 3,833
--------------------------------- -------- --------
6. Staff costs (continued)
Remuneration of directors and key management personnel
The remuneration of directors and key management personnel is
EUR0,3 million (2014: EUR 1,0 million). We refer to page 13 of the
Annual Report and Financial Statements. The only key management
personnel are the directors.
7. Finance costs
2015 2014
Eur'000 Eur'000
Interest borrowings
& bank loans 9 18
Other interest 40 42
49 60
--------------------- -------- --------
8. Redundancy costs/Compensation for loss of office
2015 2014
Eur'000 Eur'000
Redundancy costs
Compensation for loss 327 -
of office - 644
327 644
------------------------ -------- --------
The redundancy costs for the year ended 30 June 2015 relates to
severance packages for personnel and contractors that were made
redundant, or have had the terms of their redundancy communicated
to them, during the course of the year ended 30 June 2015. Last
year's balance related to the severance packages for directors.
9. Reconciling table net result, operating result-adjusted EBITDA
2015 2014
Eur'000 Eur'000
(Loss)/Profit for the year
from continuing operations (616) 170
Tax credit (152) (152)
Finance cost 49 60
Operating (Loss) profit (719) 78
Redundancy costs/Compensation
for loss of office 327 644
Depreciation, amortization
and impairment of receivables 570 622
Exchange differences (143) (229)
-------------------------------- -------- --------
Adjusted EBITDA 35 1,115
10. Other operating income
2015 2014
Eur'000 Eur'000
Other operating income 73 183
73 183
------------------------ -------- --------
The other operating income relates mainly to the write off of
old balances in accordance with Belgian law, held within the
accounts receivable and accounts payable ledger United Telecom NV
from before 2013.
11. Tax
2015 2014
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) 152 152
Total deferred tax 152 152
------------------------------ -------- --------
Total taxation credit
in the income statement 152 152
------------------------------ -------- --------
The credit for the year can be reconciled to the loss per the
income statement as follows:
2015 2014
Eur'000 Eur'000
(Loss) profit before tax from
continuing operations (768) 18
Tax expense at the theoretical
domestic rates applicable to
profits of taxable entities
in the countries concerned of
(33 %) (2014: 244%) (254) 45
Effects of:
Expenses not deductible for
tax purposes 66 59
Tax losses brought forward utilised
in the year (332) (166)
Tax losses carried forward unutilised
in the year 520 63
--------------------------------------- --------
Tax credit for current tax - -
--------------------------------------- -------- --------
Movement in deferred tax (152) (152)
--------------------------------------- -------- --------
Total taxation credit (152) (152)
--------------------------------------- -------- --------
The tax rates used for 2015 and 2014 calculations are the
product of the accounting profit of each entity multiplied by their
respective corporate tax rates.
11. Tax (continued)
Future
Reductions in the UK corporation tax rate from 23% to 21%
(effective from 1 April 2014) and to 20 % (effective from 1 April
2015) were substantively enacted on 2 July 2014. The change in UK's
corporate tax rate has no effect on any recognized deferred tax
asset or liability.
12. Earnings per share
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The share options in issue do not have a dilutive effect due to
the result for the year being a loss, and as a result diluted loss
per share is the same as basic earnings per share.
2015 2014
Eur'000 Eur'000
(Losses) / Profits
(Losses) / Profits from continuing
operations for the purposes of basic
& diluted loss per share being net
losses attributable to equity holders
of the parent (616) 170
No. No.
---------------------------------------- ------------ ------------
Number of shares
Weighted average number of ordinary
shares
for the purposes of basic & diluted
loss per share 228,658,004 218,608,630
---------------------------------------- ------------ ------------
The weighted average number of ordinary shares is calculated as
follows:
Issued ordinary shares 2015 2014
No.'000 No.'000
Start of period 218,608 207,118
Effect of shares issued in prior
period 317 9,356
Effect of shares issued in the period 9,733 2,134
Accumulated weighted average basic
and diluted number of shares 228,658 218,608
Basic and diluted earnings per share is calculated as
follows:
(loss) / profit for the year attributable
to the
equity shareholders of the Company
(Eur'000) (616) 170
Basic and diluted (loss) / profit
per share (Euro cent) (0,27) 0,08
13. Goodwill
Eur'000
Cost & Carrying amount
At 1 July 2014 13,726
At 30 June 2015 13,726
-------------------------- --------
The goodwill can be split up into United Telecom goodwill (EUR
3,1 million) and Artilium goodwill (EUR 10,6 million)
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 % (2014: 18,57%), which is appropriate for the Company.
The discount rate would need to increase to more than 22,2% 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%
(2014:2,5%) 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% (2014:3%-5%) 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 EUR2,7 million (2014: 3,6 million). If the net
present value of forecast future cash flows decreased by 21% the
recoverable amount will be less than the carrying amount.
The Group's cost base is forecasted to increase at the rate of
2% (2014:3%) 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 30,9% 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 1,6 million. If the net
present value of forecast future cash flows decreased by 34% the
recoverable amount will be less than the carrying amount.
14. Other intangible assets
Assets Telecommunications Customer Other Total
under software platform portfolio software
construction
Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
Cost
At 1 July
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
Additions
during the
year 46 - - - 46
Acquisitions
through business
combinations - - 477 - 477
At 30 June
2015 331 5,040 3,206 80 8,657
------------------- -------------- ------------------- ----------- ---------- --------
Amortisation
At 1 July
2013 - 5,040 703 16 5,759
Charge in
period - - 527 25 552
------------------- -------------- ------------------- ----------- ---------- --------
At 30 June
2014 - 5,040 1,230 41 6,311
Charge in
period - - 523 18 541
At 30 June
2015 - 5,040 1,753 69 6,852
------------------- -------------- ------------------- ----------- ---------- --------
Carrying amount
At 30 June
2015 331 - 1,453 21 1,805
------------------- -------------- ------------------- ----------- ---------- --------
At 30 June
2014 285 - 1,499 39 1,823
------------------- -------------- ------------------- ----------- ---------- --------
At 1 July
2013 325 - 2,026 24 2,375
------------------- -------------- ------------------- ----------- ---------- --------
Business Combinations
On 2 June 2015 Artilium PLC acquired 100% of the share capital
of Speak Up BVBA and thereby obtained 100% of the voting power.
Speak Up BVBA is a Belgian voice over internet protocol ("VoIP")
telecom operator.
The following summarizes the details about the acquisition.
Consideration transferred
Settlement
in cash 40
Settlement in equity
instruments 287
Total consideration 327
------------------------- ----
The acquisition of Speak Up BVBA, was settled as follows:
EUR0,04 million was settled in cash while EUR 0,287 million was
settled with the issuance of 3,416,666 new ordinary shares. The
fair value of these new shares was based on the published share
price of 2 June 2015 (at 6,0 pence).
Valuation of customer base
On acquisition of Speak Up BVBA customer lists with a fair value
of EUR0,5 million were identified and subsequently recognised. The
fair value of the customer lists was calculated using a value in
use calculation based on cash flows directly associated with the
customer base as at the date of acquisition. Cash flows from the
customer lists were forecast for a period of five years with a 10%
reduction in the customer base each year, which has been determined
to be consistent with other similar entities. A pre-tax discount
rate of 18 % has
then been applied to determine the fair value of the customer list acquired.
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Assets acquired and liabilities recognized at date of
acquisition
Intangible
assets 477
Property, plant and
equipment 12
------------------------------
Total non-current
assets 489
----------------------------- -----
Trade and other
receivables 34
Cash and cash equivalents 9
-----------------------------
Total current
assets 43
---------------------------- -----
Deferred tax liabilities -162
-----------------------------
Total non-current
liabilities -162
----------------------------- -----
Trade and other
payables -43
Total current liabilities -43
----------------------------- -----
Identifiable net
assets 327
----------------------------- -----
Goodwill arising on acquisition
Consideration
transferred 327
Less fair value identifiable
net assets acquired (327)
Goodwill arising on
acquisition -
------------------------------- ---------
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 2013 73 391 40 504
Additions - 207 - 207
Disposals - (17) (40) (57)
At 30 June 2014 73 581 - 654
Additions 25 254 - 279
Additions through
business combinations - 12 - 12
Disposals - (127) - (127)
At 30 June 2015 98 720 - 818
-------------------------- ------------------------- ---------- ------------- --------
Accumulated depreciation
At 1 July 2013 52 313 40 405
Disposals - (8) (40) (48)
Charge for the year 2 55 - 57
At 30 June 2014 54 360 - 414
Disposals - (30) - (30)
Charge for the year 2 77 - 79
At 30 June 2015 56 407 - 463
-------------------------- ------------------------- ---------- ------------- --------
Carrying amount
At 30 June 2015 42 313 - 355
At 30 June 2014 19 221 - 240
-------------------------- ------------------------- ---------- ------------- --------
At 1 July 2013 21 78 - 99
-------------------------- ------------------------- ---------- ------------- --------
There were no impairment charges for the 2015 and 2014 financial
years.
16. Subsidiaries
Details of the Company's subsidiaries at 30 June 2015 are as
follows:
Place of Proportion Method Principal
incorporation of ownership used to activity
ownership interest account
(or registration) and voting for investment
and operation power
held
Artilium N.V Belgium 100% Acquisition Telecom
accounting
United Telecom Belgium 100% Acquisition Telecom
N.V accounting
Speak Up BVBA Belgium 100% Acquisition Telecom
accounting
Artilium UK Limited UK 100% Acquisition Telecom
(formerly Trisent accounting
Communications
Limited)
Artilium Trustee UK 100% Acquisition Dormant
Company 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 38,000
(2014: EUR 43,000) is based on the cost of purchase excluding
VAT.
18. Trade and other receivables
2015 2014
Eur'000 Eur'000
Amounts receivable for the
sale of goods and services 5,808 3,068
Amounts receivable for the 30 -
sale of goods and services
acquired through business
combinations
Allowance for doubtful debts (1,128) (1,182)
--------------------------------- -------- --------
4,710 1,886
Other receivables 120 156
Other receivables acquired 4 -
through business combinations
Prepayments and accrued
income 429 306
5,263 2,348
-------------------------------- -------- --------
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 65 days (2014: 68
days). No interest is charged on the receivables.
Included within trade and other receivables is an amount of
EUR279,000 (2014: EUR245,000) 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:
2015 2014
Eur'000 Eur'000
Up to three months 279 245
Up to three months acquired - -
by business combination
279 245
----------------------------- -------- --------
The Group holds no collateral against these receivables at the
balance sheet date.
As at 30 June 2015, EUR1,128,000 of trade receivables were
impaired (2014: EUR1,182,000). 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:
2015 2014
Eur'000 Eur'000
Up to three months - -
Up to six months - -
Up to six months acquired - -
by business combination
Older than 6 months 1,128 1,182
1,128 1,182
--------------------------- -------- --------
Movement in the Group's allowance for doubtful debt is as
follows:
2015 2014
Eur'000 Eur'000
Opening balance as at
1 July 1,182 1,224
Usage for allowance for
doubtful debt (63) (110)
Receivables provided
for during the year 9 68
Exchange differences - -
Closing balance as at
30 June 1,128 1,182
-------------------------- -------- --------
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 2013 (387)
Credit to income statement 160
----------------------------- -------- --------
At 30 June 2014 (227)
Credit to income statement 164
Acquired through business
combinations (162)
At 30 June 2015 (225)
----------------------------- -------- --------
2015 2014
Eur'000 Eur'000
Deferred tax liability (333) (497)
----------------------------- -------- --------
Acquired through business
combinations (162) -
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---------------------------- -------- --------
Total deferred tax
liability (495) (497)
----------------------------- -------- --------
Deferred tax asset 270 270
----------------------------- -------- --------
Total deferred tax
asset 270 270
(225) (227)
----------------------------- -------- --------
At the balance sheet date, the Group has UK unused tax losses of
EUR17,918,000 (2014: EUR18,810,675). 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 EUR3,763,000 (2014: EUR3, 950,000).
At the balance sheet date, the Group has Belgium tax losses
carried forward of EUR10,336,017 (2014: EUR8,869,000). No deferred
tax asset (except for the United Telecom tax losses carried forward
at acquisition date) 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 EUR3,513,000 (2014:
EUR3,014,000).
The deferred tax asset on available tax losses of United Telecom
NV of EUR270,000 remained unchanged.
Deferred tax liabilities of EUR495,000 (2013: EUR497,000) relate
to intangible assets (customer portfolio) through a business
combination in 2012 (United Telecom) for a net amount of EUR333,000
at the end of June 2015 and to the deferred tax liability of
EUR162,000 recognized on the customer portfolio from the SpeakUp
acquisition in June 2015.
20. Trade and other payables
2015 2014
Eur'000 Eur'000
Trade payables 1,486 1,404
Trade payables 28 -
acquired through
business combinations
Accruals 168 903
Other payables 678 881
Other payables 15 -
acquired through
business combinations
Deferred income 4,202 902
6,577 4,090
------------------------ -------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 105 days (2014: 112
days).
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
21. Bank Loans
2015 2014
Eur'000 Eur'000
Due within one
year 255 150
Due within more 60 -
than one year
315 150
----------------- -------- --------
The different bank loans are mainly secured on the trade
receivables of the Group. Two unsecured loans with an outstanding
amount of EUR80,000 and EUR150,000 are repayable in 12 months on a
monthly basis. Interest rates are fixed at 2,59 % and 2,37%
respectively and are market conforming. The carrying amount
approximates fair values because of the short maturity of these
loans. The third bank loan with a principal of EUR85,000 is
repayable in 48 months on a monthly basis. Interest rate is fixed
at 2,43%.
22. Provisions
Restructing Settlement
early
termination Total
Warranty
provision
Eur'000 Eur'000 Eur'000 Eur'000
At 1 July 2013 - - (16) (16)
Utilisation of
provision - - (16) (16)
At 30 June 2014 - - - -
----------------- ------------ ------------- ------------- --------
At 30 June 2015 - - - -
----------------- ------------ ------------- ------------- --------
The provision for early termination EUR16,000 (2014: EUR0)
related to the remaining outstanding severance payment regarding
employees of Artilium NV dismissed in the course of year ended 30
June 2013.
23. Share capital
2015 2014
Eur'000 Eur'000
Fully paid ordinary shares:
Authorised:
300,000,002 (2014: 300,000,002)
ordinary shares of 5p each 18,523 18,523
----------------------------------- -------- ---------
Issued and fully paid:
236,115,941 (2014: 218,925,385)
ordinary shares of 5p each 15,415 14,181
----------------------------------- -------- ---------
Deferred ordinary shares:
Authorised:
900,447 (2014: 900,447)
deferred ordinary shares
of GBP4,99 each 6,503 6,503
----------------------------------- -------- ---------
2015 2014
No. No. '000
'000
--------------------------------- -------- ---------
Fully paid ordinary shares:
Balance at beginning of
financial year 218,925 216,474
Issued during the year 17,191 2,451
Issued and fully paid: 236,116 218,925
----------------------------------- -------- ---------
Fully paid ordinary shares carry one vote per share and carry
the rights to dividends.
The Company has issued the following shares during the financial
year:
-- 9,090,904 ordinary shares at 5,5p via a placing by existing
shareholders and directors on 1 September 2014.
-- 4,682,986 ordinary shares in payment to directors and key
personnel, of which 2,493,950 shares at 6,2p, 685,000 shares at
7,0p and 1,504,036 shares at 6p.
-- 3,416,666 ordinary shares to acquire SpeakUp. These shares
were granted to the vendors of SpeakUp as part of the purchase
consideration. The fair value of the shares amounted to EUR 287,000
and was determined by the share price published on 1 July 2015
(6p).
24. Own Shares
Own
shares
Eur'000
Balance at 1 July
2014 (2,336)
Balance at 30 June
2015 (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.
25. Notes to the cash flow statement
2015 2014
Eur'000 Eur'000
(Loss) / profit from continuing
operations before tax (780) 18
Adjustments for:
Depreciation of property,
plant and equipment 79 57
Amortisation of intangible
assets 541 552
Impairment on trade receivables (54) (42)
Decrease in provisions - (16)
Unrealized exchange differences (230) (226)
Operating cash flows before
movements in working capital (444) 343
------------------------------------- -------- -------------------
(Increase)/decrease in receivables (2,827) 640
(Increase)/decrease in inventory 5 (16)
Increase/(decrease) in payables 2,643 (2,632)
------------------------------------- -------- -------------------
Cash used by operations (179) (1,665)
------------------------------------- -------- -------------------
Income taxes paid - -
------------------------------------ -------- -------------------
Net cash outflow from operating
activities (623) (1,665)
------------------------------------- -------- -------------------
26. Contingent liabilities
At 30 June 2015 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.
27. Operating lease arrangements
2015 2014
Eur'000 Eur'000
Minimum lease payments
under operating leases
recognised as an expense
for the year
Land & buildings 212 152
Company cars 321 393
533 545
--------------------------- -------- --------
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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 2015 2014
Eur'000 Eur'000
Within one year 168 104
In the second to fifth
years inclusive 199 196
367 301
------------------------ -------- --------
Company cars 2015 2014
Eur'000 Eur'000
Within one year 321 393
In the second to fifth
years inclusive 642 786
963 1,152
------------------------ -------- --------
Operating lease payments represent rentals payable by the Group
for certain of its office properties and cars. Leases are
negotiated for an average term of 3 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.
28. 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 EUR95,000 (2014: EUR 83,000)
represents contributions payable to these schemes by the Group at
rates specified in the rules of the plans. As at 30 June 2015, all
contributions due in respect of the current reporting period had
been paid over to the scheme.
29. Events after the balance sheet date
On 1 July 2015 Artilium plc acquired through its subsidiary
United Telecom NV the entire issued share capital of Talking Sense
BVBA, a Belgian voice over internet protocol ("VoIP") telecom
operator.
The maximum total consideration for the Acquisition is
EUR750,000, comprising an initial consideration of EUR80,000, which
was being satisfied through the issue of 939,243 new ordinary
shares. The additional deferred consideration ("Deferred
Consideration"), split over two years, of up to EUR670,000 is based
on certain specific financial performance targets being achieved by
Talking Sense BVBA in 2016 and 2017 respectively as well as the
continued employment of the Talking Sense BVBA management team and
senior engineering team up until the end of 2017. The Deferred
Consideration will be satisfied through the further issue of new
ordinary shares by the Company.
On 6 July 2015 Artilium plc acquired all the assets of *bliep
(www.bliep.nl), through its subsidiary United Telecom NV. Total
consideration for the assets was EUR190,000, which was being
satisfied through a cash payment of EUR140,000, and the balance of
EUR50,000 was being satisfied by the issue of 585,000 new ordinary
shares to the vendors, at a price of 6.1 pence per share.
Furthermore The Company has issued a convertible loan note to an
existing shareholder for a cash amount of EUR200,000. The
convertible loan note is repayable in full in January 2016 at a
rate of eight per cent or convertible into new ordinary shares in
the Company at a price of 6 pence per share.
On 25 September 2015 Artilium plc acquired the entire issued
share capital of Comsys Telecom & Media B.V., ComsysConnect
B.V., Portalis B.V., ComsysConnect GmbH and ComsysConnect AG
(together "Comsys") Artilium paid an initial consideration of
GBP3.41 million for Comsys, satisfied by the immediate issue of
59,332,460 new ordinary shares of 5 pence each at a price 5.75
pence per share (the "Consideration Shares") and up to a maximum of
a further 41,896,673 Ordinary Shares dependent on Comsys achieving
certain revenue and gross margin targets over the next 3 financial
years.
As part of the Acquisition Mr. Gerard Dorenbos will join the
board of Artilium as a non-executive director with immediate
effect. Mr. Dorenbos has been Managing Director and owner of Comsys
Holdings BV since he completed a management buyout of Nefkens
Management Systems BV in 1983.
30. 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.
31. Trading transactions
At 10 August 2015 the Company has issued a convertible loan note
to an existing shareholder for a cash amount of EUR200,000. The
convertible loan note is repayable in full in January 2016 at a
rate of eight per cent or convertible into new ordinary shares in
the Company at a price of 6 pence per share.
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 and Financial Statements.
Transactions with Directors and key management
We refer to section Remuneration of directors on page 13 of the
Annual Report and Financial Statements.
32. 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:
2015 2014
Notes Eur'000 Eur'000
Financial assets:
Loans and receivables:
Trade and other receivables 17 4,800 2,042
Trade and other receivables
acquired through business
combinations 34 34 -
Cash and cash equivalents 726 564
Cash and cash equivalents
acquired through business
combinations 9 -
5,569 2,606
----------------------------- ------ -------- --------
Financial liabilities:
Amortised cost:
Trade and other payables 19 2,332 3,188
Trade and other payables
acquired through business
combinations 43 -
Bank loans 21 315 150
2,690 3,338
----------------------------- ------ -------- --------
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,
EUR3,7million is due from KPN Group Belgium, the Group's largest
customer.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 2015, the Group's non-derivative financial
liabilities have contractual maturities (including interest
payments where applicable) as summarised below:
30 June 2015
Current Non-current
within 6 to 12 1 to 5
6 months months years
Eur'000 Eur'000 Eur'000
Bank loans 170 85 60
Trade and other payables 3,215 840 2,522
3,385 925 2,582
-------------------------- ---------- -------- ------------
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