Summary Of Significant Accounting Policies

 

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

 Accounting policies

A.         Basis of preparation

The financial statements have been prepared in accordance with the historical cost convention and International Accounting Standards in conformity with the requirements of the Companies Act 2006. The stated accounting policies have been consistently applied to all periods presented. Microlise Group plc prepared and published its consolidated financial statements for the year ended 30 June 2020 under UK GAAP. During 2021, in connection with an Initial Public Offering (IPO), it published listing documents containing IFRS consolidated financial information for the period from incorporation to 30 June 2020 including a reconciliation of transitional adjustments. The IFRS financial information included in the listing documents included an unreserved statement of compliance with IFRS.

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

·      IAS 7 Statement of cash flows;

·      IFRS 7 Financial instruments disclosures;

·      IAS 24 Key management remuneration.

 

These are the first period of statutory financial statements prepared under FRS 101 for the company. FRS101 has been applied with a transition date effective from the incorporation of the company on 5 September 2018, with no adoption exemptions applied and with no transition adjustments arising.

 

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

 

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

 

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

 

Going concern

The directors have considered working capital forecasts prepared for the period to December 2023.The Group had cash balances of £13.2m at the period end, no borrowings and a £20m undrawn working capital facility. The Group also has a significant recurring income base with inflationary clauses in the main contracts.

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

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

 

B.         Accounting policies

Consolidation

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

 

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

 

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

 

Associates

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

 

Revenue recognition

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

 

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

 

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

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

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

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

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

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

Invoicing for all revenue streams is undertaken in accordance with the terms of the agreement with the customer.  When an invoice is due for payment at the statement of financial position date but the associated performance obligations have not been fulfilled the amounts due are recognised as trade receivables and a contact liability is recognised for the sales value of the performance obligations that have not been provided.  If payment is received in advance of the delivery of the associated performance obligation a contract liability is recognised.

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

 

Contract costs

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

 

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

 

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

 

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

 

Employee benefits

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

 

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

 

Share based payment

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

 

Taxation

The taxation expense or credit comprises current and deferred tax recognised in the profit for the financial period or in other comprehensive income or equity if it arises from amounts recognised in other comprehensive income or directly in equity. Current tax is provided at amounts expected to be paid (or recovered) in respect of the taxable profits for the period using tax rates and laws that have been enacted or substantively enacted by the reporting date. The tax credit also includes the benefit of enhanced SME research and development allowances. Microlise, as a large company from 1 July 2020 for tax R&D purposes, no longer qualifies for these and the large company RDECs are included as grant income within other operating income. 

 

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

 

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

 

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

 

Exceptional items

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

 

Government grants

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

 

Foreign exchange

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

 

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

 

Intangible assets

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

 

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

 

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

 

Asset class                                            Amortisation period

Brands                                                   15 years                      

Customer relationships                           11 to 16 years

Technology assets                                  5 to 10 years

Software                                                 3-5 years

 

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

 

Research and development expenditure

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

 

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

·      There is an intention to complete the development;

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

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

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

 

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

 

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

 

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

 

Research and development expenditure tax credits arise in the UK. Those relevant to a large company for tax purposes are credited to other operating income as a grant with any associated tax in the tax charge and the benefit of the enhanced SME allowances are included in the tax credit for the period.

 

Financial assets

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

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

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

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

 

Financial liabilities

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

 

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

 

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

 

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

 

Right-of-use assets and lease liabilities

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

 

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

 

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

 

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

 

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

 

Property, plant and equipment

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

 

Asset class                                            Depreciation method rate

Freehold property                                    2% straight line

Leasehold improvements                        Over the period of the lease

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

 

Investments

 

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

 

Inventories

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

 

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

 

Share capital and reserves

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

 

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

 

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

 

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

 

New or revised accounting standards and interpretations

IFRS interpretations and amendments issued but not yet applicable by the Group in these financial statements have been reviewed and assessed. All IFRS effective at the reporting date of 31 December 2021 have been applied.  

 

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

 

C.         Critical accounting estimates and assumptions

 

Critical judgements in applying the accounting policies

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

 

Estimates and assumptions

 

Fair values and intangible assets on acquisition of a business

Fair values are applied on the acquisition of a subsidiary which involve a degree of judgement and estimation in particular in the identification and evaluation of intangible assets. The most significant valuation related to brands, technology and customer relationship assets which have been valued using a relief from royalty method for brand and technology and an excess earnings method for customers using cash flow forecasts derived from business plans and assumptions based on experience and factors relevant to the nature of the business activity.

 

The determination of the fair values attributed to acquired assets and liabilities requires estimates to be made about the outcome of future events, including the condition of acquired assets, the ongoing value to the business of intangible assets and the recoverability of other assets.  For liabilities, an assessment is required to identify any unrecorded liabilities or disputed amounts to determine whether liabilities should be recognised at the point of acquisition.

 

More detail on the intangible assets recognised are included in note 10, and business combinations are included in note 24.

 

Useful economic lives of intangible assets

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

 

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

 

Capitalisation of development expenditure

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

 

Impairment of intangible assets including goodwill and investments

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

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

 

Right-of-use assets and lease liabilities

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

 

 

Notes to the financial statements for the 18 month period ended 31 December 2021

 

1.   Revenue and segmental analysis

 

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

 

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

 

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
By type
Revenue recognised at a point in time Supply of hardware and installation	29,336	15,398
	29,336	15,398
Revenue recognised over time Professional services including project management	4,817	2,605
Managed service agreement income	48,911	28,003
Other support and maintenance services	5,104	3,993
	58,832	34,601
	88,168	49,999
By destination:
UK	78,230	44,765
Rest of Europe	2,677	1,405
Rest of the World	7,261	3,829
Total revenue	88,168	49,999

 

Revenue in respect of one customer amounted to £22.6m representing 26% of the revenue for the 18 month period ended 31 December 2021 (year ended 30 June 2020: £13.4m and 27%).

 

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

 

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

 

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

 

  

 

 

 

		Microlise	Trutac	18 month period ended 31 December 2021	Microlise	Trutac	Year ended 30 June 2020 Total
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue		83,109	5,059	88,168	49,276	723	49,999
Depreciation and amortisation		6,197	691	6,888	4,227	100	4,327
Operating (loss)/profit		178	782	960	1,141	65	1,206
Net interest		(824)	(9)	(833)	(423)	-	(423)
Share of associate loss		(132)		(132)	(73)	-	(73)
(Loss)/profit before tax		(778)	773	(5)	645	65	710
Segment assets		111,720	9,622	121,342	116,636	5,662	122,298
Segment liabilities		(48,009)	(1,785)	(49,794)	(64,256)	(1,978)	(66,234)
Additions to non-current assets		4,878	826	5,704	2,114	165	2,279

 

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

 

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

 

	31 December 2021		30 June 2020
	Non-current assets	Net assets	Non-current assets	Net assets
	£'000	£'000	£'000	£'000
United Kingdom	88,729	70,367	91,837	54,593
France	3	34	18	152
Australia	3	12	2	460
India	381	1,135	662	859
	89,116	71,548	92,519	56,064

 

 

 

 

 

 

2.   Adjusted results

The Group's primary results measure, which is considered by the directors of the Group to better represent the underlying and continuing performance of the Group, is adjusted EBITDA as set out below. EBITDA is a commonly used measure in which earnings are stated before net finance income, amortisation and depreciation as a proxy for cash generated from trading. 

 

The group now qualifies for large company R&D tax reliefs with the £920,000 RDEC credit included in other operating income above operating profit for the period ended 30 June 2021 and in line with common practice is included in the Group's calculation of EBITDA. 

 

The measure has been adjusted in the current period by the IPO expenses and in the prior period by acquisition costs expensed under IFRS which are considered to be non-recurring and non-trading in nature.

		18 month period ended 31 December 2021	Year ended 30 June 2020
		£'000	£'000
Operating profit before interest and share of associate		960	1,206
Exceptional IPO costs (2020: acquisition expenses)		3,415	138
Depreciation		3,085	2,176
Amortisation of intangible assets		3,803	2,151
Adjusted EBITDA		11,263	5,671

 

3.   Operating profit

 

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

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
Auditors remuneration:
Audit of the Group and Company financial statements	184	40
Non-audit services*	295	52
Depreciation of property, plant and equipment	1,858	1,363
Depreciation of right-of-use assets	1,227	813
Amortisation of intangible assets	3,803	2,151
Cost of inventory sold	20,056	10,986
Research and development costs	6,767	5,379
Foreign exchange losses	180	22
In other operating income:
Government job retention scheme income	(127)	(537)
Government innovation grants	(96)	-
Research and Development Expenditure Credit	(920)	-

 

*The 2021 Group auditors, BDO LLP, also provided £295,000 of assurance services as the reporting accountants for the AIM listing. The prior auditors for 2020, Cooper Parry Group Limited, provided tax services.

The group previously qualified for SME research and development allowances and as a result the prior year tax credit benefitted from these. The company now claims RDEC credits which are treated as other operating income and reflected in the profit before tax.

 

  

 

 

 

4.   Information regarding directors and employees 

Employees

 

The aggregate remuneration of employees comprised:
 

	Group		Company
	18 month period ended 31 December 2021	Year ended 30 June 2020	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000	£'000	£'000
Wages and salaries	36,630	19,175	636	-
Social security costs	3,312	1,872	29	-
Pensions	1,399	777	9	-
Share based payment	129	-	129	-
Total	41,470	21,824	803	-

 

Average number of employees

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

	Group		Company
	18 month period ended 31 December 2021	Year ended 30 June 2020	18 month period ended 31 December 2021	Year ended 30 June 2020
Sales and distribution	76	71	-	-
Operations and development	438	379	-	-
Production and warehouse	22	24	-	-
Administration	75	77	1	-
Total	611	551	1	-

 

The directors were previously employed and paid by a subsidiary and then with 5 directly employed by the company

from September 2021.

 

Directors' remuneration

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
Directors' remuneration - aggregate emoluments	1,074	610
Group pension contributions in respect of 4 (2020:3) directors Share based payment	24 69	12
	1,167	622
Remuneration of the highest paid director	461	273
Group pension contributions Share based payment	7 31	4
	499	277

 

 

 

 

 

 

Key management compensation

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
Short term employee benefits	2,596	641
Post employment benefits	71	86
Share based payment	129	-
Total key management remuneration	2,796	727

 

Key management is defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any directors (whether executive or otherwise) of the Group which has been more clearly defined in the period for the key management roles (2020: directors only).

 

 

5.   Interest receivable

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
Interest receivable
Bank interest receivable	-	86
Other interest receivable	-	22
Unwinding of discount on financing transactions	72	177
	72	285

 

 

6.   Interest payable

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
Interest payable
Interest on bank and other borrowings	734	622
Lease liability financing charges	72	63
Other interest	99	23
	905	708

 

 

 

 

7.   Taxation on profit

 

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
Current taxation
UK corporation tax (charge)/credit	-	982
Foreign tax	(198)	-
Adjustments in respect of previous periods	(100)	65
	(298)	1,047
Deferred taxation
Origination and reversal of timing differences	(645)	(5)
Charge due to change in tax rate	(1,416)	(323)
Adjustments in respect of previous periods	146	-
	(1,915)	(328)
Tax (charge)/credit on (loss)/profit	(2,213)	719

 

 

Factors affecting the tax charge/(credit) for the period

The tax charge/(credit) on the (loss)/profit for the period differs from applying the standard rate of corporation tax in the UK of 19% (2020: 19%).  The differences are reconciled below:

 

	18 month period ended 31 December 2021	Year ended 30 June 2020
	£'000	£'000
(Loss)/profit before taxation	(5)	710
Corporation tax at standard rate	(1)	135
Factors affecting charge for the period/year:
Disallowable expenses	781	55
Income not taxed	-	(59)
Research and development allowances	36	(1,359)
Reduced rate on surrender of R&D losses for tax credit	-	305
Other timing differences	-	(54)
Overseas tax rates	27	-
Adjustments in respect of previous periods	(46)	(65)
Charge/(credit) due to change in tax rate	1,416	323
Tax charge/(credit) on profit	2,213	(719)

 

In March 2020, the Chancellor of the Exchequer announced that the tax rate from 1 April 2020 remained at 19% rather than the previously enacted reduction to 17%.

In May 2021 a change in the corporation tax rate from 19% to 25% from April 2023 was substantively enacted in the Finance Act 2021 and accordingly has been applied to deferred tax balances at 31 December 2021.  The rate of 25% (2020: 19%) is accordingly applied to applicable UK deferred taxation balances.

 

 

 

 

8.  Earnings per share

	18 month period ended 31 December 2021	Year ended 30 June 2020
(Loss)/profit used in calculating EPS (£'000)	(2,218)	1,429
Weighted average number of shares for basic EPS ('000)	106,266	102,168
Weighted average number of shares for diluted EPS ('000)	106,266	102,168
Basic and diluted earnings per share (pence)	(2.09)	1.40

 

1,107,848 share options were granted on 21 July 2021 which are potentially dilutive to a profit.

The comparative number of shares has been restated to reflect bonus issues and sub-divisions subsequently made, consistent with 2021. Costs relating to the IPO have resulted in a loss for the  current period compared with a profit in the prior period, Adjusting for this factor, the earnings per share would be 1.13 pence for the current period (2020: 1.40 pence for the period)

 

9.  Property, plant and equipment

 

Group	Freehold property	Right-of-use property	Leasehold building Improvements	Right-of-use equipment	Equipment, fixtures and fittings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Net book value
At 1 July 2019	5,449	1,332	377	420	1,586	9,164
Cost
At 1 July 2019	5,525	1,676	384	651	2,429	10,665
Acquisitions (note 24)	-	148	-		17	165
Additions	-	130	-	136	1,235	1,501
Disposals	-	-	(30)	-	-	(30)
Exchange adjustments	-	-	(25)	-	23	(2)
At 30 June 2020	5,525	1,954	329	787	3,704	12,299
Depreciation
At 1 July 2019	76	344	7	231	843	1,501
Charge for the year	102	521	68	292	1,193	2,176
Disposals	-	-	-	-	-	-
Exchange adjustments	-	-	-	-	(14)	(14)
At 30 June 2020	178	865	75	523	2,022	3,663
Net book value
At 30 June 2020	5,347	1,089	254	264	1,682	8,636
Cost
At 1 July 2020	5,525	1,954	329	787	3,704	12,299
Additions	-	1,048	-	458	1,554	3,060
Reclassification	(254)	-			254	-
Transfer to intangibles	-	-	-	-	(27)	(27)
Exchange adjustments	-	-	(23)	-	(25)	(48)
At 31 December 2021	5,271	3,002	306	1,245	5,460	15,284
Depreciation
At 1 July 2020	178	865	75	523	2,022	3,663
Charge for the period	153	834	99	393	1,606	3,085
Transfer to intangibles	-	-	-	-	(14)	(14)
Exchange adjustments	-	-	(5)	-	(18)	(23)
At 31 December 2021	331	1,699	169	916	3,596	6,711
Net book value
At 31 December 2021	4,940	1,303	137	329	1,864	8,573

 

Company	Freehold property
	£'000
Cost
At 1 July 2020	-
Additions	4,965
At 31 December 2021	4,965
Depreciation
At 1 July 2020	-
Charge for the period	25
At 31 December 2021	25
Net book value
At 30 June 2019 and 2020	-
At 31 December 2021	4,940

The property was transferred from a subsidiary company by a dividend in specie.

 

 

10.  Intangible assets

		Goodwill	Customer relationships	Technology	Brands	Software	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Net book value
At 1 July 2019		49,208	15,126	4,775	2,415	-	71,524
Cost
At 1 July 2019		49,208	15,893	5,355	2,546	-	73,002
Additions		-	-	359	-	419	778
Acquisitions (note 24)		3,092	1,887	1,838	165	-	6,982
At 30 June 2020		52,300	17,780	7,552	2,711	419	80,762
Amortisation
At 1 July 2019		-	767	580	131	-	1,478
Charge for the year		-	1,039	939	173	-	2,151
At 30 June 2020		-	1,806	1,519	304	-	3,629
Net book value
At 30 June 2020		52,300	15,974	6,033	2,407	419	77,133
Cost
At 1 July 2020		52,300	17,780	7,552	2,711	419	80,762
Additions		478	-	1,821	-	345	2,644
Transfer from tangible assets		-	-	-	-	27	27
At 31 December 2021		52,778	17,780	9,373	2,711	791	83,433
Amortisation
At 1 July 2020		-	1,806	1,519	304	-	3,629
Charge for the period		-	1,708	1,711	271	113	3,803
Transfer from tangible assets		-	-	-	-	14	14
At 31 December 2021		-	3,514	3,230	575	127	7,446
Net book value
At 31 December 2021		52,778	14,266	6,143	2,136	664	75,987

The £478,000 of additions to the goodwill in respect of Microlise relate to recognition of additional deferred tax liabilities that arise on consolidation only and which had previously been omitted.

 

 

 

 

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

		31 December	30 June
		2021	2020
		£'000	£'000
Microlise		49,686	49,208
Trutac		3,092	3,092
		52,778	52,300

 

The Group tests goodwill annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Microlise carrying value is assessed for impairment purposes by calculating the value in use using the net present value (NPV) of future cash flows arising from the originally acquired businesses discounted at a pre-tax rate of 11.6% (2020: 11.2%) and for the Trutac business at a pre-tax rate of 11.6% (2020: 12.4%).

 

The Microlise goodwill has been tested by reference to a 4 year management approved plan and Trutac by reference to a 4 year plan with a 2% long term growth rate considered applicable to the UK market applied to the terminal period. This includes consideration of the impact of cost inflationary pressures in the December 2021 tests and forecasts at that date and taking account of the corresponding inflationary price terms within the group's contracts with customers. The businesses achieved the FY21 forecasts used in the prior year test and no impairment is indicated although they are sensitive to forecast increases in EBITDA. The Microlise NPV exceeds carrying values by £19.9m (2020: £2.65m) and Trutac NPV exceeds carrying values by £2.5m     (2020: £0.75m).  Reasonable changes in the discount rate or terminal growth rate do not result in a risk of impairment of Microlise or Trutac goodwill.

 

At 31 December 2021, the Microlise plan subject to the impairment test to support the carrying value of goodwill, forecast £9.2m and required £7.1m of recurring EBITDA which compares with £6.8m recorded for 2021 and an expected increase to £7m for FY22 as a result of the growth trends in the Microlise revenues, supported by significant investment in the development of  technology and ongoing operational efficiencies to be made (30 June 2020: forecast £8.34m and required £8.0m of recurring EBITDA in the long term). 

 

The 31 December 2021 Trutac plan assessed for the impairment test to support the carrying value of goodwill forecast £1.27m and a required £0.95m compared to the current EBITDA of some £1.0m. The growth trends in Trutac revenues within the forecast is a result of continued investment into the underlying technologies, the release of new products and features as well as access to an enlarged customer base, a benefit of being part of the Microlise Group (30 June 2020: forecast £1.23m and required £1.1m of recurring EBITDA).

 

  

 

 

 

11.  Investments

 

Group				Associate
				£'000
At 1 July 2019				2,051
Share of loss for the period				(73)
At 30 June 2020				1,978
Share of loss for the period				(132)
At 31 December 2021				1,846

 

Company				Subsidiary undertakings		Associate	Total
				£'000		£'000	£'000
At 1 July 2019				70,583		2,200	72,783
Additions				7,108		-	7,108
Decrease in fair value				-		(600)	(600)
At 30 June 2020				77,691		1,600	79,291
Additions				16,622		-	16,622
Increase in fair value				-		650	650
Return of capital				(16,621)		-	(16,621)
At 31 December 2021				77,692		2,250	79,942

 

 

Subsidiary undertaking	Principal activity	Class of  shares held	% share  holding
Microlise Limited	Telematics services	Ordinary	100%
Microlise Holdings Limited	Intermediate holding company	Ordinary	100%
Microlise Midco Limited	Dormant company	Ordinary	100%
Microlise Engineering Limited	Dormant company	Ordinary	100%
Trutac Limited	Telematics services	Ordinary	100%
Microlise Pty Limited (Australia)	Telematics services	Ordinary	100%
Microlise SAS (France)	Telematics services	Ordinary	100%
Microlise Telematics Private Limited (India)	Telematics services	Ordinary	100%
Trutac Training Limited	Dormant company	Ordinary	100%
Trucontrol Ltd	Dormant company	Ordinary	100%
Trulogix Limited	Dormant company	Ordinary	100%

 

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

 

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

 

Investments in associates consist of a 20% holding in Trakm8 Holdings plc acquired on 22 December 2018 and measured in accordance with the accounting policy. The company is listed on AIM and at 31 December 2021 the market value of the shareholding was £2.25m (30 June 2020: £1.6m).

 

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

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

Summarised financial information (material associates)

 

Trakm8 Holdings plc

Trakm8 Holdings plc has a year end of 31 March, and the summarised financial information disclosed is based on their published annual statements to 31 March 2020 and 2021 together with interim financial statements to 30 September 2021, prepared under IFRS.

 

		30 September 2021	31 March 2020
		£'000	£'000
Assets - non-current		25,705	25,759
Assets - current		9,558	12,425
Liability - non-current		(7,187)	(9,017)
Liability - current		(7,586)	(7,988)
Net assets (100%)		20,490	21,179
Group share of net assets (20%)		4,098	4,236

 

		18 months ended 30 September 2021	Year ended 31 March 2020
		£'000	£'000
Revenues		24,982	19,550
Loss from continuing operations		(964)	(1,093)
Other comprehensive income		1	(7)
Total comprehensive expense		(963)	(1,100)

 

 

12.  Deferred tax assets and liabilities

Group		Intangible assets		Accelerated capital allowances		Freehold property		Tax losses		Other		Total
		£'000		£'000		£'000		£'000		£'000		£'000
At 30 June 2019		(3,784)		37		-		1,483		20		(2,244)
Arising on acquisition		(740)		-		-		500		-		(240)
Credit/(charge) for the year		(115)		(61)		-		(143)		(9)		(328)
At 30 June 2020		(4,639)		(24)		-		1,840		11		(2,812)
Foreign exchange movement		-		-				-		2		2
RDEC credit		-		-		-		-		212		212
Adjustment to goodwill		-		-		(847)		369		-		(478)
Charge for the period		(829)		(55)		(309)		(381)		(341)		(1,915)
At 31 December 2021		(5,468)		(79)		(1,156)		1,828		(116)		(4,991)

 

Deferred tax has been recognised at an average rate of 25% (2020: 19%).

 

The deferred tax is presented as:

		31 December  2021	30 June 2020
		£'000	£'000
Asset - non-current		-	1,307
Liability - non-current		(4,991)	(4,119)
Total		(4,991)	(2,812)

 

13.  Inventories

Group	31 December  2021	30 June 2020
	£'000	£'000
Raw materials and consumables	1,092	1,816
Work in progress	15	32
Finished goods and goods for resale	1,834	1,756
	2,941	3,604

 

An impairment loss of £202,000 in respect of inventory was recorded in the period ended 31 December 2021 (year ended 30 June 2020: £120,000).

 

14.  Trade and other receivables

	Group			Company
	31 December  2021	30 June 2020		31 December  2021		30 June 2020
	£'000	£'000		£'000		£'000
Current
Trade receivables	11,533	11,093		-		-
Provision for impairment of trade receivables	(303)	(154)		-		--
Trade receivables net	11,230	10,939		-		-
Contract cost assets	1,449	717		-
Amounts owed by group undertakings	-	-		-		3,450
Other receivables	206	1,416		28		50
Prepayments	2,258	2,054		225		75
Total	15,143	15,126		253		3,575
Non-current
Trade receivables	344	1,313		-		-
Contract cost assets	2,366	2,152		-		-
Total	2,710		3,465		-		-
Total	17,853		18,591		253		3,575

 

Analysis of expected credit losses is included in note 19.

 

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

	18 month period ended 31 December 2021		Year ended 30 June 2020
Contract cost assets		£'000		£'000
Opening balance		2,869		2,553
Amortised to income statement		(1,116)		(686)
Incurred in the period		2,062		1,002
Closing balance		3,815		2,869

 

15.  Cash and cash equivalents

	Group		Company
	31 December  2021	30 June 2020	31 December  2021	30 June 2020
	£'000	£'000	£'000	£'000
Cash at bank and in hand	13,210	10,061	1,090	5,055

 

 

16.  Borrowings

 

	Group		Company
	31 December  2021	30 June 2020	31 December  2021	30 June 2020
Current	£'000	£'000	£'000	£'000
Bank loans	-	1,895	-	1,895
Other loans	-	550	-	-
	-	2,445	-	1,895
Non-current
Bank loans	-	14,950	-	14,949
Other loans	-	179	-	-
	-	15,129	-	14,949
Total	-	17,574	-	16,844

 

 

Bank loans were secured by fixed and floating charges over the assets of the group and bore interest at rates of 1.75% to 2.7% over LIBOR. The loan liabilities were stated net of unamortised loan issue costs as at 30 June 2020 of £136,000 which has been fully amortised on full repayment of the loans in 2021.

 

Other loans were used to finance specific trading arrangements, had a term of 4 years and bore interest at 15%. They were repaid during the period.

 

17.  Lease liabilities

 

	Group		Company
	31 December  2021	30 June 2020	31 December  2021	30 June 2020
	£'000	£'000	£'000	£'000
Current	717	787	-	-
Non-current	994	582	-	-
Total	1,711	1,369	-	-

 

Leases

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

 

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

 

Other amounts relating to leases were as follows:

		31 December  2021	30 June 2020
		£'000	£'000
Short term lease expense		-	7
Low value lease expense		109	30
Total cash outflow for leases		1,400	903

 

 

 

 

The maturity of lease liabilities at 30 June 2020 were as follows:

 

		Property	Equipment and vehicles	Total
		£'000	£'000	£000
Within 1 year		599	188	787
1-2 years		368	61	429
2-5 years		153	-	153
Total		1,120	249	1,369

 

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

 

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

 

 

 

18.  Trade and other payables

	Group		Company
	31 December  2021	30 June 2020	31 December  2021	30 June 2020
	£'000	£'000	£'000	£'000
Current
Trade payables	4,068	3,024	27	-
Taxation and social security	944	4,799	28	-
Amounts owed to group undertakings	-	-	16,574	13,456
Other payables	1,231	1,986	1,000	1,000
Accruals	4,222	2,883	669	-
Contract liabilities	15,315	12,701	-	-
Total	25,780	25,393	18,298	14,456
Non-current
Contract liabilities	16,150	15,905	-	-
Deferred grant income	196	-	-	-
Other payables	966	1,874	1,000	2,000
Total	17,312	17,779	1,000	2,000
Total	43,092	43,172	19,298	16,456

 

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

 

 

 

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

 

	Less than one year	1-2 years	2-3 years	3-4 years	4-5 years	Total
At 30 June 2020	£'000	£'000	£'000	£'000	£'000	£'000
Contract liabilities	12,701	7,853	4,969	2,542	541	28,606

 

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

		18 month period ended 31 December 2021		Year ended 30 June 2020
		£'000		£'000
Revenue related contract liabilities
Opening balance		(28,606)		(27,163)
Invoiced in the period		(50,423)		(26,527)
Recognised as revenue in the period		47,564		25,084
Closing balance		(31,465)		(28,606)

 

 

19.  Financial Instruments

 

Financial risk management

 

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

 

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

 

Categories of financial instruments

 

The Group has the below categories of financial instruments:

		31 December  2021	30 June 2020
Recognised at amortised cost		£'000	£'000
Cash and bank balances		13,210	10,061
Trade receivables - net		11,574	13,229
Other receivables		206	1,416
Total financial assets		24,990	24,706
Trade payables		4,068	3,024
Other payables		6,419	6,742
Bank loans		-	16,845
Other loans		-	729
Lease liabilities		1,711	1,369
Total financial liabilities		12,198	28,709

 

There were no assets or liabilities at 31 December 2021 or 30 June 2020 that were recognised and measured at fair value in the historical financial information.

 

 

Credit risk

 

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

 

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

 

 

Trade receivables

 

Trade accounts receivable are derived primarily from non-recurring hardware sales and monthly service income and generally have 30-60 day terms. With the exception of one large customer who accounts for 31% (2020: 14%) of the trade receivable invoiced balance, credit risk with respect to accounts receivable is dispersed due to the large number of customers. Collateral is not required for accounts receivable. The credit worthiness of customers with balances in trade receivables not yet due has been assessed as high.

 

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

 

	31 December	30 June
	2021	2020
Past due	£'000	£'000
0-60 days	3,076	1,770
60-120 days	186	654
121+ days	1,014	779
Expected credit loss provision	(303)	(154)
Total	3,973	3,049

 

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

 

As at 30 June 2020 the lifetime expected loss provision for trade receivables is as follows:

 

Past due	Expected loss rate	Gross carrying amount £'000	Loss provision £'000
0-60 days	0%	1,770	-
60-120 days	2%	654	13
121+ days	18%	799	141
Total		3,223	154

 

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

 

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

 

 

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

 

		18 month period ended	Year ended
		31 December	30 June
		2021	2020
		£'000	£'000
At 1 July		154	79
Provision charged		149	93
Receivables written off in the period/year		-	(18)
At period/year end		303	154

 

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

 

Liquidity risk

 

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

 

	Less than one year	1-2 years	2-5 years	More than 5 years	Total
At 31 December 2021	£'000	£'000	£'000	£'000	£'000
Trade and other payables	9,521	1,000	-	-	10,521
Lease liabilities	764	858	473	-	2,095
Total	10,285	1,858	473	-	12,606

 

 

	Less than one year	1-2 years	2-5 years	More than 5 years	Total
At 30 June 2020	£'000	£'000	£'000	£'000	£'000
Trade and other payables	9,766	-	-	-	9,766
Bank loans	2,351	2,561	12,372	922	18,206
Other loans	631	179	-	-	810
Lease liabilities	783	507	176	-	1,466
Total	13,531	3,247	12,548	922	30,248

 

 

Interest rate risk

 

The bank loans were subject to interest at rates of 1.75 to 2.7% over LIBOR. A 0.5% increase in interest rates would therefore have had an impact of an increase in finance costs of approximately £85,000 in the last year.

 

Currency risk

 

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

 

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

 

	USD	Euro	AUD	INR	Total
	£'000	£'000	£'000	£'000	£'000
At 31 December 2021	3,249	460	599	1,152	5,460
At 30 June 2020	963	285	460	859	2,567

 

Capital management

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

 

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

 

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

 

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

 

20.  Pensions

 

Defined contributions pension scheme

The group operates a number of defined contribution pension schemes.  Contributions totalling £194,000 (2020: £140,000) were included in payables and due to the defined contribution scheme at the end of the year.  The total contributions are disclosed in note 3.

 

21.  Share capital

Group and Company
Allotted, called up and fully paid	At 31 December	At 30 June
	2021	2020
	£	£
115,945,956 ordinary shares of £0.001 each	115,946	-
33,902 A ordinary shares of £1 each	-	33,902
5,962 B ordinary shares of £1.55 each	-	9,241
325 C ordinary shares of £1.00 each	-	325
363 D ordinary shares of £1.00 each	-	363
	115,946	43,831

 

Movements in share capital have been as follows:

 

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

 

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

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

 

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

 

 

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

 

 

22.  Share based payments

 

The Company granted options on 22 July 2021 over 1,107,848 shares at an exercise price of £0.001 per share.

 

100,000 of the options were granted to non-executive directors and are subject only to continuing employment or good leaver conditions. The fair value is assessed as £1.35 per option using a Black Scholes model with a volatility of 60% and risk free rates of 0.5%. They are exercisable three years after grant for a period of a year.

 

1,007,848 options were granted to executive employees subject to a 3 year Total Shareholder Return condition from the date of grant of a minimum of 8% annual growth in the share price up to an 18% return for 100% to be exercised. The fair value is assessed as £0.88 per option based on a Monte Carlo pricing model with a volatility of 60% and risk-free rates of 0.5%. The exercise period is within a year of the 3 year return being assessed.

The average vesting period is estimated at 3.5 years and the share based payment charge was £129,000 for the period (2020: £nil).

 

All options remain exercisable at 31 December 2021 with a weighted average vesting period of 3 years.

 

 

23.  Related party transactions

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

 

Loans have been advanced to directors of the company. In the year ended 30 June 2020, £1,440,000 was advanced to directors and repayments were made of £941,000. Interest of £21,580 was charged and the balance of £520,580 owed is included in other debtors at 30 June 2020. This was fully repaid in the following period.

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

 

 

 

24.  Business combinations

 

FY20 acquisition

 

On 9 March 2020, the Group acquired the entire share capital of Trutac Limited, a provider of tachograph logistics and analysis software services for consideration of £6,790,000. The acquisition strengthens the group's presence in the HGV and PSV sectors and complements existing services. The goodwill arising of £3,092,000 is attributable to the workforce and expected future growth in customers and earnings. The transaction has been accounted for under the purchase method of accounting. The principal adjustments relate to £165,000 in respect of the brand and £1,887,000 of customer relationships together with the related deferred taxation liability of £390,000. The deferred tax liability was partly offset by recognition of an asset in respect of losses carried forward of £151,000.  The revenue accounting policy was also aligned with the Group resulting in additional contract liabilities of £823,000 and a right of use asset and equal lease liabilities of £201,000 recorded under IFRS 16.

 

Trutac has contributed £723,000 of revenue and recorded a profit of £113,000 included in the consolidated income statement from 10 March 2020 to 30 June 2020 (excluding acquisition expenses and amortisation of intangible assets arising on consolidation).

 

Had Trutac been consolidated from 1 July 2019 it would have contributed another £2,200,000 of revenue and a further profit before tax of £395,000 to the year (excluding acquisition expenses and amortisation of intangible assets arising on consolidation).

 

			Book value	Fair value adjustments	Fair value
			£'000	£'000	£'000
Intangible assets			1,818	2,072	3,890
Property, plant and equipment			17	148	165
Inventories			56	-	56
Cash and cash equivalents			813	-	813
Receivables			641	-	641
Payables			(657)	(823)	(1,480)
Lease liabilities			-	(148)	(148)
Deferred taxation liability			-	(239)	(239)
Net assets acquired					3,698
Goodwill					3,092
					6,790
Consideration satisfied by:
Cash					3,940
Deferred consideration					3,000
Discounted for 3 year payment period					(150)
					6,790

 

 

The Group incurred acquisition related costs of £138,000 related to stamp duty, legal and professional fees.  These costs have been included in administrative expenses in the group's consolidated statement of comprehensive income.