Ubisense Group plc
Interim results for the six months ended 30 June 2018
Ubisense Group plc (“Ubisense” or the “Group”) (AIM: UBI), a market leader in enterprise location intelligencesolutions, is pleased to announce its interim results for the six months ended 30 June 2018.

Overview

 Orders received increased by 47% to £13.7m (H1 2017: £9.3m) including a £4.5m
military training SmartSpace contract with a similar order expected in 2019
 New myWorld and SmartSpace software product launches extend the competitive
advantage in both markets
 Increased investment in sales and marketing continues to drive both the myWorldand SmartSpace pipelines
 Sale of Japanese third party geospatial services business in line with strategy to focus
on own products

Financialhighlights

 Software revenue increased by 15% Maintenance and support revenues increased by 31% to £1.1m (H1 2017: £0.8m)
 Software strategy producing increased gross margin percentages in both business
units delivered 41% overall (H1 2017: 38%)
 Cash of £5.8m and net funds of £4.0m (31 Dec 2017: cash £9.1m and net funds £6.6m)

Operational
highlights

 Won new business with industry leaders in core sectors of manufacturing,
communications and utilities
 Launched myWorld for Salesforce in the Salesforce AppExchange as the first step inbuilding a recurring revenue stream and building business with Salesforce customers
 Nominated as one of Daimler’s suppliers of the year for 2017
 Established new partner relationships to reinforce existing target industry focus andexplore adjacent industry opportunities

Richard Petti, Chief Executive Officer, commented,“These results demonstrate the continued progress Ubisense has made in recent periods in delivering its software-firststrategy. The actions we have taken have resulted in a go-to-market capability that matches our two world classenterprise software businesses. Our strategy of growing revenue from our own product software solutions continues todeliver, and I am particularly pleased with the large increase in our order book and the quality of our pipeline. The second
half has started strongly and we expect revenues to increase for our own products, with improved gross margins. These
trends give the Board confidence in the outturn for the full year.”Contact
Ubisense Group plc
Richard Petti, Tim Gingell

Tel: + 44 (0) 1223 535170

finnCap Ltd
Henrik Persson, Anthony Adams (Corporate Finance)
Tim Redfern, Richard Chambers (Corporate Broking)Tel: + 44 (0) 20 7220 0500

Tulchan Communications LLPJames Macey White, Matt Low, Deborah Roney

Tel: +44 (0) 20 7353 4200

About Ubisense
Ubisense (AIM: UBI), a global leader in Enterprise Location Intelligence solutions, is a trusted adviser to some of thebiggest automotive, aerospace, communications and utility companies in the world. Our solutions are based on
powerful enterprise platforms, supported by a range of customer-led applications, that use location to deliver a realtime digital twin of our customer's physical operations, proven to drive quality, increase productivity, manage
complexity and reduce costs. Founded in 2002, Ubisense is headquartered in Cambridge, UK, with subsidiaries inFrance, Germany, USA, Canada and Japan. For more information visit: www.ubisense.net.

Page 1 of 22

Chief Executive’s Statement
Overview
In the first half of 2018, the Group continued to trade in line with the Board’s expectations. It is particularly pleasingthat this performance shows the progress the Company has made following the £5.5m fundraise in November 2017.
The proceeds allowed Ubisense to invest in a high-quality sales and marketing capability, creating a well-organised
and effective route to market for our industry leading enterprise software solutions. While the sales cycle forenterprise software solutions can be long, Ubisense has delivered a 47% increase in year-on-year orders. We havecreated a strong pipeline across both existing customers and new prospects, which shows significant investment in
the digital transformation of their businesses.
During the period, the Group won new business with industry leaders in our core target sectors of communications,
utilities and manufacturing, as well as achieving significant sales in new industries.
Strategy
Ubisense has and continues to develop the Group’s activities as two separate business units. This structure enables
each unit to develop and execute distinct sales and marketing strategies designed to increase operational productivity
across targeted industries through its digital twin technology. The Geospatial business unit (consisting of myWorldsoftware and services, and additionally services attached to third party products) is concentrated on thecommunications and utilities industries, the SmartSpace business unit focuses on automotive, commercial vehicles,
aerospace, defence and transport.
The Group is focused on the three-point strategy outlined in the 2017 annual report to achieve the performance goalsof the business:
Refocus the businessTarget key industries and top 200 global companies
Develop customer driven product roadmaps
Manage out legacy third party software and service business

Improve sales executionStrengthen go-to-market capabilities and geographic coverage
Deploy metric-driven CRM and Marketing Automation resources
Establish a broader, more consistent business pipeline
Reposition the product portfolioSolve enterprise level business challenges
Create a modular architecture addressing known customer pain-points
Communicate the long-term value Ubisense products deliver to customers
Business development - myWorld
Opportunities for myWorld software sales remain strong with new account wins and expansion of existing customers
in the communications industry in North America. The enhanced myWorld Fiber Planning and myWorld Capture
modules, and open platform support for GIS systems, have been well received by prospects and customers.
During the first half of 2018, the Group continued to invest in its sales capability in Europe, and whilst still at an earlystage, has begun to develop its pipeline of opportunities which is expected to deliver revenue in 2019.
The myWorld product line has also extended the recent Salesforce relationship by launching a new “myWorld forSalesforce” app on the Salesforce AppExchange. This unique app provides access to business critical geospatial andengineering information through the Salesforce ecosystem, increasing productivity and reducing operating costs forutility and communication businesses. To further develop this partnership, Ubisense is working actively with theSalesforce partner team on a number of marketing and sales enablement activities in the second half of 2018.

Page 2 of 22

Chief Executive’s Statement (continued)
Business development - SmartSpaceIn the first half of 2018 for our SmartSpace business, there were notable orders from our major German and US
automotive and commercial vehicle customers, one of our long-standing North American transit customers and thefirst customer order from a European transit operator.
The highlight of the first half, and a clear success story with a new market, was the award of a £4.5m contract win fora military training application as part of a military training contract for a founding NATO member. This win is
confirmation of the applicability of the digital twin solution in adjacent markets. Violent storms in North America
disrupted the initial delivery at the end of June resulting in £1.1m revenue being deferred to July and the second halfof 2018. Without the storms, revenue growth for the first half would have been significantly greater at 31% for
SmartSpace and 21% for total own products and would have resulted in improved gross margins.
In the second half of 2018, Ubisense will be investing in sales and marketing activities for the aerospace industry
where SmartSpace has a strong proposition for the MRO market (Maintenance Repair Operations), as well as further
building its hardware agnostic solutions with inclusion of Bluetooth Low Energy products from Quuppa.
Other matters and management teamUbisense recruited three experienced professionals in some of its key geographies to fill senior management roles in
the first half of 2018. The roles recruited include Christian Wirth European General Manager based in Germany, Tatsya
Yamaguchi General Manager for Ubisense in Japan, and Steve Tongish Chief Marketing Officer.
During the period, the board reflected on its corporate governance model and has decided, given its size, to adopt the
QCA Corporate Governance Code rather than the UK Corporate Governance Code. In line with the requirements of AIM
notice 50, appropriate adjustments to the Group’s website have been made.
Current trading and outlook
The Group’s strategy of increasing revenue from own product software solutions globally via an effective, wellorganised and focused sales function, whilst still at an early stage, is delivering improved performance. The 47%
increase in orders is demonstrative of the significant improvement in the pipeline and the Company expects further
progress in pipeline building in the next period.
Whilst total revenue has been impacted by the planned and managed decline in third party Geospatial services(including the disposal of the Japanese business) and extreme weather impacted deliveries in June, the focus on own
product software sales has improved the quality of the top line as reflected in the increase in gross margin percentage.
As the strategy continues to be implemented, the Board expects gross margin and profitability to improve further.
Investment in front line sales and marketing costs increased costs in the first half which will continue into the second
half, but this is expected to be outweighed by increased sales of own products and thereby increased gross margins
going forward. The sale of advanced software requires salespeople with a highly specialised skill set and the Company
is very excited by the quality of the hires. While typical sales cycles are in the 18-24 month range, our activities arebuilding a strong pipeline and positioning Ubisense for future growth.
We expect cashflows to improve in the second half driven by the delivery of order backlog and returns on theinvestments in sales.
The Board expects that the Company will deliver full year results in line with its expectations, showing progress in
own product revenue and gross margin.

Page 3 of 22

Financial review
Financial Key Performance Indicators
H1 2018£m

H1 2017£m

Bookings of new orders

13.7

9.3

Revenue

10.3

12.4

Own product revenue

7.1

6.8

Order-book backlog to be recognised

12.3

10.2

Adjusted EBITDA

(1.1)

(0.2)

Cash and cash equivalents

5.8

6.5

Net cash/(debt)

4.0

3.2

Revenue
The Group is organised into two business units: SmartSpace and Geospatial. Geospatial includes myWorld products
and services, and additionally services connected to third party products. SmartSpace provides software solutions andservices to enterprise customers, and additionally hardware solutions.
The revenue composition by division is summarised in the table below:
Own product revenue

H1 2018£m% of total
revenue

H1 2017£m% of total
revenueYear on year
growthSmartSpace

4.6

65%

4.4

65%

6%

myWorld

2.5

35%

2.4

35%

5%

Total revenue generated from own products

7.1

100%

6.8

100%

6%

Revenue composition by revenue stream is summarised in the table below:
Revenue stream

H1 2018£m% of total
revenue

H1 2017£m% of total
revenueYear on year
growthSoftware

1.2

12%

1.1

9%

15%

Maintenance and support

1.1

10%

0.8

7%

31%

Hardware

1.5

15%

1.9

15%

(19)%

Services

3.3

32%

3.0

24%

11%

Total revenue generated from own products

7.1

69%

6.8

55%

6%

Geospatial services from third party products

3.2

31%

5.6

45%

(43)%

Total revenue

10.3

100%

12.4

100%

(17)%

The Group has shown growth in software revenues of 15% and recurring maintenance and support contracts of 31%.
Revenue generated from the Group’s own products has increased by 6% as the long-term strategy of the Group
continues to be sales and development of the SmartSpace and myWorld product suites.

Page 4 of 22

Financial review (continued)
OrdersTotal bookings of new customer orders in the first half of 2018 increased by 47% to £13.7 million (H1 2017: £9.3
million). £9.5 million of this related to SmartSpace (H1 2017: £3.1 million), £1.2 million related to myWorld (H1 2017:£3.3 million) and £3.0 million to Geospatial Services (H1 2017: £3.0 million).
SmartSpace bookings included a significant North American contract win to a provider of military training solutions,currently fulfilling a contract with a founding NATO member. Similar sized follow-on orders are expected in 2019.
The order book backlog as at 30 June 2018 was £12.3 million (30 June 2017: £10.2 million), most of which will berecognised during 2018.
Gross margin
The Group gross margin was 41% for the six months ended 30 June 2018 (H1 2017: 38%).
Gross margin by division

H1 2018£m

Grossmargin %H1 2017£m

Grossmargin %Gross margin
movement

SmartSpace

1.8

38%

1.4

32%

6%

Geospatial

2.4

43%

3.3

41%

2%

Total gross margin

4.2

41%

4.7

38%

3%

The gross margin of the SmartSpace division has increased compared to the first half of 2017 due to revenue mix witha higher proportion of higher margin software revenue. The Geospatial division’s gross margin was improved as the
myWorld revenue mix increased compared to the first half of 2017.
Operating expenses and adjusted EBITDA
Operating expenses were £6.9 million (H1 2017: £6.6 million) and are summarised as follows:
H1 2018

H1 2017£m£m

Other operating expenses

5.4

4.9

Depreciation

0.6

0.2

Amortisation and impairment

1.0

1.2

Share option expense

0.1

0.2

-

0.1

Unrealised foreign exchange on intercompany trading balances
Non-recurring items

(0.2)

-

Total operating expense

6.9

6.6

Other operating expenses were £5.4 million (H1 2017: £4.9 million) and include sales, marketing, productdevelopment and administration expenses. The Group has invested in go-to-market capacity by recruiting quotacarrying sales and pre-sales personnel during the period, which has resulted in the strengthening of the order bookand pipeline. This increase in expense has been partially offset by the impact of IFRS 16 with operating lease costs
being accounted for as interest and amortisation rather than part of other operating expenses as outlined in note 3.
Adjusted EBITDA excludes amortisation and impairment, depreciation, share option expense, unrealised foreignexchange gains/losses on intercompany trading balances and non-recurring items and is reported as it reflects theperformance of the Group. Adjusted EBITDA loss for the period was £1.1 million loss (H1 2017: £0.2 million loss).
The operating loss for the period was £2.7 million (H1 2017: £1.9 million).
EPS and dividends
Adjusted diluted loss per share was 3.9 pence (H1 2017: 2.7 pence loss). Reported basic and diluted loss per share
was 3.8 pence (H1 2017: 3.3 pence loss). The Board does not feel it appropriate at this time to commence paying
dividends.

Page 5 of 22

Financial review (continued)
Impact of IFRS 15 and IFRS 16
IFRS 15 Revenue from Contracts with Customers has replaced IAS 18 Revenue. The new standard has been adopted
from 1 January 2018. IFRS 15 introduces a number of new concepts and requirements, and also provides guidanceand clarification on existing practice.
IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement offinancial position in the form of a right-of-use asset and a lease liability. The consolidated statement ofcomprehensive income will be impacted through reduced operating expenses, and higher depreciation and financecosts. The new standard is applicable from 1 January 2019 but the Group have adopted the standard from 1 January
2018.
The impact of the adoption of IFRS 15 and IFRS 16 on the results for the period ended 30 June 2018 has been disclosed
in detail within note 3 to the financial statements. In summary, implementation of IFRS 15 has had minimal revenue
impact, whilst the impact of IFRS 16 has been to reduce operating expenses and increase adjusted EBITDA by £0.3
million for the 6 months ending 30 June 2018.
Balance sheet, cash and cash flow
Cash held on the balance sheet at 30 June 2018 was £5.8 million (31 December 2017: £9.1 million, 30 June 2017: £6.5
million) and net funds at 30 June 2018 were £4.0 million (31 December 2017: £6.6 million, 30 June 2017: £3.2 million).
The net cash outflows from operating activities were £1.3 million for the period to 30 June 2018 (H1 2017: inflow of£4.2 million).
Capital structure
The issued share capital at 30 June 2018 was 73,087,904 ordinary shares of £0.02 each. Share options were granted
to one employee in the six-month period ended 30 June 2018, and the total number of unexercised share options at
30 June 2018 was 6,583,722.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group’s
performance, and the factors which mitigate these risks, have not significantly changed from those set out on pages
23 to 25 of the Group’s Annual Report for 2017 (a copy of which is available from our website www.ubisense.net).

Page 6 of 22

Consolidated income statement
For the six months ended 30 June 2018
6 months to

6 months to

12 months to

30 June 2018

30 June 201731 December 2017
auditedunauditedunaudited

Notes

£’000

£’000

£’000

5

10,32912,38027,255(6,099)(7,676)(16,398)

4,230

4,704

10,857

Operating expenses(6,947)(6,621)(13,912)

Operating loss

(2,717)(1,917)(3,055)

4,230

4,704

10,857

Other operating expenses(5,373)(4,909)(10,492)

Adjusted EBITDA(1,143)

(205)

365

(605)

(165)

(417)

(1,003)(1,253)(2,435)

Share option expense

(159)

(161)

(316)

Unrealised foreign exchange losses on intercompany
trading balances

(54)

(133)

(252)

247

-

-

Operating loss

(2,717)(1,917)(3,055)

Net finance costs

(84)

(17)

(79)

Loss before tax(2,801)(1,934)(3,134)9

61

61(2,792)(1,873)(3,073)(2,792)(1,827)(3,055)

-

(46)

(18)

(2,792)(1,873)(3,073)

Revenues
Cost of revenues
Gross profit

Analysed as:
Gross profit

Depreciation
Amortisation of other intangible assets

Non-recurring items

6

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

Loss per share attributable to equity
shareholders of the parent (pence)
Basic

7

(3.8)

(3.3)

(5.2)

Diluted

7

(3.8)

(3.3)

(5.2)

The notes 1 to 12 are an integral part of these condensed interim financial statements.

Page 7 of 22

Consolidated statement of comprehensive income
For the six months ended 30 June 2018

Loss for the period

6 months to
30 June 2018
unaudited£’000

6 months to
30 June 2017
unaudited£’000

12 months to
31 December 2017
audited£’000(2,792)(1,873)(3,073)

17

23

(33)

(2,775)(1,850)(3,106)

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

Page 8 of 22

Consolidated statement of changes in equity
For the six months ended 30 June 2018

Sharecapital
£’000

Share
premium
£’000

Share
based
payment
reserve
£’000

1,118

41,554823(2,025)

Loss for the period

-

-

-

Exchange difference on retranslation of
net assets and results of overseas
subsidiaries--

Total comprehensive income for the period-

Reserve credit for equity-settled
share-based payment

Subtotal£’000

Noncontrollinginterest
£’000

Total
£’000

(32,192)

9,278

473

9,751

-

(1,827)(1,827)(46)(1,873)

-

28

-

28

(5)

23

-

-

28

(1,827)(1,799)(51)(1,850)

-

-

161

-

-

161

-

161

Premium on new share capital

-

1

-

-

-

1

-

1

Transactions with owners

-

1

161

-

-

162

-

162

1,118

41,555984(1,997)(34,019)

7,641

422

8,063

Loss for the period

-

-

-

-

(1,228)(1,228)28(1,200)Exchange difference on retranslation of net
assets and results of overseas subsidiaries

-

-

-

(40)

-

(40)

(16)

(56)

Total comprehensive income for the period

-

-

-

(40)

(1,228)(1,268)12(1,256)

Reserve credit for equity-settled
share-based payment

-

-

155

-

-

155

-

155

344

-

-

-

-

344

-

344

Premium on new share capital

-

5,157

-

-

-

5,157

-

5,157

Share issue costs

-

(337)

-

-

-

(337)

-

(337)

344

4,820

155

-

-

5,319

-

5,319

1,462

46,3751,139(2,037)(35,247)

11,692434

12,126

-

-

-

-

(13)

(13)

-

(13)

1,462

46,3751,139(2,037)(35,260)

11,679434

12,113

Loss for the period

-

--

-

-

(2,792)(2,792)-(2,792)

Exchange difference on retranslation of net
assets and results of overseas subsidiaries

-

-

-

17

-

17

-

17

Total comprehensive income for the period

-

-

-

17

(2,792)(2,775)-(2,775)Reserve credit for equity-settled
share-based payment

-

-

159

-

-

159

-

159

Acquisition of non-controlling interest

-

-

-

-

282

282

(434)

(152)

Transactions with owners

-

-

159

-

282

441

(434)

7

1,462

46,375

1,298(2,020)(37,770)

9,345

-

9,345

Balance at 1 January 2017

Balance at 30 June 2017 (unaudited)

Issue of new share capital

Transactions with owners
Balance at 31 December 2017
Adjustment on initial application of IFRS 15(net of tax)
Adjusted balance at 1 January 2018

Balance at 30 June 2018 (unaudited)

Translation
reserve£’000

Retainedearnings£’000

Page 9 of 22

Consolidated statement of financial position
At 30 June 2018

Notes

At
30 June2018
unaudited£’000

At
30 June2017
unaudited£’000

At
31 December
2017
audited£’000

Intangible assets

8

2,812

3,187

2,962

Property, plant and equipment

9

3,157

650

493

5,969

3,837

3,455

Inventories

1,742

1,567

1,459

Trade and other receivables

7,602

7,028

10,544

AssetsNon-current assets

Total non-current assets
Current assets

Cash and cash equivalents

5,788

6,485

9,114

Total current assets

15,132

15,08021,117

Total assets

21,101

18,917

24,572(750)

Liabilities
Current liabilities

(750)

(750)

Operating lease liability

(817)

-

-

Trade and other payables(6,578)(6,765)(9,211)

Total current liabilities(8,145)(7,515)(9,961)

Deferred income tax liability

(500)

(617)

(516)

Trade and other payables

(40)

-

(40)

(1,000)(2,500)(1,750)Bank loans10

Non-current liabilities

Bank loans

10(1,928)

-

-

(143)

(222)

(179)

Total non-current liabilities(3,611)(3,339)(2,485)

Total liabilities(11,756)(10,854)(12,446)

9,345

8,063

12,126

1,462

1,118

1,462

Share premium

46,37541,55546,375

Share based payment reserve

1,298

984

1,139

Translation reserve(2,020)(1,997)(2,037)Retained earnings(37,770)(34,019)(35,247)

9,345

7,641

11,692

Operating lease liability
Other payables

Net assets
Equity attributable to owners of the parent company
Ordinary share capital

Equity attributable to owners of the parent company
Non-controlling interests
Total equity

11

-

422

434

9,345

8,063

12,126

Page 10 of 22

Consolidated statement of cash flows
For the six months ended 30 June 2018
6 months to
30 June2018
unaudited£’000

6 months to
30 June2017
unaudited£’000

12 months to
31 December
2017
audited£’000(2,801)(1,934)(3,134)

605

165

417

1,003

1,253

2,435

-

2

2

Revaluation of intercompany balances

54

133

252

Share-based payment charge

159

161

316

(247)

-

-

Finance income

(6)

(16)

(8)

Finance costs

90

33

87

(1,143)

(203)

367

Change in inventories

(283)

(503)

(395)

Change in receivables

2,785

6,196

2,678

Change in payables(2,571)(1,252)

987

Cash used in operations before tax(1,212)

4,238

3,637

(107)

(7)

(14)

(1,319)

4,231

3,623

(247)

(54)

(140)

-

(197)

(197)

Expenditure on intangible assets

(880)

(842)

(1,813)Purchase of minority interest

(152)

-

-

Sale of Japanese business

417

-

-

6

16

8

(856)

(1,077)(2,142)

Repayment of borrowings

(750)

-

(750)

Interest paid

(59)

(56)

(110)

Principal payments under capital lease obligations

(273)

-

-

-

1

5,165

Net cash flows from financing activities(1,082)

(55)

4,305

Net (decrease)/increase in cash and cash equivalents(3,257)

3,099

5,786

9,114

3,498

3,498

(69)

(112)

(170)

5,788

6,485

9,114

Notes

Loss before tax
Adjustments for:
Depreciation
Amortisation and impairment
Loss on disposal of property, plant and equipment

Non-recurring items

Operating cash flows before working capital movements

Net income taxes received/(paid)
Net cash flows from operating activities

6

Cash flows from investing activities
Purchases of property, plant and equipment
Payment of contingent consideration

Interest received
Net cash flows from investing activities
Cash flows from financing activities

Proceeds from the issue of share capital

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 1 to 12 are an integral part of these condensed interim financial statements.
Page 11 of 22

Notes to the interim consolidated financial statements
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 and improve productivity.
The Group has operations in the UK, USA, Canada, France, Germany and Japan, selling mainly to customers in theAmericas, Europe and Asia Pacific.
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 UK. The address of its registered office is St. Andrew’s
House, St. Andrew’s Road, Chesterton, Cambridge, CB4 1DL.
The condensed consolidated interim financial statements were approved by the Board of Directors for issue on 26
September 2018.
The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning ofsection 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2017 were approved by
the Board of Directors on 14 March 2018 and delivered to the Registrar of Companies. The report of the auditors on
those accounts was unqualified, did not contain a material uncertainty related to going concern paragraph and did notcontain any statement under section 498 of the Companies Act 2006.
The condensed consolidated interim financial statements have been reviewed, not audited.

2 Basis of preparation
The condensed consolidated interim financial statements should be read in conjunction with the annual financial
statements of the Group and are prepared in accordance with IFRSs as adopted by the European Union.
Going concern basis
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 tocontinue in operational existence for the foreseeable future, a period of not less than twelve months from the date ofthis report. The Group therefore continues to adopt the going concern basis in preparing its condensed consolidated
interim financial statements.

3 New Standards adopted as at 1 January 2018
The Group has adopted the new accounting pronouncements which have become effective this year, and are as
follows:
IFRS 9 ‘Financial Instruments’
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts
to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement.
The adoption of IFRS 9 which became effective from 1 January 2018 and has therefore been adopted does not have asignificant impact on the Group’s financial results or position.

Page 12 of 22

Notes to the interim consolidated financial statements
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 Revenue from Contracts with Customers has replaced IAS 18 Revenue. The new standard is applicable from
1 January 2018. IFRS 15 introduces a number of new concepts and requirements relating to revenue recognition andalso provides guidance and clarification on existing practice. The new Standard has been applied retrospectively
without restatement, with the cumulative effect of initial application recognised as an adjustment to the opening
balance of retained earnings at 1 January 2018. In accordance with the transition guidance, IFRS 15 has only been
applied to contracts that are incomplete as at 1 January 2018.
In applying IFRS 15, hardware and certain software revenues within the SmartSpace division are deferred until thecustomer is in control of both the hardware and software components provided by Ubisense. As at 30 June 2018 there
were significant ongoing customer contracts and due to adverse weather conditions delaying delivery of hardware,
the associated hardware and software revenues on these contracts were deferred into the second half of 2018.
The conclusion of management’s assessment of the adoption of IFRS15 on contracts which were incomplete as at 1
January 2018 is as follows:







In applying IFRS 15 to contracts with were incomplete as at 1 January 2018, revenue of £15,000 which had beenpreviously reported within the 2017 financial year is deferred into the six month period ended 30 June 2018 dueto the timing of delivery of hardware within the SmartSpace division.
Hardware costs of £2,000 associated with SmartSpace contracts which were incomplete as at 1 January 2018, aredeferred into the six month period ended 30 June 2018.
No adjustment has been made to defer the incremental costs of obtaining customer contracts, such as commission
payments, as these costs would be amortised over a period of one year or less. Management have applied thepractical expedient permitted under IFRS 15 in reaching this conclusion.
As a result of these adjustments, £13,000 has been recognised as an adjustment to the opening balance of retained
earnings at 1 January 2018. Within the results for the six months ended 30 June 2018, revenues have increased£15,000 and cost of sale has increased by £2,000.

The Group’s revenue policies under IFRS 15 are as follows:
For sales within the SmartSpace division, the Group contracts with customers to provide software, maintenance &support, hardware or services. For sales within the Geospatial division, the Group contracts with customers to provide
software, maintenance & support, or services. The contractual arrangements may be to provide one of these elements
on a standalone basis or to provide a combination of the above. For sales including a combination of some or all of theabove, the distinct performance obligations are identified and revenue is allocated. Regardless of if the elements are
sold on a standalone basis or as part of a combination, the timing of revenue recognition is as follows:
Software – SmartSpace division
SmartSpace operates as standalone software that can be used to identify and manage assets in real time through thecollection of data. Smartspace integrates with Ubisense’s own hardware or can be used alongside third party
products. Smartspace software is sold under a perpetual licence arrangement and is recognised when the software ismade available to the customer for use.
Additionally, the Group sells software that is required to allow Ubisense’s own hardware to operate. Accordingly, thissoftware is only sold alongside hardware. Revenue is recognised at the point that the software has been madeavailable to the customer and as the associated hardware becomes under the control of the customer, which is
generally on delivery to the customer’s premises.
Software – Geospatial division
Revenue earned from myWorld software sales under perpetual licence agreements with maintenance and support isrecognised when the software is made available to the customer for use. Revenue earned from myWorld software
sold as a subscription is recognised over the period of the contract, which is generally one year, commencing fromwhen the software is available for use.

Page 13 of 22

Notes to the interim consolidated financial statements
If contracts include performance obligations which result in software being customised or altered, the software
cannot be considered distinct from the labour service. Revenue recognition is dependent on the contract terms andassessment of whether the performance obligation is satisfied over time. If the conditions of IFRS15 are not satisfied,revenue is deferred until the software is available for customer use.
Maintenance and support – Geospatial and SmartSpace business units
Maintenance and support is recognised on a straight-line basis over the term of the contract, which is typically one
year. Revenue not recognised in the consolidated income statement is classified as deferred revenue on the
consolidated statement of financial position.
Hardware – SmartSpace business unit only
Revenue is recognised at the point that the hardware supplied becomes under the control of the customer. This is
generally on delivery to the customer’s premises.
Services – Geospatial and SmartSpace business units
Services revenue includes consultancy, installation of hardware and training. Services revenue from time andmaterials contracts is recognised in the period that the services are provided on the basis of time worked at agreed
contractual rates and as direct expenses are incurred.
Revenue from fixed price, long-term customer specific contracts is recognised on the stage of completion of eachassignment at the period end date compared to the total estimated service to be provided over the entire contract
where the outcome can be estimated reliably. If a contract outcome cannot be estimated reliably, revenues arerecognised equal to costs incurred, to the extent that costs are expected to be recovered. An expected loss on acontract is recognised immediately in the income statement.
IFRS 16 ‘Leases’
IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement offinancial position in the form of a right-of-use asset and a lease liability. The consolidated statement of comprehensive
income will be impacted through reduced operating expenses, and higher depreciation and finance costs. The newstandard is applicable from 1 January 2019 with an option to adopt it early.
The Group has early adopted IFRS 16 effective from 1 January 2018.
The Group’s accounting policies under IFRS 16 are as follows:
The policy applies to properties and cars where the Group has substantially all of the economic benefits from use of
the asset. On adoption of the standard, a right-of-use asset and lease liability has been created.
The right-of-use asset is depreciated over the lease-term and if necessary impaired in accordance with applicablestandards. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on thelease liability (application of the effective interest method) and by reducing the carrying amount to reflect the lease
payments made.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as aliability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits fromthe leased asset are consumed.

Page 14 of 22

Notes to the interim consolidated financial statements
The standard allows two options for adoption – fully retrospective and modified retrospective. The Group has
elected to take the modified retrospective approach. As a result of this the Group has:•••recognised a lease liability at 1 January 2018 for leases previously classified as operating leases applying IAS 17.
The Group has measured lease liabilities at the present value of the remaining lease payments, discounted using
the Group’s incremental borrowing rate at the date of initial application.
recognised a right-of-use asset at 1 January 2018 for leases previously classified as operating leases applying IAS
17. The Group has chosen to measure right-of-use assets at an amount equal to the lease liabilities, adjusted by
the amount of any prepaid or accrued lease payments relating to those leases recognised in the statement offinancial position as at 31 December 2017.
2017 comparatives are left unchanged, and any opening adjustment to net assets was recognised on 1 January
2018.

The modified retrospective approach also allows a number of practical expedients which the Group has made use of:••Application of a single discount rate to a portfolio of leases with reasonably similar characteristics, being 3.5%.
Reliance on an assessment of whether a lease is onerous by applying IAS 37 Provisions, Contingent Liabilities andContingent Assets immediately before the date of initial application as an alternative to performing an impairment
review using the principles in IAS 36 Impairment of Assets.

As noted above, no comparatives are given for the adoption of IFRS 16. The Group has calculated that the right of use
asset recognised and corresponding liability as at 1 January 2018 is £3.0m. The impact on adoption within the results
for the six months ended 30 June 2018 is as follows:Finance costs have increased by £0.1m due to interest charges on the lease liability.
Depreciation expense has increased by £0.5m due to depreciation of the right-of-use asset.
EPS has decreased by 0.3p per share.
Adjusted EBITDA has improved by £0.3m due to reduction of rental expense.

The lease commitments as at 1 January 2018 were as follows;

No later than one year
Less than one year and no later than five years
Later than five years
Total

Land andbuildings
£,000
681
1,513
982
3,176

Other
£,000
94
10
104

Total
£,000
775
1,523
982
3,280

The opening lease liability is reconciled to the table of lease commitments as follows:

Lease commitment as at 1 January 2018
Interest to be unwound over the lease term
Dilapidations provision recognised
Opening lease liability and right of use asset at 1 January 2018

Total
£,000
3,280
(381)
103
3,002

Page 15 of 22

Notes to the interim consolidated financial statements
4 Accounting policies
The accounting policies adopted in the preparation of the condensed consolidated interim financial statements areunchanged from those set out in the Group’s consolidated financial statements for the year ended 31 December 2017,
except for the effects of applying IFRS 9, IFRS 15 and IFRS 16.
The operations of the Group display a degree of seasonality with stronger performance typically seen in the second
half of the year. This is due to customers’ budgetary cycles and the capital nature of the products sold by the Group.

5 Segmental information
5.1 Operating segments
Management has determined the operating segments to be the Group’s business units based on the information
reported to the Chief Operating Decision Maker (CODM) for the purpose of assessing performance and allocating
resources. The CODM is the Chief Executive Officer.
The SmartSpace division takes real-time location data from Ubisense’s own sensing hardware, or from standards based
integration with third party hardware, and transforms this data into high value spatial event information,delivering highly reliable, automatic, adaptive asset identification, precise real-time location and spatial-monitoring tooffer meaningful insights that help businesses make smarter decisions.
The Geospatial division delivers myWorld software solutions that integrate data from any source – geographic, realtime asset, GPS, location, corporate and external cloud-based sources – into a live geospatial common operating picture,empowering all users in the customer’s organisation to access, input and analyse operational intelligence to proactively
manage their networks, respond quickly to emergency events and effectively manage day-to-day operations.
Additionally services are provided in connection with third party products.
Each operating segment is managed separately by a business unit leader as each deals with different technologies andpredominately a different customer base. The performance of the operating segments is assessed on a measure ofcontribution, being gross profit less sales and business unit marketing expenditure. Assets and liabilities are notpresented to the CODM on a divisional basis.
Costs incurred centrally or not directly attributable to either the SmartSpace or Geospatial business units are reported
in the Central division. The results of each segment are prepared using accounting policies consistent with those of theGroup as a whole. No intra-segmental transactions are reported.

6 months ended 30 June 2018

SmartSpace£’000

Geospatial£’000

Central
£’000

Total
£’000

Revenue

4,630

5,699

-

10,329

Cost of sales(2,869)(3,230)-(6,099)Gross profit

1,761

2,469

-

4,230

Sales and marketing costs(1,692)(1,182)-(2,874)

69

1,287

-

1,356

Other operating costs(2,499)(2,499)Adjusted EBITDA(2,499)(1,143)

Amortisation and impairment of intangibles

Contribution(1,003)(1,003)

Depreciation

(605)

(605)

Share option expense
Unrealised foreign exchange losses onintercompany trading balances
Non-recurring items

(159)

(159)

(54)

(54)

Operating loss

247

247

(4,073)(2,717)

Net finance costs

(84)

(84)

Loss before tax(4,157)(2,801)Page 16 of 22

Notes to the interim consolidated financial statements
5 Segmental information (continued)

6 months ended 30 June 2017

SmartSpace£’000

Geospatial£’000

Central
£’000

Total
£’000

Revenue

4,372

8,008

-

12,380

Cost of sales(2,975)(4,701)-(7,676)Gross profit

1,397

3,307

-

4,704

Sales and marketing costs(1,412)(894)-(2,306)

(15)

2,413

-

2,398

Other operating costs(2,603)(2,603)Adjusted EBITDA(2,603)(205)

Amortisation and impairment of intangibles

Contribution(1,253)(1,253)

Depreciation

(165)

(165)

Share option expense
Unrealised foreign exchange losses onintercompany trading balances
Operating loss

(161)

(161)

(133)

(133)

(4,315)(1,917)

Net finance costs

(17)

(17)

Loss before tax(4,332)(1,934)

SmartSpace£’000

Geospatial£’000

Central
£’000

Total
£’000

Revenue

10,796

16,459-27,255

Cost of sales(6,310)(10,088)-(16,398)

Gross profit

4,486

6,371

-

10,857

Sales and marketing costs(3,062)(2,004)-(5,066)

Contribution

1,424

4,367

12 months ended 31 December 2017

-

5,791

Other operating costs(5,426)(5,426)

Adjusted EBITDA(5,426)

365

(417)

(417)

(2,435)(2,435)

(316)

(316)

(252)

(252)

Operating loss

(8,846)(3,055)

Net finance costs

(79)

(79)

Loss before tax(8,925)(3,134)

Amortisation and impairment of intangibles
Depreciation
Share option expense
Unrealised foreign exchange losses onintercompany trading balances

Page 17 of 22

Notes to the interim consolidated financial statements
5 Segmental information (continued)
5.2 Revenue by geography
The 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.
The Group's revenue from external customers in the Group's domicile, the UK, and its major worldwide markets havebeen identified on the basis of the customers' geographical location.
6 months to
30 June2018
unaudited£’000

6 months to
30 June2017
unaudited£’000

12 months to
31 December
2017
audited
£’000

28

251

383

2,095

3,902

8,218

France

65

201

303

Europe other

815

253

554

USA

4,540

4,917

10,954

Canada

1,011

922

2,845

Japan

1,675

1,737

3,545

Asia Pacific other

98

43

187

Rest of World

2

154

266

10,32912,38027,2556 months to
30 June2018
unaudited£’000

6 months to
30 June2017
unaudited£’000

12 months to
31 December
2017
audited£’000

Sale of Japanese business

247

-

-

Total non-recurring items

247

-

-

United Kingdom
Germany

Total revenues

6 Non-recurring items

On 30 March 2018, the group concluded the sale of its Japanese third party geospatial services business including theGeoplan brand name for a gross consideration of JPY 100m (£0.7m).
Alongside this transaction, Ubisense agreed to acquire the 23% minority interest of Geoplan Company Limited. The
acquisition of this non-controlling interest gave the Group 100% ownership of its remaining Japanese operations.
Geoplan Company Limited has been renamed Ubisense Japan K.K.

Page 18 of 22

Notes to the interim consolidated financial statements
7

Earnings per share
6 months to
30 June2018
unaudited

6 months to
30 June2017
unaudited

12 months to
31 December
2017
auditedLoss for the period (£’000)(2,792)(1,827)(3,055)

Loss for the purposes of diluted earnings per share (£’000)(2,792)(1,827)(3,055)73,08855,88358,479

230

230

215

73,31856,11358,694

Basic loss per share (pence)

(3.8)

(3.3)

(5.2)

Diluted loss per share (pence)

(3.8)

(3.3)

(5.2)

Earnings

Number of shares
Basic weighted average number of shares (‘000)
Effect of dilutive potential ordinary shares:- Share options (‘000)
Diluted weighted average number of shares (‘000)

Basic earnings per share is calculated by dividing profit for the period attributable to ordinary shareholders of theCompany by the weighted 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 dilutive share options. Options haveno dilutive effect in loss-making years, and hence the diluted loss per share for the periods ended 30 June 2018 and2017 and 31 December 2017 is the same as the basic loss per share.
The Group also presents an adjusted diluted earnings per share figure which excludes share-based payments charge,
unrealised foreign exchange gains/losses on intercompany trading balances and non-recurring expenditure from themeasurement of profit for the period.
6 months to
30 June2018
unaudited

6 months to
30 June2017
unaudited

12 months to
31 December
2017
audited

(2,792)(1,827)(3,055)

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

159

161

316

Reversal of unrealised foreign exchange gains/losses on intercompany
trading balances

54

133

252

Sale of Japanese business

(247)

-

-

Net adjustments (£’000)

(34)

294

568

(2,826)(1,533)(2,487)

(3.9)

(2.7)

(4.3)

Adjusted diluted earnings per share

Loss for the purposes of diluted earnings per share (£’000)
Adjustments

Adjusted earnings (£’000)
Adjusted diluted loss per share (pence)

Page 19 of 22

Notes to the interim consolidated financial statements
8

Intangible assets

Net book amount

Capitalised product development costs
SoftwareTotal intangible assets

9At
30 June2018
unaudited£’000

At
30 June2017
unaudited£’000

At
31 December
2017
audited
£’000

2,628

3,028

2,716

184

159

246

2,812

3,187

2,962

At
30 June2018
unaudited£’000

At
30 June2017
unaudited£’000

At
31 December
2017
audited£’000

Property, plant and equipment

Net book amount

Fixtures and fittings

473

486

342

Computer equipment

172

164

151

Capitalised operating leases

2,512

-

-

Total property, plant and equipment

3,157

650

493

10

Bank loans

In October 2016, an £8.0 million HSBC working capital facility was restructured, becoming a £4.0 million repaymentloan with £0.75 million repayable each year. £0.75 million of this facility was repaid in each of December 2016,
December 2017 and January 2018.
This loan is secured on the fixed and floating assets of the Group, attracts an interest charge of LIBOR + 3% and issubject to an operating covenant linked to “operating cash flow” performance (profit or loss before tax adding backany non-recurring items, finance costs, foreign exchange costs, share based payments, depreciation, amortisation orcapitalisation of product development). Following the placing in November 2017, the terms of the operating covenant
were agreed as follows: 2018 - £2 million negative; 2019 - £1 million negative, 2020 and beyond –£1m positive.
The covenants require future repayments of £187,500 each quarter starting on 31 March 2019.

Page 20 of 22

Notes to the interim consolidated financial statements
11 Share capital

Allotted, called-up and fully paidAt
30 June2018
unaudited£’000

At
30 June2017
unaudited£’000

At
31 December
2017
audited£’000

Ordinary shares of £0.02 each

1,462

1,118

1,462

Movement in number of sharesAt
30 June2018
unaudited£’000

At
30 June2017
unaudited£’000

At
31 December
2017
audited£’000

73,087,904

55,883,154

55,883,154

Issued under placing to institutional shareholders--

17,187,500

Issued under share-based payment plans

-

7,500

17,250Change in number of shares in period

-

7,500

17,204,750

73,087,904

55,890,654

73,087,904

Number of shares at beginning of period

Number of shares at end of period

12

Share options

On 14 December 2016 Ubisense Group plc implemented a long-term incentive share option plan for Executive Directors
and key management. Ubisense Group plc granted 5,600,000 options of two pence each in the Company with an exercise
price set at the nominal value. The options vest if the Company’s share price exceeds 70p for 60 consecutive calendar
days between the 2nd and 3rd anniversary of issue and the period of employment continues for over three years.
During the first half of 2018, 350,000 share options were issued at market value. The new share options were valued
using a Black-Scholes valuation model. 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 return is an average yield on the zero-coupon UK Government Bond in issue at the date of grant with asimilar life to the option.
At 30 June 2018, the Group had the following share-based payment arrangements.

Arrangement

Grantedduring theyear
NumberExercisedduringthe year
NumberForfeited
duringthe year
NumberAwardsoutstandingat 30 Jun
2018
NumberAwardsexercisable
at 30 Jun
2018
Number

Award
date
Year

Vests
Years

ExpiresYear

Exercise
price£Awardsoutstandingat 1 Jan2018
Number2010

2011-13

2020

0.140

322,672--(1,000)321,672

321,6722011

2012-14

2021

1.050

108,700--(7,000)101,700

101,7002012

2013-15

2022

2.125

75,500--(5,000)70,50070,5002013

2014-16

2023

2.055

93,600--(8,750)84,85084,8502014

2015-17

2024

2.250

65,000--(10,000)

55,00055,0002016

2017-19

2026

0.020

5,600,000---

5,600,000-

2018

2019-21

2028

0.555

-

350,000--

350,000-

6,265,472

350,000-(31,750)

6,583,722

633,722

0.123

0.555

-

1.846

0.138

0.946

Options

Total
Weighted average exercise price (£)

Page 21 of 22

Independent review report to Ubisense Group plc
Introduction
We have been engaged by the Company to review the financial information in the half-yearly financial report for thesix months ended 30 June 2018 which comprises the consolidated income statement, consolidated statement ofcomprehensive income, consolidated statement of changes in equity, consolidated statement of financial position,
consolidated statement of cash flows and the related explanatory notes. We have read the other information containedin the half yearly financial report and considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in ISRE (UK and Ireland) 2410,'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has
been undertaken so that we might state to the Company those matters we are required to state to them in a review
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone other than the company, for our review work, for this report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the
London Stock Exchange require that the accounting policies and presentation applied to the financial information in
the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard
to the accounting standards applicable for such accounts.
As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted
by the European Union. The financial information in the half-yearly financial report has been prepared in accordancewith the basis of preparation in Note 2.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards
on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in thehalf-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, inaccordance with the basis of accounting described in Note 2.
Grant Thornton UK LLP
Chartered Accountants
Registered Auditor
Cambridge
26 September 2018

Page 22 of 22