Ubisense Group Plc Annual Report 2015

Location Intelligence Solutions

Ubisense is a
global leader inEnterprise Location
Intelligence Solutions.
Operating through two Divisions – Real-Time
Location Systems (RTLS) and Geospatial –we deliver best-in-class asset location solutions
that significantly improve operational effectivenessand profitability for businesses around the world.

Strategic report
Highlights
What we do – at a glance
Chairman’s statement
Chief Executive’s statement
Strategic focus
Business model
Financial review
Key performance indicators
Divisional delivery – RTLS
Divisional delivery – Geospatial
Corporate social responsibility
Principal risks and uncertainties

Corporate governance
1
2
4
6
8
10
12
15
16
20
24
25

Board of Directors
Corporate governance report
Directors’ report
Directors’ responsibilities statement

Financial statements
28
30
34
36

Independent auditor’s report
Consolidated income statement
Consolidated statement ofcomprehensive income
Consolidated statement ofchanges in equity
Consolidated statement offinancial position
Consolidated statement ofcash flows
Notes to the consolidated
financial statements
Independent auditor’s reportCompany balance sheet
Company statement ofchanges in equity
Notes to the Company
financial statements
Advisers
Shareholder information

37
38
39
40
41
43
44
74
75
76
77
80
81

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Strategic
highlights• 2015: A challenging year with lower than anticipated revenues
against an increased, but now restructured, cost base
• Restructuring complete: Decisive action taken to re-align andreduce costs by focusing on core geographies and markets,reassessing marketing strategy and reducing staff numbers• Key customer wins in both Divisions: BMW Group, Ford, GM, John
Deere, Magna Steyr, Nissan, Telus, Comporium and Nagoya Water.
• Deeper customer relationships: Substantial deployments into existing
Utilities and Telecoms customers in North America and across anumber of global Manufacturing clients• Geographic consolidation: Further developed presence in Japan
achieving first myWorld contract, while transitioning the South Korea
and Singapore operations into partners• Partner channel successes: Worked successfully with Atlas
Copco across three major Automotive OEMs
• Continued product development: Investment in both product lines
maintained, with the next generation Dimension 4 RTLS platform fully
deployed in three major production environments, and the mobile
enhanced Geospatial myWorld 3.0 released in February 2016

Financialhighlights• Revenue declined 37.3% from £35.1 million to £22.0 million with theresults achieved in the higher margin solutions revenues in both Divisions
failing to offset the reduction in Geospatial sales, particularly in Europe• Gross margin decreased to 35.0% (2014: 39.9%) driven by the timingof new contracts and the revenue mix between new solution sales,
installation projects and the scale of Geospatial services• Adjusted EBITDA* loss of £5.2 million (2014: £1.8 million profit) andfurther non-recurring costs of £4.1 million (2014: £1.1 million) and
impairment charges of £4.0 million (2014: £1.3 million), led to an
operating loss of £17.0 million (2014: £4.6 million)• £10 million was raised from new and existing shareholders in May 2015 ofwhich £2 million was used to pay down a bank loan. The remainder wasused for restructuring, and the support and development of the business• Cash balance was £5.4 million (2014: £3.7 million) and net debt £0.2 million(2014: £3.2 million)* Measured as operating profit excluding depreciation, amortisation, share-based payments charge andnon-recurring costs such as reorganisation costs, and acquisition costs.

1

Ubisense Group Plc
Annual Report 2015

What we do – at a glanceWorld leading solutionstransforming location
awareness into businessintelligence

Our Enterprise Location Intelligence Solutions for
Manufacturing, Logistics, Transit, Communication,and Utility companies solve real world problems
for some of the world’s best known businesses.
Our solutions leverage location data with other types ofdata from across the enterprise to enable some of theworld’s largest businesses to improve operational
effectiveness, significantly increasing their profitability.
We unlock previously inaccessible intelligence andinsight, which empower our customers to realise
dramatic benefits in diverse application areas including
tool control, logistics tracking, process analytics, quality
management, network operations, field operations andasset management.

2

Our solutions help all levels and locations of users –from the operator to senior management to theboardroom – to achieve significant improvements,
exploiting new operational possibilities by gaining
visibility while leveraging their current best practices
and procedures.
Ubisense has a proven track record of enablingcompanies to gain significant value from a single starting
point, and seamlessly expand deployments to extend thevalue across a wide range of locations and operations.
Location is a significant factor for the operations of all
our customers. Automotive manufacturers have large
complex dynamic facilities where parts, product andmachinery all interact to produce a finished product.
Utilities and Telecommunications firms have vast
networks of geographically dispersed assets which aremanaged by a mobile workforce. By leveraging location
information all our customers are taking the next step in
optimizing their business.

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Ubisense key facts• Ubisense and its partner ecosystem have deployed solutions in
automotive, heavy manufacturing, healthcare, logistics, masstransit, entertainment, retail, telecommunications, water, gas
and electricity utilities.

Real-TimeEnterprise
Location
Platform
See page 16 for divisional delivery

At the heart of Ubisense’s multiple award­-winning Real-Time Location
System (RTLS), is a flexible and highly configurable Enterprise Location
Platform. This platform takes real-time location data from Ubisense’s
own best in class sensing hardware, or from standards-based
integration with third party hardware, and transforms this data intohigh value spatial event information.
On top of this platform sits value adding applications such as
Ubisense’s Smart Factory, Smart Transit and Smart Healthcare,
and a growing number of applications from our Partner Network.
These applications deliver highly reliable, automatic, adaptive asset
identification, precise real-time location and spatial-monitoring tooffer meaningful insights that help businesses make smarter decisions.

RTLS key facts• Ubisense’s products are in operational use in mission criticalsituations across 10 of the 12 leading automotive
manufacturers in the world• Every day, more than 10,000 vehicles are manufactured withsystems enabled by Ubisense

Geospatial

Our flagship geospatial product is myWorld: a flexible software solutionthat integrates data from any source – Geographic, real-time asset,
GPS, location, corporate and external cloud-based sources – into a live
geospatial common operating picture.

See page 20 for divisional delivery

myWorld empowers all users in the customer’s organisation to access,input and analyse operational intelligence – whether they are online oroffline, in the office or field.
It enables organisations to proactively manage their networks, respondquickly to emergency events, and more effectively manage day-to-day
operations to reduce costs and improve customer experience.

Geospatial key facts• Over 12,000 utility & telecoms professionals use oursoftware everyday• Our myWorld customers saved their operations &engineering teams 45 million minutes in 2015

3

Ubisense Group Plc
Annual Report 2015

Chairman’s statement

How we’ve
performed

Peter Harverson
Chairman“The task now is toleverage our best-in-classproducts and ensure wesee a tangible return toprofitability.”

42015 was a challenging year for Ubisense,
in managing the impact of unprecedented
market forces in key sectors and our continued
transition to an enterprise solutions business.
In response to reduced revenue expectations as
the year progressed, we acted swiftly to increase
focus on sales effectiveness and adjust ouroperating cost base to be better aligned to ourrevenues. These actions, alongside the provenperformance enhancements and reduced costs
we bring to customers, give us confidence that
we can capitalise on growth opportunities whilst
maintaining financial prudence.

Strategic report

Corporate governance

Reflections on 2015
As we entered 2015, we were investing heavily inmarketing activities, growing the organisation andcontinuing to invest in new markets, with the full
expectation that revenue would accelerate driving the
profitable growth of the business.
The results for 2015 show that a combination of
unforeseen external market forces, together with poor
execution, led to a disappointing financial outcome. For
the Real-Time Location Services (RTLS) Division, global
economic concerns and, in particular, the damage doneto German premium automotive suppliers, continue toresonate in the market but, encouragingly, orders
continue to be received from these organisations even if
at a lower level. For the Geospatial Division, customer
commitment to our platform and applications remains
strong with new deployments achieving rapid adoption,and the enhanced mobile capability with the next version
release is generating good levels of customer interest.
Strategy
We will achieve this by combining our direct sales efforts
with those of our strategic partners such as Atlas Copcoand leveraging our expanding network of reseller
partners. Having restructured the business, we areconfident that incremental revenue can be generated
without further significant expansion of the cost base,whilst still allowing for the right level of investment in our
products.

Financial statements

Ubisense Group Plc
Annual Report 2015

OutlookThe business went through a difficult period in 2015 andmarket conditions remain challenging, so we continue tobe prudent in our expectations of a recovery in the nearterm. With a renewed focus on sales and developing thepartner channel, we have created a solid platform fromwhich to grow in a profitable way on a more
appropriately-sized cost base.
Whilst mindful of the challenging environment, we are
well positioned to take advantage of the demand for our
products and solutions in both Divisions, and first quarter
revenues are marginally ahead of the prior year
notwithstanding the significantly reduced costs base. We
pride ourselves on hiring and developing the best location
people in the business. I would like to take thisopportunity to thank our staff for their on-goingdedication and commitment during the restructuring andto express our gratitude for the support and patience of
our shareholders.

Peter Harverson
Chairman
6 April 2016

Board of Directors
In June, Robert Parker stepped down as Chief Financial
Officer, with Tim Gingell assuming his responsibilities as
Interim Chief Financial Officer and Company Secretary.
October saw Andy Hopper signal his intention to leave
the business at the end of the calendar year, officially
stepping down as Chairman and Director of the Group on
31 December 2015. I would like to thank Andy for his hard
work and commitment during his time with the Group.
Originally a Non-Executive Director of the Group, I was
appointed Vice Chairman in April 2015 and officially took
over from Andy as Chairman on 1 January 2016.

5

Ubisense Group Plc
Annual Report 2015

Chief Executive’s statement

Positioning
for the future

Richard Green
Chief Executive Officer“The opportunity for
Ubisense continues to beconsiderable. Our provenproducts are in use across
10 of the 12 leading
automotive manufacturers
in the world, and over
12,000 utility andtelecommunications
professionals are using
our software every day.”6

Overall 2015 proved to be a disappointing
year as the business was hit by weaker than
expected demand at the same time that wewere investing to grow both the organisationand our geographical reach. At the start of theyear, we anticipated growing the organisationalpresence and reach into a market that showedsigns of material expansion.
Last year, our strategic focus was on accelerating the
growth of solutions sales with an increased proportionof software, whilst anticipating the decline in
Geospatial revenues, particularly in Europe. The
revenue growth required to offset this presented asignificant challenge. Before the end of the first half,some delays in orders in the RTLS Division from large
German premium automotive OEMs meant we had toreset our revenue expectations for the second half ofthe year. Once it became clear that we would not beable to recover the shortfall against the first halfrevenue expectations by the end of the year, we took
decisive action to re-align our costs with the revised
revenue expectations.

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Our initiatives to refocus our resources on coregeographies and markets and reduce our staff base are
now complete. Our reset cost base means that we enter2016 in a much better position to deliver organic growthof the business.

Product development
We made considerable investment in the development of
the product lines of both Divisions in the year, recognisingthat continued investment in products is needed
to support future growth.

Customer successes
The opportunity for Ubisense continues to beconsiderable. Our proven products are in use across
10 of the 12 leading automotive manufacturers in theworld, and over 12,000 utility and telecommunications
professionals are using our software every day.

DIMENSION4, our next generation RTLS platform, wasfully deployed in three major production environments.
The feedback has been very positive, leading to asignificant improvement in product performance andinstallation efficiencies.

Both Divisions of the business continued to expand theirrespective customer bases in the period. Wins were madewith BMW Group, Ford, GM, John Deere, Magna Steyr,
Nissan, Telus, Comporium and Nagoya Water and we
extended our systems in our existing customer base withsignificant deployments in Utilities and Telecoms in North
America and many of our global Manufacturing
customers.
We have successfully built on our initial entry into Japan,
an important strategic territory for us. In Geospatial, we
won our first notable Japanese myWorld contract with
Nagoya Water and, on the RTLS side, good progress wasmade building on proof of concept deployments at both
Nissan and Toyota.
Strategic partnerships
The Atlas Copco relationship delivered on threeopportunities in Europe, Asia and the US, validating ourstrategy of scaling the business through partner channels.
Other industrial vendors have also incorporated ourtechnology into their wireless tools recognising themarket opportunity with location intelligenceenhancement. Other partners of note include intelligence(a NTT Data company), VLS and Noldus.

myWorld also continued on its development path withfurther integrations to legacy GIS systems from esri andIntergraph, as well as enhancing the mobile capability ofthe solution which is expected to deliver some key
contract wins in 2016.
Summary
We believe that with the business stabilised and arenewed focus on the two Divisions and their respective
product lines, there is a considerable opportunity for us toboth win new customers and provide additional solutions
for our existing customers. We are, as ever, very gratefulfor the continued support of our stakeholders, and arecommitted to driving value for them in 2016 and beyond.

Richard Green
Chief Executive Officer
6 April 2016

Additionally, a partnership has been developed for the
myWorld platform with ONZO (a global provider of data
science-based utility analytics solutions) which wassigned in the early part of 2016.

7

Ubisense Group Plc
Annual Report 2015

Strategic focus

Delivering on
our strategy
Ubisense is a global leader
in Enterprise Location
Intelligence Solutions forcompanies across the world.
Our vision:

To be the most widely adopted location
intelligence software platform in our target
markets - second to none.
We help unlock previously inaccessible intelligence andinsight to empower our customers to realise dramatic
benefits in diverse application areas including vehicle
manufacturing, network operations, field operations
and asset management. Ubisense Enterprise Location
Intelligence solutions are used by a number of blue-chipcustomers across the world such as Toyota, VW, Airbus,
BMW, Telus, NiSource, Cablevision and Exelon.
Ubisense is headquartered in Cambridge, UK and
has offices in the USA, Germany and Japan.
Strategy
The opportunity for Ubisense continues to be large.
As a market-leading provider of location intelligenceplatform solutions to some of the world’s leading bluechip companies, with proven success and establishedproducts in two distinct and growing Divisions, thefoundations are now in place to enable the Company
to scale through partners.
Following what has been a year of considerable
challenge for the Group, the Board’s focus in the
coming year is on returning to profitability throughimproving sales effectiveness in both Divisions across
key territories and verticals combined with a prudent
approach to managing operating costs.

8

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Our strategy
in action….
What
Build on our two specialised platforms:
Geospatial & RTLS

Build a scalable business platformby developing third-party channels

Through having

Best Location
People in theBusiness

With focus on
Channel Business
GrowthBe able to scale bydeveloping channel
partners

Great
Customer
Base

Proven Products
in Real-Time
Environments

Sales Process and Focus
Embedded acrossthe Company

Best-in-Class
Platforms

Commercial Strategy
Be focused on
strategic delivery

Best Solutions
for the Most
Complex
Customer
Problems

One Team
Measurably improving
performance

Business development

The Group‘s products are becoming generally accepted
across its chosen industries and Ubisense, with its partners,
is increasingly able to penetrate the target markets to deliver
value-added applications that address the needs of verticals.
Our strategic acquisition in Japan has delivered early wins for
the RTLS Division in global OEMs through partners such as
Meiji Denki, further validating our approach in the market.
Furthermore, the adoption of myWorld by Nagoya Water
endorses its utility for the water industry in Japan.
The Group continues to invest in product development todeliver leading-edge location platforms upon which to build
best in class applications.
9

Ubisense Group Plc
Annual Report 2015

Business model

How weadd value

By pin-pointing the precise positions and statusof a customer’s assets, be they tools and products
in a manufacturing assembly facility or equipment
and cables in a distribution network, we cantransform the efficiency of their processes –and therefore the profitability of their business.
Our products gather real-time data from a variety
of sources, including our own sensor networks,
existing monitoring systems, enterprise
information systems and cloud-based systems.
Our applications provide the businesslogic to improve the customer processes,
updating information systems, control
systems and mobile devices in real-time.

10

Industry leading technology
Ubisense has already established very close commercial
relationships with blue-chip customers in end markets,
partnering with some of the world’s most recognised andrespected brands.
At the centre of this success has been the development offlexible and highly configurable software platform
technologies which, whilst in the development phase, led
to the identification of critical commercial applications in
Automotive, Manufacturing, Telecom and Utilities where
we have been extremely successful in using our firstmover IP advantage to build the market by creating anddelivering new classes of value added services, which are
now fully proven in the market.
Addressable market opportunities
The enterprise acceptance of our solutions has also
accelerated allowing consumerisation of maps led by
Google, the proliferation of smart devices, the growth incloud technologies, Industry 4.0 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 to deliversignificant improvements in quality, efficiency and costsavings.

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Blue-chip customer baseIn growing these capabilities we have worked with someof the world’s leading companies to address some of
the most difficult and pressing business issues for thecustomer, thereby giving us a tremendous track record
in delivery. The opportunity is to now build on thisexperience and growing market demand to expand theplatform technologies and the range of applications thatcan be supported.
Alongside this, the opportunity to deliver across newvertical markets is significant. We have already identified
and had success across not only Automotive, Manufacturing,
Telecoms and Utilities, but are now gaining traction andincreasing sales success in delivering applications in
Healthcare, Mass Transit, Logistics and Entertainment
where the flexibility, reliability and usability of theplatforms have been a key determinant of success.
Channel scalability
The success and strong customer traction so far has been
established with a direct sales channel working alongsidea growing and increasingly successful set of sales solution
partners. The opportunity now is to expand the reseller
channel to grow our vertical and geographical market
presence, taking advantage of in-depth market
knowledge, geographical coverage and considerably
lower cost of sale that the development of the indirectchannel would bring.

11

Ubisense Group Plc
Annual Report 2015

Financial review

RevenueDuring the year the Group re-organised into two Divisions,
RTLS and Geospatial, recognising the separate solutions
and services, and targeting distinct sets of customers. The
Group’s strategy is outlined further in the Strategic report.
Whilst we’re organised as two separate Divisions supported
by a central corporate team, the revenue streams are best
understood as follows:• Both Divisions sell solutions whereby revenues are thosedriven from the Ubisense product suites (RTLS – Smart
Factory; Geospatial – myWorld), technical expertise andreseller arrangements. A solution sale will include a
mixture of application software (licences in perpetuity
and subscription based), installation and commissioning
services, hardware (for RTLS) and maintenance andsupport. Margins in any given period will vary depending
upon the mix and phase of the given set of solutions
being delivered. The Group sees this revenue stream as
key to driving the long-term growth and profitability ofthe business and there is a strategic shift towards thishigher margin revenue stream.
• The Geospatial Division also generates services revenues
which are those not involving the Ubisense product suites
as defined above. These revenues are typically multi-year
or annually renewed managed services contracts,
consultancy and training. The Group generally has goodvisibility on future revenue from these services contracts,and drives customer loyalty in addition to providing acustomer base into which it can sell its solutions.
The majority of our revenues relate to a small number oflarge deals, the timing of which is not solely within ourcontrol and each can carry a significant impact on our
results in any single reporting period.
Total revenues fell 37.3% to £22.0 million (2014: £35.1
million). Within total revenues, the RTLS Division’s revenue
fell by 21.0% to £6.4 million (2014: £8.1 million) as a resultof the commercial challenges suffered by the German
automotive OEMs. Geospatial revenue fell by 42.6% to£15.5 million (2014: £27.0 million) primarily due to the
reduction in low margin Geospatial services contracts in
Europe.
Recurring revenues declined by 30.8% to £6.8 million(2014: £9.8 million) or 31.0% of total revenues (2014: 28.1%).
£2.7 million of this was maintenance and support which
decreased by 36.9% (2014: £4.2 million) and represents
12.1% of total revenues (2014: 12.0%).
12

As a global business with activities focused in Europe,
North America and Asia Pacific, the reported results are
subject to exchange rate volatility. During the period the
GBP has weakened against the US Dollar, but strengthened
against the Euro and Japanese Yen; currencies in which theGroup derives a significant proportion of its revenues. If
currency exchange rates had remained constant in 2015
compared to 2014, the Board estimates that Group
reported revenues would have been £0.3 million higher at£22.2 million and the adjusted EBITDA loss £0.2m larger.
To mitigate currency effects, the Group’s policy is tomaintain natural hedges where possible by matchingforeign currency revenues and expenditure. The Board
regularly reviews the forecast currency requirements and,at this stage, does not consider external hedging
arrangements for profit and loss items to be appropriate for
the Group.
Orders2015 saw a number of major new contract awards andextensions to existing contracts resulting in new orders forthe period of £19.2 million (2014: £31.6 million). £5.1 millionof this related to RTLS and £14.1 million to Geospatial.
The order book as at 31 December 2015 stood at £9.6
million (2014: £12.4 million), a 22.6% decrease from 2014.
This reflects the Group’s strategy to focus on sales ofsolutions in both Divisions, which provides a shorter leadtime between order and revenue generation than
Geospatial services, which in 2014 was significantly madeup of multi-year contracts at lower margin.
Gross margin
The gross margin fell from 39.9% in 2014 to 35.0% in 2015.
This was as a result of the timing of new contracts and therevenue mix between sales of new solution contracts,
implementation of installation projects and scale ofGeospatial services.
Operating expenses
Operating expenses increased by £6.1 million (32.8%) to£24.7 million (2014: £18.6 million).
Operating expenses includes sales, marketing, productmarketing, product development, administration,
depreciation, amortisation and foreign exchange and wereincreased in the first half of 2015 with an increase inmarketing and headcount costs to match revenue

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

expectations. Once it became clear that the expected
revenue increase would not arise then the Group initiated a
restructuring and streamlining of the organisation to
reduce costs going forward.

Interest and tax
Net interest payable for the period was £0.3 million (2014:£0.2 million) as a result of drawing down our HSBC and
Mizuho bank loans.

The re-organisation programme included reverting to two
Divisions, removing administration overheads, reducing
marketing costs and headcount, disposal of non-core
operations in South Korea, Singapore and the Philippines,
and reducing certain business development activities,
incurring non-recurring expenditure of £4.0 million split
between cost saving £3.2 million (2014: £0.5 million) anddisposal of non-core operations £0.8 million including a
specific debtor provision, delivering £5.8 million ofannualised cost reductions.

The Group has a net tax credit of £0.6 million (2014: £0.7
million expense) as a result of cash received of £0.5 million
under the UK R&D tax credit regime and £0.1 million of
non-cash deferred tax on capitalised development costs
and acquired intangible assets. Management’s best
estimate of the effective current tax rate is nil due to theavailability of prior years’ losses. The Group has substantial
tax losses carried forward but does not currently recognisea deferred tax asset in respect of these losses.

In total, the Group incurred non-recurring expendituremainly relating to the reorganisation program of £4.1
million (2014: £1.1 million). Additionally, a provision for
impairment of goodwill was made for £4.0 million
recognising the challenging trading period that the Group
had during 2015. Acquired intangible assets relating toServices revenues were not impaired during the year (2014:£1.3 million).
Gross expenditure on product development was £3.1
million (2014: £3.9 million) reflecting the continuing
investment in our flagship Smart Factory and myWorld
products. Capitalised product development costs at £2.5
million (2014: £3.0 million) represented 81% (2014: 75%) ofgross development spend. Amortisation of the capitalised
development costs remained at £2.6 million (2014: £2.6
million) as a result of significant investment in productdevelopment in recent years.
EBITDA and operating profit
Group adjusted EBITDA for the period was a loss of £5.2
million (2014: £1.8 million profit). To provide a better guideto underlying business performance, adjusted EBITDA
excludes non-recurring items along with depreciation,amortisation, interest and tax from the measure of profit.
Both the operating loss of £17.0 million (2014: £4.6 million)
and the loss before tax of £17.3 million (2014: £4.8 million)
includes amortisation/impairment charges of £7.2 million(2014: £5.0 million), depreciation charges of £0.4 million(2014: £0.4 million) and the non-recurring items noted
above of £4.1 million (2014: £1.1 million).

EPS and dividend
Adjusted diluted loss per share was 25.2 pence (2014: 3.5
pence loss). Reported basic and diluted loss per share was52.3 pence (2014: 16.7 pence). No dividend has been
declared.
Balance sheet, cash and cash flow
The Group has a balance sheet with net assets at 31
December 2015 of £12.0 million (31 December 2014:£18.8 million).
In May 2015, the business completed a share placing
raising gross proceeds of £10.0 million with the placementof 11,111,112 new ordinary shares at a price of £0.90 per
share from existing and new shareholders. The net
proceeds from the placing were used by the Group to
repay the £2 million HSBC acquisition loan, support thedevelopment of the business and to enable a restructuring
to occur.
The Group has a three-year working capital facility of £8.0
million agreed with HSBC in May 2015. £4.5 million of thisfacility was drawn as at 31 December 2015 (2014: £4.0
million). The Mizuho Bank facility was increased to 200
million Japanese Yen in H2 2014 and JPY 200 million was
drawn at 31 December 2015 (2014: JPY 200 million). Thisfacility was fully repaid on 31 March 2016.
In October 2014, the Group agreed an additional £2.0
million four-year-term loan with HSBC to provide funds for
future acquisitions. This facility was fully repaid in 2015.

13

Ubisense Group Plc
Annual Report 2015

Financial review continued

Cash and cash equivalents held in the balance sheet at 31 December 2015 was £5.4 million (31 December 2014: £3.7
million). The movement in the cash position during the year is summarised below:
2015£mLoss before tax
Depreciation and amortisation charges
Other non-cash expenses(17.3)
7.7
0.3

Operating cash inflow before working capital movement
Working capital inflows

(9.3)
5.3

Operating cash flows before capital expenditure
Capital expenditure on product development and property, plant & equipment
Net interest and tax received

(4.0)
(2.8)
0.3

Cash outflow from trading activities(6.5)

With bank loans outstanding of £5.6 million, net debt at 31 December 2015 was £0.2 million (31 December 2014: £3.2
million net debt). The movement in the net debt position is summarised below:
2015£m

Net debt at 1 January 2015
Cash outflow from trading activities
Share placing to institutional investors - net

(3.2)
(6.5)
9.5

Net debt at 31 December 2015

(0.2)

Subsequent to the period end the further cash outflow
related to restructuring costs together with first quarter
losses and working capital movements have led to a net
debt position of £2.4million at 31 March 2016.
Financial instruments
Information on both the Group’s financial risk
management objectives and the Group’s policies on
exposure to relevant risks in respect of financial
instruments are set out in note 26 of the consolidated
financial statements.
Capital structure
The issued share capital at 31 December 2015 was
36,620,247 (December 2014: 25,062,842) ordinary sharesof £0.02 each. The increase of 11,557,405 shares relates to11,111,112 shares issued in the May 2015 placing and446,293 share option exercises by employees. The total
number of unexercised share options at 31 December
2015 was 1,486,731.

14

Review of investment in, and balances with,subsidiaries
An impairment review was undertaken of thestandalone Company’s balance sheet, and in particular, its
investments in, and balances with, subsidiaries, noting theresults delivered in 2015 and the outlook to future
periods. Following this review, an impairment charge
was made in the Company’s books.
One consequence of our strategy of focusing on higher
margin revenue streams driven from Ubisense-owned
IP and exiting from specific lower margin business has
been an impairment to goodwill of £4.0million (2014:£1.2million).

Tim Gingell
Interim Chief Financial Officer and Company Secretary
6 April 2016

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Key performance indicators

Financial key performance indicators
The primary financial key performance indicators for theGroup, which are reported monthly, are as follows:• Adjusted EBITDA
Adjusted EBITDA excludes amortisation, depreciationand non-recurring items and is reported as it reflects
the performance of the Group. Adjusted EBITDA forthe year was £5.2 million loss (2014: £1.8 million
profit).
• Revenue and contribution by Division
The revenue and contribution in each Division isdifferent with the stage of completion of individual
contracts together with the mix of Geospatial services
affecting divisional revenue, gross margin andcontribution results. Segmental results are outlined innote 5.1 of the consolidated financial statements.

Non-financial key performance indicators for theGroup include:• Quantity and quality of lead generation, pipeline andconversions to deals in the sales pipeline.
• Project duration including installation service days.
• Our reaction and solution times to customer requests.
Following the reorganisation into two Divisions in the
middle of the year, the Board regularly reviews the KPIs in
respect of changes within periods and changes between
reporting periods. The Board believes that the Group has
made steady progress against the KPIs, particularly interms of driving the business towards positive adjusted
EBITDA and improved cash flow.

• Cash and working capital
The Group closely monitors the cash balances andworking capital movements. The closing cash balance
for the Group was £5.4 million (2014: £3.7 million) andnet debt was £0.2 million (2014: £3.2 million net debt).
The movement in the cash position is explained indetail in the Financial review starting on page 9.
• Order backlog
Order backlog provides the Group visibility over future
revenues. At 31 December 2015, the order backlog was£9.6 million (2014: £12.4 million). This decreasereflects the Group’s strategy of focusing on solutions
revenues which attract shorter lead times between
order and revenue generation than Geospatialservices.

15

Ubisense Group Plc
Annual Report 2015

Divisional delivery

Real-Time
Location Systems

16

Strategic report

Corporate governance

Financial statements

S
de m
v

t
ar e
ic

O p e r at i o n s
ce nt r eIntelligence
EngineVs t ir t
at

l
ua n
io

Smart Factory
overcoming
manufacturingbusiness challenges

Ubisense Group Plc
Annual Report 2015

Pr o ce s sovement

E xp l o r e r

Im p rhso e rrs

is
Ub R T

Smart Factory is a system that isproven to help manufacturers sustain
continuous flow, optimize efficiency andreduce errors in manual assembly
processes. The system enables users to
instantly recognise opportunities for
improvement, to quickly and easily move
ID points without reconfiguring
hardware infrastructure, and to instantly
identify critical issues and the real-timestatus of operations.

en
L S seE nt e rp ri s es ys t e m s

t
O
n
se

The Smart Factory model

Smart Factory also enables automatic,
product sensitive device control and pokeyoke, anywhere in the plant, reducing manualerrors, cycle time and line stoppages.
By accurately identifying and locating process
critical assets, Smart Factory provides real-time
operational awareness, adaptive control anddata-driven insights.
How it works
Smart Factory gathers location data, and datafrom existing plant systems and devices.
The system combines this information,correlating the real-time process interactions
with operational details, to deliver a virtualinterpretation of exactly what’s going on in thefactory. By leveraging this knowledge, Smart
Factory empowers automation and drives
widespread improvements to users’.
manufacturing processes.

10

out of

12

Of the world’s leading
automotive manufacturers
use Smart Factory

17

Ubisense Group Plc
Annual Report 2015

Divisional delivery

Real-Time
Location
Systemscase study

18

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

CLAAS TRACTOR
With advanced searching and real-time spatial
monitoring capabilities, Smart Factory enabled Claas,a leading European tractor maker, to drive widespread
efficiencies at its facility in Le Mans.
Challenge
To reduce tractor inventory and improve production flow in a busy
offline department with multiple work areas.
Every day, Claas Le Mans produces around 50 tractors in 12 different
models, and has up to 600 tractors in its extensive offline department at
any given time. With so many different tractors in its parking areas, it
was extremely difficult and time consuming for Claas workers to identify
and locate the correct ones when needed – finding the right tractor
commonly involved a physical search of multiple yards.
Claas had realized that it could make considerable cost savings if it
could prevent this wasted search time, and could improve its cash flowby reducing its inventory of un-shipped tractors. However, it lacked thereal-time asset visibility required to make this happen.

Solution
Smart Factory enabled complete, always-on visibility of operations in
the Le Mans factory Offline area, helping Claas to greatly reduce both
search times and delivery times.
The Smart Factory system delivered powerful real-time location andGPS-enabled searching capabilities, eliminating wasted search time in
the tractor holding area. With Smart Factory, Claas’ workers can instantly
identify and find the exact vehicle required (using tailored criteria suchas production number, model or age for example) in an easy to interpret
map view. They no longer have to perform laborious manual searches,or try to maintain paper-based records.
In addition to this significant waste reduction, Smart Factory provides
Claas with new insights, and real-time alerts on dwell times in spaces
such as repair bays, enabling the manufacturer to drive further process
improvements in the Offline area.

Results• With Smart Factory, Claas’ workers know the location and status ofevery tractor and critical production asset in the offline area, at all
times. Wasted time spent searching for tractors in re-work has been
eliminated, freeing personnel to focus on higher value-adding tasks.
• The manufacturer has been able to reduce the volume of on-wheels
vehicles in the parking areas, and release vital revenue.
• Claas Offline Managers have new insights with which to
improve production flow.

19

Ubisense Group Plc
Annual Report 2015

Divisional delivery

Geospatial

20Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Organisations that excel inoperations and maintenanceempower their people with theknowledge resources they needto do their jobs.
They strive to make data interpretation simple and sharing
fast – from the field, to the office, and back again. Whenthat happens, the right decisions are made faster, costs
reduce and customer experience improves.
Ubisense myWorld is a means to achieve exactly that. It uses a
Google Maps style interface and real-time connectivity to deliveractionable information to field and office users. myWorld enables
an organisation to meet the demands of internal and external
stakeholders without burdening the IT infrastructure.
How it works
Ubisense myWorld is a web and mobile platform that integrates
data from multiple sources – existing GIS products, otherenterprise systems and external information – into one, single view.
It supports anyone in an organisation with access to a map-based
overview of detailed network data, on any device whether they’re
online or offline. myWorld is designed for electric, gas, water andtelecom companies. It provides simple, smart and fast location
intelligence to 95% of an organisations’ workforce who are nottrained GIS users. With a familiar Google Maps style interface thatworks across all devices from PCs to smartphones, it’s
straightforward and intuitive to use.

21

Ubisense Group Plc
Annual Report 2015

Divisional review

Geospatial
case study
NiSource: Northern Indiana PublicService Company (NIPSCO) a subsidiaryof NiSource Inc. (NYSE: NI) – a Fortune
500 company that provides energy tonearly four million customers in the
United States – purchased Ubisense
myWorld Damage Assessment in 2015.

22

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Ubisense myWorld Damage Assessment enabled NiSource
to streamline its field data collection process during storm
restoration enabling the company to allocate field teams andreceive their assessments in real time, delivering instant visibilityof the level of damage and completeness of their assessment.
Challenge
To streamline the company’s field data collection process during storm
restoration to enable NiSource to help restore power to customers fasterand more predictably.
Customers depend on a reliable source of electricity and therefore thecompany have to be prepared for outages caused by storms or otheremergencies. When a storm hits, NiSource needs to mobilise its teams in afast and effective manner to get them to the affected areas and assess thedamage as early as possible. These teams would historically be working withpaper maps and radio-based manual reporting. The time taken to assess any
damage, identify the assets involved and get this information back to theoperational teams could be very lengthy.
Delays in providing accurate information from the field caused many issues.
NiSource wants to provide the best possible restoration time estimates to its
customers and delays in information impact estimation quality which has adirect influence on customer service levels. Delays also have a direct impact
on storm restoration costs. Improved information has been proven to reduceoverall restoration time, improves resource allocation and makes requests formutual aid from other utilities more accurate.

Solution
The myWorld Damage Assessment solution, rapidly deployed in approximately
seven months, enabled NiSource to better communicate and share
information in near real time, increasing visibility about damaged areas andinfrastructure to make swift, informed decisions that streamline therestoration process.
By leveraging and integrating existing systems and enterprise data sources andadding new, cloud-based data such as Google Maps, weather and traffic feeds,
myWorld Damage Assessment automated the existing paper-based system toenable the aggregation of critical assessment information as it was collected in
the field. In this way, myWorld Damage Assessment provides a live view of theassessment efforts for Storm Supervisors and Emergency Managers, and enables
field workers to collect damage data more effectively, using any mobile device
with or without a permanent network connection.

ResultNiSource can now, with its electronic tablet-based integrated damage
assessment system, aggregate critical assessment information as it iscollected in the field, using this to improve the accuracy of its estimatedrestoration time predictions, help reduce repair times, improve System
Average Interruption Duration Index (SAIDI) scores and make quicker
decisions about mutual aid requests – all adding to greatly improve acustomer’s experience and satisfaction during outages.
The system has already been used effectively during two major storm events
that have hit the mid-west since December. With the success of this first
implementation, NIPSCO are now planning further integration into their
Outage Management System (OMS) and Materials Management system toprovide a closed-loop system for their operations teams in the field.

23

Ubisense Group Plc
Annual Report 2015

Corporate social responsibility

Values andstandards
Employee involvement
The Group aims to attract, retain and motivate the best
staff regardless of gender, race, religion, sexual
orientation, age or disability. To that end it is committed
to offering equal employment opportunities.

Health and safety environment
The Group is committed to maintaining a safe and healthy
working environment for all staff. To that end it provides
appropriate training and supervision and complies with allapplicable regulatory requirements.

The Group provides its employees systematically withinformation on matters of concern to them and regularly
consults its staff, or their representatives, for views on
matters affecting them.

The Group seeks wherever possible to minimise its
impact on the environment for the benefit of its staff andthe public at large. The Group is committed to complying
with environmental regulations in particular Waste
Electrical and Electronic Equipment recycling (WEEE) andencourages and supports staff in waste recycling
within its offices.

The Group encourages employee involvement in theGroup’s performance by periodically granting shareoptions and Group performance-related variable
compensation, and ensures that employees are fully
aware of financial and economic factors affecting theperformance of the Group.
Employee policies
The Group is committed to following the applicable
employment laws in each territory in which it operates.
The Group is committed to ensuring that disabled persons,whether registered or not, have equal opportunities when
applying for vacancies, with due regard to their aptitudes
and abilities. In addition to complying with legislativerequirements, procedures ensure that disabled employees
are fairly treated and that their training and careerdevelopment needs are carefully managed. For those
employees becoming disabled during the course of theiremployment, every effort is made, whether throughretraining or redeployment, to provide an opportunity forthem to remain with the Group.

24

Community activity
At Ubisense we are committed to being a responsible
business, both in how we work with our customers but also
in terms of how we contribute to the wider community andthe world around us. It is important to our employees towork for a socially responsible organisation and ourapproach therefore reflects our people.
We are actively involved in supporting and developing
the local community to make a lasting positive impact,
and with our employees we are involved in a wide varietyof community projects. These have included in the UK:charity and payroll giving; support for local universities
with summer internships and work placements; andmanagement time to help promote entrepreneurshipand mentoring to students.
We also regularly offer our office and business facilities
to support local organisations such as the Cambridge
Network and the Cambridge Enterprise & Technology
Club, where for example we recently hosted a very
successful event with over 35 representatives fromlocal business.

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Principal risks and uncertainties

How wemanage risk
The Group faces competitive and strategicrisks that are inherent in a rapidly growing
emerging market. The Board and the Executive
management team review strategy and risks tothe business regularly. Where possible, processes
are in place to monitor and mitigate the identified
risks.
The key business risks affecting theGroup are set out opposite:

Technological risks
The Group operates in an industry where competitive
advantage is heavily dependent on technology. It is
possible that technological development may reduce theimportance of the Group’s function in the market or render
the patents on which it relies redundant. For instance, theGroup’s Enterprise location systems rely on ultra-wideband
radio signals to operate. There is no guarantee thattechnological advances will not render systems based on
ultra-wideband radio obsolete.
In order to mitigate this risk, Ubisense invests in a range of
research and development activities to maintain its
competitive advantage and participates in industry andresearch forums in order to keep abreast of technologicaladvances. The Group spent £3.1 million in its R&D
programmes in the year (2014: £3.9 million) of which £2.5
million (2014: £3.0 million) was capitalised.
Financial instruments
Information on both the Group’s financial risk
management objectives and the Group’s policies on
exposure to relevant risks in respect of financial
instruments are set out in note 26 of the consolidated
financial statements.
Growth management
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 acrossthe business and 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
continues to develop its systems and processes that canscale with the business whilst maintaining good financial
management.
Staff recruitment and retention
The contribution made by Ubisense’s highly skilled andexperienced staff is vital to the Group’s success. As theGroup grows, it is important to recruit and retain staff.
The Group has in place appropriate incentive structures toattract and retain the calibre of employees necessary toensure the efficient development and management of theGroup.

25

Ubisense Group Plc
Annual Report 2015

Reliance on third parties, including manufacturers
The Group relies on certain key third-party equipment
manufacturers in the completion of its products, andtherefore does not always have complete control over the
supply of 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 to complete its
work for its customers within the timetable laid down by thecontract or at a profit may be impaired. If a manufacturer isunable to deliver the products for any reason, the Groupmay be required to purchase such equipment or materials
from another source at a higher price. The resulting
additional costs may be substantial and the Group may be inbreach of its contracts with customers, which may result ina financial loss on a particular contract or a loss of business.
In addition, any resulting failure to fulfil contracts withcustomers and other business partners may have an adverse
effect on the Group’s future profitability and reputation.
In order to mitigate this risk, the Group closely manages andreviews its relationship with key suppliers on a regular basis.
Dependence on key customers
The Group has a concentrated customer base, many ofwhich are substantially larger enterprises than the Group.
As such, the purchasing power of the Group’s customers isoften significant, which may impact the ability of theGroup to negotiate terms which are favourable to it incontracts. The Group is reliant on significant projects withits key customers to deliver its projected financial results.
Changes to the timing and/or terms of significant projects,
to the investment decisions of key customers or failure by
the Group to retain key customers may have a significant
adverse effect on the Group’s business and financial
results. In the financial year to 31 December 2015 theGroup’s 10 largest customers accounted for 41% of theGroup’s revenue (2014: 47%), of which one customer
accounted for just under 6% (2014: 13%). The loss of amajor customer could result in a decrease in Grouprevenues, margins and profitability.
In order to mitigate this risk, the Group continues to invest
in the key customer relationships that it has successfully
retained over many years, whilst also maintaining astrategy to extend and diversify its customer base.

26

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 thetiming of cash collections is contingent on the customer
re-selling our products to end users.
The Group’s exposure under such contracts is limited andreviewed regularly by the Board.
A significant proportion of the Group’s revenue is derived
from a small number of large deals, the timing of which is
not within the control of the Group. Such a profile makes
forecasting difficult and changes against expectations have
had, and may continue to have, a significant impact on theGroup’s results, particularly given the Group’s significant
level of operational gearing. To mitigate this risk, theGroup’s management maintains regular detailed reviewsof the opportunity pipeline including critical stages tocomplete the larger deals taking judgement on the risks
involved. The status of key deals in the current period isreported on at Board meetings.
Credit
The main credit risk is attributable to trade receivables
owed by customers. As the majority of the Group’s
customers are very large, blue-chip utilities, telecoms andmanufacturing companies, the risk of non-payment tends
to be less of a traditional credit nature and more related tocustomer satisfaction.
Credit exposure by customer is reviewed regularly by the
Executive management team and the main Board with
provision made for doubtful receivables when there arecircumstances which, based on experience, are evidenceof a likely reduction in the recoverability of the receivable.
Bank covenants
In May 2015 the Group extended the three year working
capital bank loan facility to £8.0 million (2014: £5.0 million)
with HSBC Bank plc repayable in 2018, and as at
31 December 2015 the outstanding balance was £4.5 million(2014: £4.0 million).
Following the fund raise in May 2015, the £2.0 million
acquisition loan with HSBC Bank plc that existed as at
31 December 2014 was repaid.

Strategic report

Corporate governance

The Group is required to meet certain financial criteria
agreed as covenants for the bank loan as laid out in note 18
to the financial statements. The financial measures are
regularly reviewed against covenant requirements toensure the Group’s obligations can be met.
The Group notified HSBC of a breach of the covenants
relating to adjusted EBITDA as at 31 December 2015 and as
at 31 March 2016, against which HSBC provided
Reservation of Rights letters indicating that they do notintend to take further action.
With a covenant test based on a rolling 12-month adjusted
EBITDA calculation, the Group anticipates further covenantbreaches in the next 12 months until the full effect of therestructuring actions taken in 2015 are delivered, and thedisappointing results of 2015 no longer have an impact on
the calculation. The Group is engaged in constructive
discussions with HSBC on a multi-year repayment loan withbusiness appropriate covenants as a replacement of thisfacility.
Intellectual property
The Group has a number of trademarks registered, and ispursuing registration of a number of trademarks in the
major territories in which it operates. The Group also has apatent portfolio comprising of a number of patents filed in
territories worldwide. Should a third party successfully
demonstrate priority over any of these rights, it could
inhibit the Group, or the Group’s customers, from selling
products in certain territories.
Any failure to protect the Group’s intellectual property may
result in another party copying or otherwise obtaining andusing its proprietary technology without authorisation.
There may not be adequate protection for the intellectual
property in every country in which the Group’s products
are made available and policing unauthorised use of
proprietary information is difficult and expensive. Due tothe Group’s size and limited cash resources, it may not beable to detect and prevent infringement of its intellectual
property.
In addition, some of the Group’s patents are licensed froma third party. The terms of that licence are on relatively
standard commercial terms. However, there can be no
guarantee that such third party will adequately maintainsuch patents and therefore the protection and benefit
afforded to the Company by such patents cannot be
guaranteed.

Financial statements

Ubisense Group Plc
Annual Report 2015

The steps which the Group has taken to protect its
intellectual property may be inadequate to prevent themisappropriation of its proprietary technology. Any
misappropriation of the Group’s intellectual property could
have an adverse impact on the Group’s business and its
operating results. Furthermore, the Group may need totake legal action to enforce its intellectual property, toprotect trade secrets or to determine the validity or scopeof the proprietary rights of others. Litigation relating to theGroup’s intellectual property, whether instigated by theGroup to protect its rights or arising out of alleged
infringement of third-party rights, may result in substantial
costs and the diversion of resources and management
attention, and there can be no guarantees as to theoutcome of any such litigation.
Digital infrastructure and cybersecurity
Breaches of the Group’s digital security through cyberattacks or otherwise, or failure of the Group’s digital
infrastructure could seriously disrupt operations and resultin the loss or misuse of data or sensitive information, legal
or regulatory breaches and potentially legal liability. These
could result in significant costs or have reputational
consequences.
Following a review of the resilience and disaster recovery
capability of the Group’s critical systems and exchanges in
2015, we have invested resources in enhancing site
resilience and defences, improving network monitoring
and reviewing the incident response processes to mitigate
the impact of a security breach.

Approved by the Board of Directors and signed onbehalf of the Board

Tim Gingell
Interim Chief Financial Officer and Company Secretary
6 April 2016
Ubisense Group Plc
Registered number: 05589712

27

Ubisense Group Plc
Annual Report 2015

Board of Directors

Peter Harverson,
ChairmanPeter 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 thedevelopment of the company’s
European Corporate Accounts
programme. Subsequently hebecame Director of Services Sales– EMEA with a charter to develop
new areas of business, including
professional services. Peter retired
from Sun Microsystems in December
2005. Most recently he was NonExecutive 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 adviser to Cambridge
IP Limited.

28

Richard Green,
Chief Executive Officer
Richard initially trained as amechanical engineer and has
over 25 years’ experience inthe software industry.
Having established Smallworld
as one of the leading geographic
information system companies
serving utility and telecoms
companies in Europe and the US,
the company subsequently listedon 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 Instituteof Mechanical Engineers. He is also
Entrepreneur in Residence at the
Cambridge Judge Business School.

Dr. Robert Sansom,
Non-Executive Director
An active angel investor and mentor
to start-ups, Robert is founder of theCambridge Angels, a group of
seasoned technology and biotechnology entrepreneurs who
invest in and mentor 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 waslisted on NASDAQ in 1994 andsubsequently acquired by Marconi
for $4.5 billion in 1999. Additionally,
Robert served as the Chief
Technology Officer at Marconi
until 2000.
Robert is a member of the boardof directors of Cambridge
Communications Systems Limited,
CRFS Limited, Featurespace Ltd andNetronome Systems, Inc. He waselected as a Fellow of the Royal
Academy of Engineering in 2010,
and is a trustee of Camfed.

Strategic report

Corporate governancePaul Taylor,
Non-Executive Director
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 andfor the development of AVEVA’s
overseas subsidiaries including
adherence to group standards.
Between 1998 and 2001, Paul was
also UK Director of Human Resources
and was appointed to the position of
Finance Director and Company
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 Sector division.

Financial statements

Ian Kershaw,
Non-Executive Director
Ian has over 30 years’ experiencein the automotive, manufacturing
and power industries. He has global
responsibility for both transaction
support and operational
performance improvement
within Ricardo’s strategic
consulting division.
Ian has held management positions
with Caterpillar, Rolls-Royce andBentley Motor Cars and Arthur
D. Little.

Ubisense Group Plc
Annual Report 2015

Tim Gingell,
Interim Chief Financial Officer /Company Secretary
Tim has over 25 years commercial
and financial experience across
software, wireless and telecoms
industries.
Tim qualified as a Chartered
Accountant with Deloitte in
London and most recently was
CFO or Director for a number ofIBM’s acquired companies having
joined IBM when they acquired i2from Silver Lake Sumeru.
Prior to that Tim led the financeteam at the venture-capital-backed
company The Cloud Networks,
and previously had spent 10 years at
MFS/Worldcom in commercial roles.

Paul was a recipient of the FTSE250
Finance Director of the Year award
and is also a Non-Executive Directorof Escher Group Holdings plc, Digital
Barriers plc and KBC Advanced
Technologies plc.

29

Ubisense Group Plc
Annual Report 2015

Corporate governance report

Although not required to do so by the AIM Listing Rules, the Directors have chosen to provide selected corporate
governance disclosures with 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 stage ofdevelopment, will assist in the delivery of corporate strategy, the generation of shareholder value and the safeguardingof shareholders’ long-term interests. We do not comply with the UK Corporate Governance Code September 2014 (theCode). However, the Directors are committed, wherever it is reasonably practicable, to ensure that the Group is
managed in accordance with the principles set out in the Code.
Composition of the Board
The Board comprises the Non-Executive Chairman, three Non-Executive Directors and one Executive Director.
Biographical details of all members of the Board are set out on pages 28 and 29.
Since the flotation of the Company in 2011, no equity-based incentives have been granted to Non-Executive Directors
and there are no such plans for any such grants in the future. At the end of the year, the Chairman and all NonExecutive Directors had shares and share options in Ubisense Group Plc.
The holding of shares and share options by Non-Executive Directors could, amongst other things, be relevant indetermining 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 the meaning of
the Code, noting that their shareholdings in the Group are small.
The roles of Chairman and Chief Executive Officer are vested in separate individuals, each with clear allocation of
accountability and responsibility. The Chairman has prime responsibility for running the Board and the Chief Executive
Officer has executive responsibilities for the Group’s strategic development, operations and results. The structure of
the Board and the integrity of each Director ensures that there is no one individual or group dominating the decision
making process.
The role of the Board
The Board holds full meetings at least 10 times per year, with attendance required in person whenever possible. The
principal matters that it considers are as follows:• reviewing operating and financial performance;• ensuring that appropriate management development and succession plans are in place;• determining corporate strategy, including consideration and approval of the Company’s annual strategy review;• establishing dividend policy;• approving and accepting all new committed funding facilities;• approving and accepting major changes in the capital structure of the Company;• reviewing and approving formal treasury policies relating to funding, liquidity, transactional foreign exchange andinterest rate risk management;• reviewing the health and safety and environmental performance of the Company;• approving corporate acquisitions, mergers, divestments, joint ventures and major capital expenditure; and• receiving, reviewing and approving recommendations by the designated Committee on matters related to audit,
nominations and remuneration.
The Board is supplied with information in a timely manner and in a form and of a quality appropriate to enable it todischarge its duties. The Board has a policy to set out which matters are reserved for the decision of the Board andthose to which the Executive Directors need not refer for approval. This policy also requires that all recommendations
and decisions by a Board Committee are approved or ratified by the Board.

30

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Summary of Board meeting attendance in 2015
The Board is expected to meet regularly on a formal basis at least 10 times a year. 20 Board meetings were held in
2015. Attendance at the meetings was as follows:
Total meetings
attended

Tim Gingell
Richard GreenPeter Harverson
Andrew Hopper
Ian Kershaw
Robert Parker
Robert Sansom
Paul Taylor

9 (9)20 (20)19 (20)20 (20)17 (20)10 (11)
17 (20)20 (20)Figures in brackets denote the maximum number of meetings that could have been attended.
Board Committees
The Board has established three Committees: the Audit Committee, the Nomination Committee and the Remuneration
Committee.
Summary of Committee membership
The Committee membership as at 31 December 2015, was as follows:

Tim Gingell
Peter Harverson
Ian Kershaw
Robert Sansom
Paul Taylor

Audit
Committee

Nomination
Committee

Remuneration
Committee

Yes
–
Yes
–
Chair

–
Yes
–
Chair
Yes

–
Chair
Yes
–
Yes

On 1 January 2016, Ian Kershaw became Chair of the Remuneration Committee whilst Peter Harverson remains onthat Committee.
Summary of Committee meeting attendance
Tim Gingell
Richard GreenPeter Harverson
Ian Kershaw
Robert Parker
Robert Sansom
Paul Taylor

Audit
Committee

Nomination
Committee

Remuneration
Committee

4 (4)
–
–
4 (4)
2 (2)
–
4 (4)

–
–
4 (4)
–
–
4 (4)
4 (4)

1 (1)
1 (1)
4 (4)
4 (4)
–
–
4 (4)

Figures in brackets denote the maximum number of meetings that could have been attended.

31

Ubisense Group Plc
Annual Report 2015

Corporate governance report continued

The role of each Committee is described in more detail below:
Audit Committee
The Audit Committee has responsibility for the following matters:• Financial reporting:–– Review of all financial reports released to the market and shareholders.
–– Review of significant reporting issues and key judgements.
–– Review of accounting policies selected and their application.
• External audit:–– Recommending appointment, re-appointment or removal of the external auditors.
–– Overseeing the Group’s relationship with the external auditors, including assessing their independence.
–– Agreeing the annual audit plan and reviewing the finding and effectiveness of 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 the period under review, theCommittee has met four times on a formal basis excluding meetings of the Chairman with external advisers. 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 andexperience is achieved.
• Succession planning for the Board and other key management roles.
• Identifying and recommending to the Board candidates to fill Board vacancies.
• Ensuring Non-Executive Directors are able to make the necessary time commitments to fulfil their role.
• Ensuring Non-Executive Directors receive letters of appointment, detailing their responsibilities.
• Making recommendations to the Board about the appointment, removal or continuation in office of any Director.
During the period under review, the Committee has met four times on a formal basis. The Committee is expected tomeet formally twice a year.

32Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Remuneration Committee
The Remuneration Committee has responsibility for the following matters:• Agreeing the framework for the Group’s remuneration policy for Directors and key 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 scope of pension arrangements.
• Ensuring contractual terms and payments made on termination are fair to both the individual and the Group.
• Agreeing the policy for authorising expense claims by the Chair and Chief 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 Directors that 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 of each Executive Director’s remuneration
package is performance-related.
During the period under review, the Committee has met four times on a formal basis. The Committee is expected tomeet 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 than eliminate
the risk of failure to achieve the Group’s objectives. It should be recognised that such systems can only provide
reasonable but not absolute assurance 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 ofthe system of internal financial controls are:• Budgetary control over all operations, and measuring performance against pre-determined targets on at least amonthly basis.
• Regular forecasting and reviews covering trading performance, assets, liabilities, cash flows and bank 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 the effectiveness of other internal controls, including financial, operational, compliance
controls and risk management.

33

Ubisense Group Plc
Annual Report 2015

Directors’ report

The Directors present their annual report on the affairs of the Group together with the audited financial statements forthe year to 31 December 2015.
Incorporation and constitution
Ubisense Group Plc is domiciled in England and incorporated in England and Wales under Company Number
05589712. Ubisense Group Plc’s Articles of Association are available on the Group’s website at www.ubisense.net.
Capital structure
The Company has one class of ordinary share of two pence each which carries no right to fixed income. Each sharecarries the right to one vote at general meetings of the Company.
Details of the share capital of the Company, including shares issued during the year, can be found in note 20 of theconsolidated financial statements.
Substantial shareholdings
On 6 April 2016, the Company had been notified of the following significant interests in its ordinary share capital:

Kestrel Partners
Threadneedle Investments
Robert Sansom
NFU Mutual Insurance Society Ltd
Ruffer LLP
Richard Green*
Living Bridge
Charles Stanley
Unicorn Asset Management

Total holding
number% of issued sharecapital8,427,393
4,227,636
2,985,899
2,336,490
1,935,671
1,844,462
1,432,049
1,331,444
1,205,97823.01%
11.54%
8.15%
6.38%
5.28%
5.04%
3.91%
3.64%
3.29%

* Includes 115,617 (2014: 115,617) shares held by the RT Green Children’s Trust of which Richard Green is a trustee.

Directors
The Directors serving at 31 December 2015 were as follows:
Richard GreenPeter Harverson
Ian Kershaw
Robert Sansom
Paul Taylor
Board changes
On 29 June 2015, Robert Parker resigned his position as Chief Financial Officer and left the Company.
On 21 July 2015 Tim Gingell, having joined the Group in February 2015, was appointed as Company Secretary and isInterim Chief Financial Officer whilst the Group reviews its options for a permanent replacement.
On 9 October 2015, Andrew Hopper notified the Board of his intention to resign both as Chairman and Non-Executive
Director after almost 10 years of service with Ubisense effective from 31 December 2015.
Directors’ interests – shares
Directors’ interests in the ordinary shares of Ubisense Group Plc at 31 December 2015 were as follows:
2015
number2014
numberRichard Green*Peter Harverson
Andrew Hopper
Ian Kershaw
Robert Sansom
Paul Taylor

1,844,462
65,161
277,401
2,000
2,985,899
33,334

1,734,906
65,161225,000–
2,493,676–

Total

5,208,257

4,518,743* Includes 115,617 (2014: 115,617) shares held by the RT Green Children’s Trust of which Richard Green is a trustee.

There has been no change in the interests set out above between 31 December 2015 and 6 April 2016.
34

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Directors’ remuneration, share options and loans
Details of Directors’ remuneration and share options are provided in note 7 of the financial statements. There are noloans to or from the Directors.
Directors’ indemnity arrangements
The Group has made qualifying third-party indemnity provisions for the benefit of its Directors which were madeduring the year and remain in force at the date of this report.
The Group has purchased and maintained throughout the year Directors’ & Officers’ liability insurance in respect ofitself and its Directors.
Corporate governance
The Company’s statement on corporate governance can be found in the Corporate Governance report on page’s
30 to 33 of these financial statements. The Corporate Governance report forms part of the Directors’ report and isincorporated into it by cross reference.
Business review
The information that fulfils the requirements of the business review, including details of financial performance for theyear ending 31 December 2015, key performance indicators, principle risks and uncertainties and the future outlook are
set out in the Chairman’s statement, Chief Executive’s statement and Financial review.
Post-balance sheet events
In the Financial review, the Group outlined the fact that the Mizuho loan was repaid on 31 March 2016, and that theGroup had notified the bank of the breach of covenants on the HSBC bank plc loan.
Dividends
The Directors do not recommend payment of a dividend for the year (2014: £nil).
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.

Approved by the Board of Directors and signed on behalf of the Board

Tim Gingell
Interim Chief Financial Officer and Company Secretary
6 April 2016
Ubisense Group Plc
Registered number: 05589712

35

Ubisense Group Plc
Annual Report 2015

Directors’ responsibilities statement

The Directors are responsible for preparing the Directors’ report, the Strategic report and the financial statements inaccordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors are required to prepare the consolidated financial statements in accordance 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
Accounting Standards and applicable laws). Under company law the Directors must not approve the financial
statements unless they give a true and fair view of the state of affairs and profit or loss of the Company and Group forthat period. In preparing these financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the
consolidated financial statements;• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed
and explained in the Company financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company andenable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible
for safeguarding 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 auditor are unaware;and• that 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 to establish 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. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

36

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

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 2015 which
comprise the consolidated 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 cash
flows and the related notes. The financial reporting framework that has been applied in their preparation is applicablelaw 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 theCompanies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members thosematters we are required to state to them in 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 asa 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 36, the Directors are responsible forthe preparation of 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:www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion, the Group’s financial statements:• give a true and fair view of the state of the Group’s affairs as at 31 December 2015 and of its loss for the year
then ended;• have been properly prepared in accordance with IFRSs as adopted by the European Union; and• have 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 theGroup 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 it requires us toreport to you if, in our opinion:• 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 Parent Company financial statements of Ubisense Group Plc for the year ended
31 December 2015.

Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
6 April 201637

Ubisense Group Plc
Annual Report 2015

Consolidated income statement
For the year ended 31 December 2015

2015
£’000

2014
£’000

21,982(14,290)

35,051(21,053)

Gross profit
Operating expenses

7,692(24,671)

13,998(18,579)

Operating loss

(16,979)(4,581)Analysed as:
Gross profit
Other operating expenses

7,692(12,914)

13,998(12,169)(5,222)(388)(309)(6,985)(4,075)

1,829
(359)
(2,019)(2,937)(1,095)

Notes

Revenue
Cost of revenues

Adjusted EBITDA
Depreciation
Amortisation and impairment of acquired intangible assets
Amortisation and impairment of other intangible assets
Non-recurring items

5

13
12
12
9.2

(16,979)(4,581)

Finance income
Finance costs

Operating loss
8
8

12
(301)

14
(211)

Loss before tax
Income tax

910.1(17,268)
632(4,778)736

Loss for the year

(16,636)(4,042)

Loss attributable to:Equity shareholders of the Company
Non-controlling interest(16,569)(67)(4,085)
43(16,636)(4,042)(52.3p)(52.3p)(16.7p)(16.7p)Loss per share attributable to the equity shareholders of the Parent (pence)
Basic
Diluted11
11

The notes on pages 44 to 73 are an integral part of these consolidated financial statements.

38

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Consolidated statement of comprehensive income
For the year ended 31 December 2015

2015
£’000

2014
£’000

Loss for the year
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(16,636)(4,042)

139

(531)

Total comprehensive loss for the year

(16,497)(4,573)Attributable to:– Equity shareholders of the Company– Non-controlling interest(16,423)(74)(4,549)(24)

Total comprehensive loss for the year

(16,497)(4,573)The notes on pages 44 to 73 are an integral part of these consolidated financial statements.

39

Ubisense Group Plc
Annual Report 2015

Consolidated statement of changes in equity
For the year ended 31 December 2015

Attributable to equity shareholders of the Parent Company

Balance at 1 January 2014
Loss for the year
Exchange difference on
retranslation of net assets andresults of overseas subsidiaries
Total comprehensive loss forthe year
Reserve credit for equity-settled
share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs

Sub-total£’000

Noncontrollinginterest
£’000

Total
£’000

(6,342)

18,694554

19,248–(4,085)(4,085)43(4,042)

–

(464)

–

(464)

(67)

(531)

–

–

(464)

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

–
–
4,230
(229)

75
–
–
–

–
–
–
–

–
–
–
–

75
40
4,230
(229)

–
–
–
–

75
40
4,230
(229)

Share
capital
£’000

Share
premium£’000

Share-based
payment
reserve£’000

Translation
reserve£’000

Retainedearnings
£’000

461

24,050

746

(221)

–

–

–

–

–

–
–
40
–
–

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

18,791

Loss for the year
Exchange difference on
retranslation of net assets andresults of overseas subsidiaries

–

–

–

–

–

–

–

146

–

–

–

146

–
231
–
–

–
–
9,845
(474)

54
–
–
–

–
–
–
–

–
–
–
–

–

–

9,656

–

9,656

(539) (26,996)

11,494456

11,950Total comprehensive loss forthe year
Reserve credit for equity-settled
share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs
Transactions with owners

231

9,371

54

Balance at 31 December 2015

732

37,422875(16,569) (16,569)
146–(16,569) (16,423)
54
231
9,845
(474)

The notes on pages 44 to 73 are an integral part of these consolidated financial statements.

40(67) (16,636)
(7)

139

(74) (16,497)
–
–
–
–

54
231
9,845
(474)

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Consolidated statement of financial position
For the year ended 31 December 2015

Notes

2015
£’000

2014
£’000

12
13

9,786
943

14,363
1,112

10,72915,475

2,815
9,277
5,392

2,881
15,541
3,697

Total current assets

17,484

22,119Total assets

28,21337,594(8,629)(1,123)(9,816)(927)(9,752)(10,743)(1,157)(203)(4,500)(651)(1,336)(120)(6,000)(604)

Total non-current liabilities(6,511)(8,060)Total liabilities(16,263)(18,803)

Net assets

11,95018,791

AssetsNon-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Liabilities
Current liabilities
Trade and other payables
Bank loans

14
15
16

17
18

Total current liabilities
Non-current liabilities
Deferred income tax liabilities
Trade and other payables
Bank loans
Other payables

10
18
19

41

Ubisense Group Plc
Annual Report 2015

Consolidated statement of financial position continued
For the year ended 31 December 2015

Notes

Equity attributable to owners of the Parent Company
Ordinary share capital
Share premium
Share-based payment reserve
Translation reserves
Retained earnings

20
20

Equity attributable to shareholders of the Company
Non-controlling interests
Total equity

2015
£’000

2014
Restated£’000

732
37,422875(539)(26,996)501
28,051
821(685)(10,427)

11,494

18,261456

530

11,95018,791

The notes on pages 44 to 73 are an integral part of these consolidated financial statements.
The financial statements were approved by the Board of Directors on 06 April 2016 and signed on its behalf by:

Richard Green
Chief Executive Officer
Ubisense Group Plc
Registered Number: 05589712

42

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Consolidated statement of cash flows
For the year ended 31 December 2015

2015
£’000

2014
£’000

(17,268)(4,778)

388
7,294
–
54
(12)
301

359
4,956
22
75
(14)
211

Operating cash flows before working capital movement
Change in inventories
Change in receivables
Change in payables(9,243)66
6,264(1,010)831(293)(3,661)
447

Cash used in operations before tax(3,923)(2,676)

Notes

Loss before tax
Adjustments for:
Depreciation
Amortisation and impairment
Loss on the disposal of property, plant and equipment
Share-based payments charge
Finance income
Finance costs

9, 13
9, 12
9
21.2
8
8

436

47

(3,487)(2,629)

–
(3)
(196)
4
(2,652)
12

(509)
–
(885)
1
(3,500)14

Net cash flows from investing activities(2,835)(4,879)Cash flows from financing activities
Proceeds of borrowings
Repayment of borrowings
Interest paid
Proceeds from the issue of ordinary share capital522(2,000)
(277)
9,602

3,427
–
(151)
4,041

Net cash flows from financing activities

7,847

7,317

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
Exchange differences on cash and cash equivalents

1,525
3,697
170

(191)
3,964
(76)

5,392

3,697

Net income taxes received/(paid)
Net cash flows from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Disposal of subsidiaries, net of cash disposed
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Expenditure on intangible assets
Interest received

Cash and cash equivalents at end of period

24

16

The notes on pages 44 to 73 are an integral part of these consolidated financial statements.

43

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements

1 General information
Ubisense Group Plc (the Company) and its subsidiaries (together, the Group) deliver best-in-class asset location
solutions that significantly improve operational effectiveness and profitability for businesses around the world.
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 2015, was 43.0 pence per share (31 December
2014: 120.0 pence).
The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to UbisenseGroup 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.
The Group has its main operations in the UK, USA, Canada, Germany, France and Japan and sells mainly in North
America, Europe and Asia. The Group legally consists of 10 companies headed by Ubisense Group Plc (UK). A full list of
subsidiaries is given in note 23 of the financial statements.
These consolidated financial statements have been approved for issue by the Board of Directors on 06 April 2016.
2 New accounting standards
For the purposes of the preparation of these consolidated financial statements, the Group has applied all standards
and interpretations as adopted in the European Union that are effective for accounting periods beginning on or after
1 January 2015.
The accounting policies used are the same as set out in detail in the annual report 2014 and have been appliedconsistently to all periods presented in these financial statements. No new standards or amendments or interpretations
to existing standards have become effective in the year. No new standards, amendments or interpretations to existing
standards having an impact on these financial statements that have been published and that are mandatory for theGroup’s accounting periods beginning on or after 1 January 2016, 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 theGroup’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 theGroup’s financial statements.
• 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).
• Annual improvements 2014 (effective date financial year commencing on/after 1 January 2016).
• IFRS 9 ‘Financial Instruments’ (effective date financial year commencing on/after 1 January 2018).
• IFRS 15 ‘Revenue from contracts with customers’ (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.
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.
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 theCompanies 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 GBP and allvalues are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.

44

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

The preparation of these financial statements in conformity with IFRS requires the Directors to make certain criticalaccounting estimates and 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.
Going concern basis
The Directors are required to review the basis on which the accounts are prepared and continue to believe that a going
concern basis is appropriate. In reaching their conclusion they recognise that the Group meets its day-to-day working
capital requirements through its bank facilities.
The Group had cash of £5.4 million at the balance sheet date, reducing to £2.2 million at the end of March 2016,
following the repayment of the Mizuho loan. As disclosed in note 18, the Group is in breach of the financial andoperating covenants associated with its major bank facility of £4.5 million, however it is in constructive discussions with
its lending bank which remains supportive and has indicated that it is not planning to take action following thebreaches at 31 December 2015 and 31 March 2016. Further, the Group and its lending bank anticipate concluding a
new loan facility with appropriate covenants having already agreed the outline of a multi-year repayment plan.
In reaching their going concern conclusion, the Directors have considered the following points:• Net debt at end March 2016 was £2.35 million with £2.15 million cash and £4.5 million HSBC debt.
• An opportunity funnel mainly from existing customers that exceeds revenue target for 2016 (H1 and Full Year).
• Customers continue to expand and extend deployments rather than decommission them.
• Sales recruitment continues providing the headcount to build sales momentum.
• Sales process work continues to be developed and embedded into the business.
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 12 months from the date of thisreport. The Group, therefore, continues to adopt the going concern basis in preparing its financial statements.
In addition, the Group has considered its funding options and expects to announce a conditional share placing in orderto strengthen the balance sheet, reduce the loan outstanding and permit selective investment in the business.
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 the power to govern the financial and operating policies of an entity, uses thispower to affect the returns from that entity and has exposure to variable returns from its investment in the entity.
Co-terminus financial statements of the subsidiaries are prepared for the same reporting year as the Company,
using consistent accounting policies. Businesses acquired or disposed 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 andsimilar circumstances.
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 businesscombination and the non-controlling interest’s share of changes in equity since the date of combination.
Foreign currencies(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 GBP.
(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 are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initial transactions.
45

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued(c) Consolidation
For the purpose of presenting consolidated financial statements, the results and financial position of all the Group
entities (none of which have the currency of a hyperinflationary economy) that have a functional currency other than
GBP are translated into GBP 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 eachperiod the transaction occurred; and• all resulting exchange differences are recognised in other comprehensive income.
Segment reporting
IFRS 8 requires a “management approach” under which information in the financial statements is presented on thesame basis as that used for internal management reporting purposes.
The Group is organised on a global basis into two operating segments based on the Group’s Divisions: Real-Time
Location Systems (RTLS) and Geospatial. The Directors believe that the Chief Operating Decision Maker (CODM) is theChief Executive Officer of the Group. The CODM and the rest of the Board are provided with information on adivisional basis to assess the financial performance of, and allocate resources to, the Group.
The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “adjusted EBITDA"
as the primary measure 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 discounts, value added tax and other similar sales taxes. Revenue is measured by reference to thefair 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 all its performance obligations.
Revenue earned from sales under licence agreements is recognised when the software is made available. When thesale includes a period of support and maintenance, a proportion of the revenue is deferred and recognised as straightline 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 andtraining 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, including customisation and modification, is
recognised on the stage of completion of each assignment at the period end date compared to the total estimatedservice to be provided over the 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 tobe recovered. An expected loss on a contract is recognised immediately in the income statement.
Where bundled sales including a combination of some or all of the above are made, the revenue attributable to thedeal is apportioned across the constituents of the bundle, and then recognised according to the policies stated above.
Employee benefits(a) Retirement 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 thecontributions payable in 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.

46

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015(b) Share-based payments
The Group issues equity-settled share-based payments to certain employees. Vesting conditions are continuing
employment and, for senior employees, a diluted EPS performance target. Equity-settled share-based payments aremeasured at fair value at the date of grant using the Black-Scholes pricing model. The fair value is expensed on astraight-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 the number 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 result of 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.
Operating lease income and expense
The Group as the lessor(a) Rental income
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating the lease are recognised as straight-line over the lease term.
The Group as the lessee(b) Rental expense
Operating lease rentals are charged as operating expenses to the income statement in equal annual amounts over thelease term. Assets leased under operating leases are not recorded in the statement of financial position because thelessor retains a significant portion of the risks and rewards of ownership.
(c) Lease incentives
The benefit of lease incentives such as rent-free periods or up-front cash payments are spread equally on a straightline basis over the 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 understanding of 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 methodby 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 inrespect of the Group’s taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs fromprofit 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 or deductible. Taxation received is recognised only when it isprobable that the Group is entitled to the asset.

47

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued(b) Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves thecomparison of the carrying amounts of assets and liabilities in the consolidated financial statements with theirrespective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to theGroup are assessed for recognition as deferred tax assets. However, deferred tax is not provided on the initialrecognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a businesscombination 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 probablethat 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 isrecognised 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 in other comprehensive income
or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for theacquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of theacquiree 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 andcontingent liabilities assumed in a business combination are measured initially at their provisional fair values at theacquisition 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.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity
interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
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 isrecognised 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 forwithin equity.
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of
non-controlling interest 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 andthe net fair value 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 andprocesses. 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 isa market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, theasset will be used in generating such benefits;48

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

• there are adequate technical, financial and other resources to complete the development and to use or sell theintangible asset; and• 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
over their useful economic lives. Amortisation is shown within administrative expenses in the income statement. The
estimated useful lives of current development projects are three years. Upon completion the assets are subject toimpairment testing.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an
expense in 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 typicallythree years.
Acquired intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and amortised on astraight-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: three years.
• Customer relationships recognised on acquisition: three years.
• Order backlog: based on contract life recognised on acquisition, typically less than one year.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is 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: three to 10 years, or period of the lease if shorter.
• Computer equipment: three years.
Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of anasset is determined as the difference between the sales proceeds and the carrying amount of the asset and isrecognised in operating expenses.
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 at least annually for impairment and whenever there is an indication that the asset may
be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable.
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 are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of theimpairment at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss beenrecognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is the actual cost of third-party components
and labour, and is applied on a first in, first out basis. Net realisable value is based on estimated selling price lessadditional cost to completion and disposal. Provision is made for obsolete, slow moving or defective items whereappropriate and are recognised as an expense in the period in which the write-down or loss occurs.

49

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course ofbusiness. 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 withbanks and other 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 businessfrom 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 carriedat amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value isrecognised in the income statement over the period 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 isprobable that some or 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 amortised over 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 areshown in equity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as sharecapital and the amounts paid over the nominal value in respect of share issues, net of related costs, is classified asshare premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by theCompany to the Group’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 fromtheir functional currencies to the Group’s presentation currency of GBP, are recognised directly in othercomprehensive income and accumulated in the translation reserve.
4 Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, bydefinition, 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.
Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually in accordance with the accounting policy stated in note 3. Thisrequires an estimation 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
50

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The Group
uses pre-tax discount rates of 11.5% for this purpose. The carrying amount of goodwill at 31 December 2015 is£4.3 million, following an impairment of £4.0 million. Further consideration of the impairment of goodwill is included innote 12.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s
judgement of the point at which technical and commercial feasibility is demonstrable. The carrying amount of
capitalised development costs at 31 December 2015 is £4.0 million.
Revenue recognition
Significant management judgement is applied in determining the allocation and timing of the recognition of revenue
on fixed price, 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 2015 is £2.1 million.
Inventories
The provision for obsolete, slow-moving or defective inventory is based on management’s estimation of thecommercial life of inventory lines and is applied on a prudent basis. In assessing this, management takes into
consideration the sales history of 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 shareoptions at the statement of financial position date. In estimating the amount of the deferred tax asset that should berecognised, the Directors make judgements based on current budgets and forecasts about the amount of futuretaxable profits and the timings of when these 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 by reference to companies in similar industries.
Contingent consideration
The Group initially estimates the amounts payable under ‘earn-out’ plans to the former shareholders of acquiredcompanies based on the business model produced at the time of acquisition. Earn-out clauses within acquisition
agreements typically contain provisions for amounts payable to the former shareholders based on future financial
performance. In order to calculate the expected future payments, the acquisition business model contains estimatesof 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 the original 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.
5 Segment information
5.1 Operating segments
Management has determined the operating segments to be the Group’s Divisions 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 Real-Time Location Systems (RTLS) 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 spatialmonitoring to offer meaningful insights that help businesses make smarter decisions.

51

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

5 Segment information continued
5.1 Operating segments continued
The Geospatial Division delivers software solutions that integrates data from any source – geographic, real-time 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.
Each operating segment is managed separately by a business unit leader as each deal 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 RTLS or Geospatial Division are reported in the Central
Division. The results of each segment are prepared using accounting policies consistent with those of the Group as awhole. No intra-segmental transactions are reported.
RTLS
£’000

Geospatial£’000

Central
£’000

Total
£’000

Revenues
Cost of revenues

6,445(3,694)

15,458(10,545)

79(51)

21,982(14,290)

Gross profit

2,751

4,913

28

7,692

Sales and marketing costs(2,810)(1,800)(472)(5,082)

(59)

3,113

(444)

2,610

Other operating costs(7,832)(7,832)Adjusted EBITDA
Depreciation
Amortisation of intangibles
Non-recurring items(8,276)(388)(7,294)(4,075)(5,222)(388)(7,294)(4,075)

Operating loss
Finance costs(20,033)(289)(16,979)(289)

Loss before tax
Income tax(20,322)632(17,268)
632

Loss after tax(19,690)(16,636)

Year ended 31 December 2015

Contribution

In the prior year, the Group was organised into a single Enterprise Location Intelligence business unit. This was thebasis of the Group’s external market offering and internal organisation at that time and the CODM received informationin this way. The Group had one reportable segment under IFRS8 in the year ending 31 December 2014.
Data is not available to report full comparative information for the current reportable segments due to the excessive
effort and cost that would be involved to develop it. Revenue is as follows:Year ended 31 December 2014

Revenues

RTLS
£’000

Geospatial£’000

Central
£’000

Total
£’000

8,053

26,98414

35,051In the previous year, revenue from the single Enterprise Location Intelligence business unit was reported by the natureof revenue. Information has been prepared for the year ending 31 December 2015, although it was not reported to the
CODM during 2015.
2015
£’000

2014
£’000

Solutions
Services

12,782
9,200

20,067
14,984

Total revenues

21,98235,05152

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

5.2 Geographical areas
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. Non-current assets are allocated based on their
physical location.
Revenue

UK
FranceGermany
Europe otherUSA
CanadaJapan
Asia Pacific otherRest of World

Non-current assets

2015
£’000

2014
£’000

2015
£’000

2014
£’000

487
616
3,074
580
12,131
1,423
3,330
337
4

1,584
784
11,782362
13,061
976
6,015
416
71

6,412
4
1,242
–
1,008
2
2,061
–
–

7,607
24
2,197
–
2,015
4
3,621
7
–

21,98235,051

10,72915,475

5.3 Information about major customers
Included in revenues arising from the Geospatial Division are revenues of approximately £1.5 million (2014: £1.4 million)
which arose from sales to the Group’s largest customer. No single customer contributed 10% or more to the Group’s
revenue in 2015, but another Geospatial customer contributed £4.4 million in 2014.
6 Employee information
6.1 Employee numbers
The average monthly number of people, including Executive Directors, employed by the Group during the year was:
Actual number of people
as at 31 December
By activity

Technical consultants
Sales & marketing
Research & development
Administration

By geography

United Kingdom
EuropeAmericas
Asia

Average monthly
number of people

2015
Number2014
Number

2015
Number2014
Number

89
38
31
22

134
46
33
37

103
45
33
27

135
45
32
38

180

250

208

250

2015
Number2014
Number

2015
Number2014
Number

44
39
63
34

61
69
79
41

54
44
71
39

63
63
80
44

180

250

208

250

53

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

6 Employee information continued
6.2 Employee benefits

Wages and salaries
Social security costs
Contributions to defined contribution pension arrangements
Share-based payments

Notes

2015
£’000

2014
£’000

21.2

15,768
1,362
581
54

15,905
1,512
784
75

17,765

18,276

Total aggregate employee benefits

Included in the wages and salaries figure above are termination benefits of £2.0 million (2014: £0.5 million) which arepresented as non-recurring costs in the income statement – see note 9.2.
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 11 key management personnel (2014: 10) and 12 personnel at
31 December 2015 (2014: 11). The compensation paid or payable to key management for employee services isshown below:

Short-term employee benefits
Wages and salaries
Social security costs
Other benefits
Post-employment benefits
Contributions to defined contribution pension arrangements
Share-based payments
Equity-settled share-based payments
Total key management compensation

2015
£’000

2014
£’000

1,371
95
5

973
95
19

1,471

1,087

26

47

3

25

1,500

1,159

Included in the wages and salaries figure above are termination benefits of £263,000 (2014: £nil) which are presented
as non-recurring costs in the income statement – see note 9.2.
7 Directors’ remuneration and interests
7.1 Directors’ remuneration

DirectorBasicsalary£’000

Benefits
in kind£’000

Termination
benefits£’000

Subtotal£’000

Employer’s
contributions todefinedcontribution
pension£’000

Robert Parker
Richard Green*Peter Harverson**Andrew Hopper
Robert Sansom***
Paul Taylor**
Ian Kershaw

83
180
94
30
–
51
20

1
3
–
–
–
–
–

132
–
–
–
–
–
–

216
183
94
30
–
51
20

4
20
–
–
–
–
–

220
203
94
30
–
51
20

200
289
20
28
–
20
12

Total

458

4

132

594

24

618

569

*

Total
2015
£’000

Total
2014
£’000

Remuneration is through the Group’s flexible benefits scheme under which the individual can elect to switch basic salary into pension contributions and otherbenefits. The basic salary entitlement in the year was £190,000.
** Included for Peter Harverson and Paul Taylor in 2015 (2014: £nil) are amounts of £25,000 each for Directors fees and £69,000 and £26,000 respectively for
additional duties requested by the Board.
*** Robert Sansom has waived his entitlement to annual remuneration in the year of £20,000 (2014: £20,000 waived).

54

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

7.2 Directors’ interests – share options

Director

Richard Green

Robert Parker
Peter Harverson
Andrew Hopper

Award
date
Years

Vests
Years

ExpiresYear2011 2012–14 2021
2012 2013–15 2022
2013 2014–16 2023
2014 2015–17 2024
2014 2015–17 2024
2010 2011–13 20202010 2011–13 2020

Total

Awardsoutstanding at
1 January
Exercise
2015
Price
Number
£

1.050
2.125
2.055
2.250
2.250
0.140
0.140

Ceased to bea Director
during theyear
NumberAwards
Lapsed outstanding at
Granted Exercised
during the during the during the 31 December
2015
year
year
year
NumberNumberNumberNumberAwardsexercisable at
31 December
2015
Number100,000
60,00060,00075,000

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

100,000
60,00060,00075,000100,000
60,00060,000–295,000

–

–

–

–

295,000

220,000

60,00091,333
20,278(60,000)
–
–

–
–
–
–
– (20,278)

–
–
–

–
91,333––
91,333–

466,611(60,000)– (20,278)–

386,333

311,333

During the year, no Directors have been granted share options in the Company or other Group entities. None of theterms and conditions of the existing share options were varied during the year. The market price of the Company’s
shares at the end of the financial year was £0.43 pence. The range of market prices during the year was between £1.26
and £0.42 pence.
Ian Kershaw, Robert Sansom and Paul Taylor do not have any share options at 31 December 2015 (31 December 2014:nil). There have been no options granted to or exercised by Directors between 31 December 2015 and 06 April 2016.
Directors’ gains on share options

Andrew Hopper

Gain on exercise
2015
£’000

Gain on exercise
2014
£’000

6

–

7.3 Directors’ interests – shares
Directors’ interests in the ordinary shares of Ubisense Group Plc, at 31 December 2015 and 31 December 2014, wereas follows:

Richard Green*
Robert Sansom
Andrew HopperPeter Harverson
Paul Taylor
Ian Kershaw*

2015
Number2014
Number

1,844,462
2,985,899
277,401
65,16133,3342,000

1,734,906
2,493,676
225,000
65,161

5,208,257

4,518,743–

Includes 115,617 (2014: 115,617) shares held by the RT Green Children’s Trust of which Richard Green is a trustee.

There has been no change in the interests set out above between 31 December 2015 and 06 April 2016.

55

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

8 Finance income and costs
2015
£’000

2014
£’000

Interest income from cash and cash equivalents

12

14

Finance income

1214Interest payable – bank
Interest payable – other

(287)
(14)

(197)
(14)

Finance costs

(301)

(211)

Net finance costs

(289)

(197)

9 Loss before tax: analysis of expenses by nature
9.1 Expenses by nature
The following items have been charged/(credited) to the income statement in arriving at loss before tax:
2015
£’000

2014
£’000

309
4,043
2,942
388
–
677
63
1,478
581
175
4,075
166

751
1,268
2,937
359
22
715
167
2,884
766
(180)
1,095
254

2015
£’000

2014
£’000

Reorganisation costs
Disposal of subsidiary companies
Strategic Asia-Pacific market entry costs
Unrealised foreign exchange losses on intercompany trading balances
Aborted acquisition costs
Others

3,163
809
–
37
7
59

458
–
603
–
34
–

Total non-recurring items

4,075

1,095

Notes

Amortisation of acquired intangible assets
Impairment of goodwill and acquired intangibles
Amortisation and impairment of other intangible assets
Depreciation of owned property, plant and equipment
Loss on disposal of property, plant and equipment
Operating lease rental charges – land and buildings
Operating lease rental charges – other
Inventory recognised as an expense
Research and development costs expensed
Net foreign currency losses/(gains)
Non-recurring items (excluding impairment of goodwill)
Auditors’ remuneration

12
12
12
13

9.2
9.3

9.2 Non-recurring items

During 2015, the Group incurred reorganisation costs totalling £3.2 million comprising mainly redundancy costs inorder to align the employee base with the future strategy of the Group. The employment terminations in 2015 are
expected to provide annualised cost savings of £4.0 million in 2016.
The Group disposed of two subsidiary companies during the year and incurred costs relating to exits from thesemarkets. More details are included in note 24.
Foreign exchange losses on unrealised intercompany trading balances of £37,000 were incurred. These will be
non-recurring due to the conversion of trading balances to long-term loans in 2016.
The Group incurred £7,000 of costs (2014: £34,000), mainly comprising professional fees, in connection with apotential future acquisition. The acquisition plans have been aborted. During 2014, the Group incurred £603,000 of
non‑recurring expenditure relating to strategic Asia Pacific market entry. No such costs were incurred in 2015.

56

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

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:
2015
£’000

2014
£’000

Fees payable to the Group’s auditor for the audit of:
Parent Company and consolidated financial statements
Financial statements of subsidiaries, pursuant to legislation

35
91

27
100

Total audit fees

126

127

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

27
–
13

74
53
–

Total non-audit fees

40

127

Total auditors’ remuneration

166

254

2015
£’000

2014
£’000

Current tax
UK corporation tax
Foreign tax
Research and development tax credits – prior years

–
69
(524)

–
238
(537)

Total current tax credit

(455)

(299)

Deferred tax
Origination and reversal of temporary differences

(177)

(437)

The auditor of Ubisense Group Plc is Grant Thornton UK LLP.
10 Income tax
10.1 Income tax recognised in the income statement

Total deferred tax credit

(177)

(437)

Total income tax credit

(632)

(736)

The tax credit differs from the standard rate of corporation tax in the UK for the year of 20.3% (2014: 21.5%) for thefollowing reasons:

Loss before tax
Loss before tax multiplied by the standard rate of corporation tax in the UK of 20.3%(2014: 21.5%)
Tax effects of:
Expenses not deductible for tax purposes
Accrued contingent consideration released not subject to tax
Utilisation of previously unrecognised tax losses
Tax losses for which no deferred tax asset was recognised
Tax unprovided in prior years
Research and development tax credits – prior years
Difference on tax treatment of share options – unrecognised
Re-measurement of deferred tax – change of tax rate
Differential on overseas tax rates
Other unrecognised temporary differences
Total income tax credit

2015
£’000

2014
£’000

(17,268)(4,778)(3,505)(1,027)

829
–
(94)
3,526
54
(524)
(223)
(42)
(712)
59

137
7
77
734
–
(537)
17
120
(31)
(233)

(632)

(736)

57

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

10 Income tax continued
10.2 Factors that may affect future tax charges
The Group has tax losses of £10.5 million (2014: £9.3 million) that are available for offset against future taxable profits
of those subsidiary companies in which the tax losses arose. Deferred tax assets have not been recognised in respectof 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 26 October 2015, the UK Government substantially enacted reductions to the UK corporation tax rates. Effectivefrom 1 April 2017, the UK corporation tax rate will reduce to 19% from 20% and effective from 1 April 2020, the rate willfurther reduce to 18%. As a result, the deferred tax balances have been re-measured at 19%, the rate ofrealisation expected.
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

Deferred income tax liabilities

2015
£’000

2014
£’000

2015
£’000

2014
£’000

At 1 January
Deferred tax credited to the income statement
Deferred tax charged to the income statement

–
–
–

–
–
–

(1,336)780(603)(1,773)
1,085
(648)

At 31 December––(1,157)(1,336)The components of deferred tax included in the consolidated statement of financial position are as follows:
2015
£’000

2014
£’000

Development costs capitalised
Intangible assets recognised on acquisition of subsidiaries

(797)
(360)

(888)
(448)

Total deferred income tax liabilities(1,157)(1,336)

Deferred tax assets have not been recognised in respect of the following items because it is not probable that futuretaxable profits will be available against which the Group can utilise the benefits:
2015
£’000

2014
£’000

Tax losses carried forward
Equity-settled share options temporary differences

2,864
24

2,546
201

Total unrecognised deferred tax assets

2,888

2,747

58

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

11 Earnings per share (EPS)
Earnings
Earnings for the purposes of basic and diluted EPS being net loss attributable to equity
holders of the Parent Company (£’000)
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS (‘000)
Effect of dilutive potential ordinary shares:— Share options (‘000)

2015

2014

(16,569)(4,085)31,657

24,541

418

969

32,07525,510

Basic EPS (pence)(52.3)(16.7)

Diluted EPS (pence)(52.3)(16.7)

Weighted average number of ordinary shares for the purposes of diluted EPS (‘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 all dilutive share options andwarrants 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/impairment from the measurement of profit
for the period.
2015

2014

(16,569)(4,085)

309
4,043
54
4,075

751
1,268
75
1,095

Net adjustments (£’000)

8,481

3,189

Adjusted earnings (£’000)(8,088)(896)

Adjusted diluted EPS (pence)(25.2)

(3.5)

Notes

Earnings for the purposes of diluted EPS being net loss attributable to equity
holders of the Parent Company (£’000)
Adjustments:
Reversal of amortisation on acquired intangible assets (£’000)
Impairment of goodwill and acquired intangible assets (£’000)
Reversal of share-based payments charge (£’000)
Reversal of non-recurring items (£’000)

9, 12
9, 12
21.2
9.2

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

59

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

12 Intangible assets

Cost
At 1 January 2014
Effects of movement in exchange
rates
Additions

Goodwill£’000

Acquiredcustomer
relationships andorder backlog£’000

Acquired
softwareproducts£’000

Capitalised
product
development
costs
£’000

Software
£’000

Total
£’000

9,619

2,042

937

7,461

633

20,692

(203)
–

(205)
–

(52)
–

–
2,956

(38)
544

(498)
3,500

At 31 December 2014

9,416

1,837

885

10,417

1,139

23,694

Exchange difference
Additions
Disposals

91–(1,193)

63
–
–

16
–
(338)

–
2,499
(511)

68
152
(59)

238
2,651
(2,101)

At 31 December 2015

8,314

1,900

563

12,4051,300

24,482

Accumulated amortisation
At 1 January 2014
Effects of movement in exchange
rates
Charge for the year
Impairment for the year

–

(268)

(414)

(3,541)(222)(4,445)––(1,192)

36
(497)
(76)

11
(254)
–

(1)
(2,568)
(80)

24
(289)
–

70
(3,608)(1,348)At 31 December 2014

(1,192)

(805)

(657)

(6,190)(487)(9,331)

Effects of movement in exchange
rates
Charge for the year
Elimination on disposal
Impairment for the year

–
–
1,192
(4,043)

(24)
(189)
–
–

(11)
(119)
338
–

–
(2,609)
429
(55)

(52)
(279)
57
–

(87)
(3,196)
2,016(4,098)At 31 December 2015

(4,043)(1,018)(449)(8,425)(761)(14,696)

At 31 December 2015

4,271

882

114

3,980

539

9,786

At 31 December 2014

8,224

1,032

228

4,227

652

14,363

Net book amountThe 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 to a plan or design for the production of new or substantially improved products
and processes. The software assets represent assets purchased from third parties.
During the year, an impairment expense of £4,043,000 was recognised in respect of goodwill (2014: £1,192,000),£55,000 in respect of capitalised development costs (2014: £80,000) and £nil in respect of acquired customer
relationships and order backlog (2014: £76,000).
The goodwill impairment expense in 2015 writes down the goodwill to the present value of the future cash flows fromservices revenues, which is lower than previously estimated due to the challenging trading period that the Group had
during 2015. The impairment expense in 2014 relating to goodwill and unamortised customer relationships attributable
to the acquisition of Realworld OO Systems Limited in 2011, which were written-down to £nil carrying value at
31 December 2014. The impairments in both years have arisen as a result of the Group strategy, focusing on higher
margin revenue streams driven from Ubisense-owned IP and exiting from specific lower margin business areas.
The impairment of capitalised development costs in both 2015 and 2014 writes-off expenditure on products that will
not be launched to the market.

60

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

In assessing whether intangible assets have been impaired, the carrying amount of the cash-generating unit (CGU) is
compared with the recoverable amount of the CGU. The Board consider the CGUs to reflect the two operating
segments (RTLS – Smart Factory; Geospatial – myWorld).
All goodwill relates to the Geospatial CGU. In the event of a shortfall in estimated revenues of 10% a further goodwill
impairment of £506,000 would be required. In the event of a 20% shortfall the further goodwill impairment wouldbe £1,012,000.
The recoverable amount is the higher of 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 forthe purposes of performing an impairment test of goodwill, unless this would lead to an impairment loss. If goodwill
would be impaired using value in use as the recoverable amount, a fair value less costs to sell 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, based on the most recent financial budgets approved by the Board. The future cash flows areadjusted for risks specific to the cash-generating unit and are discounted using a pre-tax discount rate. The discountrate 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 2015(2014: 11.5%) for each of the CGUs. The recoverable amounts of all CGUs have been determined from value-in-use
calculations based on three-five year forecasts projected from the 2016 budget approved by the Board for each CGU
with an assumed terminal growth rate of nil (2014: nil) and no improvement in relative operating margin after theforecast period. The Board has considered reasonable possible sensitivities in key assumptions, particularly revenue, on
which the value-in-use calculations are based.
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

Cost
At 1 January 2014
Effect of movements in exchange rates
Additions
Disposals

689
(23)
556
(331)

607
(26)
402
(96)

1,296
(49)
958
(427)

At 31 December 2014

891

887

1,778

Effect of movements in exchange rates
Transfers
Additions
Disposals
Disposal of subsidiary

58
(194)
78
(35)
(12)

(71)
194
118
(11)
–

(13)
–
196
(46)
(12)

At 31 December 2015

786

1,117

1,903

61

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

13 Property, plant and equipment continued
Fixtures andfittings£’000

Computerequipment
£’000

Total
£’000

Accumulated depreciation
At 1 January 2014
Effect of movements in exchange rates
Charge for the year
Disposals

(255)
17
(139)
239

(413)
13
(220)
92

(668)
30
(359)
331

At 31 December 2014

(138)

(528)

(666)

Effect of movements in exchange rates
Transfers
Charge for the year
Elimination on disposals
Disposal of subsidiary

(1)
181
(233)
35
7

43
(181)
(155)
10
–

42
–
(388)
45
7

At 31 December 2015

(149)

(811)

(960)

At 31 December 2015

638

305

943

At 31 December 2014

753

359

1,112

2015
£’000

2014
Restated£’000

Raw materials
Finished goods

1,348
1,467

1,088
1,793

Total inventories

2,815

2,881

Net book amount

14 Inventories

There are no impairment provisions against inventory included in the above amounts (2014: £nil). The Group’s
inventories are comprised of products which are not generally subject to rapid obsolescence on account oftechnological, deterioration in condition or market trends.
15 Trade and other receivables

Trade receivables, grossAllowances for doubtful debts
Trade receivables, net
Amounts recoverable on contracts
Other receivables
Prepayments
Corporation tax recoverable
VAT and taxation receivable
Total trade and other receivables

Notes

2015
£’000

2014
£’000

15.1

7,421
(1,691)

8,961
(68)

5,730
2,067
199
882
1
398

8,893
4,134
211
1,255
521
527

9,277

15,541

15.2

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximationof fair value.
The following disclosures are in respect of trade receivables and are either impaired or past due. The individually
impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations, and areassessed on a customer-by-customer basis following 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.

62

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

15.1 Movement in allowance for doubtful debts
2015
£’000

2014
£’000

At 1 January
Exchange differences
Amounts recovered in the year
Amounts written-off in the year
Allowance made

(68)
(10)
–
43
(1,656)

(141)
–
33
41
(1)

At 31 December(1,691)(68)

Allowance made in 2015 includes £1,626,000 for two entities in the Asia Pacific region. Provision has been madeagainst these balances as their recoverability is uncertain following the disposals and cost reduction actions inthat region.
15.2 Ageing of past due but not impaired receivables
2015
£’000

2014
£’000

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

3,506

5,492

920
1,304

2,494
907

Total

5,730

8,893

2015
£’000

2014
£’000

Cash at bank and in hand

5,392

3,697

Cash and cash equivalents

5,392

3,697

16 Cash and cash equivalents

The carrying amount approximates to fair value because of the short-term maturity of these instruments, being nogreater than 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:
2015
£’000

2014
£’000

British Pound (GBP)
Euro (EUR)
US Dollar (USD)
Japanese Yen (JPY)South Korean Won (KRW)
Canadian Dollar (CAD)
Philippine Peso (PHP)

1,718
1,151
2,216
130
–
177
–

904
1,361
1,169
122
36
103
2

Cash and cash equivalents

5,392

3,697

63

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

17 Trade and other payables
2015
£’000

2014
£’000

Payments received on accountTrade payables
Trade accruals
Current tax liability
Other taxation and social security
Other payables

2,017
2,148
3,668
–
661
135

2,137
4,021
2,020
51
822
765

Total trade and other payables

8,629

9,816

All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation offair value.
18 Bank loans
In May 2015, the Group renewed its working capital loan facilities and repaid its £2.0 million acquisition bank loan.
The Group has an £8.0 million bank loan facility agreed with HSBC Bank Plc to provide working capital for the Group.
This loan is repayable in full in June 2018 by Ubisense Ltd, is secured on the fixed and floating assets of the Group andattracts an interest charge of LIBOR + 3%. As at 31 December 2015, £4.5 million of the £8.0 million facility is drawndown and is subject to certain operating and net worth covenants of the business, being:• total senior debt (net of cash balances) not exceeding 2x adjusted EBITDA;• interest charges and repayments of principal due in the next 12 months in respect of borrowings whose originalstated term to maturity exceed 12 months not exceeding 3x adjusted EBITDA; and• total senior debt (net of cash balances) not exceeding 2.5x the aggregate of trade debtors (net of provisions) andwork-in-progress (amounts recoverable on contracts).
The Group notified HSBC of a breach of the covenants relating to adjusted EBITDA as at 31 December 2015 and as at
31 March 2016, against which HSBC provided Reservation of Rights letters indicating that they do not intend to takefurther action.
With a covenant test based on a rolling 12-month adjusted EBITDA calculation, the Group anticipates further covenantbreaches in the next 12 months until the full effect of the restructuring actions taken in 2015 are delivered and thedisappointing results of 2015 no longer have an impact on the calculation. The Group is engaged in constructive
discussions with HSBC on a replacement of this facility.
At 31 December 2014, the Group had the following bank loans with HSBC Bank Plc in place, which were repaid in full in
May 2015 by Ubisense Limited:• A three-year bank loan facility of up to £5.0 million, repayable in full in August 2016. Interest was payable at LIBOR
plus 3%. The facility was secured on the fixed and floating assets of the Group and was subject to certain operating
performance and net worth covenants of the business. As at 31 December 2014, £4.0 million was drawn.
• A four-year bank loan facility of £2.0 million, repayable in quarterly instalments. Interest was payable at Bank ofEngland base rate plus 3%. The facility was secured on the fixed and floating assets of the Group and was subject tocertain operating and net worth covenants of the business. As at 31 December 2014, £2.0 million was outstanding.
The Group renewed a six-month loan facility of 200 million Japanese Yen (JPY) in June 2015 and which was further
extended until 31 March 2016 at which point it was repaid. The loan was unsecured and interest was payable at 0.99%.
As at 31 December 2015, the JPY 200 million facility was drawn-down in full (31 December 2014: JPY 170 million of
JPY 200 million facility drawn).

64Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

19 Other payables
Notes

Contingent consideration
Property provisions
Rent deposit repayable

19.2

Total other payables

2015
£’000

2014
£’000

448
179
24

414
179
11

651

604

In September 2014, Ubisense Limited entered a new ten-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 withinproperty, plant and equipment and is being depreciated over the lease term.
19.2 Contingent consideration
Ubisense Group Plc acquired the Ubisense Inc (formerly named Geoplan Interworks K.K.) group of companies(Geoplan) in December 2013.
The purchase consideration contained a contingent cash element, under which the Group is required to pay additionalamounts 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 JPY nil and JPY 149 million (£nil
to £892,000).
At acquisition, the fair value of the contingent consideration was JPY 136 million (£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 the liability is denominated in JPY, it is subject to the impact of exchange rates.
At
1 January
2015
£’000

Effect ofexchange rates£’000

Unwindingof discount
£’000

At
31 December
2015
£’000

Contingent consideration – non-current

414

19

15

448

Total

414

19

15

448

Number ofordinary sharesof £0.02 each

Share capital£’000

Share premium
£’000

Total
£’000

Balance at 1 January 2014

23,079,146

461

24,05024,511

Issued under share-based payment plans
Issued on placing to institutional shareholders

54,107
1,929,589

1
39

23
3,978

24
4,017

20 Share capital and premium

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
Issued on placing to institutional shareholders

446,293
11,111,112

9
222

67
9,304

76
9,526

Change in year

11,557,405

231

9,371

9,602

Balance at 31 December 2015

36,620,247

732

37,42238,154

Balance at 31 December 2014

The Company has one class of ordinary shares which carry no right to fixed income.
During the period, the Company issued 11,557,405 shares, increasing the total number of shares in issue from25,062,842 to 36,620,247 as follows:• 11,111,112 shares at 0.90 pence per share for a total gross consideration of £10.0 million with share issue costs of£474,000 written-off against the share premium account.; and• 446,293 shares as a result of options exercised with a weighted average exercise price of 0.17 pence per share fortotal cash consideration of £76,131.
65

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

21 Share-based payments: options
21.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over shares in the Company to incentivise high performing
key employees of the Group periodically.
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 entirelyon the third anniversary from the date of grant, depending on continuing service during the vesting period. The
contractual life of the options is 10 years from the date of grant after which they expire if unexercised.
21.2 Analysis of amounts recognised in the financial statementsa) Analysis of amounts recognised in the consolidated income statement
2015
£’000

2014
£’000

54

75

2015
£’000

2014
£’000

54

75

2015
£’000

2014
£’000

875

821

Total share-based payments charge recognised in operating profitb) Analysis of amounts recognised in the consolidated statement of changes in equity in the year

Net share-based payments credit recognised in equityc) Cumulative amounts included within equity in the consolidated statement of financial position

Cumulative reserve credit for share-based payments

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

Arrangement

Options

Grantedduring theyear
NumberExercisedduringthe year
NumberForfeited
duringthe year
NumberAwardsoutstanding at
31 December
2015
NumberAwardsexercisable at
31 December
2015
Number

Award
date
Year

Vests
Years

ExpiresYear

Exercise
price£Awardsoutstanding at
1 January
2015
Number

2007
2008
2009
2010
2011
2012
2013
2014

2008–10
2009–11
2010–122011–13
2012–142013–15
2014–16
2015–17

2017
2018
2019
2020
2021
2022
2023
2024

0.900
0.900
0.900
0.140
1.050
2.125
2.055
2.250

300
650
3,750
847,454
386,117
316,000
351,500
437,500

–
–
–
–
–
–
–
–

–
–
–
(431,293)(15,000)
–
–
–

–
(650)
(3,750)(7,700)(72,917)(114,500)(82,200)(137,500)

300––
408,461
298,200
201,500
269,300
300,000

300––
408,461
298,200
141,500
112,867
35,0002,343,271–(446,293)(419,217) 1,477,761

996,328

1.240

–

0.170

1.371

0.760

Total
Weighted average exercise price (£)

1.916

No share options were granted in 2015. 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 atthe date of exercise for options exercised during the year was £0.754 (2014: £1.921).

66

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

21.4 Principal assumptions
The fair value of share-based payments grants has been valued using the Black-Scholes option-pricing model.
Expected volatility was determined 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.
The following assumptions were used in the model for options granted during the year ended 31 December 2014. No
options were granted in the year ended 31 December 2015.
Instrument

OptionNumber granted
Grant date
Share price at grant date (£)
Exercise price (£)
Fair value per option (£)
Expected life (years)
Expected volatility (%)
Risk-free interest rate (%)
Expected dividends expressed as a dividend yield (%)

447,500
23 May 2014
2.250
2.250
0.60
3.0
34
1.83
–

22 Operating lease commitments
Leases as lessee
At 31 December 2015, the Group has lease agreements in respect of property and equipment for which payments
extend over a number of years. The Group enters into these arrangements as these are a cost-efficient way ofobtaining the short-term benefits of these assets. The Group lease rental charge is disclosed in note 9.1. There are noother material off-balance sheet arrangements.
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings

Other

2015
£’000

2014
£’000

2015
£’000

2014
£’000

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

606
2,320
1,282

785
2,441
3,043

59
113
–

121
85
–

Total

4,208

6,269

172

206

Lease ending

The above table reflects the committed cash payments under operating leases, rather than the expected charge to theincome statement in the relevant periods. The effect on the income statement will differ to the above figures due tothe amortisation of rent-free and discounted rent periods included in property leases signed in 2012 and 2014. The
expected charge in 2016 for operating leases is expected to be £105,000 higher than the committed cash payments
shown above. From existing subleasing agreements under non-cancellable operating leases which end in less than one
year, the Group will receive income of £31,000.
The Group has guaranteed rent bonds issued by its banks on its behalf totalling £122,000 as at 31 December 2015(2014: £134,000). These are not expected to result in any material financial loss.

67

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

23 Subsidiaries
The Group consists of the Parent Company, Ubisense Group Plc, incorporated in the UK, and a number of subsidiarycompanies which operate and are incorporated around the world. Information about the composition at the end of thereporting period is as follows:

Subsidiary

Country ofincorporation

Ubisense Limited
Ubisense GmbH
Ubisense SAS
Ubisense Inc.
Ubisense Solutions Inc.
Geospatial Systems Limited
Ubisense Inc.
Geoplan Company Limited*
Binary Star Developments K.K.*

UK
Germany
FranceUS
Canada
UK
Japan
Japan
Japan

Principal activity

Proportion ofordinary shares
held by Group (%)

Proportion ofordinary shares
held bynon-controllinginterests (%)

Location solutions
Location solutions
Location solutions
Location solutions
Location solutions
Location solutions
Intermediate holding company
Location solutions
Non-trading

100
100
100
100
100
100
100
77
100

–
–
–
–
–
–
–
23
–

All subsidiaries are directly held by Ubisense Group Plc except those denoted* which are held by the intermediateholding company, Ubisense Inc.
All subsidiaries prepare local statutory accounts up to 31 December each year except for Geospatial Systems Limited
which prepares accounts up to 31 March and Binary Star Developments K.K. to 31 January. For subsidiaries which havea different financial year end to the Group, additional co-terminus accounts are prepared reflecting the same financial
reporting as the Group for the purposes of consolidation.
During the year, the Group disposed of its 100% interest in Ubisense Company Ltd, a company incorporated in South
Korea and Geoplan Philippines Inc, a company incorporated in the Philippines. The proceeds on sale of USD 1,000 foreach entity were received in cash. No investment has been retained in either entity.
Neither subsidiary company was material to the financial performance or position of the Ubisense Group therefore noamounts have been classified as discontinued operations. The loss on disposal of the subsidiary companies is disclosed
in note 24.
24 Disposal of subsidiaries
As referred to in note 23, the Group disposed of two subsidiary companies during the year.
On 18 May 2015, Ubisense Inc. disposed of its 100% equity interest in its subsidiary, Geoplan Philippines Inc. forconsideration of USD 1,000. The net assets of Geoplan Philippines Inc. at the date of disposal were as follows:
Total
£’000

Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables

2
145
4
(165)
(14)

Gain on disposal

15

Total consideration

1

Satisfied by:
Cash and cash equivalents
Net cash outflow arising on disposal
Consideration received in cash and cash equivalents
Less: cash and cash equivalents disposed of

1
1
(4)
(3)

68

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

In the current year, Geoplan Philippines Inc. contributed £nil to the Group’s adjusted EBITDA (2014: loss of £41,000).
Costs associated with the disposal of £112,000 have been included in non-recurring items.
On 30 September 2015, Ubisense Inc. disposed of its 100% equity interest in its subsidiary, Ubisense Company Ltd, forconsideration of USD 1,000. The net assets of Ubisense Company Ltd at the date of disposal were as follows:
Total
£’000

Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables

3
913
4
(923)
(3)

Profit on disposal

4

Total consideration

1

Satisfied by:
Cash and cash equivalents
Net cash outflow arising on disposal
Consideration received in cash and cash equivalents
Less: cash and cash equivalents disposed of

1
1
–
1

In the current year, Ubisense Company Ltd contributed a loss of £84,000 to the Group’s adjusted EBITDA (2014: loss of£272,000). Costs associated with the disposal of £644,000 have been included in non-recurring items.
The disposals of both subsidiaries are not considered discontinued operations as the subsidiary disposals have notexited a major line of business or geographic area for the Group.
25 Related-party transactions
Compensation of key management personnel disclosed in note 6.3 and full details of Directors’ remuneration are given
in note 7.
During the year, Ubisense Company Ltd contemplated entering into a commercial sub-lease arrangement with a third
party. One of the Directors of Ubisense Group Plc, is also a Director of that third party. The arrangement was notcompleted although as an outcome the third party paid Ubisense £3,800 plus VAT (2014: £nil). As at 31 December 2015,
Ubisense Company Ltd showed that £4,560 was owed by the third party (31 December 2014: £nil). Full payment of thisbalance outstanding was subsequently received in 2016.
There were no other related-party 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 are summarised 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, andfocuses on actively securing the Group’s short- to medium-term cash flows. The Group does not actively engage inthe trading of financial assets for speculative purposes. The most significant financial risks to which the Group is
exposed are described below.
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 andexpenditure. 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.

69

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

26 Financial risk management continued
26.2 Foreign currency risk management continued
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 theclosing rate.
Japanese Yen

AssetsLiabilities

US Dollars

Euros

2015
£’000

2014
£’000

2015
£’000

2014
£’000

2015
£’000

2014
£’000

–
–

–
–

145
(62)

2,240
(199)

535
(1)

886
–

All foreign currency financial assets and liabilities are classified as current.
26.3 Foreign currency sensitivity analysis
The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial
liabilities and the 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 percentages have been determinedbased on the average market volatility in exchange rates in the previous 12 months.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts theirtranslation at the period end. A positive number indicates an increase in profit and equity.
Japanese Yen

Effect of a 5% strengthening in
relevant exchange rate on:
Income statement
EquityEffect of a 5% weakening in relevant
exchange rate on:
Income statement
EquityUS Dollars

Euros

2015
£’000

2014
£’000

2015
£’000

2014
£’000

2015
£’000

2014
£’000

(43)
(43)

(5)
(5)

(27)
(27)

182
182

(95)
(95)

221
221

50
50

5
5

32
32

(201)
(201)

110
110

(244)
(244)

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 £8.0 million
which is partially offset by cash held at variable rates. Interest is payable at LIBOR plus 3% on the £8.0 million facilityand £4.5 million was outstanding at 31 December 2015 (2014: £4.0 million). Other bank loans are at a fixed interest rateof 0.99%.
The following table illustrates the sensitivity of the net profit of the Group for the year and equity to a reasonably
possible change in interest 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 fromthe beginning of the year and the financial instruments held at the reporting date that are sensitive to interest ratechanges. All other variables are held constant. A positive number indicates an increase in profit or equity.

Effect of a 0.5% decrease in interest rate on:
Income statement
EquityEffect of a 0.5% increase in interest rate on:
Income statement
Equity

70

2015
£’000

2014
£’000

30
30

23
23

(30)
(30)

(23)
(23)

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 201526.5 Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge a contractual obligation resulting in financial loss to theGroup. 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, and incorporates this information into its credit risk controls. Where available atreasonable 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 under review are of good credit quality. All receivables are subject to regular review to ensure that they arerecoverable and any issues identified as early as possible. In order to manage credit risk the Directors set limits forcustomers 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 theGroup’s customers, and approximately 80% by balance at any given time, are large utility companies and otherblue‑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 issubject to a limit, which is reassessed periodically by management. At 31 December 2015, one customer individuallyaccounted for more than 10% of the trade receivables balance (31 December 2014: none).
None of the Group’s financial assets are secured by collateral or other credit enhancements.
Details of certain trade receivables at 31 December 2015 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 this risk 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, aswell as maintaining sufficient headroom so that loan covenants are not breached. The Group policy throughout theyear has been to remit surplus working capital balances 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 facilities of £9.1 million, of which£5.6 million was drawn-down at 31 December 2015 (2014: £8.1 million facility, £6.9 million drawn-down).
The Group considers expected cash flows from financial assets, predominately cash and trade receivables, in assessing
and managing liquidity risk. The Group’s cash and trade receivable resources at 31 December 2015 (see note 15)
exceed the current cash outflow requirements.

71

Ubisense Group Plc
Annual Report 2015

Notes to the consolidated financial statements continued

26 Financial risk management continued
26.6 Liquidity risk analysis continued
As at 31 December 2015, the Group’s financial liabilities, including interest payments where applicable, havecontractual maturities as summarised below:
Current

As at 31 December 2015
Trade and other payables
Bank loan
Other payables
As at 31 December 2014
Trade and other payables
Bank loans
Other payables

Non-current

Within6 months£’000

Between 6 and12 months£’000

Between1 and 5 years£’000

Later than
5 years
£’000

7,924
1,123
–

705
–
–

203
4,500
472

–
–
179

9,465
927
–

351
–
–

120
6,000
425

–
–
179

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 going concerns whilst
maximising the return to stakeholders and to maintain an optimal capital structure to reduce the long-term cost ofcapital. The capital structure of the Group consists of cash and cash equivalents and capital and reserves attributable
to the owners of the Company, and the Group’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 the amount 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 thatallows 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 has bank facilities at 31 December 2015 of £9.1 million (31 December 2014: £8.1 million) of which£8.0 million denominated in GBP and £1.1 million denominated in JPY (2014: £7.0 million GBP, £1.1 million JPY). At
31 December 2015 £5.6 million of the facilities were drawn (31 December 2014: £6.9 million) of which £4.5 million isdenominated in GBP and £1.1 million denominated in JPY (2014: £6.0 million GBP, £0.9 million JPY). The Group mayneed to seek further capital, through equity or debt, in order to support the business. Currently, the Group has
considered its funding options and expects to announce a conditional share placing in order to strengthen the balance
sheet, reduce the loan outstanding and permit selective investment in the business.

72

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 201526.8 Categories of financial instruments
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis ofmeasurement 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:

Financial assets
Loans and receivables:– Trade receivables– Amounts recoverable on contracts– Other receivables– Cash and cash equivalents

Notes

2015
£’000

2014
£’000

15
15
15
16

5,730
2,067
1,480
5,392

8,893
4,134
2,514
3,697

14,66919,238

2,148
3,668
2,813
203
5,623

4,021
2,020
3,775
190
6,927

Total financial assets
Financial liabilities
Amortised cost:– Trade payables– Trade accruals– Other payables– Provisions– Bank loans
Fair value:– Contingent consideration
Total financial liabilities

17
17
17
19
18
19.2

448

414

14,903

17,34773

Ubisense Group Plc
Annual Report 2015

Independent auditor’s reportto the members of Ubisense Group Plc

We have audited the Parent Company financial statements of Ubisense Group Plc for the year ended 31 December
2015 which comprise the Company balance sheet, Company statement of changes in equity and the related notes. The
financial reporting framework that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 ‘The Financial
Reporting Standard applicable in the UK and Republic of Ireland’.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members thosematters we are required to state to them in 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 asa 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 31, the Directors are responsible forthe preparation of the Parent Company 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 Parent Company financial statements in accordance withapplicable 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/auditscopeprivate.
Opinion on financial statements
In our opinion the Parent Company financial statements:• give a true and fair view of the state of the Company’s affairs as at 31 December 2015;• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and• have 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 Directors’ report for the financial year for which thefinancial 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 toyou 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 2015.

Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
6 April 201674

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Company balance sheet
At 31 December 2015

Notes

2015
£’000

2014
£’000

3

9,691

17,999

4

7,056
10

10,11319

7,066(1,849)10,132
(143)

5,217

9,989

Total assets less current liabilities

14,90827,988

Net assets

14,90827,988Fixed assets
Investments in subsidiaries
Current assets
Debtors
Cash at bank and in hand
Creditors – amounts falling due within one year5

Net current assets

Capital and reserves
Called-up share capital
Share premium accountShare-based payment reserve
Profit and loss reserve

6
7
7
7

732
37,422875(24,121)501
28,051821(1,385)Equity shareholders’ funds

8

14,90827,988The notes on pages 77 to 79 are an integral part of the Company financial statements.
The financial statements were approved by the Board of Directors on 6 April 2016 and signed on its behalf by:

Richard Green
Chief Executive Officer
Ubisense Group Plc

Registered Number: 05589712

75

Ubisense Group Plc
Annual Report 2015

Company statement of changes in equity
For the year ended 31 December 2015

Attributable to equity shareholders

Balance at 1 January 2014

Sharecapital
£’000

Share
premium£’000

Share-based
payment
reserve£’000

Retainedearnings
£’000

Total
£’000

461

24,050746(500)

24,757

Total comprehensive loss for the year
Reserve credit for equity-settled
share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs

–

–

–

(885)

(885)

–
40
–
–

–
–
4,230
(229)

75
–
–
–

–
–
–
–

75
40
4,230
(229)

Transactions with owners

40

4,001

75

–

4,116

Balance at 31 December 2014

501

28,051821(1,385)27,988–––(22,736)(22,736)

–
231
–
–

–
–
9,845
(474)

54
–
–
–

–
–
–
–

54
231
9,845
(474)

Total comprehensive loss for the year
Reserve credit for equity-settled
share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs
Transactions with owners

231

9,371

54

–

9,656

Balance at 31 December 2015

732

37,422875(24,121)

14,908The notes on pages 77 to 79 are an integral part of the Company financial statements.

76

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

Notes to the Company financial statements

1 Principal accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. They havebeen prepared under the historical cost convention and in accordance with applicable United Kingdom AccountingStandards and law.
This is the first year in which the financial statements have been prepared under FRS 102. An explanation of thetransition is provided in note 9.
The principal accounting policies are summarised below. They have been applied consistently throughout the year andthe preceding year.
The Company has taken advantage of the following exemptions allowed under FRS 102:• Section 33 ‘Related-party disclosures’ not to show transactions with other wholly-owned companies in the Group
headed by Ubisense Group Plc.
• Section 7 statement of cash flows not to prepare a cash flow statement for the Parent Company.
• Section 11/12 financial instrument disclosures.
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 been adjusted, based on management’s best estimate, for the effects ofnon‑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 the aggregate amount ofshare‑based payment with a corresponding increase in equity 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 moretax, 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 inperiods different from those in which they are included in financial statements. Deferred tax assets are recognised tothe extent that it is regarded as more likely than not that they 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 andloss account for the year. Ubisense Group Plc reported a loss for the financial year ended 31 December 2015 of£22,736,000 (2014: £885,000).
The Company does not have any employees (2014: nil). Directors’ emoluments are disclosed in note 7 of theconsolidated financial statements. The Directors were not remunerated by the Parent Company.

77

Ubisense Group Plc
Annual Report 2015

Notes to the Company financial statements continued

3 Investments in subsidiaries
Investments in
subsidiaries£’000

Cost and net book amountAt 1 January 2015
Additions
Capital contribution relating to share-based payments
Impairment

17,999890
54(9,252)

At 31 December 2015

9,691

Additions
Additions in the year relate to compensation of Ubisense GmbH for losses under a Domination Agreement. The
additions of £890,000 represents the compensation for the losses in the years ending 31 December 2012, 2013 and2014 when the entity was Ubisense AG. There will be no similar compensation for losses in future.
Capital contribution
The capital contributions relating to share-based payments arise because the Company has granted share options to
the employees of its various subsidiaries.
Impairment
At 31 December 2015, there were indicators of impairment of the investment in the subsidiaries asset. The carrying
value of the investment, considered together with the net amounts owed by subsidiary undertakings, was compared to
the recoverable amount and an impairment found to exist. As such, the investment has been written-down to arecoverable amount, being the discounted future cash flows generated from the investment. The discount rate used
was 11.5%, this being derived from the weighted average cost of capital.
The impairment expense has been recognised in profit or loss for the year.
Further information about subsidiaries is provided in note 23 of the consolidated financial statements.
4 Debtors

Amounts owed by subsidiary undertakings

2015
£’000

2014
£’000

7,056

10,113

7,056

10,113

The amounts owed by subsidiary undertakings have been impaired during the year by £12,615,000 (2014: £nil) to
reduce their carrying value to a recoverable amount. The impairment expense has been recognised in profit or loss forthe year.
£904,000 owed is due in more than 12 months.
5 Creditors: amounts falling due within one year

Trade accruals
Amounts owed to subsidiary undertakings

78

2015
£’000

2014
£’000

54
1,795

143
–

1,849

143

Strategic report

Corporate governance

Financial statements

Ubisense Group Plc
Annual Report 2015

6 Share capital

Allotted, called up and fully paid
Ordinary shares of £0.02 each2015
Number2014
Number

2015
£’000

2014
£’000

36,620,247

25,062,842

732

501

A description of the movements in share capital in the year is given in note 20 of the consolidated financial statements.
7 Reserves
Sharepremium£’000

Share-based
payment
reserve£’000

Profit andloss reserve£’000

Balance at 1 January 2015
Loss for the year
Reserve credit for equity-settled share-based payment
Premium on new share capital
Share issue costs

28,051
–
–
9,845
(474)

821
–
54
–
–

(1,385)(22,736)–––

Change in year

9,371

54

(22,736)

Balance at 31 December 2015

37,422875(24,121)8 Transition to FRS 102
The Company has adopted FRS 102 for the year ended 31 December 2015 and has recalculated the comparative
amounts as if FRS 102 had always been applied. The shareholders’ funds at the effective date of 1 January 2014 remainunchanged from previously published financial statements and no restatements are required.

79

Ubisense Group Plc
Annual Report 2015

Advisers

Registered Office
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
Website: www.ubisense.net
Investor Relations
Redleaf Communications
1st Floor, 4 London Wall Buildings
Blomfield Street
LondonEC2M 5NT
Nominated Advisers and Brokers
Numis Securities Limited
The London Stock Exchange Building,
10 Paternoster Square,
LondonEC4M 7LT
Lawyers
Mills & Reeve LLP
Cambridge OfficeBotanic House
98-100 Hills Road
Cambridge
CB2 1PH
AuditorGrant Thornton UK LLP
Cambridge Office
101 Cambridge Science Park
Milton Road
Cambridge
CB4 0FY
Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol
BS99 6ZZ
BankerHSBC Bank plc
VitrumSt John’s Innovation Park
Cowley Road
Cambridge
CB4 0WS80

Shareholder information

Shareholder enquiries
Any shareholder with enquiries should, in the first instance, contact our Registrars,
Computershare, using the address provided in the list of Advisers.
Share price information
London Stock Exchange Alternative
Investment Market (AIM) symbol: UBI
Information on the Company’s share price 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 2015
Full year results announced 7 April 2016

Ubisense Group Plc
St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge
CB4 1DL

www.ubisense.net