Ubisense Group Plc
Annual Report 2014

Ubisense Group Plc
St. Andrew’s House, St. Andrew’s Road
Chesterton, Cambridge CB4 1DL
Tel: +44 (0)1223 535 170 Fax: +44 (0)1223 535 167

www.ubisense.net

2014
AnnualReportUbisense Group Plc

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Ubisense Annual ReportEnterprise
LocationIntelligence
Solutions
We enable some of the world’s largest
businesses to improve operational effectiveness,significantly increasing their profitability.

Visit our website for further information on
our company and products at ubisense.net

Ubisense Annual Report

CONTENTS
Overview
2014 highlights

4

Our Chairman’s statement

6

Strategic report
Ubisense in brief – What we do

8Smart Factory

10

myWorld

12

Case studies

14

Chief Executive’s review

18

Financial review

20

Strategic report

24

Governance
Board of Directors

28

Directors’ report

32

Corporate governance report

34

Directors’ responsibilities statement

37

Financial statements
Independent auditor’s report

38

Consolidated income statement

39

Consolidated statement of comprehensive income

40

Consolidated statement of changes in equity

41

Consolidated statement of financial position

42

Consolidated statement of cash flows

44

Notes to the consolidated financial statements

45

Independent auditor’s report77

Company balance sheet

78

Notes to the Company financial statements

79

Additional information
Notice of Annual General Meeting

82

Notes to the notice of Annual General Meeting

84

Advisors

87

Shareholder information

87

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Ubisense Annual ReportCompany
Highlights

Ubisense Annual Report

Financial highlights
Margins +5.7%

Adjusted EBITDA +73%

Core revenues +50%

Cash and cash equivalents (6.7%)

39.9%£20.1m

£1.9m
£3.7m

	T
 he Group’s stated policy is to grow revenues and margins fromits Solutions businesses, resulting in Solutions contribution growing
faster than Services. In 2014 for the first time Solutions revenues
were greater than Services:	Solutions revenues (as above) grew by 49.8% to £20.1 million(2013: £13.4 million), of which £18.5 million, 42%, was organic	Services revenue grew by 10.3% to £15.0 million (2013: £13.6 million),organic revenues fell by £2.7 million, 21%.
	Recurring revenues grew by 27.3% as a result of the increasing focus
on Solutions and now represent 28.1% of total revenues (2013: 26.5%).
Within this total, the Solutions portion increased by almost 70%.
	Gross margin increased to 39.9% (2013: 34.2%).
	Adjusted EBITDA* was £1.9 million (2013: £1.1 million). However,a much higher amortisation charge of £3.7 million following theGeoplan acquisition plus various exceptional charges (£1.3 million)
and non-recurring items (£1.1 million) led to an operating loss of£4.6 million (2013: £1.6m).
	£8.1 million bank facility to provide capacity to meet future working
capital requirements, with £6.9 million drawn.

Strategic highlights	T he Group won its largest ever contract in each of its two core
Solutions markets. (Daimler has installed Ubisense’s Smart Factory
product on its E-Class assembly line, and Duke Energy has
deployed Ubisense’s myWorld to approx. a quarter of its 20,000+
field operations personnel.)	T he Group signed up major new customers in both market segments:
Tesla, Honda, Komatsu and CLAAS in automotive, and Exelon,
NiSource and Liberty Utilities in utilities.
	2
 014 saw a high number of extensions among existing customers
for both Smart Factory and myWorld, including VW, Daimler, BMW,
Toyota, John Deere, Central Hudson and Cablevision.
	G eoplan acquisition performing well and producing new Solutions
revenue streams in Japan and South Korea.
*	Measured as operating profit excluding depreciation, amortisation, share-based payments
charge and non-recurring costs such as reorganisation costs, and acquisition costs.

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Ubisense Annual Report

Ubisense Annual Report

OUR CHAIRMAN’S
STATEMENTAs we predicted last year, Ubisense has travelled
fast towards achieving its goal of becoming a global
enterprise software and solutions business. We haveachieved this by turning our location technology andexperience into a vital component of the processes andpractices of some of the world’s best known businesses.

ANDY HOPPER, CBE
CHAIRMANIn the Financial Review, you willsee, in detail, how we have beenable to increase revenues in our chosencore Solutions business, transitioning fromthe lower margin services element we
had experienced in earlier years.
The response we have received from newand existing customers – as evidenced in
the Chief Executive’s Review – gives us
great confidence that this is a sustainable
trajectory which can create substantial
value for shareholders.
I am immensely proud to have been
associated with Ubisense since its
inception, and in this statement I will focus
on the context of our achievements interms of the business and the technologythat continues to be applied at the very
highest level. Our priority is to ensure that
we are market leader to our customers.

Why customers need us
First it must be understood that, in driving
Enterprise Location Intelligence into twosolution areas, we were anxious to provethat our ideas would have a genuine
application in the commercial world. The
combined entity, formed from my earlier
Cambridge Computer Laboratory projects
and Richard Green’s unit (which had
evolved from Smallworld), spent its earlyyears providing proof of concept at avery high level. Having achieved this,it took us some years to find scalable
commercial opportunities and it was not
until 2008 that BMW helped us identify
a critical commercial application of ourIP, which became known as the Smart
Factory product. That technology is now
installed in 8 of the 15 major vehicle
manufacturers in the world.

Similarly, our myWorld location
intelligence product only came into
being in 2012 by identifying a mission
critical industry challenge after yearsof experience in the US utilities markets.
Following significant new wins in the
US in 2014 we also expect substantial
growth in this market.
Shareholders should be aware that weare serving two of the largest markets
in the world where the cost of “downtime” is measured in hundreds of dollars
per minute – vehicle manufacturing andutility networks. These are not markets
dependent on short-term trends orsudden new technology shocks. They are
mature and require immense attention
to detail at every level to continue tofurther drive down costs, to improve
production or response times, to establish
better quality, to retain customers and torespond to increasing health and safety
regulation. Perhaps most importantly
we help ensure that our customers’
management has better visibility of theircritical processes, so that mistakes are
not repeated, assets are more swiftly
identified or recovered and lessons
learned, so that improvements can bemade in assets, people and process.
So while Ubisense’s products andexpertise is genuinely differentiated andinnovative, the demand for it is driven bythat most fundamental customer need –to do the job better. This gives us great
confidence that we are a business witha very long-term future.
However, I do want to draw attention to ourcontinued preoccupation with providing
the very best application of modern
technological thinking and innovation.

Continued technological advance
will keep us ahead
During 2014 we participated in a number ofvery important and exciting programmes:
Industry 4.0 This German Government
inspired initiative is clearly key to any
number of our automotive customers andthe experience we have gained has kept
us as a prime proponent of the skills andthinking needed to create advancementin this area. Ubisense has been a longstanding partner with the FIR (Institutefor Industrial Management) at the RWTH
Aachen University.
M anufacturing Technology Centre
We are also a partner at the
Manufacturing Technology Centre (MTC)in Coventry, UK alongside major players
such as Siemens and Rolls-Royce, andhave been pleased to be amongst thefirst to demonstrate actual applications
to assist digital enablement in the
manufacturing process.
	The University of Sheffield Advanced
Manufacturing Research Centre (AMRC)
This newly formed UK Government
backed initiative is developing the
AMRC Factory 2050 initiative – the“factory of the future”. Ubisense won atender in November 2014 for the supply
of a factory-wide system for tracking
and monitoring. Once again we are oneof the few partners to have alreadydeveloped installable product into
this new initiative.

All of the aforementioned is part ofthe broader market drive towards anindustrial “internet of things”, and the
new impetus to create products which
gather information and help enable
intelligent production during their lifecycle.
As you would expect, Ubisense, despite
our youth and size, is very much at the
cutting edge of this thinking.

Conclusion
In this Report you will see that we havemade important financial steps to help
us achieve our business goals during
2015 and beyond. The Company has
transformed since Initial Public Offering(IPO) and is continuing to evolve from a
Cambridge tech company into a global
enterprise software business. But our
technological and innovative expertise
remains constant and these, combinedwith the robustness of the giant markets
which we serve, give your Board great
confidence for the future.

Andy Hopper, CBE
Chairman
16 March 2015

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Ubisense Annual Report

Ubisense Annual ReportUBISENSE IN BRIEF

WHAT WE DO
Ubisense is a global leader inEnterprise Location Intelligence
Solutions for Manufacturing,
Communication and Utility companies.

Our Solutions leverage
location data with othertypes of data from acrossthe enterprise to enable
some of the world’s largest
businesses to improve
operational effectiveness,significantly increasing
their profitability.

We unlock previously inaccessible
intelligence and insight, whichempower our customers to realise
dramatic benefits in diverse application
areas including tool control, logistics
tracking, process analytics, quality
management, network operations, field
operations and asset management.
Our Solutions help all levels andlocations of users – from the operator
to senior management to the boardroom– to achieve significant improvements,
exploiting new operational possibilities
by gaining visibility while leveraging theircurrent best practices and procedures.

Ubisense has a proven trackrecord of enabling companies togain significant value from a single
starting point, and seamlessly expand
deployments to extend the value
across a wide range of locations
and operations.
Ubisense Location Intelligence
Solutions are proven to givebusinesses new abilities andoperational intelligence, allowing
them to evolve, refine and eventransform operational effectivenessin a dramatic and measurable way.

Once customers start to unleash location
intelligence, the possibilities are limitless.

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Ubisense Annual Report

SMART FACTORY
OVERCOMING
MANUFACTURING
BUSINESS CHALLENGES
The global automotive manufacturing industry
is growing rapidly, and it is evolving. It is estimatedthat by 2019 manufacturers will be producing
a staggering 100 million light vehicles per year.
But selective pressures are forcing companies
to adapt their processes, or risk losing out.

T
AR CE
I

By leveraging this knowledge, Smart Factory empowers
automation and drives widespread improvements to users’
manufacturing processes.

What manufacturers get	Measurable cost reduction, with lean, optimised
procedures throughout the assembly process	Guaranteed productivity gains, as errors and wasted
time are reduced or eliminated	Reduced cost of quality, by maximising right-first-timeand reducing the cost of rework	The ability to manage product customisation,
through error-proofing and guiding increasingly
variable manual processes.

O P E R AT I O N S
CENTERS
DE M
V

Smart Factory gathers location data, and data fromexisting plant systems and devices. The system combines
this information, correlating the real-time process interactions
with operational details, to deliver a virtual interpretationof exactly what’s going on in the factory.

V
ST I RTAINTELLIGENCE
ENGINEE
O R
RS

Just meeting the most essential needs
for product development increases
overheads by around 4% each year,
yet vehicle companies are unable tooffset this expense onto customers.
With Smart Factory manufacturers candrive measurable cost reduction andlean, optimised procedures throughout
their assembly process.

The percentage of each vehicle’s salevalue that comes from its component
parts is on the rise, and this is drivinga fundamental shift in the market
environment. Innovation that occurs
on a supplier level is immediately andsimultaneously available to all OEMs.
No one can afford to fall behind, but theincreased up-take of new parts meansthat burdensome assembly line re-fits
are required more and more frequently.
Smart Factory gives manufacturers an
unprecedented ability to refine andimprove their processes, by deliveringreal-time knowledge and data-driven
insights into their operations.

The Smart Factory modelIS
U B RT

Cost and waste reduction

How it works

PROCESSOV E M E N T
IMPRThere is now an unfathomable levelof complexity and product variation
confronting vehicle manufacturers,
and it is increasing. This presents anenormous array of challenges: controlling
worker mistakes; ensuring that assets
and tools are in the right place at theright time; interpreting vast quantities
of enterprise information… the list goeson. Smart Factory provides the adaptive
control and automation required to copewith multiple, complex process variations
on the same assembly line.

Coping with accelerated innovation

E X P LO R E RManaging complexity andproduct variation

L
UA N
O
TI

Ubisense Smart Factory
is a production-provensolution designed specificallyto help manufacturers
better exploit their vehicle
assembly processes, andmeet the demands of theirvolatile marketplace.

E
LS NSE

ENTERPRISE
SYST E M S

HOT N SSE

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MYWORLDOVERCOMING
NETWORKS BUSINESSCHALLENGES
Organisations that excel in operations and maintenanceempower their people with the knowledge resources
they need to do their jobs. They strive to make datainterpretation simple and sharing fast – from the field,
to the office, and back again. When that happens,
the right decisions are made faster, costs reduceand customer experience improves. Ubisense
myWorld is a means to achieve exactly that.

Ubisense myWorld integrates
data from multiple sources
and uses a Google Maps styleinterface to deliver actionable
information to field and officeusers. myWorld enables
network organisations tomeet the demands of internaland external stakeholders
without burdening their
IT infrastructure.

Unlocking critical information
Utility and Telecoms companies store
their critical location and enterprisedata inside one or more disconnectedbusiness systems, which are typically only
accessible by a small group of trained
personnel. This means that staff in key
operational roles have very limited accessto the knowledge they need to makethe best decisions day to day. myWorld
enables every person in the enterpriseto leverage the power of maps, spatial
data and other task-relevant information,
so that their jobs can be completed with
optimal efficiency.

Transitioning to the future
Networks enterprises are not technology
enabled. Their operations are basedaround paper processes, which aredisconnected, laborious and error prone.
However, the steps required to level-up

network enterprises are perceived to
be too costly, disruptive and risk laden
for them to progress. myWorld delivers
flexible technology and connectivity
without burdening a company’s IT
infrastructure. Its innovative browserbased approach greatly simplifies
myWorld deployment and administration,
removing barriers to technology adoption.

Coping with external pressures
It is estimated that within the next five
years electric utilities will lose up to
30% of their revenue due to changes
in the industry, and there are similar
environmental pressures affecting the
Telecom and Gas sectors. The only way tostay profitable and thrive in this arena is to
reduce costs and wasted time. myWorld isspecifically developed to help companies
to correlate issues, identify performancetrends, and prioritise activities, so that they
can drive enterprise-wide efficiencies.

How it works

What utilities get

Ubisense myWorld is a web andmobile platform that integrates datafrom multiple sources – companies’
existing GIS products, other enterprisesystems and external information –into one, single view. It supports anyone
in an organisation with access to a mapbased overview of detailed network
data, whether they’re online or offline.

	Make better use of data, and leverageexternal information
	Share actionable knowledge between
office and field workers
	Optimise inspections, servicing andmaintenance activities
Improve emergency response times
	Uphold compliance and integrity	Boost customer service performanceand increase customer retention.

myWorld: Simple, smart and fast applications that
improve operations and maintenance efficiency
for Utilities and Telecoms enterprises.

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Ubisense Annual Report

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HOW WE HELPEDBOOSTING
PRODUCTIVITY
AT BMW
BMW, renowned for innovation and ultra-efficiency,
implemented Ubisense Smart Factory in its
Regensburg car manufacturing plant to automate
tool control and eliminate manual barcode
scanning, driving widespread efficiency gains.

UBISENSE
SMART
FACTORY

Challenge
BMW urgently needed to gain
better visibility of its operations andeliminate inefficiencies.
Every day, more than 1,000 cars are
manufactured at BMW Regensburg withmultiple models produced on the sameassembly line, each to an exact customer
specification. Achieving this level ofproductivity and customisation involves
many thousands of complex processes.
With so many interactions happening
simultaneously, errors, delays and waste
were proving impossible to monitor
and avoid.

Solution

In terms of value creation, the project
has been a complete success.
Project Manager, BMW Regensburg

Using its best-in-class real-time location
system (RTLS) to track thousands ofinteractions along the BMW assemblyline and instantly adapt tool settings,
Ubisense Smart Factory enabled BMW
factory workers to seamlessly complete
their processes and meet their objectives,
without delaying operations.

Ubisense Smart Factory completely
eliminated manual barcode scanningat the plant, saving time and helping
factory workers avoid costly mistakes.
The Smart Factory automatic
identification capabilities allowed
the BMW team to easily rebalance
operations to maintain optimal
production flow.

Results
By implementing Ubisense Smart
Factory at the Regensburg plant,
BMW was able to completely
eliminate costs related to manual
tool control, minimise line stoppages
and significantly reduce cycle time.
It has saved hundreds of unproductive
hours a day, cut the risk of errors andminimised the amount of rework.
Empowered with unprecedented levelsof visibility into their manufacturing
processes, BMW can now make better
informed, data-driven decisions tocontinually streamline and enhance
operations at the plant.

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HOW WE HELPEDENABLING RAPIDRECOVERY FROMHURRICANE SANDY
Ubisense myWorld gave a major cable operator
unprecedented operational visibility to pinpointwidespread damage to infrastructure, prioritise
response efforts and restore service to customers.

UBISENSE
MYWORLD

Challenge

Solution

The devastation caused by Hurricane
Sandy left nearly 8 million businesses
and households without power in
15 states and the District of Columbia.
The largest Atlantic hurricane on record,
it caused widespread flooding andpower failures that wiped out cable
service in the Northeast.

Ubisense had just begun working
with this major cable provider todeploy Ubisense myWorld, and wasable to accelerate the deployment
to just 36 hours so that the cable
operator could respond to Hurricane
Sandy’s destruction.

Sixty-five percent of one cable operator’scustomer base was without service,and the company quickly realised itneeded to gain much greater operational
visibility to fully comprehend the extent
of the storm damage. Without this criticalinsight the cable company would beunable to effectively manage its disaster
response teams.

Ubisense myWorld delivered an
unprecedented degree of operationalawareness, and allowed the cable
operator to quickly assess the
450 miles of cable that had beendamaged across 16,000 locations,and prioritise and streamline
restoration efforts accordingly.

Results
The cable operator was the firstof those impacted by the storm
to restore service to its customers.
It was able to respond more quickly
and effectively than the other network
operators impacted by the storm’s
devastation, and provided accurate
and timely information to utility
partners – helping them with theircritical restoration efforts.

The largest Atlantic hurricane on record,
and the second most costly hurricane in
United States history, caused widespreadflooding and power failures that wipedout cable service in the Northeast.

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19

CHIEF EXECUTIVE’S
REVIEW

In last year’s Annual Report, I wrote about the
exceptional progress we had made in developing
our strategic and product focus in order to enable
us to improve how we approach our key markets –vehicle manufacturing, utilities and communications.

RICHARD GREEN
CHIEF EXECUTIVEOFFICERThis year I am very pleased to reportthat the strategy is bearing fruit.
We have reached a watershed in terms ofcontracts and customers won in our target
industries around the globe and I believe
our company stands on the threshold ofsignificant gains in Solutions revenue,
margin growth and profitability, which willtake us to a new level as a business.

Highlights
In both of our key revenue streams –vehicle manufacturing (via Smart Factory
RTLS products) and networks asset
management (via myWorld geospatial
products) we have this year won our twolargest and most important customer
contracts in our company’s history.
	Existing customer Daimler has deployed
Smart Factory to support the production
process of its flagship next-generation
Mercedes E-Class model in the assemblyline at Sindelfingen, Stuttgart. Thissignificant new contract comes after
our proven installation on the S-Class
assembly line at the same factory andshows precisely how our Solutions arecapable of adaption and adoption byexisting customers to enhance theirprocesses for multi-line and multi-site use.
	In other words we are capable ofgenerating new sales from existingcustomers at an ever increasing rate,
as our skills and understanding of
their business and technical needs
grow apace.
	In network asset management, we won
a major new contract with Duke Energy
in North Carolina, one of the largest
power utility companies in North America,
to install our myWorld product acrossalmost a quarter of their field operations
personnel. The contract followed themerger of Duke with Progress Energy
and we competed against the existing
incumbent providers. Ubisense provedthat it has critical differentiators overvastly larger installed competitors.
	And while we cannot rest on our laurels,
we would hope to increase our installedbase with companies like Duke Energy,
increasing the scale of what we cando for them from 25% of their field
operations workforce to 50% of theircustomer-facing and field operations
and beyond in the foreseeable future.

New customers
We were also pleased to be selectedby a number of new household-namecustomers in our target markets.

where we had proven our expertise as apartner. This enabled us to be considered,compete and ultimately win our first
myWorld installation at Duke Energy against
much larger, incumbent competitors.

add value with each expanded installation
on a line, including the Mini in Oxford, as
well as plants in China.

Existing customers

It seems to us that this is the ultimate
expression of confidence in our people,
processes and products. Customers
choose to use us more and more,in multiple locations and acrossever-increasing application areas.

2014 was also notable for solid growthof expanded installations amongst ourexisting customer base in both vehicle
manufacturing and networks asset
management and it is fitting that we review
progress in this regard. I have alreadystated that we are showing strong businessgains from new-name customers in bothbusiness areas. But an equally exciting
opportunity is to build impact and influence
within our existing customer group.

Following on from the excellent work
we are doing for John Deere, we see
further opportunities to develop in
vehicle manufacturing areas such as
agricultural and construction, diversifying
from automotive to a wider range ofapplications and business segments.

As customers see how Ubisense isenabling them to handle increasing
complexity, while driving volume,
quality and reduced cost in one partof the manufacturing process or in one
location, they work with us to expandthat success into other processes, lines
and plants. For example where we often
begin in automotive manufacturing on
the final assembly line, it is now standardpractice for us to work on new Smart
Factory installations in other areas suchas repair and rework, to help customers
manage cost and quality, while increasing
throughput. Our expertise grows and thus
so does the scope of what we are able toachieve within our existing customer base.

In network asset management we added
Exelon, NiSource, Duke Energy and Liberty
Utilities as new myWorld customers.
I should remind shareholders that it
was Duke Energy that was a significant
managed services customer for Ubisense

BMW, a cornerstone customer for
Ubisense, has nine major assembly plants
around the world and when we began our
Smart Factory installations with them in
2008, we were in one. Today we are in six
and are continuously proving that we can

In vehicle manufacturing we signed
breakthrough Smart Factory deals with
automotive manufacturers Honda, andwith Tesla, the electric car manufacturer.
We also were delighted to sign our firstdeal with Komatsu and CLAAS, the heavy
vehicle specialists.

And we are experiencing strong traction at
VW, now featuring in 4 of their 100+ plants.

Whilst this trend is most pronounced
in vehicle manufacturing, I see the
networks business replicating thissuccess. As mentioned, our network asset
management product is some five years
younger than the vehicle manufacturing
product in terms of customer adoption.
We believe each is capable of a great
deal more.

Other progress and delivery
I am very pleased with the Geoplan
acquisition we made last year in Asia
Pacific. Having integrated the businesssuccessfully we are now seeing realprospects for geographical expansion
across Asia Pacific. We have begun our
first installations at Hyundai and also at
Toyota and we are very positive aboutfurther developments in the region,
including further work for NYK in theirautomotive logistics business.
We have also referenced over the years
our continued work with partners suchas Atlas Copco and Daifuku, who havehelped us integrate into their own networkof products and solutions in very large
businesses and geographical segments.
I’m encouraged by progress here too.

Our new Smart Factory DIMENSION4
technology will make it far easier for ourpartners to deploy and adopt our products
and incorporate them more swiftly andeconomically into their own solutions. I see
this as a strong engine for growth in themedium term, quite outside the impact itwill have amongst existing customers.

PeopleAn enterprise software business of course
relies on its people and I must congratulate
the team in adapting to our new strategy
and making it work. I would also like tothank some of our newer senior teamadditions, in particular our CFO RobertParker and our new Marketing andCommercial Team, led by Charles Watson.
These new arrivals are complementing ourestablished technology skills and together
we are moving the business onto a more
accomplished corporate footing, which
will clearly benefit shareholder returns.

Outlook
We believe Ubisense’s prospects
have never looked better for winning
new customers and yet we also believethat there is quite literally a world ofopportunity for us to provide solutionsand value for our current customers.
We are, as ever, very grateful for the
support of our shareholders andlook forward to a rewarding future.

Richard Green
Chief Executive Officer
16 March 2015

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21

FINANCIAL REVIEW

2014 saw a number of major new contract awards andextensions to existing contracts resulting in new orders
for the period of £31.6 million.

ROBERT PARKER
CHIEF FINANCIAL
OFFICER

Revenue
The Group is organised as a single
Enterprise Location Intelligence business
unit, combining Vehicle Manufacturing
and Network Asset Management
application areas. The Group’s strategy
is outlined further in the Strategic Report.
While we market, organise and report asingle offering, Ubisense has two distinct
revenue streams which are serviced by
a common cost base:	Solutions revenues are those driven
from the Ubisense product suites (Smart
Factory and myWorld), technical expertiseand exclusive reseller arrangements.
A solution sale will include a mixtureof application software (licences inperpetuity and subscription based),
installation and commissioning services,
hardware (for vehicle manufacturing)and maintenance and support. Margins
in any given period will vary depending
upon the make-up and phase of thegiven set of Solutions being delivered.
The Company sees this revenue stream
as critical to driving the long-term growthand profitability of the business and there
is a strategic shift towards this higher
margin revenue stream.
	Services revenues are those not
involving the Ubisense product suites
as defined above. These revenues are
typically multi-year managed services
contracts, consultancy and training. The
Company generally has good visibility
on future revenue from Services anddrives customer loyalty in addition toproviding a customer base into which
it can sell its Solutions.

The majority of our revenues relate toa small number of large deals, the timingof which is not solely within our control,and each can carry a significant impact on
our results in any single reporting period.
Total revenues grew 29.8% to £35.1 million(2013: £27.0 million); of this £28.7 million
was organic growth. Within total revenues,
the Solutions revenue grew by 49.8%
to £20.1 million (2013: £13.4 million), of
which £18.5 million, 41% was organic.
Services revenue grew by 10.2% to£15.0 million (2013: £13.6 million). Thiswas primarily due to services revenuesof £4.8 million from the Geoplan group,whilst the organic business in Services
fell by £3.4 million.
Recurring revenues grew by 27.3%
to £9.8 million (2013: £7.2 million) or
28.1% of total revenues (2013: 26.5%),of which £4.2 million was maintenanceand support which increased by 69.9%(2013: £1.3 million), and represents 12.0%
of total revenues (2013: 4.7%). This increaseis as a result of the installed base of
products progressively increasing andit serves to stabilise revenue trends
as the business grows.
As a global business with activities
focussed in Europe, North America andAsia Pacific, the reported results are
subject to exchange rate volatility. During
the period, Sterling has strengthened
against the US Dollar, Euro and JapaneseYen; currencies in which the Group
derives a significant proportion of its
revenues. If currency exchange rates had
remained constant in 2014 compared

to 2013, the Board estimates that Group
reported revenues would have been
£2.5 million higher at £37.6 million andadjusted EBITDA £0.1m higher.
To mitigate currency effects, the Group’s
policy is to maintain natural hedges where
possible by matching foreign currency
revenues and expenditure. The Board
regularly reviews the forecast currency
requirements and at this stage, does notconsider external hedging arrangementsfor profit and loss items to be appropriate
for the Group.

Orders
2014 saw a number of major new
contract awards and extensions toexisting contracts resulting in new orders
for the period of £31.6 million (2013:£32.5 million), of which £21.0 million
related to Solutions (2013: £18.3 million).
A number of major Solutions deals closed
in 2014 which included further expansion
into our automotive customers with Smart
Factory systems. In addition, our network
Solutions business is continuing to growwith myWorld and we secured contracts
with some of the largest utilities in the
United States during the year.
The order book as at 31 December 2014
stood at £12.4 million (2013: £17.9 million)– a 31% decrease from 2013. This reflects
the Group’s strategy to focus on the
Solutions business, which provides shorter
lead time between order and revenue
generation than Services, which in 2013
was significantly made up of multi-year
contracts at lower margin.

Of the 2013 backlog, £14.4 million ofrevenue was recognised in 2014 and£3.5 million will be recognised in 2015 andbeyond. Of the 2014 backlog, £10.7 million
will be recognised as revenue in 2015,
with £1.7 million forecast to be recognisedin 2016 and beyond. The Group has
increasing visibility on revenues into
2015 as our penetration within existingcustomers increases.

Gross margin
The gross margin increased from
34.2% in 2013 to 39.9% in 2014. Thiswas primarily as a result of an increase
in Solutions revenue in the revenue
mix, which provides higher margins
than Services revenues.

Operating expenses
Operating expenses increased by£7.7 million (70%) to £18.6 million (2013:£10.9 million). The increase is due to theinclusion of operating expenses from theGeoplan group of £2.7 million following
its acquisition in December 2013 and£5.0 million of the increase was fromthe existing Group, which included anincrease in amortisation charges by£2.0 million to £3.7 million for the year
and non-recurring items of £2.4 million.
Operating expenses includes marketing,product marketing, product development,
administration, depreciation & amortisationand foreign exchange.

Gross expenditure on productdevelopment was £3.9 million (2013:£4.0 million) reflecting constant investment
in our flagship Smart Factory and
myWorld products. Capitalised productdevelopment costs at £3.0 million (2013:£3 million) represented 75% (2013: 76%)of gross development spend. Amortisationof the capitalised development costs
increased to £2.6 million (2013: £1.2 million)
as a result of significant investment inproduct development in recent years.
The Group incurred non-recurring
expenditure of £2.4 million (2013:£0.8 million). £0.6 million related to
strategic Asia Pacific market entry costs
relating to integration of the Geoplan
acquisition made in December 2013.
The Group underwent an internal
re-organisation in the second halfof the year, which incurred £0.5 millionof related costs. Acquired intangible
assets relating to Services revenues
were impaired by £1.3 million during
the year. This impairment is a resultof the Group’s strategy of focussing
on high-margin Solutions revenues.

22 Ubisense Annual Report

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23

FINANCIAL REVIEWCONTINUED

EBITDA and operating profit

Interest and tax

Group Adjusted EBITDA for the period
was £1.9 million (2013: £1.1 million). To
provide a better guide to underlying
business performance adjusted EBITDA
excludes share-based payment charges
and non-recurring items along withdepreciation, amortisation, interestand tax from the measure of profit.

Net interest payable for the period was£0.2 million (2013: £0.1 million) as a resultof drawing down our HSBC bank andMizuho bank loans.

Both the operating loss of £4.6 million(2013: £1.6 million) and loss before taxof £4.8 million (2013: £1.7 million) includes
amortisation charges of £3.7 million(2013: £1.6 million), depreciation chargesof £0.4 million (2013: £0.3 million) andthe non-recurring items noted aboveof £2.4 million (2013: £0.8 million).
Amortisation charges have increased
significantly due to the amortisation of
acquired intangible assets following theGeoplan acquisition in December 2013and higher amortisation on capitalised
development costs reflecting theincreased investment in recent years.

The Group has a net tax credit of£0.7 million (2013: £0.2 million expense) asa result of cash receivable of £0.5 million
under the UK R&D tax credit regime and£0.2 million of non-cash deferred tax
on capitalised development costs andacquired intangible assets. Management’s
best estimate of the effective current tax
rate is nil due to the availability of prioryears’ losses. The Group has substantial
tax losses carried forward but does not
currently recognise a deferred tax asset
in respect of these losses.

EPS and dividend
Adjusted diluted loss per share
was 3.5 pence (2013: 3.5 pence loss).
Reported basic and diluted loss per
share was 16.7 pence (2013: 8.9 pence).
No dividend has been declared.

Balance sheet, cash and cash flow
The Group has a robust balance
sheet with net assets at 31 December
2014 of £18.8 million (31 December 2013:£19.4 million). Due to the proximity to theyear end of the Geoplan acquisition in
December 2013, the fair values of assets
and liabilities acquired were provisional

at 31 December 2013 in line with IFRS 3.
The post-acquisition review of the net
assets acquired has been conducted in thecurrent period and as a result, the balance
sheet at 31 December 2013 restated.
In April 2014, the business completed
a share placing raising gross proceedsof £4.2 million with the placement of
1,929,589 new ordinary shares at a priceof £2.20 per share from existing and newshareholders. The net proceeds from theplacing are being used by the Group to
support the growing Solutions business.
The Group has a three-year working capital
facility of £5.0 million agreed with HSBC in
2013. £4.0 million of this facility was drawn
as at 31 December 2014 (2013: £3.5 million).
In June 2014, a 130 million Japanese
Yen denominated loan (£0.8 million) was
agreed with Mizuho Bank and fully drawn
down in H1 2014. The facility was increased
to 200 million Japanese Yen in H2 2014
and 170 million Japanese Yen was drawn at
31 December 2014 (2013: £nil). This facility
takes advantage of the low interest rates
available in Japan and acts as a natural
hedge against the Group’s assets in Asia.

Cash and cash equivalents held in the balance sheet
at 31 December 2014 was £3.7 million (31 December 2013:£4.0 million). The movement in the cash position during
the year is summarised below:

With the bank loan outstanding of £6.9 million, net debt
at 31 December 2014 was £3.2 million (31 December 2013:£0.5 million net funds). The movement in the net debt
position is summarised below:
2014
£m

2014
£m

Loss before tax(4.8)

Net funds at 1 January 2014

0.5

Depreciation and amortisation charges

5.3

Cash outflow from trading activities(7.7)

Other non-cash expenses

0.3

Share placing to institutional investors

4.0

Operating cash inflow before working
capital movement

Net debt at 31 December 2014

(3.2)

0.8

Working capital outflows(3.5)

Operating cash flows before capital expenditure(2.7)

Capital expenditure on product development andproperty, plant & equipment(4.4)

Deferred and contingent consideration paid inrespect of Geoplan group acquisition(0.5)

Interest and tax paid

(0.1)

Cash outflow from trading activities(7.7)

Capital structure
The issued share capital at 31 December 2014 was 25,062,842(December 2013: 23,079,146) ordinary shares of £0.02 each.
The increase of 1,983,696 shares relates to 1,929,589 sharesissued in the April 2014 placing and 54,107 share option
exercises by employees. 447,500 share options were granted
to employees on 23 May 2014 at an exercise price of £2.25,
being the share price at the time. 192,500 options vest after
three years, depending on continued service during the vesting
period. 255,000 options also have certain performance criteria
attached in order to vest. The total number of unexercised
share options at 31 December 2014 was 2,343,271.

In October 2014, the Group agreed an
additional £2.0 million four-year term loan
with HSBC to provide funds for futureacquisitions. This facility was drawn infull at the year end (2013: £nil).
Robert Parker
Chief Financial Officer
16 March 2015

24 Ubisense Annual Report

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25

STRATEGIC REPORT

Ubisense is a global leader in Enterprise Location
Intelligence Solutions for Manufacturing, Communicationand Utility companies. We enable some of the world’s
largest businesses to improve operational effectiveness,significantly increasing their profitability.

ROBERT PARKER
CHIEF FINANCIAL
OFFICERWe help unlock previously
inaccessible intelligence and insightto empower our customers to realise
dramatic benefits in diverse application
areas including vehicle manufacturing,
network operations, field operations andasset management. Ubisense Enterprise
Location Intelligence Solutions are usedby a number of blue chip customers
across the world, such as Toyota, VW, GM,
Hyundai, Honda, PSA, BMW and Daimler.
Ubisense is headquartered in Cambridge,
UK, with offices in the USA, Canada,
Germany, France, Japan, South Korea
and Singapore.
The enterprise acceptance of our
Solutions has been accelerated by several
factors such as the consumerisation ofmaps led by Google, the proliferationof smart devices, the growth in cloudtechnologies and the modern deviceto-device networking referred to as“internet of things”. Ubisense’s software
products and services capability benefit
from these trends, enabling enterprises
across the high-value Manufacturing,
Utility and Telecommunications sectors todeliver significant improvements in quality,
efficiency and cost savings. This also
opens up new, adjacent markets
for Ubisense.
The Group acquired the Geoplan
group of companies in December 2013
to accelerate market penetration into
the Asia Pacific region. With the businessreorganisation conducted in 2014, thestrategy of the Group is to:	Continue to transition to a
products-led business, supported
by Services capability
	Drive a change in the revenue mix
to deliver more, high-margin softwarewith associated recurring revenues	Develop next-generation applications
that deliver ROI to customers
	Focus direct business on Vehicle
Manufacturing and Network AssetManagement enterprises including
Communications and Utility
	Drive step and repeat businessin Automotive manufacturing across
new site locations
	Focus on our key target markets ofNorth America, Europe and Asia Pacific	Streamline and align operations,providing a rewarding work environment
to attract and retain talented staff.

Business review and future
developments
Business development
An increase in our gross margin by 5.7
percentage points from 34.2% to 39.9%,
adds validity to our strategy to focus
on our Enterprise Location Intelligence
Solutions, and the investment we havemade in our next-generation platforms
and sales and marketing infrastructure.
The Group‘s products are becoming
generally accepted across its chosenindustries and Ubisense is increasingly
able to penetrate deeper into its customer
base by installing additional applications
on each site, and is confident this trend

will continue. With the acquisition of theGeoplan group in Asia, we believe thatour geographical footprint is complete
at present.
The Group continues to invest in
product development with activities
focusing on two product lines: Smart
Factory in the vehicle manufacturingindustry and myWorld in the utilities
and communications industries. Futureacquisition strategy will extend to theGroup’s product portfolio, allowing
opportunities to upsell into our existingcustomer base.
Partnerships
While our direct sales channel is gaining
strong customer traction, our solution
partners are also contributing to thestrong revenues in the year. The Group
continues to develop relationships withpartners such as Atlas Copco and Daifuku
and is optimistic about the opportunities
to expand market presence these
relationships provide. The Group is also
setting the foundation for developing areseller channel to extend geographic
footprint in 2016 and beyond.

Key performance indicators

	Revenue mix
The revenue mix of Solutions andServices is reported as the gross marginon each stream is different. Solutions
revenues, which attract a higher margin
than Services revenues, accounted for
57% of total revenues (2013: 50%).

Having regularly reviewed the KPIs
in respect of changes within periods
and changes between reporting periods
the Directors believe that the Grouphas made steady progress against
the KPIs, especially revenue mix andadjusted EBITDA.

	Cash and working capital
The Group closely monitors the
cash balances and working capital
movements. The closing cash balance
for the Group was £3.7 million (2013:£4.0 million) and net debt was£3.2 million (2013: £0.5 million net
funds). The movement in the cash
position is explained in detail in the
Financial Review starting on page 20.

Financial instruments	Order backlog
Order backlog provides the Group
with visibility over future revenues.
At 31 December 2014, the order backlog
was £12.4 million (2013: £17.9 million). Thisdecrease reflects the Group’s strategy
to focus on Solutions revenues, which
attract shorter lead times between orderand revenue generation than Services.
Non-financial key performance indicators
for the Group include:

The primary financial key performanceindicators for the Group, which arereported monthly, are as follows:	Quantity and quality of leadgeneration, pipeline and conversions
to deals in the sales pipeline	Adjusted EBITDA
Adjusted EBITDA excludes amortisation,
depreciation, non-recurring items andshare-based payments and is reported
as it reflects the performance of theGroup. Adjusted EBITDA for the year
was £1.9 million (2013: £1.1 million).

	Project duration, including installation
service days	Our reaction and solution times
to customer requests.

Information on both the Group’s financial
risk management objectives and theGroup’s policies on exposure to relevantrisks in respect of financial instruments
are set out in note 26 of the consolidated
financial statements.

Principal risks and uncertainties
The Group faces competitive andstrategic risks that are inherent in a rapidly
growing emerging market. The Boardand the Executive Management Teamreview strategy and risks to the businessregularly. Where possible, processes
are in place to monitor and mitigate
the identified risks.
The key business risks affecting theGroup are set out below:
Technological risks
The Group operates in an industry
where competitive advantage is heavily
dependent on technology. It is possiblethat technological development may
reduce the importance of the Group’sfunction in the market or render thepatents on which it relies redundant.
For instance, the Group’s Enterprise
Location systems rely on ultra-wideband
radio signals to operate. There is no
guarantee that technological advances
will not render systems based on ultrawideband radio obsolete. The Group’s

26 Ubisense Annual Report

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27

STRATEGIC REPORTCONTINUED

existing reference designs may become
obsolete or may be superseded by newtechnologies or changes in customer
requirements. The technology used in theGroup’s products is still evolving, is highly
complex and may change rapidly.
In order to mitigate this risk, Ubisense
invests in a range of research anddevelopment activities to maintain its
competitive advantage and participates inindustry and research forums in order tokeep abreast of technological advances.
Growth management and acquisitions
The Directors believe that further
expansion, either organic or via acquisition,
will be required in the future to capitaliseon the anticipated increase in demand for
the Group’s Solutions. The Group’s future
success will depend, in part, on its ability
to manage this anticipated expansion.
Such expansion is expected to placedemands on management, support
functions, accounting, sales and marketingand other resources. If the Group is unable
to manage its expansion effectively, its
business and financial results could suffer.
In order to mitigate this risk, the Group
undertakes extensive due diligence on
acquisition targets and uses dedicatedproject teams to integrate acquisitions
into the Group.
It is the Board’s strategy to investigate
and explore complementary acquisition
targets from time to time. In this regard,
the Board would seek to acquirebusinesses which enable the Company
to expand its product portfolio and its
geographic footprint in order to increase
its offering to its customers and expand
demand for the Group’s Solutions.

Staff recruitment and retention
The contribution made by Ubisense’s highly
skilled and experienced staff is vital to theGroup’s success. As the Group grows, it isimportant to recruit and retain staff.
The Group has in place appropriate
incentive structures to attract and retain
the calibre of employees necessary toensure the efficient development andmanagement of the Group.
Reliance on third parties, including
manufacturers
The Group relies on third party equipment
manufacturers in the completion of its
products and, therefore, does not always
have complete control over the equipment
and materials it requires to comply with its
obligations under customer contracts.
To the extent that the Group cannot
acquire equipment or materials according
to its plans and budgets, its ability tocomplete its work for its customers
within the timetable laid down by thecontract or at a profit may be impaired.
If a manufacturer is unable to deliver the
products for any reason, the Group may
be required to purchase such equipment
or materials from another source at ahigher price. The resulting additionalcosts may be substantial and the Groupmay be in breach of its contracts withcustomers, which may result in a financial
loss on a particular contract or a loss ofbusiness. In addition, any resulting failure
to fulfil contracts with customers and otherbusiness partners may have an adverse
effect on the Group’s future profitability
and reputation. One key supplier supplies
more than 75% of the hardware required
annually by the Group.

In order to mitigate this risk, theGroup closely manages and reviews
its relationship with key suppliers ona regular basis.

manufacturing companies, the riskof non-payment tends to be less ofa traditional credit nature and more
related to customer satisfaction.

Dependence on key customers
The Group is dependent on a number ofkey contracts and customer relationships
for its current and future growth anddevelopment. Ubisense has strong
customer relationships with considerable
repeat business from a number of large
international organisations. In the financial
year to 31 December 2014 the Group’s 10
largest customers accounted for 47% of
the Group’s revenue (2013: 60%), of which
one customer accounted for in excess
of 10% (2013: 10%). The loss of a major
customer could result in a decrease inGroup revenues, margins and profitability.

Credit exposure by customer is reviewed
regularly by the Executive Management
Team and the main Board with provision
made for doubtful receivables when
there are circumstances which, basedon experience, are evidence ofa likely reduction in the recoverabilityof the receivable.

In order to mitigate this risk, the Group has
extensive sales and account management
processes and procedures and iscontinuing to diversify its customer base.
Contracts
Some of the Group’s commercial
contracts include terms where revenues
and/or invoicing are related to customer
acceptance. Other contracts contain terms
whereby the timing of cash collections
is contingent on the customer re-selling
our products to end users.
The Group’s exposure under suchcontracts is reviewed regularly by the
Executive Management Team and themain Board.
Credit
The main credit risk is attributable to tradereceivables owed by customers. As the
majority of the Group’s customers are verylarge, blue chip utilities, telecoms andBank covenants
The Group has bank loan facilities of£7.0 million with HSBC Bank plc to provide
future working capital capacity and for
acquisitions. The loans are repayable in2016 (£5.0 million) and 2017 (£2.0 million)
and the outstanding balance at
31 December 2014 was £6.0 million.
The Group is required to meet certain
financial criteria agreed as covenants forthe bank loans. The financial measures
are regularly reviewed against covenantrequirements to ensure the Group’s
obligations can be met. All covenants tests
during the year were met and all tests forthe forthcoming 12 months are forecast
to be met based on our annual operatingplan and our latest rolling forecast.

Research and development (R&D)
The Group continues to invest in
R&D, spending £3.9 million in its R&D
programmes in the year (2013: £4.0 million)of which £3.0 million (2013: £3.0 million)
was capitalised. In the opinion of the
Directors, these investments will maintainand generate significant revenues infuture years.

Intellectual property
The Group owns intellectual property
both in its software tools and the products
derived from them. The Directors consider
such properties to be of significant value
to the business.

Employee involvement
The Group aims to attract, retain andmotivate the best staff regardless ofgender, race, religion, sexual orientation,
age or disability. To that end it is committed
to offering equal employment opportunities.
The Group provides its employees
systematically with information on mattersof concern to them and regularly consults
its staff, or their representatives, for views
on matters affecting them.
The Group encourages employee
involvement in the Group’s performanceby granting share options andGroup performance-related variable
compensation, and ensures that
employees are fully aware of financial
and economic factors affecting theperformance of the Group.

employees are fairly treated and that
their training and career development
needs are carefully managed. For those
employees becoming disabled during thecourse of their employment, every effort
is made, whether through retraining or
redeployment, to provide an opportunity
for them to remain with the Group.

Health and safety environment
The Group is committed to maintaining asafe and healthy working environment for
all staff. To that end it provides appropriate
training and supervision and complies withall applicable regulatory requirements.
The Group seeks wherever possible tominimise its impact on the environment
for the benefit of its staff and the publicat large. The Group is committed tocomplying with environmental regulations,in particular WEEE, and encourages andsupports staff in waste recycling within
its offices.
Approved by the Board of Directors andsigned on behalf of the Board.

Employee policies
The Group is committed to following
the applicable employment laws ineach territory in which it operates.
The Group is committed to ensuringthat disabled persons, whether registeredor not, have equal opportunities when
applying for vacancies, with due regard totheir aptitudes and abilities. In addition tocomplying with legislative requirements,
procedures ensure that disabled

Robert Parker
Chief Financial Officer
16 March 2015
Ubisense Group plc
Registered number: 05589712

28 Ubisense Annual Report

Ubisense Annual Report

BOARD OF DIRECTORSPROFESSOR ANDREW
HOPPER CBENON-EXECUTIVECHAIRMANRICHARD GREEN
CHIEF EXECUTIVEOFFICERROBERT PARKER
CHIEF FINANCIAL
OFFICERPETER HARVERSONNON-EXECUTIVEDIRECTORIAN KERSHAWNON-EXECUTIVEDIRECTOR

Andy is one of the foremost leaders in thetechnology industry having co-founded
12 successful companies, including
Acorn Computers Limited acquired by
Olivetti; Virata, Inc. listed on NASDAQ;
Adaptive Broadband Limited, acquired
by California Microwave, Inc.; Cambridge
Broadband Limited; Level 5 Networks
Limited; and RealVNC Limited. Andy isProfessor of Computer Technology at the
University of Cambridge and is currently
Head of the University of Cambridge
Computer Laboratory and a member of
the University’s Council. Andy has worked
on location systems for over 20 years.
He was elected as a Fellow of the Royal
Society in 2006 and the Royal Academyof Engineering in 1996. Andy was madea CBE in 2007 for services to thecomputer industry.

Richard initially trained as a mechanicalengineer and has over 25 years’ ofexperience in the software industry.
Having established Smallworld as oneof the leading geographic information
system companies serving utility andtelecoms companies in Europe and theUS, the company subsequently listed on
NASDAQ in 1996 and was acquired by GE
in 2000 for $214 million. Richard was Ernst& Young UK’s Science and Technology
Entrepreneur of the Year in 2010. Richard
is a Fellow of the Institute of MechanicalEngineers and sits on the Institute of
Mechanical Engineers Manufacturing
Industries Board.

Robert is a Chartered Accountant withmore than 25 years’ experience in seniorfinance roles across multiple sectors.
Most recently Robert was CFO of the
Optitune Group, a Finnish cleantech
company. Robert has held senior positions
with Sumitomo Electric Europe Ltd, Eircom
UK, National Grid and Immedia.

Peter has held a number of seniorinternational sales and marketingroles in the IT industry. These included
Regional Director, Intel Corporation
and Vice President Europe, Cadence
Design Systems. In 1995 he joined
Sun Microsystems where he was
responsible for the development of thecompany’s European Corporate Accounts
programme. Subsequently he became
Director of Services Sales – EMEA
with a charter to develop new areas ofbusiness, including professional services.
Peter retired from Sun Microsystems
in December 2005. Most recently he
was Non-Executive Chairman of Aspex
Semiconductors Limited, sold to Ericsson
AB in July 2012. Currently, Peter is a
Non-Executive Director of Brady plc, CRFS
Limited, and Chairman of eoSemi Limited.
Peter is also an advisor to Cambridge
IP Limited.

Ian has over 28 years’ experiencein the automotive, manufacturing andpower industries. He is responsible
for Ricardo’s strategic consulting
activities in Northern Europe and is alsoa Board member of Surface Generation,a developer of advanced manufacturingsystems for high-performance materials.
Ian has held management positions with
Caterpillar, Rolls-Royce Motor Cars andArthur D. Little.

	Audit Committee
Non-Executive Chairman	Remuneration Committee

He is also Entrepreneur in Residence at
Judge Business School, Cambridge anda Fellow of the Royal Society of Arts.

Nominations Committee

Audit Committee	Nominations Committee	Remuneration Committee

Remuneration Chairman

Audit Committee

29

30 Ubisense Annual Report

Ubisense Annual Report

BOARD OF DIRECTORSCONTINUED

DR ROBERT SANSOMNON-EXECUTIVEDIRECTORPAUL TAYLORNON-EXECUTIVEDIRECTOR

An active angel investor and mentor
to start-ups, Robert is founder of theCambridge Angels, a group of seasoned
technology and bio-technology
entrepreneurs who invest in andmentor technology start-ups in the
Cambridge area. Previously, Robert was
co-founder, CTO and Director of FORE
Systems, Inc., a leading provider of
networking equipment. FORE was listedon NASDAQ in 1994 and subsequently
acquired by Marconi for $4.5 billion
in 1999. Additionally, Robert served
as the Chief Technology Officer at
Marconi in 1999. Robert is a memberof the Board of Directors of Cambridge
Communications Systems Limited, CRFS
Limited, Featurespace Ltd and Netronome
Systems, Inc. He was elected as a Fellowof the Royal Academy of Engineeringin 2010.

Paul is a Fellow of the Associationof Chartered Certified Accountants.
Paul joined AVEVA Group Plc in 1989
and was heavily involved in the flotation
process and was responsible for UK
accounting and for the development of
AVEVA’s overseas subsidiaries including
adherence to group standards. Between
1998 and 2001, Paul was also UK Directorof Human Resources and was appointed
to the position of Finance Director andCompany Secretary of AVEVA Group plc
on 1 March 2001. Before joining AVEVA,Paul trained within the accountancy
profession before moving to Philips
Telecommunications (UK) where he was
responsible for the management accounts
of its Public Sectors division. Paul was arecipient of the FTSE250 Finance Directorof the Year award and is also a NonExecutive Director of Anite plc, Escher
Group Holdings plc, Digital Barriers plc
and KBC Advanced Technologies plc.

	Nominations Chairman

Audit Chairman

Remuneration Committee	Nominations Committee	Remuneration Committee

Ubisense has a proventrack record of helping
businesses evolve, refine
and transform operational
effectiveness.

3132 Ubisense Annual Report

Ubisense Annual Report

DIRECTORS’ REPORTThe Directors present theirannual report on the affairsof the Group together
with the audited financial
statements for the year
to 31 December 2014.

Incorporation and constitution

Directors’ interests – shares

Ubisense Group plc is domiciled in England and incorporated in England and Wales
under Company Number 05589712. Ubisense Group plc’s Articles of Association areavailable on the Group’s website at www.ubisense.net.

Directors’ interests in the ordinary shares of Ubisense Group plc at 31 December 2014
were as follows:
2014
Number

2013
NumberRichard Green*

1,734,906

1,734,906

Peter Harverson

65,161

65,161

Details of the share capital of the Company, including shares issued during the year,
can be found in note 20 of the consolidated financial statements.

Andrew Hopper

225,000

225,000

Robert Sansom

2,493,676

2,493,676

Substantial shareholdings

Total

4,518,743

4,518,743

On 16 March 2015, the Company had been notified of the following significant interests
in its ordinary share capital:*	Includes 115,617 (2013: 115,617) shares held by the RT Green Children’s Trust of which Richard Greenis a trustee.

Capital structure
The Company has one class of ordinary share of two pence each which carries no right tofixed income. Each share carries the right to one vote at general meetings of the Company.

Total holding
Number% of issued
share capital

Robert Sansom

2,493,676

9.95

Richard Green

1,734,906

6.92

NFU Mutual Investment Managers

1,417,046

5.65

FIL Investments International

1,261,280

5.03

Unicorn Asset Management

1,205,9784.81

1,141,113

4.55

Directors’ indemnity arrangements

Threadneedle Investments

1,000,453

3.99Charles Stanley

974,354

3.89

The Group has made qualifying third party indemnity provisions for the benefit of its
Directors, which were made during the year and remain in force at the date of this report.

City Financial

800,000

3.19

Ubisense Employee Share Plan

Directors
The Directors serving at 31 December 2014 were as follows: Richard Green, Peter
Harverson, Prof Andrew Hopper, Ian Kershaw, Robert Parker, Robert Sansom, Paul Taylor.

Board changes

There has been no change in the interests set out above between 31 December 2014
and 16 March 2015. Paul Taylor, Robert Parker and Ian Kershaw hold no shares as at
31 December 2013 (or their appointment date if later), 31 December 2014 nor 16 March 2015.

Directors’ remuneration, share options and loans
Details of Directors’ remuneration, share options and loans are provided in note 7 of thefinancial statements.

The Group has purchased and maintained throughout the year Directors’ & Officers’
liability insurance in respect of itself and its Directors.

Corporate governance
The Company’s statement on corporate governance can be found in the Corporate
Governance report on pages 34 to 36 of these financial statements. The Corporate
Governance report forms part of the Directors’ report and is incorporated into it bycross-reference.

In February 2014, after 10 years at Ubisense, Gordon Campbell, Chief Financial Officer,
notified the Board of his intention to step down from his role. Gordon Campbell has madea significant contribution to the growth and development of the Group, including listingon AIM, and this will continue in a new role leading the post-acquisition integration.

Post balance sheet events

On 10 February 2014, Robert Parker was appointed as CFO of Ubisense Group plc.
Robert Parker joins Ubisense from Optitune plc where he had been CFO since 2012.
Robert Parker brings extensive experience in both the strategic development andoperational management of high growth, multicultural businesses. He has a proventrack record of driving organic growth, executing M&A and raising finance in boththe private and public markets.

The Directors do not recommend payment of a dividend for the year (2013: £nil).

On 27 May 2014, J Keith Lomas and Richard Newell notified the Board of their intentions
to resign as Non-Executive Directors after five and seven years of service respectively.
Ian Kershaw, Managing Director of Ricardo Strategic Consulting, joined the Board on
27 May 2014 as a Non-Executive Director.

Annual General Meeting

There are no significant post balance sheet events.

Dividends

Approved by the Board of Directors andsigned on behalf of the Board

AuditorA resolution to re-appoint Grant Thornton UK LLP as the Group’s auditor will be
proposed at the forthcoming Annual General Meeting. In accordance with normal
practice, the Directors will be authorised to determine the auditor’s remuneration.

The Annual General Meeting of the Company is due to take place at the Grouphead office of St Andrew’s House, St Andrew’s Road, Chesterton, Cambridge,
CB4 1DL on 24 April 2015 at 8.30 a.m. Details of the resolutions proposed at theAGM are explained on pages 82–86 of this document.

Robert Parker
Chief Financial Officer
16 March 2015
Ubisense Group plc
Registered number: 05589712

33

34 Ubisense Annual Report

Ubisense Annual Report

CORPORATE GOVERNANCEREPORT
Although not required to do
so by the AIM Listing Rules,
the Directors have chosen toprovide selected corporate
governance disclosureswith this report, which they
consider to be valuable to
the reader.

The Directors believe that effective
corporate governance, appropriate to
the Group considering its size and stageof development, will assist in the deliveryof corporate strategy, the generation ofshareholder value and the safeguardingof shareholders’ long-term interests.
We do not comply with the UK Corporate
Governance Code September 2014(“the Code”). However, the Directors arecommitted, wherever it is reasonably
practicable, to ensure that the Groupis managed in accordance with theprinciples set out in the Code.

Composition of the Board
The Board comprises the non-executive
Chairman, four Non-Executive Directors
and two Executive Directors. Biographicaldetails of all members of the Board are
set out on pages 28–30.
Since the flotation of the Company in2011, no equity-based incentives havebeen granted to Non-Executive Directors
and there are no such plans for any suchgrants in the future. At the end of theyear, the Chairman and two of the four
Non-Executive Directors had shares andshare options in Ubisense Group Plc.
The holding of shares and shareoptions by Non-Executive Directors
could, amongst other things, be relevant
in determining whether a Non-Executive
Director is independent. Therefore,
after detailed consideration, the Board
has determined that Paul Taylor and
Ian Kershaw are the only independent
Non-Executive Directors within themeaning of the Code.
The roles of Chairman and Chief
Executive Officer are vested in separate
individuals, each with clear allocationof accountability and responsibility. The
Chairman has prime responsibility forrunning the Board and the Chief Executive
Officer has executive responsibilities
for the Group’s strategic development,
operations and results. The structureof the Board and the integrity of each
Director ensures that there is no one
individual or group dominating thedecision-making process.

The role of the Board

Summary of Board meeting attendance in 2014

The Board holds full meetings at least 10
times per year, with attendance required inperson whenever possible. The principal
matters that it considers are as follows:

The Board is expected to meet regularly on a formal basis at least 10 times a year.
14 Board meetings were held in 2014. Attendance at the meetings was as follows:	Reviewing operating and financial
performance

Total meetings attended*

Gordon Campbell

1 (2)Richard Green

14 (14)

Peter Harverson

12 (14)

Andrew Hopper

14 (14)

Ian Kershaw

5 (6)J Keith Lomas

7 (8)Richard Newell5 (8)	Establishing dividend policy

Robert Parker

11 (12)

	Approving and accepting all newcommitted funding facilities

Robert Sansom

12 (14)

Paul Taylor

14 (14)	Ensuring that appropriate management
development and succession plans arein place	Determining corporate strategy,
including consideration and approval of
the Company’s annual strategy review

	Approving and accepting majorchanges in the capital structureof the Company

Summary of Committee membership
The Committee membership as at 31 December 2014, and at 16 March 2015, is as follows;
Audit
Committee

Nomination
Committee

Remuneration
Committee

Richard Green–

Observer–Peter Harverson

–

Yes

Chair

Andrew Hopper

Observer

Yes

ObserverIan Kershaw

Yes

–

–

Robert Parker

Observer–ObserverRobert Sansom

–

Chair

Yes

Chair

Observer

Yes

Audit
Committee*

Nomination
Committee*

Remuneration
Committee*

Gordon Campbell

–

–

–

Richard Green

–

1 (1)

1 (3)

Peter Harverson

–

1 (1)

3 (3)

Andrew Hopper

1 (3)

1 (1)

2 (3)

Ian Kershaw

3 (3)

–

–

J Keith Lomas

1 (1)

1 (1)

1 (1)

Richard Newell

–

1 (1)

–

Robert Parker

3 (3)

–

2 (3)

Board Committees

Robert Sansom

3 (3)

1 (1)

3 (3)

The Board has established three
Committees: the Audit Committee,
the Nomination Committee and theRemuneration Committee.

Paul Taylor

–

1 (1)

3 (3)

	Reviewing and approving formal
treasury policies relating to funding,liquidity, transactional foreign exchange
and interest rate risk management	Reviewing the health and safety
and environmental performanceof the Company
	Approving corporate acquisitions,mergers, divestments, joint venturesand major capital expenditure	Receiving, reviewing and approving
recommendations by the designatedcommittee on matters related to audit,
nominations and remuneration.
The Board is supplied with information
in a timely manner and in a form andof a quality appropriate to enable it todischarge its duties. The Board has a policy
to set out which matters are reserved forthe decision of the Board and those towhich the Executive Directors need notrefer for approval. This policy also requiresthat all recommendations and decisions
by a Board Committee are approved or
ratified by the Board.

Paul Taylor

Summary of Committee meeting attendance* Figures in brackets denote the maximum number of meetings that could have been attended.

The role of each Committee is described in more detail overleaf.

35

36 Ubisense Annual Report

Ubisense Annual Report

CORPORATE GOVERNANCEREPORT

DIRECTORS’ RESPONSIBILITIESSTATEMENT

Audit Committee

The Directors are responsible for preparing the Directors’
report, the Strategic report and the financial statementsin accordance with applicable law and regulations.

CONTINUED

The Audit Committee has responsibility
for the following matters:

	Ensuring Non-Executive Directors
receive letters of appointment, detailingtheir responsibilities

Financial reporting	Review of all financial reports released
to the market and shareholders.

	Making recommendations to the Board
about the appointment, removal orcontinuation in office of any Director.

	Review of significant reporting issues
and key judgements.

During the period under review, theCommittee has met once on a formal
basis. The Committee is expected tomeet formally twice a year.

	Review of accounting policies selected
and their application.
External audit
	Recommending appointment,
re-appointment or removal of theexternal auditors.
	Overseeing the Group’s relationshipwith the external auditors, including
assessing their independence.
	Agreeing the annual audit plan andreviewing the finding and effectivenessof the audit.
Whistleblowing
	Review of the Group’s whistleblowing
policies and procedures.
As part of its procedures, the Committee
discusses the interim and annual financial
statements with the external auditors.
When appropriate, non-Committee
members are invited to attend. During theperiod under review, the Committee has
met three times on a formal basis excluding
meetings of the Chairman with external
advisors. The Committee is expected
to meet formally four times a year.

Nomination Committee
The Nomination Committee has
responsibility for the following matters:
	Reviewing the size and composition of
the Board to ensure that an appropriate
mix of skills, knowledge and experienceis achieved	Succession planning for the Board andother key management roles	Identifying and recommending to theBoard candidates to fill Board vacancies
	Ensuring Non-Executive Directors
are able to make the necessary timecommitments to fulfil their role

Remuneration Committee
The Remuneration Committee has
responsibility for the following matters:
	Agreeing the framework for the Group’s
remuneration policy for Directors andkey management personnel, including
determining individual remuneration
policies for Executive Directors
	Approving the design and targets for
short and long-term incentive plans	Determining the policy and scopeof pension arrangements
	Ensuring contractual terms andpayments made on termination are fair
to both the individual and the Group	Agreeing the policy for authorisingexpense claims by the Chair andChief Executive.
The Group has a formal and transparent
procedure for developing policy on
Directors’ remuneration. No Director isinvolved in deciding his own remuneration.
The Committee aims to set levels of
remuneration for Executive Directorsthat are sufficient to attract, retain andmotivate Directors of the quality required,without paying more than necessary,and that are appropriate for the sizeand complexity of the Group. It aims
to see that a significant proportion ofeach Executive Director’s remuneration
package is performance related.
During the period under review,
the Committee has met three times
on a formal basis. The Committee is
expected to meet formally twice a year.

Internal control
The Board of Directors has overall
responsibility for the Group’s system
of internal control and for reviewing
its effectiveness. The risk-managing
process and systems of internal control
are designed to manage rather thaneliminate the risk of failure to achieve
the Company’s objectives. It should berecognised that such systems can only
provide reasonable but not absoluteassurance against material misstatement
or loss. The Directors acknowledge their
responsibilities for the Group’s system
of internal control and for reviewing its
effectiveness. The principal features of thesystem of internal financial controls are:	Budgetary control over all operations,
measuring performance against
pre-determined targets on at least
a monthly basis
	Regular forecasting and reviews
covering trading performance,
assets, liabilities, cash flows andbank covenants	Delegated limits of authority covering
key financial commitments including
capital expenditure and recruitment
	Identification and management of key
business risks.
The Board continually reviews theeffectiveness of other internal controls,
including financial, operational, compliance
controls and risk management.

Company law requires the Directors
to prepare financial statements foreach financial year. Under that law the
Directors are required to prepare theconsolidated financial statements inaccordance with International Financial
Reporting Standards (IFRSs) as adopted
by the European Union and have elected
to prepare the parent company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom AccountingStandards and applicable laws). Under
company law the Directors must not
approve the financial statements unlessthey give a true and fair view of the stateof affairs and profit or loss of the Company
and Group for that period. In preparing
these financial statements, the Directors
are required to:	Select suitable accounting policies
and then apply them consistently	Make judgements and estimatesthat are reasonable and prudent	State whether applicable IFRSs havebeen followed, subject to any material
departures disclosed and explained in
the consolidated financial statements
	State whether applicable UK AccountingStandards have been followed, subject
to any material departures disclosed
and explained in the Company
financial statements
	Prepare the financial statements on
the going concern basis unless it isinappropriate to presume that theCompany will continue in business.

The Directors are responsible forkeeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and disclosewith reasonable accuracy at any time thefinancial position of the Company, andenable them to ensure that the financial
statements comply with the Companies
Act 2006. They are also responsible forsafeguarding the assets of the Company
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities.

Disclosure of information to auditor
Each of the persons who are Directors
at the time when this Directors’ report
is approved has confirmed that:	So far as that Director is aware, there
is no relevant audit information of which
the Company’s auditors are unaware
	The Director has taken all the steps
that ought to have been taken as a
Director in order to be aware of any
relevant audit information and toestablish that the Company’s auditors
are aware of that information.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on
the Company’s website. Legislationin the United Kingdom governing the
preparation and dissemination of financial
statements may differ from legislationin other jurisdictions.

37

38 Ubisense Annual Report

INDEPENDENT AUDITOR’S REPORTto the members of Ubisense Group Plc

We have audited the group financial statements of Ubisense Group Plc for the year ended 31 December 2014 which comprise theconsolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity,
the consolidated statement of financial position, the consolidated statement of cashflows and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to themin an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 37, the directors are responsible for the preparationof the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements
In our opinion, the group financial statements:
give a true and fair view of the state of the group’s affairs as at 31 December 2014 and of its loss for the year then ended;have been properly prepared in accordance with IFRSs as adopted by the European Union; andhave been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic report and the Directors’ report for the financial year for which the group financial
statements are prepared is consistent with the group financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where under the Companies Act 2006 requires us to report to you if,
in our opinion:

Ubisense Annual Report

39

CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2014

Notes

2014
£’000

2013
£’000

5

35,05127,002

Cost of revenues(21,053)(17,761)

Gross profit

13,998

9,241

Operating expenses(18,579)(10,867)

Operating loss

(4,581)(1,626)Gross profit

13,998

9,241

Other operating expenses(12,094)(8,100)

1,904

1,141

Revenue

Analysed as:

Adjusted EBITDA
Depreciation

13

(359)

(266)

Amortisation of acquired intangible assets

12

(751)

(313)

Amortisation of other intangible assets

12(2,937)(1,332)

Share-based payments charge

21.2

(75)

(92)

Non-recurring items

9.2(2,363)(764)(4,581)(1,626)

Operating loss
Finance income

8

14

10

Finance costs

8

(211)

(103)

Loss before tax

9(4,778)(1,719)

10.1

736

(219)

(4,042)(1,938)(4,085)(1,968)43

30(4,042)(1,938)

Income tax
Loss for the year
Loss attributable to:Equity shareholders of the Company
Non-controlling interest

certain disclosures of directors’ remuneration specified by law are not made; orLoss per share attributable to the equity shareholders of the parent (pence)

we have not received all the information and explanations we require for our audit.

Basic

11

(16.7p)(8.9p)

Other matter

Diluted11(16.7p)(8.9p)We have reported separately on the parent company financial statements of Ubisense Group plc for the year ended 31 December 2014.

The notes on pages 45 to 76 are an integral part of these consolidated financial statements.

Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
16 March 2015

40 Ubisense Annual Report

Ubisense Annual Report

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2014

Loss for the year

for the year ended 31 December 2014

2014
£’000

2013
£’000

(4,042)(1,938)Attributable to equity shareholders of the parent company

Other comprehensive income:Items that may be reclassified subsequently to profit and loss
Exchange difference on retranslation of net assets and results of overseas subsidiaries
Total comprehensive loss for the year

Balance at 1 January 2013

– Non-controlling interest
Total comprehensive loss for the year
The notes on pages 45 to 76 are an integral part of these consolidated financial statements.

Sub-total£’000

Noncontrollinginterest
£’000

Total
£’000

(4,374)18,921–

18,921

Sharecapital
£’000

Share
premium£’000

Share-based
payment
reserve£’000

Translation
reserve£’000

Retainedearnings
£’000

438

22,251

654

(48)

(531)

(203)

Loss for the year

–

–

–

–

(1,968)(1,968)30(1,938)(4,573)(2,141)

Exchange difference on retranslationof net assets and results of overseas
subsidiaries

–

–

–

(173)

–

(173)

(30)

(203)

Total comprehensive loss for the year

–

–

–

(173)

(1,968)(2,141)–(2,141)

Reserve credit for equity-settled sharebased payment

–

–

92

–

–

92

–

92

Non-controlling interest in new subsidiary

–

–

–

–

–

–

554

554

Issue of new share capital

23

–

–

–

–

23

–

23

Premium on new share capital

–

1,799

–

–

–

1,799

–

1,799

Transactions with owners

23

1,799

92

–

–

1,914

554

2,468

Balance at 31 December 2013 (restated)461

24,050746(221)(6,342)

18,694554

19,248Loss for the year

–

–

–

–

(4,085)(4,085)43(4,042)

Exchange difference on retranslationof net assets and results of overseas
subsidiaries

–

–

–

(464)

–

(464)

(67)

(531)

Total comprehensive loss for the year

–

–

–

(464)

(4,085)(4,549)(24)(4,573)

Reserve credit for equity-settled sharebased payment

–

–

75

–

–

75

–

75

Issue of new share capital

40

–

–

–

–

40

–

40

Premium on new share capital

–

4,230

–

–

–

4,230

–

4,230

Share issue costs

–

(229)

–

–

–

(229)

–

(229)

Transactions with owners

40

4,001

75

–

–

4,116

–

4,116

Balance at 31 December 2014

501

28,051

821(685)(10,427)

18,261

530

18,791Attributable to:– Equity shareholders of the Company

41(4,549)(2,141)(24)–(4,573)(2,141)

The notes on pages 45 to 76 are an integral part of these consolidated financial statements.

42 Ubisense Annual Report

Ubisense Annual Report

43

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
for the year ended 31 December 2014

Notes

2014
£’000

2013
Restated
£’000

Notes

2014
£’000

2013
Restated£’000

AssetsEquity attributable to owners of the parent company

Non-current assets

Ordinary share capital

20

501

461

Share premium

20

28,051

24,050Share-based payment reserve

821

746

Translation reserves

(685)

(221)

Retained earnings(10,427)(6,342)

18,261

18,694530

554

18,791

19,248Intangible assets

12

14,363

16,247

Property, plant and equipment

13

1,112

628

15,475

16,875

Total non-current assets
Current assets
Inventories

14

2,881

2,587

Equity attributable to shareholders of the Company

Trade and other receivables

15

15,541

11,547

Non-controlling interests

Cash and cash equivalents

16

3,697

3,964

Total equity

Total current assets

22,11918,098The notes on pages 45 to 76 are an integral part of these consolidated financial statements.

Total assets

37,594

34,973

The financial statements were approved by the Board of Directors on 16 March 2015 and signed on its behalf by:

Liabilities
Current liabilities
Trade and other payables

17(9,816)(10,023)

Bank loans

18

(927)

–

(10,743)(10,023)

Total current liabilities
Non-current liabilities
Deferred income tax liabilities

10

Trade and other payables(1,336)(1,773)(120)–

Bank loans

18(6,000)(3,500)

Other payables

19

(604)

(429)

Total non-current liabilities(8,060)(5,702)

Total liabilities(18,803)(15,725)

Net assets

18,791

19,248Richard Green

Robert Parker

Chief Executive Officer

Chief Financial Officer

Ubisense Group plc
Registered number: 05589712

44 Ubisense Annual Report

Ubisense Annual Report

CONSOLIDATED STATEMENT OF CASH FLOWSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2014

Notes

Loss before tax

2014
£’000

2013
£’000

(4,778)(1,719)Adjustments for:1 General information
Ubisense Group plc (“the Company”) and its subsidiaries (together, “the Group”) deliver mission-critical location-based smart technology
which enables companies to optimise their business processes.
The Company is a public limited company which is listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange(UBI) and is incorporated and domiciled in the United Kingdom. The value of Ubisense Group plc shares, as quoted on the London
Stock Exchange plc at 31 December 2014, was 120.0 pence per share (31 December 2013: 246.0 pence).

Depreciation

9, 13

359

266

Amortisation and impairment

9, 12

4,956

1,645

9

22

–

21.2

75

92

Finance income

8

(14)

(10)

Finance costs

8

211

103

The Group has its main operations in the UK, US, Canada, Germany, France, Japan, South Korea, Singapore and the Philippines and sells
mainly in North America, Europe and Asia. The Group legally consists of 12 companies headed by Ubisense Group plc (UK). A full list of
subsidiaries is given in note 23 of the financial statements.

Operating cash flows before working capital movement

831

377

These consolidated financial statements have been approved for issue by the Board of Directors on 16 March 2015.

Change in inventories

(293)

(639)

Change in receivables(3,661)

242

Change in payables

447

(727)

Cash used in operations before tax(2,676)(747)

Net income taxes received/(paid)

47

(7)

(2,629)

(754)

(509)

1,846

(885)

(140)

1

–

(3,500)(3,085)14

10(4,879)(1,369)Loss on the disposal of property, plant and equipment
Share-based payments charge

Net cash flows from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired

24

Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Expenditure on intangible assets
Interest received
Net cash flows from investing activities

The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to Ubisense Group plc on 31 May
2011 ahead of its initial public offering and listing on AIM on 22 June 2011. The address of its registered office is St. Andrew’s House,
St. Andrew’s Road, Chesterton, Cambridge, CB4 1DL.

2 New accounting standards
For the purposes of the preparation of these consolidated financial statements, the Group has applied all standards and interpretations
that are effective for accounting periods beginning on or after 1 January 2014.
During 2014, the Group has applied several new revised and amended standards and interpretations which became effective inthe year: IFRS 10 “Consolidated financial statements”, IAS 32 “Financial instrument: Presentation” (amended), IAS 36 “Impairment
on assets” (amended) and IAS 39 “Financial instruments: recognition and measurement” (amended). Their adoption has not had amaterial impact on the disclosures and amounts reported. Otherwise the accounting policies used are the same as set out in detailin the Report and Accounts 2013 and have been applied consistently to all periods presented in these financial statements. No new
standards, amendments or interpretations to existing standards that have been published and that are mandatory for the Group’s
accounting periods beginning on or after 1 January 2015, or later periods, have been adopted early. The Directors do not consider
that the adoption of these standards and interpretations would have a material impact on the Group’s financial statements.
Standards and interpretations not yet applied by the GroupThe following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the Group’s
financial statements.
Amendment to IAS 19 “Employee benefits” (effective date financial year commencing on/after 1 July 2014)
Amendment to IAS 16 “Property, plant and equipment” (effective date financial year commencing on/after 1 January 2016)
Amendment to IAS 38 “Intangible assets” (effective date financial year commencing on/after 1 January 2016)

Cash flows from financing activities

Annual improvements 2012 and 2013 (effective date financial year commencing on/after 1 July 2014)

3,427

3,500

(151)

(92)

Annual improvements 2014 (effective date financial year commencing on/after 1 January 2016)

Proceeds from the issue of ordinary share capital

4,041

111

IFRS 15 “Revenue from contracts with customers” (effective date financial year commencing on/after 1 January 2017)

Net cash flows from financing activities

7,317

3,519

Net (decrease)/increase in cash and cash equivalents

(191)

1,396

3,964

2,716

(76)

(148)

3,697

3,964

Proceeds of borrowings
Interest paid

Cash and cash equivalents at start of period
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of period
The notes on pages 45 to 76 are an integral part of these consolidated financial statements.

45

16

IFRS 9 “Financial Instruments” (effective date financial year commencing on/after 1 January 2018)
All standards and interpretations are not expected to have any significant impact on the financial statements when applied.

46 Ubisense Annual Report

Ubisense Annual Report

47

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.

Segment reporting
IFRS 8 requires a “management approach” under which information in the financial statements is presented on the same basis as thatused for internal management reporting purposes.

Basis of preparation
The consolidated financial statements of Ubisense Group plc have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as adopted by the European Union (IFRSs as adopted by the EU) and the Companies Act 2006 applicable
to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.
The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£’000)
except when otherwise indicated.

The Group is organised on a global basis as a single Enterprise Location Intelligence business. This is the basis of the Group’s externalmarket offering and internal organisational and management structure and is the primary way in which the Chief Executive Officer, whois the Chief Operating Decision Maker, receives financial information to assess Group performance. As a result, the Group has therefore
determined that it has only one reportable segment as defined by IFRS 8.

The preparation of these financial statements in conformity with IFRS requires the Directors to make certain critical accounting estimatesand judgements that affect the amounts reported in the financial statements and accompanying notes. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements,
are disclosed in note 4.

In addition, the Board and Management Team consider the business to have two revenue streams with different characteristics,
Solutions and Services, which are generated from the same asset and cost base.

Going concern basis
The Group meets it day-to-day working capital requirements through its bank facilities. The Group had cash of £3.7 million at thebalance sheet date along with £1.2 million undrawn on its bank facilities as well as an order book equivalent to 35% of annual revenue.
In this context, the Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, support
the conclusion that there is a reasonable expectation that the Company and the Group have adequate resources to continue inoperational existence for the foreseeable future, a period of not less than 12 months from the date of this report. The Group,
therefore, continues to adopt the going concern basis in preparing its financial statements.
Consolidation
The Group financial statements include the results, financial position and cash flows of the Company and all of its subsidiary undertakings.
Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when the Company has thepower to govern the financial and operating policies of an entity, uses this power to affect the returns from that entity and has exposure
to variable returns from its investment in the entity.

The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “Adjusted EBITDA” as the primarymeasure of profit, and this is reported on the face of the income statement.

Revenue recognition
Revenue represents amounts derived from the provision of goods and services which fall within the Group’s ordinary activities,
exclusive of value added tax and other similar sales taxes. Revenue is measured by reference to the fair value of consideration
received or receivable.
Revenues on product sales are recognised at the time that units are shipped, except for shipments under arrangements involving
significant acceptance requirements. Under such arrangements, revenue is recognised when the Group has substantially met allits performance obligations.
Revenue earned from sales under licence agreements is recognised when the software is made available. When the sale includes
a period of support and maintenance, a proportion of the revenue is deferred and recognised straight line over the period of support.
For licence rental fees, amounts are recognised over the period of the contract, commencing from when the software is available for use.
Services and training revenue from time and materials contracts is recognised in the period that the services and training are provided
on the basis of time worked at agreed contractual rates and as direct expenses are incurred.

Co-terminous financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistentaccounting policies. Businesses acquired or disposed of during the year are accounted for using acquisition method principles from,or up to, the date control passed. Intra-group transactions and balances are eliminated on consolidation. All subsidiaries use uniform
accounting policies for like transactions and other events and similar circumstances.

Revenue from fixed-price, long-term customer-specific contracts, including customisation and modification, is recognised on
the stage of completion of each assignment at the period end date compared to the total estimated service to be provided overthe entire contract where the outcome can be estimated reliably. If a contract outcome cannot be estimated reliably, revenues
are recognised equal to costs incurred, to the extent that costs are expected to be recovered. An expected loss on a contract
is recognised immediately in the income statement.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination and thenon-controlling interest’s share of changes in equity since the date of combination.

Where bundled sales including a combination of some or all of the above are made, the revenue attributable to the deal
is apportioned across the constituents of the bundle, and then recognised according to the policies stated above.

Foreign currencies(a) Retirement benefits(a) Functional and presentation currency

The functional currency of each Group entity is the currency of the primary economic environment in which each entity operates.
The consolidated financial statements are presented in Sterling, which is the Company’s functional and presentation currency.
(b) Transactions and balances

Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at
the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the period
end date. Such exchange differences are included in the income statement within “operating expenses”. Non-monetary items that aremeasured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
(c) Consolidation

For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of whichhave the currency of a hyperinflationary economy) that have a functional currency other than Sterling are translated into Sterling as follows:
Assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date	Income and expenses for each income statement are translated at the exchange rate ruling at the time of each period
the transaction occurred
All resulting exchange differences are recognised in other comprehensive income.

Employee benefits
The Group operates various defined contribution pension arrangements for its employees.
For defined contribution pension arrangements, the amount charged to the income statement represents the contributions payablein the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals
or prepayments in the statement of financial position.
(b) Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured atfair value at the date of grant using the Black–Scholes pricing model. The fair value is expensed on a straight-line basis over the vesting
period, together with a corresponding increase in equity in the share-based payment reserve, based on the Group’s estimate of thenumber of shares that will eventually vest.
(c) Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal,
to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a resultof an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if
the Group has made an offer of voluntary redundancy, it is probable the offer will be accepted, and the number of acceptances can be
estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.

48 Ubisense Annual Report

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49

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3 Summary of significant accounting policies (continued)
Operating lease income and expense(a) Rental expense

Operating lease rentals are charged as operating expenses to the income statement in equal annual amounts over the lease term.
Assets leased under operating leases are not recorded in the statement of financial position because the lessor retains a significant
portion of the risks and rewards of ownership.
(b) Lease incentives

The benefits of lease incentives such as rent-free periods or up-front cash payments are spread equally on a straight-line basis overthe lease term.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further understandingof the financial performance of the Group. They are material one-off items of income or expense that have been shown separately due
to the significance of their nature or amount and do not reflect the on-going cost base or revenue-generating ability of the Group.
Interest income and expense
Interest income and expense is included in the income statement on a time basis, using the effective interest method by reference
to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:(a) Current tax

The current tax charge represents an estimate of the amounts payable or receivable to or from tax authorities in respect of the Group’s
taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit before tax as reported in the income
statement because it excludes certain items of income and expense that are taxable or deductible in other years or are never taxable ordeductible. Taxation received is recognised only when it is probable that the Group is entitled to the asset.
(b) Deferred tax

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying
amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available
to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. However,deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the relatedtransaction is a business combination or affects tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated,without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the reporting date. Deferred tax is recognised as a component of tax expense in the income statement,
except where it relates to items charged or credited directly to other comprehensive income or equity when it is recognised inother comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initiallyat their provisional fair values at the acquisition date. Fair values are reassessed during the measurement period and updated if required.
The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets.

Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controllinginterest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net
assets of the subsidiary acquired, the difference is recognised in profit or loss.
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the net fairvalue of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses.
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes.
Development expenditure is only capitalised if all of the following conditions are met:
Completion of the intangible asset is technically feasible so that it will be available for use or sale
The Group intends to complete the intangible asset and use or sell it
The Group has the ability to use or sell the intangible asset
	The intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market
for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used ingenerating such benefits
There are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset
The expenditure attributable to the intangible asset during its development can be measured reliably.
Internally-generated intangible assets, consisting mainly of direct labour costs, are amortised on a straight-line basis overtheir useful economic lives. Amortisation is shown within administrative expenses in the income statement. The estimateduseful lives of current development projects are three years. Upon completion the assets are subject to impairment testing.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expensein the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences that do not form an integral part of related hardware,
are capitalised at cost and amortised on a straight-line basis over their useful economic life, which is typically 3 years.
Acquired intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and amortised on a straight line basis
over their useful economic lives. Amortisation is shown within operating expenses in the income statement. The useful economic
lives of the intangible assets recognised on acquisition are as follows:
Software products recognised on acquisition: 3 years
Customer relationships recognised on acquisition: 5–10 years
Order backlog: based on contract life recognised on acquisition, typically less than 1 year.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciationis charged to the income statement so as to write off the cost or valuation less estimated residual values over their expected useful
lives on a straight-line basis over the following periods:
Fixtures and fittings: 3–8 years, or period of the lease if shorter

Acquisition-related costs are expensed as incurred.

Computer equipment: 3 years

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in theacquiree is remeasured to fair value at the acquisition date through profit or loss.

Demonstration equipment: 1 year.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either
in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured
and its subsequent settlement is accounted for within equity.

Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of the asset and is recognised in operating expenses.

50 Ubisense Annual Report

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3 Summary of significant accounting policies (continued)

4 Critical accounting judgements and key sources of estimation and uncertainty

Impairment of non-financial assets
Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amortisation
and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets aregrouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets otherthan goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first out
basis. Net realisable value is based on estimated selling price less additional cost to completion and disposal. Provision is madefor obsolete, slow-moving or defective items where appropriate and these are recognised as an expense in the period in which
the write-down or loss occurs.
Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course of business.
If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment.
Cash and cash equivalents
In the Consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks andother short-term highly liquid investments with original maturities of three months or less.
Trade payables
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 fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost;
any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over theperiod of the borrowings using the effective interest method.
Fees paid on the establishment of debt facilities are recognised as transaction costs of the debt to the extent that it is probable that someor all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that
it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortisedover the period of the facility to which it relates.
All borrowing costs are recognised in the income statement in the period they are incurred.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown inequity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and the amounts
paid over the nominal value in respect of share issues, net of related costs, are classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by the Company to theGroup’s employees under its employee share option plans.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional
currencies to the Group’s presentation currency of Sterling are recognised directly in other comprehensive income and accumulated
in the translation reserve.

Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually in accordance with the accounting policy stated in note 3. This requires anestimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires
the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitablediscount rate in order to calculate the present value of those cash flows. The Group uses pre-tax discount rates of 11.5% for thispurpose. The carrying amount of goodwill at 31 December 2014 is £8.2 million, following an impairment of £1.2 million. Further
consideration of the impairment of goodwill is included in note 12.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s judgementof the point at which technical and commercial feasibility is demonstrable. The carrying amount of capitalised development
costs at 31 December 2014 is £4.2 million.
Revenue recognition
Significant management judgement is applied in determining the allocation and timing of the recognition of revenue on fixedprice, long-term customer-specific contracts. In this process management takes into account milestones, hardware supplied,
actual work performed and further obligations and costs expected to complete the work. The carrying value of amounts
recoverable on contracts at 31 December 2014 is £4.1 million.
Inventories
The provision for obsolete, slow-moving or defective inventory is based on management’s estimation of the commercial lifeof inventory lines and is applied on a prudent basis. In assessing this, management takes into consideration the sales historyof products and the length of time that they have been available for resale.
Deferred tax
A deferred tax asset is recognised where the Group considers it probable that future tax profits will be available against which
the tax credit will be utilised in the future. This specifically applies to tax losses and to outstanding vested share options at thestatement of financial position date. In estimating the amount of the deferred tax asset that should be recognised, the Directors
make judgements based on current budgets and forecasts about the amount of future taxable profits and the timings of whenthese will be realised. No deferred tax asset is currently recognised.
Valuation of separately identifiable intangible assets
As detailed in note 3, separately identifiable intangible assets are identified and amortised over defined periods. The Directors
use an acknowledged valuation approach but this is reliant upon certain judgements which they determine are reasonable byreference to companies in similar industries.
Contingent consideration
The Group initially estimates the amounts payable under ‘earn-out’ plans to the former shareholders of acquired companies
based on the business model produced at the time of acquisition. Earn-out clauses within acquisition agreements typicallycontain provisions for amounts payable to the former shareholders based on future financial performance. In order tocalculate the expected future payments, the acquisition business model contains estimates of the future financial
performance for the acquired business.
The post-acquisition performance and expected future performance of acquired companies is reviewed throughout the year.
Any adjustments required to contingent consideration arising from a significant departure of financial performance from theoriginal acquisition plan are made as required and recognised through the profit and loss.
The Directors do not consider that there are any other critical accounting judgements or key sources of estimation uncertainty.

51

52 Ubisense Annual Report

53

Ubisense Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

5 Segment information

6 Employee information

IFRS 8 requires a “management approach” under which information in the financial statements is presented on the same basis asthat used for internal management reporting purposes. As announced in September 2013, the Group is now organised on a global basis
as a single Enterprise Location Intelligence business. This is the basis of the Group’s external market offering and internal organisationaland management structure and is the primary way in which the Chief Executive Officer, who is the Chief Operating Decision Maker,
receives financial information to assess Group performance. As a result, the Group has therefore determined that it has only one
reportable segment as defined by IFRS 8.

6.1 Employee numbers
The average monthly number of people, including Executive Directors, employed by the Group during the year was:

The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “Adjusted EBITDA” as theprimary measure of profit and this is reported on the face of the income statement.
In addition, the Board and Management Team consider the business to have two revenue streams with different characteristics,
Solutions and Services, which are generated from the same asset and cost base.
5.1 Revenue by nature

2014
£’000

2013
£’000

Solutions

20,067

13,375Services

14,984

13,627

Total revenues

35,05127,002The Board and Management Team also review the revenues on a geographical basis, based around the regions where the Group has
its significant subsidiaries or markets.

Actual number of people
as at 31 December
2014
Number

2013
Number2014
Number

2013
NumberTechnical consultants

134

130

135

97

Sales & marketing

46

40

45

34

Research & development

33

40

32

35

Administration

37

29

38

20

250

239

250

186

2014
Number

2013
Number2014
Number

2013
NumberUnited Kingdom

61

53

63

51

Europe

69

54

63

56

Americas

79

72

80

71

Asia Pacific

41

60

44

8

250

239

250

186

Notes

2014
£’000

2013
£’000

Wages and salaries

15,905

13,152Social security costs

1,512

1,346

Contributions to defined contribution pension arrangements

784

626

75

92

18,276

15,216

By activity

By geography

5.2 Geographical areas
The Group’s revenue from external customers and information about its non-current assets (excluding goodwill and deferred tax)
by geography is detailed below:
Revenue

Non-current assets

2014
£’000

2013
£’000

2014
£’000

2013
£’000

743

539

4,563

4,239

Europe12,743

12,478446

294

Americas14,223

11,988769

477

Asia Pacific

7,342

1,997

1,473

2,464

35,05127,002

7,251

7,474

UK

Revenues from external customers in the Group’s domicile, the UK, as well as its major markets, Europe, Americas and Asia Pacific, havebeen identified on the basis of the customer’s geographical location. Non-current assets are allocated based on their physical location.
5.3 Information about major customers
During 2014, revenues of £4.4 million (2013: £6.0 million) were derived from one European customer. There were no other customers
in 2014 or 2013 who contributed in excess of 10% of revenue.

Average monthly
number of people

6.2 Employee benefits

Share-based payments
Total aggregate employee benefits

21.2

Included in the wages and salaries figure above are termination benefits of £458,000 (2013: £nil) which are presented as non-recurringcosts in the income statement – see note 9.2. The employment terminations in 2014 are expected to provide annualised cost savingsof £3,360,000 in 2015.

54 Ubisense Annual Report

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55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

6 Employee information (continued)

7.2 Directors’ interests – share options

6.3 Key management compensation
Key management includes Directors (Executive and Non-Executive) and members of the Executive Management Team. During
the year, there was an average number of 10 key management personnel (2013: 12) and 11 personnel at 31 December 2014 (2013: 11).
The compensation paid or payable to key management for employee services is shown below:
2014
£’000

2013
£’000

Wages and salaries

973

998

Social security costs

95

151

Other benefits

19

28

1,087

1,177

47

Contributions to defined contribution pension arrangements

Awardsexercisable at
31 December
2014
Number0.140

120,500(120,500)

–

–

–

–

–

2011 2012–14 2021

1.050

32,500(32,500)

–

–

–

–

–

2012 2013–15 2022

2.125

40,000(40,000)

–

–

–

–

–

2013 2014–16 2023 2.055

40,000(40,000)

–

–

–

–

–

233,000(233,000)

–

–

–

–

–

2010

49

Lapsed during
the year
NumberAwardsoutstanding at
31 December
2014
Number

2011–13 2020

Gordon Campbell

Post-employment benefits

Exercisedduringthe year
NumberExercise
price£Director

Richard Green

Grantedduringthe year
NumberExpires
Year

Award
date
Year

Short-term employee benefits

Cease to be
Director during
the year
NumberAwardsoutstanding at
1 January 2014
NumberVests
Year2011 2012–14 2021

1.050

100,000

–

–

–

–

100,000

100,000

2012 2013–15 2022

2.125

60,000––––60,00040,0002013 2014–16 2023 2.055

60,000––––60,00020,0002014 2015–17 2024 2.250––

75,000––75,000–220,000–

75,000––295,000

160,000––

60,000––60,000–Share-based payments
Equity-settled share-based payments

25

37

Robert Parker

2014 2015–17 2024 2.250

Total key management compensation

1,159

1,263

Peter Harverson

2010

2011–13 2020

0.140

91,333––––

91,333

91,333

Andrew Hopper

2010

2011–13 2020

0.140

20,278––––20,27820,278Richard Newell2010

2011–13 2020

0.140

1,056

(1,056)

–

–

–

–

–

(234,056) 135,000––

466,611271,611

7 Directors’ remuneration and interests
7.1 Directors’ remunerationBasicsalary£’000

Performance
payments£’000

Benefits
in kind£’000

Subtotal£’000

Employer’s
contributions
to defined
contribution
pensionarrangements
£’000

134

49

3

186

14

200

–

11

–

–

11

2

13

169

Richard Green*

166

102

3

271

18

289

267

Peter Harverson

20

–

–

20

–

20

15

Andrew Hopper

28

–

–

28

–

28

25

J Keith Lomas

6

–

–

6

–

6

15

Richard Newell

6

–

–

6

–

6

15

Robert Sansom**

–

–

–

–

–

–

–

Paul Taylor

20

–

–

20

–

20

15

Ian Kershaw

12

–

–

12

–

12

–

403

151

6

560

34

594

521

Director

Robert Parker*
Gordon Campbell*

Total

Total

Total
2014
£’000

Total
2013
£’000

*	The Directors are remunerated through the Company’s flexible benefits scheme under which they can elect to switch basic salary into pension contributions
and other benefits. The basic salary entitlement in the year was: Richard Green £175,000, Robert Parker £133,654, Gordon Campbell £12,440.
** Robert Sansom has waived his entitlement to annual remuneration in the year of £20,000 (2013: £15,000 waived).

565,667

The 2014 grants vest subject to meeting performance criteria set out in the long-term incentive plan (“LTIP”). No other Directors havebeen granted share options in the Company or other Group entities. None of the terms and conditions of the share options werevaried during the year. All options were granted in respect of qualifying services.
Ian Kershaw, Robert Sansom and Paul Taylor do not have any share options as at 31 December 2014. There have been no options
granted to or exercised by Directors between 31 December 2014 and 16 March 2015.
The market price of the Company’s shares at the end of the financial year was £1.20. The range of market prices during the year
was between £1.20 and £2.75.
Directors’ gains on share options

Richard Green

Gain onexercise
2014
£’000

Gain onexercise
2013
£’000

–

155

56 Ubisense Annual Report

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57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

7 Directors’ remuneration and interests (continued)

9 Loss before tax: analysis of expenses by nature

7.3 Directors’ interests – shares
Directors’ interests in the ordinary shares of Ubisense Group plc, at 31 December 2014 and 31 December 2013, were as follows:

9.1 Expenses by nature
The following items have been charged/(credited) to the income statement in arriving at loss before tax:
Notes

2014
£’000

2013
£’000

Amortisation of acquired intangible assets

12

751

313

1,734,906

Amortisation and impairment of other intangible assets

12

2,937

1,332

65,161

65,161

Depreciation of owned property, plant and equipment

13

359

266

225,000

225,000

Loss on disposal of property, plant and equipment

22–

J Keith Lomas–

47,712

Operating lease rental charges – land and buildings

715

445

Richard Newell–643,354

Operating lease rental charges – other

167

135

Robert Sansom

2,493,676

2,493,676

Inventory recognised as an expense

2,884

1,057

4,518,743

5,297,796

Research and development costs expensed

766

946

Net foreign currency gains

(180)

(153)

2014
Number

2013
Number

–87,987

Richard Green*

1,734,906

Peter Harverson
Andrew Hopper

Gordon Campbell* Includes 115,617 (2013: 115,617) shares held by the RT Green Children’s Trust of which Richard Green is a trustee.

Gordon Campbell, J Keith Lomas and Richard Newell ceased to be Directors during the year and therefore no interest in sharesis disclosed at 31 December 2014, although these individuals still retain an interest in the ordinary shares of Ubisense Group Plc.

Non-recurring items

9.2

2,363

764

Auditors’ remuneration

9.3

254

216

9.2 Non-recurring items

2014
£’000

2013
£’000

Strategic Asia Pacific market entry costs

603

650

Acquisition costs

34

114

Reorganisation costs

458–

Impairment of acquired intangible assets

1,268

–

Total non-recurring items

2,363

764

There has been no change in the interests set out above between 31 December 2014 and 16 March 2015.
Paul Taylor, Robert Parker and Ian Kershaw hold no shares as at 31 December 2013 (or their appointment date if later),
31 December 2014 nor 16 March 2015.

8 Finance income and costs

2014
£’000

2013
£’000

Interest income from cash and cash equivalents

14

10

Finance income

1410Interest payable – bank

(197)

(103)

Interest payable – other

(14)

–

Finance costs

(211)

(103)

Net finance costs

(197)

(93)

During 2014, the Group incurred non-recurring items of £2.4 million of which £0.6 million (2013: £0.7 million) related to strategic Asia Pacificmarket entry. In addition, the Group incurred acquisition costs, mainly comprising professional fees, in connection with a potential futureacquisition (2013: professional fees in connection with an acquisition that did not proceed).
During 2014, the Group incurred reorganisation costs totalling £458,000 comprising mainly redundancy costs in order to align theemployee base with the future strategy of the Group.
The impairment of acquired intangible assets relates to the write-off of goodwill and customer relationships acquired with Realworld
OO Systems Limited in 2011. More details are included in note 12.

58 Ubisense Annual Report

59

Ubisense Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

9 Loss before tax: analysis of expenses by nature (continued)

The tax credit differs from the standard rate of corporation tax in the UK for the year of 21.5% (2013: 23%) for the following reasons:9.3 Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor
and its associates:
2014
£’000

2013
£’000

2014
£’000

2013
£’000

Loss before tax(4,778)(1,719)Loss before tax multiplied by the standard rate of corporation tax in the UK of 21.5% (2013: 23%)

(1,027)

(395)

137

219

Tax effects of:Fees payable to the Group’s auditor for the audit of:
Parent Company and consolidated financial statements

27

16

Expenses not deductible for tax purposes

Financial statements of subsidiaries, pursuant to legislation

100

91

Accrued contingent consideration released not subject to tax

7–

Total audit fees

127

107

Utilisation of previously unrecognised tax losses

77

(96)

Tax losses for which no deferred tax asset was recognised

734

708

–

38

(537)

(188)

Fees payable to the Group’s auditor for other services:
Tax services

74

26

Tax unprovided in prior years

Corporate Finance services

53

75

Research and development tax credits – prior years

Other services–

8

Difference on tax treatment of share options

17

74

Total non-audit fees

127

109

Re-measurement of deferred tax – change of tax rate

120–

Total auditors’ remuneration

254

216

Differential on overseas tax rates

(31)

(149)

Other temporary differences

(233)

8

Total income tax (credit) / expense

(736)

219

The auditor of Ubisense Group plc is Grant Thornton UK LLP.
During the year, the auditor was used for due diligence work as this was considered most beneficial to the Group due to the auditor’sestablished knowledge and experience of the Group’s activities. The auditor’s independence and objectivity was safeguarded throughthe use of separate engagement teams. No services were provided pursuant to contingent fee arrangements.

10 Income tax
10.1 Income tax recognised in the income statement

2014
£’000

2013
£’000

Current tax–

2Foreign tax

239

36

Research and development tax credits – prior years

(537)

(177)

Total current tax credit

(298)

(139)

Origination and reversal of temporary differences

(438)

358

Total deferred tax (credit) / expense

(438)

358

Total income tax (credit) / expense

(736)

219

UK corporation tax

Deferred tax

10.2 Factors that may affect future tax charges
The Group has tax losses of £9.3 million (2013: £8.9 million) that are available for offset against future taxable profits of those subsidiarycompanies in which the tax losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be
used to offset taxable profits elsewhere in the Group, and they have arisen in subsidiaries whose future taxable profits are uncertain.
No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries, because the earnings are continually
reinvested by the Group and no tax is expected to be payable on them in the foreseeable future.
On 3 July 2012, the UK Government substantially enacted reductions to the UK corporation tax rates. Effective from 1 April 2014,
the UK corporation tax rate reduced from 23% to 21% and effective from 1 April 2015, the rate will reduce further to 20%. As aresult, the deferred tax balances have been re-measured.

60 Ubisense Annual Report

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

10 Income tax (continued)

11 Earnings per share (EPS)

10.3 Deferred tax
The movement in deferred tax in the Consolidated statement of financial position during the year is as follows:
Deferred income tax assets

2014

2013

(4,085)(1,968)24,541

21,984969

1,034

25,51023,018

Earnings
Deferred income tax liabilities

Earnings for the purposes of basic and diluted EPS being net loss attributable
to equity holders of the parent company (£’000)

2014
£’000

2013
£’000

2014
£’000

2013
Restated£’000

At 1 January––(1,773)(653)

Weighted average number of ordinary shares for the purposes of basic EPS (’000)

Arising on acquisition of subsidiaries

–

–

–

(761)

Effect of dilutive potential ordinary shares:

Deferred tax credited to the income statement

–

–

1,085

57

– Share options (’000)

Deferred tax charged to the income statement

–

–

(648)

(416)

Weighted average number of ordinary shares for the purposes of diluted EPS (’000)

At 31 December––(1,336)(1,773)

Basic EPS (pence)(16.7)(8.9)

Diluted EPS (pence)(16.7)(8.9)

The components of deferred tax included in the Consolidated statement of financial position are as follows:
2014
£’000

2013
Restated£’000

Development costs capitalised

(448)

(901)

Intangible assets recognised on acquisition of subsidiaries

(888)

(872)

Total deferred income tax liabilities(1,336)(1,773)

Number of shares

Basic earnings per share is calculated by dividing profit for the period attributable to ordinary shareholders of the Company by theweighted average number of ordinary shares outstanding during the period. For diluted earnings per share, the weighted average
number of shares is adjusted to allow for the effects of all dilutive share options and warrants outstanding at the end of the year. Options
have no dilutive effect in loss-making years, and hence the diluted loss per share for the year is the same as the basic loss per share.
The Group also presents an adjusted diluted earnings per share figure which excludes amortisation on acquired intangible assets,share-based payments charge and non-recurring items such as acquisition, integration or reorganisation costs and impairment ofassets from the measurement of profit for the period.
Notes

Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profits will
be available against which the Group can utilise the benefits:

Tax losses carried forward
Equity-settled share options temporary differences
Total unrecognised deferred tax assets

2014
£’000

2013
£’000

2,546

2,537

201

452

2,747

2,989

Earnings for the purposes of diluted EPS being net loss attributable to equity holders of theparent company (£’000)

2014
£’000

2013
£’000

(4,085)(1,968)Adjustments:
Reversal of amortisation on acquired intangible assets (£’000)

9, 12

751

313

Reversal of share-based payments charge (£’000)

21.2

75

92

Reversal of non-recurring items (£’000)

9.2

2,363

764

Net adjustments (£’000)

3,189

1,169

Adjusted earnings (£’000)

(896)

(799)

Adjusted diluted EPS (pence)

(3.5)

(3.5)

The adjusted EPS information is considered to provide a fairer representation of the Group’s trading performance.

62 Ubisense Annual Report

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63

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

12 Other intangible assets
Goodwill
Restated£’000

Acquiredcustomer
relationships
and order
backlog£’000

Acquired
softwareproducts
Restated£’000

Capitalised
product
development
costs
£’000

Software
£’000

Total
Restated
£’000

7,418

449

529

4,424

299

13,119

–

–

–

–

–

–

2,201

1,593

408

–

173

4,375

–

–

–

3,037

161

3,198

At 31 December 2013

9,619

2,042

937

7,461

633

20,692

Exchange difference

(203)

(205)

(52)

–

(38)

(498)

–

–

–

2,956

544

3,500

9,416

1,837

885

10,417

1,139

23,694

At 1 January 2013

–

(148)

(221)

(2,314)(117)(2,800)Charge for the year

–

(120)

(193)

(1,227)(105)(1,645)

At 31 December 2013

–

(268)

(414)

(3,541)(222)(4,445)

Effects of movement in exchange rates

–

36

11

(1)

24

70

Charge for the year

–

(497)

(254)

(2,568)(289)(3,608)

Impairment for the year

(1,192)

(76)

–

(80)

–

(1,348)At 31 December 2014

(1,192)

(805)

(657)

(6,190)(487)(9,331)Cost
At 1 January 2013
Effects of movement in exchange rates
Acquisition of Geoplan
Additions

Additions
At 31 December 2014
Accumulated amortisation

Net book amountAt 31 December 2014

8,224

1,032

228

4,227

652

14,363

At 31 December 2013

9,619

1,774

523

3,920

411

16,247using a pre-tax discount rate. The discount rate is derived from the Group’s post-tax weighted average cost of capital and is adjusted
where applicable to take into account any specific risks. A discount rate of 11.5% has been used for impairment calculations performed
in 2014 (2013: 10.0% and 14.5%). The recoverable amounts of all CGUs have been determined from value-in-use calculations based on
3–5 year forecasts projected from the 2014 annual operating plan approved by the Board for each CGU, with an assumed terminal
growth rate of nil (2013: 0–3%) and no improvement in relative operating margin after the forecast period. The Board has consideredreasonable possible sensitivities in key assumptions on which the value-in-use calculations are based. If the discount factor increased
to 35%, this would not cause the carrying value to exceed the estimated recoverable amount.
There was no further impairment of intangible assets as the estimated recoverable amount exceeded the carrying value for all CGUs.

13 Property, plant and equipment

Fixtures andfittings£’000

Computerequipment
£’000

Total
£’000

At 1 January 2013

543

517

1,060

Effect of movements in exchange rates

(42)

4

(38)

Additions

52

88

140

Acquisition of subsidiary

136

–

136

–

(2)

(2)

At 31 December 2013

689

607

1,296

Effect of movements in exchange rates

(23)

(26)

(49)

Additions

556

402

958

Disposals

(331)

(96)

(427)

At 31 December 2014

891

887

1,778

At 1 January 2013

(199)

(240)

(439)

Effect of movements in exchange rates

32

3

35

Charge for the year

(88)

(178)

(266)

–

2

2

(255)

(413)

(668)

17

13

30

Charge for the year

(139)

(220)

(359)

Cost

Disposals

Accumulated depreciation

Disposals

The acquired software products, customer relationships and order backlog assets arose on the acquisition in 2013 of the Geoplan
group of companies and in 2011 of Integrated Mapping Solutions, Inc. (now merged into Ubisense Inc.) and Realworld OO Systems
Limited (now re-named Geospatial Systems Limited). Capitalised development assets relate to expenditure that can be applied toa plan or design for the production of new or substantially improved products and processes. The software assets represent assets
purchased from third parties.

At 31 December 2013

Disposals

239

92

331

The restatement of 2013 goodwill and acquired software products relates to the provisional fair value of assets acquired with theGeoplan group. Further details are included in note 24.

At 31 December 2014

(138)

(528)

(666)

At 31 December 2014

753

359

1,112

At 31 December 2013

434

194

628

During the year, an impairment expense of £1,192,000 was recognised in respect of goodwill and £76,000 in respect of acquired customer
relationships. This impairment expense related to goodwill and unamortised customer relationships relating to the acquisition of Realworld
OO Systems Limited in 2011, which have been written down to £nil carrying value at 31 December 2014. This impairment arose as a resultof the Group strategy focussing on higher margin Solutions revenue streams and exiting from specific lower margin business areas.
In assessing whether intangible assets have been impaired, the carrying amount of the cash-generating unit (“CGU”) or groups of CGUs
(including goodwill) is compared with the recoverable amount of the CGU or groups of CGUs. The recoverable amount is the higherof fair value less costs to sell and value in use. In the absence of readily available information about the fair value of a cash-generating
unit, the recoverable amount is deemed to be the value in use for the purposes of performing an impairment test of goodwill, unless thiswould lead to an impairment loss. If goodwill would be impaired using value in use as the recoverable amount, a fair value less costs tosell assessment would be performed as this may lead to a higher recoverable amount. The Group calculates the value in use using a
discounted cash flow model. The future cash flows are adjusted for risks specific to the cash-generating unit and are discounted

Effect of movements in exchange rates

Net book amount64 Ubisense Annual Report

Ubisense Annual Report

65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

14 Inventories

2014
£’000

2013
Restated£’000

Raw materials

1,088

811

Finished goods

1,793

1,777

Total inventories

2,881

2,588

There are no impairment provisions against inventory included in the above amounts (2013: £nil). The Group’s inventories are comprisedof products which are not generally subject to rapid obsolescence on account of technological, deterioration in condition or market trends.

15 Trade and other receivables

Notes

Trade receivables, gross

2014
£’000

2013
£’000

8,961

7,072

Allowances for doubtful debts

15.1

(68)

(141)

Trade receivables, net

15.2

8,893

6,931

4,134

3,347

211

285

1,255

645

Corporation tax recoverable

521

177

VAT and taxation receivable

527

162

15,541

11,547

Amounts recoverable on contracts
Other receivables
Prepayments and accrued income

Total trade and other receivables

15.2 Ageing of past due but not impaired receivables

2014
£’000

2013
£’000

5,492

5,114

2,494

1,500

907

317

8,893

6,931

2014
£’000

2013
£’000

Cash at bank and in hand

3,697

3,848

Short-term bank deposits

–

116

3,697

3,964

Neither past due nor impaired
Past due but not impaired:– 0 to 90 days overdue– More than 90 days overdue
Total

16 Cash and cash equivalents

Cash and cash equivalents

The carrying amount approximates to fair value because of the short-term maturity of these instruments, being no greaterthan three months.
Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term cash deposits earninterest at fixed rates for the term of the deposit.
The composition of cash and cash equivalents by currency is as follows:
2014
£’000

2013
£’000

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.

British Pound (GBP)

904

489

Due to having a blue chip customer base and effective credit control procedures, the Group is not significantly exposed to the riskof bad debt. The following disclosures are in respect of trade receivables that are either impaired or past due. The individually
impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations. Any impairment is assessedon a customer-by-customer basis following a detailed review of the particular circumstances. To the extent they have not been
specifically provided against, the trade receivables are considered to be of sound credit rating.

Euro (EUR)

1,361

496

US Dollar (USD)

1,169

739

Japanese Yen (JPY)

122

1,718

South Korean Won (KRW)

36

352

Canadian Dollar (CAD)

103

11

15.1 Movement in allowance for doubtful debts

2014
£’000

2013
£’000

Philippine Peso (PHP)2–

At 1 January

(141)

(80)

Turkish Lira (TRY)–

159

Amounts recovered in the year

33

2

3,697

3,964

Amounts written off in the year

41–

Allowance made

(1)

(63)

At 31 December

(68)

(141)

Cash and cash equivalents

66 Ubisense Annual Report

67

Ubisense Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

17 Trade and other payables

2014
£’000

2013
£’000

Payments received on account

2,137

2,765

Trade payables

4,021

3,570

Trade accruals

2,020

1,748

51

41

Other taxation and social security

822

667

Other payables

765

705

Notes

Current tax liability

Other liabilities – deferred consideration

24.2

–

172

Other liabilities – contingent consideration

24.2

–

355

9,816

10,023

Total trade and other payables

All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation of fair value.

In August 2013, the Group agreed a new three-year bank loan facility of up to £5.0 million to provide additional future working capital
capacity and is repayable in full in August 2016. Interest is payable at LIBOR plus 3% and the facility is secured on the fixed and floating
assets of the Group. The facility is subject to certain operating performance and net worth covenants of the business. As at 31 December
2014, and as at 16 March 2015, £4.0 million (31 December 2013: £3.5 million) is outstanding and is repayable by Ubisense Limited to
HSBC Bank plc.
In June 2014, the Group agreed a new one-year bank loan of 130 million Japanese Yen. The facility was increased to 200 million
Japanese Yen in October 2014. The loan is unsecured and interest is payable at 0.99%. At 31 December 2014, and as at 16 March 2015,
170 million Japanese Yen (2013: nil) is outstanding and repayable by Geoplan Company Limited to Mizuho Bank.

Rent deposit repayable

Total
£’000

Balance at 1 January 2013

21,919,744

438

22,251

22,689Issued under share-based payment plans

399,593

8

103

111

Issued on acquisition of subsidiary759,809

15

1,696

1,711

Change in year

1,159,402

23

1,799

1,822

Balance at 31 December 2013

23,079,146

461

24,05024,511

54,1071

23

24

Issued on placing to institutional shareholders

1,929,589

39

3,978

4,017

Change in year

1,983,696

40

4,001

4,041

25,062,842

501

28,051

28,552

Issued under share-based payment plans

Balance at 31 December 2014

During the period, the Company issued 1,983,696 shares, increasing the total number of shares in issue from 23,079,146 to 25,062,842
as follows:	1,929,589 shares at £2.20 per share for a total gross consideration of £4,246,000 with share issue costs of £229,000 written off
against the share premium account	54,107 shares as a result of options exercised with a weighted average exercise price of £0.45 per share for total cash considerationof £24,334.

Options are generally granted at an exercise price equal to the market price of the shares under option at the date of the grant. The
options generally vest evenly over three years on the anniversary from the date of the grant or entirely on the third anniversary fromthe date of grant, depending on continuing service during the vesting period. The contractual life of the options is 10 years from thedate of grant, after which they expire if unexercised.

Notes

2014
£’000

2013
£’000

24.2

414

429

179

–

11

–

604

429

In September 2014, Ubisense Limited entered a new 10-year lease on the Group’s headquarter offices. The property provision is a
dilapidation provision to restore the office to its original state. It is included in fixtures and fittings within Property, Plant and Equipment
and is being depreciated over the lease term.

Share premium£’000

21.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over shares in the Company to the best-performing employees of the Grouparound the world.

All covenants tests during the year were met and all tests for the forthcoming 12 months are forecast to be met based on our annual
operating plan and our latest rolling forecast.

Property provisions

Share capital£’000

21 Share-based payments: options

In August 2014, the Group agreed a new additional four year bank loan facility of £2.0 million to provide funds for acquisitions andis repayable in quarterly instalments. Interest is payable at Bank of England base rate plus 3% and the facility is secured on the fixedand floating assets of the Group. The facility is subject to certain operating and net worth covenants of the business. As at 31 December
2014, £2.0 million (31 December 2013: £nil) was outstanding and at 16 March 2015 £1.9 million was outstanding. The loan is repayable by
Ubisense Limited to HSBC Bank plc.

Contingent consideration

Number ofordinary sharesof £0.02 each

The Company has one class of ordinary shares which carry no right to fixed income.

18 Bank loans

19 Other payables

20 Share capital and premium

21.2 Analysis of amounts recognised in the financial statements(a) Analysis of amounts recognised in the Consolidated income statement

2014
£’000

2013
£’000

Total share-based payments charge recognised in operating profit

75

92

2014
£’000

2013
£’000

75

92

(b) Cumulative amounts included within equity in the Consolidated statement of financial position

2014
£’000

2013
£’000

Cumulative reserve credit for share-based payments

821

746

(b) Analysis of amounts recognised in the Consolidated statement of changes in equity in the year

Net share-based payments credit recognised in equity

68 Ubisense Annual Report

Ubisense Annual Report

69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

21 Share-based payments: options (continued)

22 Operating lease commitments

21.3 Reconciliation of movements in equity-settled share-based payment arrangements in the year

Leases as lessee
At 31 December 2014, the Group has lease agreements in respect of property and equipment for which payments extend over a numberof years. The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets.
The Group lease rental charge is disclosed in note 9.1. There are no other material off-balance sheet arrangements.

Arrangement

Options

Award
date
Year

Vests
Year

ExpiresYear

Exercise
price£Awardsoutstanding at
1 January 2014
NumberGranted during
the year
NumberExercisedduringthe year
NumberForfeited during
the year
NumberAwardsoutstanding at
31 December
2014
NumberAwardsexercisable at
31 December
2014
Number2007 2008–10

2017

0.900

300

–

–

–

300

300

2008

2009–11

2018

0.900

650

–

–

–

650

650

2009

2010–12

2019

0.900

3,750

–

–

–

3,750

3,750

2010

2011–13

2020

0.140

883,144–(35,690)–

847,4542011

2012–14

2021

1.050

408,450–(18,417)(3,916)2011

2012–14

2021

1.975

11,386––2012

2013–15

2022

2.125

344,000–2013

2014–16

2023

2.055

371,5002014

2015–17

2024

2.250

Total
Weighted average exercise price (£)

The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings

Other

Lease ending

2014
£’000

2013
£’000

2014
£’000

2013
£’000

847,454

No later than one year

785

433

121

111

386,117

386,117

Later than one year and no later than five years

2,441

1,409

85

117

(11,386)––

Later than five years

3,043

550

–

–

–

(28,000)

316,000

210,667

Total

6,269

2,392

206

228

–

–

(20,000)

351,500

117,167–

447,500–(10,000)

437,500–

2,023,180

447,500(54,107)(73,302)2,343,271

1,556,105

1.025

2.250

0.450

2.042

1.240

0.777

In May 2014, 447,500 share options were granted to employees with an exercise price of £2.25 per share, being the market
value at the date of exercise. The weighted average share price at the date of exercise for options exercised during the year
was £1.921 (2013: £2.1053).

The above table reflects the committed cash payments under operating leases, rather than the expected charge to the income
statement in the relevant periods. The effect on the income statement will differ from the above figures due to the amortisationof rent-free and discounted rent periods included in property leases signed in 2012 and 2014. The expected charge in 2015 for
operating leases is expected to be £84,000 higher than the committed cash payments shown above.
The Group has guaranteed rent bonds issued by its banks on its behalf totalling £134,000 as at 31 December 2014 (2013: £122,000).
These are not expected to result in any material financial loss.

23 Principal subsidiaries

Proportionof ordinary
shares held by
non-controllinginterests (%)

Country ofincorporation

Principal activity

Proportionof ordinary
shares held bygroup (%)

Ubisense Limited

UK

Location solutions

100–

Ubisense GmbHGermany

Location solutions

100–

Ubisense SAS

FranceLocation solutions

100–

The following assumptions were used in the model for options granted during the years ended 31 December 2014 and 31 December 2013.

Ubisense Inc.

US

Location solutions

100–

Instrument

Ubisense Solutions Inc.

CanadaLocation solutions

100

–

UK

Location solutions

100–

Ubisense Inc.

Japan

Intermediate holding company

100–

21.4 Principal assumptions
The fair value of share-based payments grants has been valued using the Black–Scholes option-pricing model. Expected volatility wasdetermined based on the historic volatility of comparable companies. The expected life is the expected period from grant to exercise
based on management’s best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations. The
risk-free rate of return is an average yield on the zero-coupon UK Government Bond in issue at the date of grant with a similar life
to the option or warrant.

Number granted
Grant dateSubsidiary

OptionOption447,500

421,500

23 May 2014 19 April 2013

Geospatial Systems Limited

Share price at grant date (£)

2.250

2.055

Geoplan Company Limited*Japan

Location solutions

77

23

Exercise price (£)

2.250

2.055

Binary Star Developments K.K.*

Japan

Non-trading

100–

Fair value per option (£)

0.60

0.30

Ubisense Company Limited*

South Korea

Location solutions

100–

Expected life (years)

3.0

3.0

Geoplan Philippines, Inc.*

Philippines

Location solutions

100–

Expected volatility (%)

34

20

Risk-free interest rate (%)

1.83

0.79

–

–

Expected dividends expressed as a dividend yield (%)

All subsidiaries are directly held by Ubisense Group plc except those denoted * which are held by intermediate holding companies.
All subsidiaries prepare local statutory accounts up to 31 December each year except for Geospatial Systems Limited which preparesaccounts up to 31 March and Binary Star Developments K.K. to 31 January. For subsidiaries which have a different financial year-end
to the Group, additional co-terminous accounts are prepared reflecting the same financial reporting as the Group for the purposesof consolidation.

70 Ubisense Annual Report

Ubisense Annual Report

71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24 Business combinations
24.1 Subsidiaries acquired
Subsidiary

Country of incorporation

Principal activity

Date of acquisition

Proportion ofequity interest
acquiredJapan

Location solutions

3 December 2013100%

Ubisense Inc.

The Ubisense Inc. (formerly named Geoplan Interworks K.K.) group of companies (“Geoplan”) was acquired to enhance the Group’s
geographic reach into the Asian market. The Geoplan group is headquartered in Japan and its markets across the region will be
developed from there.

24.3 Assets acquired and liabilities recognised at the date of acquisition
As at 31 December 2013, the fair values of acquired assets, liabilities and goodwill for Geoplan were determined on a provisional
basis due to the proximity of the acquisition to the year end. The post-acquisition review of the fair value of the net assets acquired
was completed in the current period. The following amendments have been retrospectively applied to net assets acquired andliabilities recognised at the date of acquisition.
At 31 December
2013
£’000

Fair value
adjustment£’000

At 31 December
2013
Restated£’000

Acquired software products

626

(218)

408

1,593

–

1,593

AssetsNon-current assets

24.2 Consideration transferred

Total
£’000

Cash consideration paid

635

Acquired customer relationships and order backlog

Consideration satisfied by issue of Ubisense shares

1,711

Other intangible assets

173

–

173

Deferred consideration

178

Property, plant and equipment

132

–

132

Contingent cash consideration arrangement816

Total non-current assets

2,524

(218)

2,306

Consideration transferred

3,340

Current assets

Consideration was satisfied by issue of Ubisense shares, comprised 759,809 new ordinary shares of nominal value of £0.02
in Ubisense at a price of 225.25 pence per ordinary share, being the average of the volume-weighted mid-market closing
price on each of the preceding five business days.

Inventories

1,605

(518)

1,087

Trade and other receivables

1,080

–

1,080

Cash and cash equivalents

2,481

–

2,481

The deferred consideration was paid in full in January 2014.

Total current assets

5,166

(518)

4,648

Under the contingent cash consideration arrangement, the Group is required to pay additional amounts to the vendors of Geoplan
based on the achievement of two separate performance milestones that may arise between 2014 and 2017 with a combined
undiscounted range of outcomes between nil and 149 million Japanese Yen (£nil to £892,000).

Liabilities

At acquisition, the fair value of the contingent consideration was 136 million Japanese Yen (£816,000) being management’s best
estimate of the probability-adjusted estimated discounted future cash flows. The discount rate used is 3.5%, based on the Group’s
estimated incremental borrowing rate for unsecured liabilities at the reporting date, and therefore reflects the Group’s credit position.
The fair value amount recognised for this arrangement is revised based on the most recent management estimates and, as theliability is denominated in Japanese Yen, it is subject to the impact of exchange rates.

Trade and other payables(4,500)–(4,500)Total current liabilities(4,500)–(4,500)

Deferred income tax liabilities

(843)

83

(760)

Total non-current liabilities

(843)

83

(760)

Non-controlling interest

(704)

150

(554)

Fair value of identifiable net assets acquired

1,643

(503)

1,140

At 31 December
2013
£’000

Effect ofexchange rates£’000

Paid in the
period£’000

Unwinding of
discount£’000

Current liabilities

Non-current liabilities

Fair value
adjustment£’000

At 31 December
2014
£’000

Contingent consideration – non-current

429

(29)

–

14

–

414

Contingent consideration – current

355

7

(330)

–

(32)

–

Total contingent consideration

784

(22)

(330)

14

(32)

414

Deferred consideration

172

7

(179)

–

–

–

Total

956

(15)

(509)

14

(32)

414

Acquisition-related costs amounting to £464,000 have been excluded from the consideration transferred and have been recognised
as an expense within the “operating expenses” line item in the consolidated income statement in 2013.

72

Ubisense Annual Report73

Ubisense Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24 Business combinations (continued)
24.4 Goodwill arising on acquisitions

Total
£’000

Fair value of consideration transferred

3,340

Less: fair value of identifiable net assets acquired(1,140)Goodwill arising on acquisitions

2,200

Effect of movement of exchange rates(203)

Goodwill at 31 December 2014

1,997

26.3 Foreign currency sensitivity analysis
The following table illustrates the sensitivity of profit and equity in regard to the Group’s financial assets and financial liabilities andthe USD/GBP, EUR/GBP and JPY/GBP exchange rates “all other things being equal”. It assumes a +/-5% change in the GBP exchange
rate against the relevant foreign currencies. The percentage has been determined based on the average market volatility inexchange rates in the previous 12 months.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at theperiod end. A positive number indicates an increase in profit and equity.
Japanese Yen

US Dollars

Euros

2014
£’000

2013
£’000

2014
£’000

2013
£’000

2014
£’000

2013
£’000

Goodwill arose on the acquisition of Geoplan in respect of the benefits of a highly knowledgeable workforce, expected operational
synergies, revenue growth and future market development. These benefits are not recognised separately from goodwill because
they do not meet the recognition criteria for identifiable intangible assets.

Effect of a 5% strengthening in relevant exchange rate on:
Income statement

(5)

–

182

41

221

33

Goodwill is not expected to be deductible for tax purposes.

Equity

(5)

–

182

41

221

33

24.5 Impact of acquisitions on the results of the Group
Geoplan contributed £109,000 to the consolidated profit from 3 December 2013 to 31 December 2013. If Geoplan had beenacquired on 1 January 2013, revenue of the Group for 2013 would have been £31,649,000, adjusted EBITDA would have been
£870,000 and the loss before tax would have been £1,903,000.

Effect of a 5% weakening in relevant exchange rate on:
Income statement

5

–

(201)

(37)

(244)

(30)

Equity

5

–

(201)

(37)

(244)

(30)

24.6 Post-period disposal
The Group is in the progress of selling Geoplan Philippines Inc. under a management buy-out. This proposed transaction will
not have a material impact on the Group or on the results for 2015.

Exposure to foreign currency exchange rates vary during the year, depending on the volume of transactions. Nonetheless, the analysis
above is considered to be representative of the Group’s exposure to currency risk.
26.4 Interest rate sensitivity
The Group’s exposure to interest rate risk relates primarily to the Group’s variable rate bank loan facilities of £7.0 million, which arepartially offset by cash held at variable rates. Interest is payable at LIBOR plus 3% on the £5.0 million facility and £4.0 million was
outstanding at 31 December 2014 (2013: £3.5 million). Interest is payable at Bank of England base rate plus 3% on the £2.0 million
facility, which was fully drawn at 31 December 2014 (2013: £nil). Other bank loans are at a fixed interest rate of 0.99%.

25 Related party transactions
Other than compensation of key management personnel disclosed in note 6.3 there are no transactions with other related parties.
Full details of Directors’ remuneration are given in note 7.
There were no other transactions with Directors of the Company.

26 Financial risk management26.1 Risk management objectives and policies
The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by category aresummarised below. The main types of risks are market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.
The Group’s risk management is coordinated at its headquarters, in close cooperation with the Board of Directors, and focuseson actively securing the Group’s short to medium-term cash flows. The Group does not actively engage in the trading of financial
assets /for speculative purposes. The most significant financial risks to which the Group is exposed are described below.

Foreign currency denominated monetary assets and liabilities which expose the Group to currency risk are disclosed below.
The amounts shown are those not denominated in the local functional currency, translated into GBP at the closing rate.
US Dollars

Euros

2014
£’000

2013
£’000

2014
£’000

2013
£’000

2014
£’000

2013
£’000

Assets

–

–

2,240

777

886

623

Liabilities

–

–

(199)

(5)

–

(5)

All foreign currency financial assets and liabilities are classified as current.

2014
£’000

2013
£’000

Income statement

23

17

Equity23

17

Income statement

(23)

(17)

Equity(23)(17)

Effect of a 0.5% decrease in interest rate on:

26.2 Foreign currency risk management
The Group operates globally and undertakes certain transactions denominated in foreign currencies, predominantly in US dollars (USD),
Euros (EUR) and Japanese Yen (JPY), exposing the Group to foreign currency risk. The Group’s risk management policy is to maintain natural
hedges where possible, by matching foreign currency revenue and expenditure. The Group does not enter into forward exchange contracts
to mitigate the exposure to foreign currency risk as the Group’s currency transactions are not considered significant enough to warrant this.

Japanese Yen

The following table illustrates the sensitivity of the net profit of the Group for the year and equity to a reasonably possible change ininterest rates of +/-0.5%. These changes are considered to be reasonably possible based on observation of current market conditions.
The calculations are based on a change in the interest rate with effect from the beginning of the year and the financial instruments heldat the reporting date that are sensitive to interest rate changes. All other variables are held constant. A positive number indicates anincrease in profit or equity.

Effect of a 0.5% increase in interest rate on:

74

Ubisense Annual Report

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75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

26 Financial risk management (continued)
26.5 Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge a contractual obligation resulting in financial loss to the Group. The Group’s
maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised
in note 26.8, which are principally cash and cash equivalents and trade receivables.
Cash and cash equivalents are held at banks with good independent credit ratings in accordance with the Group Treasury policy.
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by the Group, andincorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports
on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties.
The Group’s management considers that its financial assets that are not impaired or past due for each of the reporting dates underreview are of good credit quality. All receivables are subject to regular review to ensure that they are recoverable and any issues
identified as early as possible. In order to manage credit risk the Directors set limits for customers based on a combination of payment
history and third party credit references. Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt
ageing and collection history. In addition many of the Group’s customers, and approximately 80% by balance at any given time, arelarge utility companies and other blue chip companies that would be considered a low credit risk.
The amount of exposure to any single counterparty or a group of counterparties having similar characteristics is subject to a limit, whichis reassessed periodically by management. At 31 December 2014, no customers individually accounted for more than 10% of the tradereceivables balance.
None of the Group’s financial assets are secured by collateral or other credit enhancements.
Details of certain trade receivables at 31 December 2014 that have not been settled by the contractual due date but are not considered
to be impaired are included in note 15.2.
26.6 Liquidity risk analysis
Liquidity risk is the risk arising from the Group not being able to meet its obligations as they fall due. The Group seeks to manage thisrisk by monitoring scheduled debt servicing payments for long-term financial liabilities, regularly reviewing forecast inflows and outflows
due in day-to-day business and investing cash assets safely and profitably. The data used for analysing these cash flows is consistent
with that used in the contractual maturity analysis below.
Cash flow forecasting is performed at the subsidiary level and aggregated by Group finance. Rolling cash flow forecasts are used by
the Group to monitor liquidity requirements to ensure it has sufficient cash to meet operational needs, as well as maintaining sufficient
headroom so that loan covenants are not breached. The Group policy throughout the year has been to remit surplus working capitalbalances at the subsidiary level to Group treasury and place on short-term deposit or interest-bearing reserve accounts and to draw
down on borrowing facilities and distribute funds locally when required. As disclosed in note 18, the Group has total bank loan facilitiesof £8.1 million, of which £6.9 million was drawn down at 31 December 2014 (2013: £5.0 million facility, £3.5 million drawn down).
The Group considers expected cash flows from financial assets, predominately cash and trade receivables, in assessing andmanaging liquidity risk. The Group’s cash and trade receivable resources at 31 December 2014 (see note 15) exceed the current
cash outflow requirements.
As at 31 December 2014, the Group’s financial liabilities, including interest payments where applicable, have contractual maturities
as summarised in the following:

26.6 Liquidity risk analysis (continued)

Current

Non-current

Within6 months£’000

Between
6 and 12 months£’000

Between1 and 5 years£’000

Later than
5 years
£’000

9,465

351

120

–

927

–

6,000

–

–

–

425

179

6,195

355

430

–

–

–

3,500

–

As at 31 December 2014
Trade and other payables
Bank loans
Provision for liabilities
As at 31 December 2013
Trade and other payables
Bank loans
Financial assets used for managing liquidity risk.
Cash flows from trade and other receivables are contractually due within six months in the majority of cases. Extended credit terms
have been agreed with specific customers. Cash is generally held in accounts with immediate notice. Where surplus cash deposits
are identified these are placed in accounts with access terms of no more than three months.
26.7 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilst maximising
the return to stakeholders and to maintain an optimal capital structure to reduce the long-term cost of capital. The capital structureof the Group consists of cash and cash equivalents and capital and reserves attributable to the owners of the Company, and theGroup’s borrowing facilities.
In order to maintain or adjust the capital structure, the Group may issue shares, take on debt, sell assets to raise cash, adjust theamount of dividends payable to shareholders or return capital to shareholders.
The capital structure is continually monitored by the Group. The Group’s strategy is to have a capital structure that allows investment
in long-term profitable growth, takes into account prevailing trading conditions and seeks to improve balance sheet efficiency over time.
The Group is not subject to externally imposed capital requirements.
The Group entered into a £5.0 million bank facility in 2013 of which £4.0 million was drawn as at 31 December 2014 (2013: £3.5 million)
in order to provide working capital capacity to fund business growth. A further £3.1 million of loan facilities were entered into in 2014,£2.0 million denominated in GBP and £1.1 million denominated in JPY. At the year end, £2.9 million of these new facilities were drawnof which £2.0 million was denominated in GBP and £0.9 million was Japanese Yen. The Group may need to seek further capital,
through equity or debt, in the future in order to support the current growth plans.

76

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Ubisense Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDINDEPENDENT AUDITOR’S REPORT

26 Financial risk management (continued)

We have audited the parent company financial statements of Ubisense Group Plc for the year ended 31 December 2014 which comprisethe parent company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation isapplicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

to the members of Ubisense Group Plc

26.8 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 in note 3. The carrying amounts presented in the Consolidated Statement of
Financial Position relate to the following categories of financial instrument:
Notes

2014
£’000

2013
£’000

Financial assets
Loans and receivables:

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to themin an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 37, the directors are responsible for the preparationof the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit andexpress an opinion on the parent company financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

– Trade receivables

15

8,893

6,931

– Amounts recoverable on contracts

15

4,134

3,347

– Other receivables

15

2,514

285

– Cash and cash equivalents

16

3,697

3,964

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.

19,238

14,527

Opinion on financial statements

Total financial assets
Financial liabilities

Scope of the audit of the financial statements

In our opinion the parent company financial statements:

Amortised cost:

give a true and fair view of the state of the company’s affairs as at 31 December 2014;– Trade payables

17

4,021

3,570

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and– Trade accruals

17

2,020

1,748

have been prepared in accordance with the requirements of the Companies Act 2006.

– Other payables

17

3,775

705

– Deferred consideration

24.2

–

172

– Contingent consideration

24.2

414

785

– Provisions

19

190

–

– Bank loans

18

6,927

3,500

17,347

10,480Total financial liabilities

77

Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if,
in our opinion:	adequate accounting records have not been kept by the parent company, or returns adequate for our audit have notbeen received from branches not visited by us; or	the parent company financial statements are not in agreement with the accounting records and returns; or	certain disclosures of directors’ remuneration specified by law are not made; or	we have not received all the information and explanations we require for our audit.

Other matter
We have reported separately on the Group financial statements of Ubisense Group plc for the year ended 31 December 2014.

Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
16 March 2015

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Ubisense Annual Report

Ubisense Annual Report

COMPANY BALANCE SHEETNOTES TO THE COMPANY FINANCIAL STATEMENTS

for the year ended 31 December 2014

1 Principal accounting policies

Notes

2014
£’000

2013
£’000

3

17,99917,332The principal accounting policies are summarised below. They have been applied consistently throughout the year and the preceding year.

10,113

7,540

The Company has taken advantage of the exemption allowed under FRS 8 “Related party disclosures” not to show transactions withother wholly owned companies in the Group headed by Ubisense Group plc.

19

288

10,132

7,828

(143)

(403)

Net current assets

9,989

7,425

Total assets less current liabilities

27,98824,757

Net assets

27,98824,757

Fixed assets
Investments in subsidiaries
Current assets
Debtors

4

Cash at bank and in hand

Creditors – amounts falling due within one year

5

Capital and reserves
Called-up share capital

6

501

461

Share premium account7

28,051

24,050Share-based payment reserve

7

821

746

Profit and loss reserve7(1,385)(500)

Equity shareholders’ funds

827,98824,757

The notes on pages 45 to 76 are an integral part of these consolidated financial statements.
The financial statements were approved by the Board of Directors on 16 March 2015 and signed on its behalf by:

Richard Green

Robert Parker

Chief Executive Officer

Chief Financial Officer

Ubisense Group plc
Registered number: 05589712

79

The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been
prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards and law.

Share-based payments
The Company issues equity-settled share-based payments to certain employees of its subsidiaries. Equity-settled share-based payments
are measured at fair value at the date of grant using the Black–Scholes pricing model. The expected life used in the model has beenadjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The share-based payment is accounted for as a capital contribution to the subsidiaries. Investments in subsidiaries are increased by theaggregate amount of share-based payment with a corresponding increase in shareholders’ funds for the same amount.
Investments in subsidiaries
Fixed asset investments are shown at cost less provision for impairment.
Deferred taxation
Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to
pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they
are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not thatthey will be recovered. Deferred tax assets and liabilities are not discounted.

2 Loss for the year
As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss accountfor the year. Ubisense Group plc reported a loss for the financial year ended 31 December 2014 of £885,000 (2013: £835,000).
The Company does not have any employees (2013: nil). Directors’ emoluments are disclosed in note 7 of the consolidated
financial statements. The Directors were not remunerated by the parent Company.

80 Ubisense Annual Report

Ubisense Annual Report

81

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

3 Investments in subsidiaries

Investments
in subsidiaries£’000

Cost and net book amountAt 1 January 2014

17,332

Additions592

Capital contribution relating to share-based payments

75

At 31 December 2014

17,999Sharepremium£’000

Share-based
payment
reserve£’000

Profit andloss reserve£’000

24,050746(500)

Loss for the year

–

–

(885)

Reserve credit for equity-settled share-based payment

–

75

–

Premium on new share capital

4,230

–

–

Share issue costs

(229)

–

–

Change in year

4,001

75

(885)

28,051821(1,385)

7 Reserves

Balance at 1 January 2014

Additions
Additions in the year relate to a subscription of new shares in existing subsidiary companies; Ubisense Group Plc purchased
55 million shares in Ubisense Inc. (formerly named Geoplan Interworks K.K.) for consideration of 100 million Japanese Yen.

Balance at 31 December 2014

Capital contribution
The capital contributions relating to share-based payments arise because the Company has granted share options to theemployees of its various subsidiaries.

8 Reconciliation of movements in shareholders’ funds

2014
£’000

2013
£’000

Loss for the year

(885)

(835)

Reserve credit for equity-settled share-based payment

75

92

Issue of new share capital

40

23

Premium on new share capital

4,001

1,799

Net change in shareholders’ funds

3,231

1,079

Shareholders’ funds at 1 January

24,757

23,678

Shareholders’ funds at 31 December

27,98824,757

4 Debtors
Amounts owed by subsidiary undertakings

2014
£’000

2013
£’000

10,113

7,537

–

3

10,113

7,540

Other debtors

5 Creditors: amounts falling due within one year

2014
£’000

2013
£’000

Trade accruals

143

403

6 Share capital

2014
Number

2013
Number

2014
£’000

2013
£’000

25,062,842

23,079,146

501

461

Allotted, called up and fully paid
Ordinary shares of £0.02 each

A description of the movements in share capital in the year is given in note 20 of the consolidated financial statements.

82 Ubisense Annual Report

Ubisense Annual Report

83

NOTICE OF ANNUAL GENERAL MEETING
Ubisense Group plc(Incorporated and registered in England and Wales with registered number 05589712)

Notice is hereby given that the annual general meeting (“Meeting”) of Ubisense Group plc (the “Company”) is to be held at theGroup Head Office at St. Andrew’s House, St. Andrew’s Road, Chesterton, Cambridge, CB4 1DL on 24 April 2015 at 8.30 a.m.
You will be asked to consider and vote on the resolutions below. Resolutions 1, 2, 3, 4 and 5 will be proposed as ordinary
resolutions and resolution 6 will be proposed as a special resolution.
Ordinary business
Report and accounts
1.		THAT the Company’s annual accounts for the financial year ended 31 December 2014, together with the Directors’ report andAuditor’s report on those accounts, be received and adopted.
Re-election of Directors
2.		THAT Paul Taylor, who retires by rotation and offers himself for re-appointment by general meeting, be re-elected as a Directorof the Company.
3.		THAT Richard Green, who retires by rotation and offers himself for re-appointment by general meeting, be re-elected as a Directorof the Company.
Re-appointment of auditors
4.		THAT Grant Thornton UK LLP be reappointed as the Company’s auditors to hold office from the conclusion of this meeting until
the conclusion of the next meeting at which accounts are laid before the Company and that the Directors be authorised to agree
the remuneration of the auditors.

6.		THAT subject to and conditional upon the passing of resolution number 5 above, the Directors be and are hereby generally authorisedin accordance with Section 570 of the Act to allot equity securities (as defined in Section 560 of the Act) of the Company for cash as if
Section 561(1) of the Act did not apply to any such allotment, provided that this authority shall be limited to:a.		the allotment of equity securities in connection with an offer by way of rights in favour of the holders of equity securities in proportion(as nearly as may be possible) to the respective number of ordinary shares of £0.02 each held by them, but subject to such exclusions
or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements or legal or practicalproblems in respect of overseas holders or otherwise;b.		the allotment of equity securities in connection with options granted in accordance with the Company’s articles of association prior to
the Company’s admission to trading on the AIM Market of the London Stock Exchange up to an aggregate nominal value of £24,765;c.		the allotment of equity securities (otherwise than pursuant to sub-paragraphs (a) and (b) above) up to a maximum aggregate nominal
value of £75,189 (being the nominal value of approximately 15% of the issued share capital of the Company),
and this authority shall expire on the earlier of the conclusion of the next Annual General Meeting of the Company held after the dateon which this resolution becomes unconditional and the date 15 months after the passing of this resolution save that the Company may
make any offer(s) or enter into any agreement(s) before such expiry which would or might require equity securities to be allotted after such
expiry and the Directors may allot equity securities pursuant to any such offer(s) or agreement(s) as if the authority conferred hereby had
not expired. This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot equity securities
but without prejudice to any allotment of equity securities already made, offered or agreed to be made pursuant to such authorities.
By order of the Board

Special business
Issue of ordinary shares
5.		THAT the Directors be hereby generally and unconditionally authorised and empowered pursuant to and in accordance with
Section 551 of the Companies Act 2006 (the ”Act”) to exercise all the powers of the Company to allot shares and/or grant rights
to subscribe for or to convert any security into shares (“Rights”):a.		up to an aggregate nominal value of £167,086 (being the nominal value of approximately one third of the issued share capitalof the Company); andb.		up to an aggregate nominal value of £24,765 in connection with options granted in accordance with the Company’s articles
of association prior to the Company’s admission to trading on the AIM Market of the London Stock Exchange,such authorities to expire on the earlier of the next Annual General Meeting of the Company held after the date on which this resolution
becomes unconditional and the date 15 months after the passing of this resolution, save that the Company may at any time before
such expiry make any offer(s) or enter into any agreement(s) which would or might require shares to be allotted or Rights to be granted
after such expiry and the Directors may allot shares or grant Rights in pursuance of any such offer(s) or agreement(s) as if the authority
conferred hereby had not expired. This resolution revokes and replaces all unexercised authorities previously granted to the Directors
to allot shares or grant Rights but without prejudice to any allotment of shares or grant of Rights already made, offered or agreed to bemade pursuant to such authorities.

Robert Parker
Company Secretary
Ubisense Group plc
St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge
CB4 1DL
16 March 2015

84 Ubisense Annual Report

Ubisense Annual Report

NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING
Ubisense Group plc

Entitlement to attend and vote1.		Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members
registered on the Company’s register of members:
		 At the time which is 48 hours prior to the Meeting; or,		 	If this Meeting is adjourned, at the time which is 48 hours prior to the adjourned Meeting,		 shall be entitled to attend and vote at the Meeting.
Appointment of proxies
2.		If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or
any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting.
You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
3.		If you are not a member of the Company but you have been nominated by a member of the Company to enjoy information rights,
you do not have a right to appoint any proxies under the procedures set out in this “Appointment of proxies” section.
4.		A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint
the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you
wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) andgive your instructions directly to them.
5.		You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may notappoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, you may photocopy theproxy form. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as yourproxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction is oneof multiple instructions being given. All forms must be signed and should be returned together in the same envelope. Failure to
specify the number of shares to which each proxy appointment relates or specifying more shares than the number of shares heldby you at the time set out in note 1 above will result in the proxy appointments being invalid.
6.		A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against
the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxywill vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
Appointment of proxies using hard-copy form
7.		The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.
		 To appoint a proxy using the proxy form, the form must be:		 	Completed and signed;		 	Sent or delivered to The Company Secretary, Ubisense Group plc, St. Andrew’s House, St. Andrew’s Road,
Chesterton, Cambridge CB4 1DL or emailed to The Company Secretary at companysecretary@ubisense.net; and		 	Received by The Company Secretary no later than 48 hours prior to the time set for the start of the Meeting.
		CREST members should use the CREST electronic proxy appointment service and refer to note 8 below in relation
to the submission of a proxy appointment via CREST.
		In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf
by an officer of the company or an attorney for the company.
		Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority)
must be included with the proxy form.
		In each case the proxy appointment must be received not less than 48 hours before the time for the holding of the Meeting or
adjourned Meeting together (except in the case of appointments made electronically) with any authority (or notarially certified
copy of such authority) under which it is signed.

Appointment of proxies through CREST
8.		As an alternative to completing the hard-copy proxy form, CREST members who wish to appoint a proxy or proxies by utilising
the CREST electronic proxy appointment service may do so for the Meeting and any adjournment(s) of it by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who
have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able totake the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications andmust contain the information required for such instructions, as described in the CREST Manual. The message, regardless ofwhether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy,must, in order to be valid, be transmitted so as to be received by the Company’s agent (ID: 3RA50) by not later than 48 hours
prior to the time appointed for the Meeting or adjourned Meeting. For this purpose, the time of receipt will be taken to be thetime (as determined by the timestamp applied to the message by the CREST Applications Host) from which the Company’s
agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change
of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not makeavailable special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his
CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST
sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practicallimitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
Appointment of proxy by joint members
9.		In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior).
Changing proxy instructions
10.	To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended
proxy appointment received after the relevant cut-off time will be disregarded.
		Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using anotherhard-copy proxy form, please contact The Company Secretary, Ubisense Group plc, St. Andrew’s House, St. Andrew’s Road,
Chesterton, Cambridge CB4 1DL.
		If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt
of proxies will take precedence.

8586 Ubisense Annual Report

NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING CONTINUEDADVISORS

Termination of proxy appointments
11.		In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard-copy notice clearly stating yourintention to revoke your proxy appointment to The Company Secretary, Ubisense Group plc, St. Andrew’s House, St. Andrew’s Road,
Chesterton, Cambridge CB4 1DL. In the case of a member which is a company, the revocation notice must be executed under its
common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any
other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included
with the revocation notice.

Registered Office Ubisense Group Plc
St. Andrew’s House, St. Andrew’s Road
Chesterton, Cambridge CB4 1DL, UK
Tel: +44 (0)1223 535 170
Fax: +44 (0)1223 535 167
www.ubisense.net

		The revocation notice must be received by The Company Secretary not less than 48 hours before the time for holding the Meetingor adjourned Meeting.

Registered number
05589712		If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraphdirectly below, your proxy appointment will remain valid.

Company Secretary
Robert Parker

		Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy andattend the Meeting in person, your proxy appointment will automatically be terminated.

Nominated Advisors and Brokers
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square, London
EC4M 7LT, UK

Corporate representatives
12.	A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers
as a member provided that no more than one corporate representative exercises powers over the same share.

BankerHSBC Bank plc
Vitrum, St John’s Innovation Park
Cowley Road, Cambridge CB4 0WS, UK

Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ, UK

Lawyers to the Company
Mills & Reeve LLP
Botanic House 98-100 Hills Road
Cambridge CB2 1PH, UK

Investor relations
Montfort Communications
2nd Floor Berkeley Square House
Berkeley Square, London W1J 6BD, UK

AuditorGrant Thornton UK LLP
Cambridge Office
101 Cambridge Science Park, Milton Road
Cambridge CB4 0FY, UK

Issued shares and total voting rights
13.	As at 5.00 p.m. on 16 March 2015, the Company’s issued share capital comprised 25,062,842 ordinary shares of £0.02 each.
Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights
in the Company as at 5.00 p.m. on 16 March 2015 is 25,062,842.
Communication
14.	Except as provided above, members who have general queries about the Meeting should use the following means of communication:		 	Calling The Company Secretary on +44 (0) 1223 535 170; or		 	Calling our shareholder helpline on 0870 707 1131 or +44 (0) 870 707 1131 from outside of the UK. Lines are open Monday to Friday,
9.00 a.m. to 5.00 p.m.; or		 	Emailing The Company Secretary at companysecretary@ubisense.net

SHAREHOLDER INFORMATION

		 You may not use any electronic address provided either:		 	In this notice of annual general meeting; or		 	Any related documents (including the proxy form), to communicate with the Company for any purposes other than thoseexpressly stated.
Shareholder enquiries
Any shareholder with enquiries should,
in the first instance, contact our Registrars,
Computershare, using the addressprovided in the list of Advisors.
Share price information
London Stock Exchange Alternative
Investment Market (AIM) symbol: UBI
Information on the Company’s shareprice is available on the Ubisense Investor
Relations website at:www.ubisense.net/en/investor-relations/

Investor relations
St. Andrew’s House, St. Andrew’s Road
Chesterton, Cambridge CB4 1DL, UK
Email: corporate@ubisense.net
Tel: + 44 (0) 1223 535 170
Financial calendar
Financial year end

31 December 2014

Full year results announced 16 March 2015
Annual General Meeting

24 April 2015

Ubisense Group Plc
Annual Report 2014

Ubisense Group Plc
St. Andrew’s House, St. Andrew’s Road
Chesterton, Cambridge CB4 1DL
Tel: +44 (0)1223 535 170 Fax: +44 (0)1223 535 167

www.ubisense.net

2014
AnnualReportUbisense Group Plc