Bringing clarity tocomplex operations

Ubisense Group Plc
Annual Report 2013

We’re the world’s foremost specialists in location
intelligence – whether we’re bringing previously
inaccessible efficiencies to manufacturing
processes or revolutionising the managementof huge networks in the utilities sector.
Our mission:
We transform our customers’ business processes
by applying our world-class location intelligenceexpertise, embedded in innovative solutions thatbring clarity and control to complex operations

Contents
Overview

Financial statements

Highlights..............................................................1

Independent auditor’s report............................ 26

Chairman’s statement..........................................2

Consolidated income statement........................27

Strategic report

Consolidated statementof comprehensive income..................................28
Consolidated statement of changes in equity...29

Our business overview........................................ 4

Consolidated statement of financial position....30

Our business ........................................................8

Consolidated statement of cash flows..............32

Chief Executive’s review.....................................10

Notes to the consolidated
financial statements...........................................33

Financial review..................................................12
Strategic report..................................................14

Independent auditor’s report.............................60
Company balance sheet....................................61
Notes to the Company financial statements.....62

Governance
Board of Directors..............................................18
Directors’ report.................................................20

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

Corporate governance report............................22
Statement of Directors’ responsibilities............25

Additional information
Notice of Annual General Meeting.....................64
Corporate directory..........................................IBC
Shareholder information...................................IBC

1

Ubisense Group Plc Annual Report 2013

Highlights
Financial highlights
Order book+32.1%+75.5%£32.5m£17.9mGroup revenue

Recurring revenues

2012: £24.3m

2012: 25.1%£27.0m26.5%

Adjusted EBITDA*

Product development

2012: £1.2m

2012: £3.2m

£1.1m

£4.0m

Cash and cash equivalents

Bank facility

2012: £2.7m£3.5m drawn

£4.0m

£5.0m

Strategic highlights
Broadening reach of addressable market in Japan and South Korea with acquisition of Geoplan
Customer bookings in the year up 32.1% to £32.5 million, including multi-year contracts
Order book up 75.5% year on year to £17.9 million as at 31 December 2013 and continues
to provide good revenue visibility
Appointment as Google enterprise partner

Operational highlights
Product certification granted in Japan and South Korea enabling deployment of RTLI solutions
Significant orders during the period from leading European telecoms network operator,
the largest US agricultural manufacturer, a top-five US telecoms operator and a leading
US energy utility
All three German automotive groups deploying Ubisense Smart Factory System in a stepand repeat cycle
Robert Parker appointed Chief Financial Officer on 10 February 2014*M easured as operating profit excluding depreciation, amortisation, share-based payments charge andnon-recurring costs such as reorganisation costs, AIM listing expenses and acquisition costs.
** E arnings measured as profit for the period excluding amortisation on acquired intangible assets, share-based
payments charge and non-recurring exceptional items such as acquisition and reorganisation costs.

Overview

Customer bookings

Ubisense Group Plc Annual Report 2013

2

Chairman’s statement

The necessary investments and efforts we have madehave allowed Ubisense to experience solid growththrough major new strategic client wins, as the use ofreal-time location intelligence solutions is becoming
increasingly widespread through many industries.

Introduction

Our aim is to deliver a
single enterprise location
intelligence platform toaddress all our customer
base and target markets

2013 was a busy year for the Group, driving
forward our aim to be synonymous with enterpriselocation intelligence. We have seen significant
developments in our strategy to transform
our business to a single Real-time Location
Intelligence (RTLI) solution, fully leveraging
our product IP across our customer base.
To strengthen this further and expand our
global footprint, on 3 December 2013 wecompleted the acquisition of the Geoplan
Interworks K.K. (“Geoplan”) group of companies.
We are still in the early stages of the integration
process but I am delighted with the progress todate and am excited by the potential we see in
Asia over the next few years.

Overview
Group revenue increased by 11.2% to£27.0 million and we achieved an adjusted
EBITDA of £1.1 million. The Group’s gross profit
was £9.2 million, representing a gross marginof 34.2%. The Group has a robust balance
sheet with net assets of £19.4 million, including
cash and cash equivalents of £4.0 million.
During 2013 we experienced continued
momentum across the business as we migrated
to an RTLI solutions focused business, throughthe strengthening of key customer relationships,
acquisition of new customers, improved market
reach and our approach to product management.
We have also ensured that our resources are
fully focused on delivering our leading location
intelligence technology for markets where
we add the most value.

The necessary investments and progress wehave made have allowed Ubisense to experiencesolid growth through major new strategic client
wins, as the use of real-time location intelligencesolutions is becoming increasingly widespreadthrough many industries. Our year-end orderbook is up 75.5% year on year to £17.9 million– a significant achievement – and this continues
to provide us with good revenue visibility
going forward.
We have also delivered excellent progress
and further market traction in the conversionof our consulting services customers into
RTLI solutions customers. Our market-leading
RTLI solutions offering is benefiting from theacceleration in enterprise acceptance as it allows
customers across high-value manufacturing,utility and telecommunication sectors to achieve
substantial improvements in efficiency and costsavings. Our reputation with all our customers
continues to be one of value, reliability andexceptional service.
Our aim is to deliver a single enterprise location
intelligence platform to address all of our customer
base and target markets.

Current trading and outlook
In the period since the year end, trading has
been in line with the Board’s expectations.
Ubisense has entered 2014 with increasing
momentum in the business and we are
extremely well positioned to capitaliseon the opportunities we see.

Ubisense Group Plc Annual Report 20133

Overview

We will continue to pursue growth bothorganically and through acquisitions thatalign with our strategic objectives, enhance
our offering and deliver value for our shareholders.
Although the world economic recovery is
still in an early stage, we are able to provide
market-leading innovative solutions for ourcustomers and we begin 2014 with a robust
order book and pipeline which gives us
confidence for the future.

Conclusion
On behalf of the Board, I would like to thankour customers, partners and employees fortheir support in making 2013 such a strong
year for the Ubisense Group. I look ahead
with confidence for the 2014 financial year.

Andy Hopper, CBE
Chairman
24 March 2014

Our market-leading RTLI solutions offering is benefitingfrom the acceleration in enterprise acceptance as itallows customers across high-value manufacturing,utility and telecommunication sectors to achieve
substantial improvements in efficiency and cost savings.”

Ubisense Group Plc Annual Report 20134

Our business overview

Continuous
monitoringof progress

Benefit: real-time assessment ofoperational delay when progress
deviates from plan, supporting WIP
re-planning across sites.

Reliability

Problem

Solution

ResultAcross the major A380 assembly
factories, the tracking and reportingof status of the industrial process wasdone via various paper-based processes.
Central management received data fromdifferent sources, which provided various
views of the operational status. To ensurecomponents arrive at the final assemblyline at the right times from the distributed
plants an improved process tracking
system was required.

By precisely tracking Ubisense tags oncomponents, the Smart Factory Systemprovides Airbus with real-time work inprogress monitoring. This includes
accurate tracking of actual progress percomponent, a real-time visual display ofcomponent locations and synchronised
information for the components of every
single aircraft. Instantaneous alerts are
given when process deviations occur,
including missed steps and exceeded
step cycle times.

Automatic work in progress (WIP)
monitoring of components has reduced
delays in reporting. The ability to identify
the quantity of WIP and to impact
assessment of operational delays
across plants has improved.

Ubisense Group Plc Annual Report 2013

5

Replace manual
methods of
network design

Automation

Problem

Solution

ResultOne of the most prevalent challenges
faced by telecommunications operators
today is how to roll out new network
technologies required to deliver highbandwidth services to their enterpriseand residential customers in an
expedited and cost-effective manner
to remain competitive.

Building on many years supplying supportand software consultancy services for
Swisscom’s manual planning engineeringand inventory tool, Ubisense delivered new
design automation tools for Swisscom
to trial.

The Proof of Concept was a complete
success. Ubisense and Swisscom are
now taking the design solution into
production as a key component of the
new fibre rollout plan that started at theend of 2013. Swisscom will be able toroll out FTTS to deliver high bandwidth
services to existing and new customers,
and Swisscom customers will benefit bybeing able to watch IPTV on multiple
devices in parallel, including 3D and
UHD (4k) content.

Strategic report

Benefit: rapidly deliver high-value
services to existing and new customers.

Ubisense Group Plc Annual Report 20136

Our business overview continued

Automate
error-proofing forcritical assembly
operations
Benefit: reduction in defects on
safety-critical tightening operations
during vehicle assembly.

Quality
Problem

Solution

ResultBecause multiple vehicle models areproduced on the same assembly line,
power tool settings must be constantly
adapted for the specific model entering
a work station. Previously, to load thespecific tool settings a vehicle’s VIN was
identified via a barcode scan upon entry
to a work station. Manual barcode scans
for VIN identification were taking up tosix seconds per tool operation across
150 tool stations for 1,100 cars per day.

By precisely tracking Ubisense tags onvehicles and tools, the system provides
BMW with efficient and reliable tool
control through automatic identificationof a vehicles VIN, eliminating the barcode
scans and automatically loading tool
programs and torque settings for eachvehicle identified.

Real-time, automatic tool control has
reduced non-value added work acrossthe assembly line and contributes to error
prevention. Hundreds of hours per day
have been saved due to the eliminationof manual barcode scans.

Ubisense Group Plc Annual Report 20137

Demonstrate
conformance tosafety standards

Compliance
Problem

Solution

ResultFor a time, UGI Utilities used anelectronic system to track its gas leaksurveys across distribution system ofapproximately 12,000 miles of gas mains,
until the company encountered a database
replication issue. This issue forced UGI
to revert back to a paper-based system,
the process still used by most natural
gas utilities.

Ubisense provided UGI executives witha demonstration of VeroTrack, a gas leakdetection system that highlights facilities
surveyed and records gas readings
automatically, eliminating the need tohighlight paper maps and manuallyenter data. VeroTrack records gas
detector readings and GPS coordinates
automatically, and integrates with a GIS
to create standardised reports andauditable records.

As a result of the Ubisense deployment,
UGI’s productivity has increased
dramatically. Instead of surveying forseven hours and reporting for one, fieldsurveyors are able to survey for the fulleight hours and cover more ground.

UGI needed an online survey tracking
system with geospatial mapping
capabilities that would not only detectnatural gas leaks but also track the
progress of the leak surveyors against
the gas mains as mapped in ageographic information system (GIS).

Strategic report

Benefit: automate surveying
underground gas network and facilities,
automatically tracking progress andstoring data as auditable records todemonstrate compliance with standards.

Ubisense Group Plc Annual Report 20138

Our business

Ubisense is a market leader in enterpriselocation intelligence solutions that enable
companies to improve their critical businessprocesses. Ubisense solutions bring clarity
to complex operations for improved
situational awareness and automation to
improve quality and reliability at lower cost.
Ubisense products are used by blue-chipcustomers around the world.
Founded in 2002, Ubisense is a publiccompany (AIM:UBI) with over 240 staff
worldwide serving 500 customers in
50 countries. Ubisense is headquarteredin Cambridge, UK, with offices in the
US, Canada, France, Germany, Japan,
S. Korea, the Philippines and Singapore.

240

Staff worldwide serving...

500

customers in...

50

countries

Ubisense Group Plc Annual Report 2013

Our product offerings
enable businesses across thehigh-value manufacturing, utility
and telecommunications sectors to
reduce costs and make significant
improvements in efficiency.

Our markets» Manufacturing» Telecommunications
Ubisense products are used by over
40 telecoms network operators worldwide,
providing business location intelligence forgreater operational visibility. Our products
fuse their enterprise system data with
operational data for anytime, anywhere
access to their critical, location-based
data, making it easily accessible to anyone
within their organisation. Ubisense products
provide situational awareness and more
effective process support facilitated by thisgreater operational visibility. Telecom andcable network operators are able to address
issues faster and to deliver a better customer
experience to their end users.

» Utilities
Utilities supply and distribution network
operators need to gather, process, maintainand keep up to date huge amounts network
asset data. This enables them to meetcustomer satisfaction, commercial, healthand safety, sustainability, and regulatory
requirements. Ubisense offers theelectricity, gas and water supply industries arange of cost-effective, user-friendly
software solutions that add businesslocation intelligence to their network asset
management processes, providing manybusiness benefits.

Enterprise location
intelligence
Ubisense enterprise location intelligence products
provide visualisation and control of complex processes.
Applying them results in improved decision making,improved quality and improved throughput.
By pin-pointing in space and time the precise
positions and status of a customer’s assets,
be they tools and products in a manufacturingassembly facility or equipment and cables ina distribution network, we can transform theefficiency of their processes – and therefore
the profitability of their business.

1

Solutions

Revenues driven from the Ubisense
software product suites (Smart Factory,
myWorld, Verotrack and Ubisense RTLS
hardware), technical expertise and exclusive
reseller arrangements. A solution sale will
include a mixture of application software(licences in perpetuity and term-based),
hardware, installation and commissioning2

Our products gather real-time data from avariety of sources, including our own sensor
networks, existing monitoring systems,
enterprise information systems and cloud
based systems. Our applications provide
the business logic to improve the customer
processes, updating information systems,
control systems and mobile devices
in real-time.

services, and maintenance and support.
Margins in any given period will varydepending upon the make-up and phaseof the given set of Solutions being delivered.
The Company sees this revenue stream as
critical to driving the long term growth andprofitability of the business.

Services

Revenues not involving the Ubisense
product suites as defined above. Theserevenues are typically multi-year managed
services contracts, consultancy and training.

The Company generally has good visibility
on future revenue from Services and believes
it is critical to driving customer loyalty andproviding a customer base into which it
can sell its Solutions.

Strategic report

Manufacturers are striving to optimise theirbusinesses using lean production
techniques. The intelligent production
systems underpinning these processes
require real-time location intelligence about
the movement of product and assets
during the production steps. Ubisense
Smart Factory products are used toconstruct a digital analogue of ourcustomer’s factories. A Smart Factorymodel contains both the physical factory
spaces; assets, stations and products andthe logical arrangement of the factory;
process logic, inter-step dependencies
and business rules. The result is a real-time
dynamic 3D simulation of all criticalmanufacturing processes that enables
Smart Factory to monitor, automate andoptimise manufacturing operations.

9

Ubisense Group Plc Annual Report 201310

Chief Executive’s review

Our value proposition is, and remains, our main
growth driver as customers are seeing clear returnon investment from increased operational efficiencies
and reduced costs in their operations.

Implementing intelligent
concepts through thedevelopment of unique
IP is core to our
product offering

Overview
The Group made exceptional progress in 2013,delivering on our stated strategy. In the year,
we decided to bring together all of our leading
location-based technologies into one converged
offering in order to meet the increasing demandsof our customers. Our single RTLI businessallows the Company to benefit from theemerging trends of smart devices and thegrowth in cloud technologies.
The implementation of this strategy has
allowed us to achieve pleasing growth in theyear. We experienced growing awareness andincreased deployment with a number of large
manufacturers and network operators.
Our strategic objectives are as follows:»»continue to evolve as a solutions-based
business with a services capability,
developing IP licensed on perpetualor term basis to customers;»»develop additional software licence offerings
for specific business problems that deliver
ROI to customers and represent upsell
opportunities and additional maintenanceand support revenue;»»focus direct business on manufacturing,telecoms and utility enterprises – particularly
automotive manufacturing, cable televisionand triple play operators as well as gas andelectric utilities;»» drive step and repeat business in automotive
manufacturing across new site locations
where we have demonstrated businessvalue in initial deployments;»»use channel partners to reach other verticalmarkets at low cost of sale with specificdomain know-how and market access; and»»continue to innovate and provide arewarding work environment to attract
and retain talented staff.

Business observations:»»We continue to see location as a key

asset attribute for many critical businessprocesses and the focal point for integrationof enterprise data.

»»In our telecoms and utility markets, newmobile-based capabilities are realisingbusiness opportunities for software productsin field operations, where real-time data
access and updates demonstrate improved
business efficiency for the mobile workforce.

»»In our manufacturing markets, we see

opportunities to penetrate upstream
and downstream around initial pointsof deployment as customers recognise
the value of location.

Our value proposition is, and remains, ourmain growth driver as customers are seeing
clear return on investment from increased
operational efficiencies and reduced costsin their operations.

Customer momentum
In the year, the growth momentum in our
Solutions business continued, as we extended
our product sales into our existing client baseand leveraged these existing relationships.
Our focus remained on our priority markets inhigh-value manufacturing and network operators,
where we delivered year-on-year growth inrevenues of 18%. Our RTLI solutions havestrengthened our customer relationships as we
continue to innovate and offer a growing range
of applications to support their drive towards
end-to-end location intelligence solutions
across their whole business.
Ubisense products and solutions have now
been installed in eight out of the top 15 auto
manufacturers and we continue to penetrate
the global automotive market with installations
at more new plants in North America, Europe
and South Korea. Crucially, in the year, our
RTLS solution was authorised for certification
for sale into Japan which, along with theUbisense Group Plc Annual Report 201311

Strategic reportdevelopment of the Smart Warehouse System
by Daifuku for its large customer base, has
opened up a large number of new opportunities
and potential new customers.
During the year, we saw repeat orders from ourexisting customer base and won several new
solutions contracts including major strategic winsat customers such as VW, Honda and Toyota
and we have extended our installations at existingcustomers including Airbus, Aston Martin,BMW, Cummins, Daimler and John Deere.
We continue to deliver into telecoms and utility
network operators, servicing both existing andnew customers. We remain committed to thiscustomer base and strongly believe that we will
be able to further sell our enhanced RTLI solutions
to them as a trusted supplier. We are pleased
to report new customer wins with Swisscom,
Central Hudson, Piedmont Gas and Kepco.

Acquisitions
Geoplan was acquired for a maximum
consideration of £3.4 million, with initialconsideration of £2.3 million and £1.1 million
being deferred. Of the initial consideration,£0.6 million consists of cash and the remainder
Ubisense shares. Of the deferred consideration,£0.2 million has been paid as at 24 March 2014.
The acquisition of Geoplan contributed £0.7 million
to revenues in the year. We are integrating thecompany into our existing business andoperations are being consolidated, providing
us with cross-selling opportunities and a strong
presence in Japan to open up the manufacturingmarket there. We are delighted with the progress
we have made so far in both Japan and South
Korea and will look to take advantage of thevast opportunities this acquisition has brought
to us across Asia.
We continue to look for acquisition opportunities
to enhance our market penetration, geographicalfootprint and product portfolio.

We continue to look for acquisition opportunities
to enhance our market penetration, geographicalfootprint and product portfolio.”

Strategic partnerships
Substantial progress was achieved with ourstrategic partners Atlas Copco, Google and ourpartnership with the Daifuku Corporation in Japan.
We remain committed to developing
partnerships that deliver differentiatedvalue propositions, leveraging each other’s
expertise and relationships to provide
substantial benefit for our joint customers.

Products
Implementing intelligent concepts throughthe development of unique IP is core to our
product offering and differentiates us fromour competitors. We continue to invest heavily
in research and development as well as extending
our collaboration with university and research
institute partners.
We have continued with the consolidationof current products into more market focused
application suites such as Smart Factory, ourflagship, end-to-end manufacturing solution.
Feedback has been very positive and we areultimately moving to a single enterprise location
intelligence platform to address all ourcustomers’ requirements.

Additionally we have focused on integration
with other enterprise system platforms suchas SAP, and this makes for more effective
deployment for our customers as integration
timescales and costs are much lower.

Conclusion
By continuing to invest in our product suiteand working in close co-operation with ourcustomers we have established a strong
platform for growth and are in a good position
to build on our successes. We look forward
to the future with confidence.

Richard Green
Chief Executive Officer
24 March 2014

Ubisense Group Plc Annual Report 201312

Financial review

As a result of the record customer orders in the
period, the order book as at 31 December 2013
stood at £17.9 million – a 75.5% increaseyear-on-year.

The Group has a robust
balance sheet with net
assets of £19.4 million

Orders2013 saw a number of major new contract
awards and extensions to existing contracts,
resulting in record new orders for the periodof £32.5 million (2012: £24.6 million) including
a number of multi-year managed services deals.
£31.5 million of these orders were organic.
As a result of the record customer orders in the
period, the order book as at 31 December 2013
stood at £17.9 million (2012: £10.2 million) – a
75.5% increase year on year. £14.7 million of theorder book comes from the organic business.
This continues the trend of an increasing orderbook and gives the Company good visibility on
revenues into 2014 and beyond.

RevenueAt the start of 2013, Ubisense reorganised intoa single Real-time Location Intelligence (RTLI)
business integrating all our leading location-based
technologies driving to a single platform which weare increasingly converging. The RTLI strategy isoutlined further in the Strategic Report. While wemarket, organise and report a single offering,
Ubisense has two revenue streams which
are serviced by a common cost base:»» Solutions – revenues driven from the Ubisense

product suites (Smart Factory System,
netSolutions, netPlanning, myWorld, Verotrack),technical expertise and exclusive reseller
arrangements. A Solution sale will include a
mixture of application software (licences inperpetuity and subscription based), installationand commissioning services, hardware andmaintenance and support. Margins in any given
period will vary depending upon the make-up
and phase of the given set of solutions being
delivered. The Company sees this revenue
stream as critical to driving the long-term
growth and profitability of the business.

»»Services – revenues not involving the Ubisense
product suites as defined above. Theserevenues are typically multi-year managed
services contracts, consultancy and training.
The Company generally has good visibility
on future revenue from Services and believes
it is critical to driving customer loyalty andproviding a customer base into which it cansell its solutions.

Total revenues grew by 11.2% to £27.0 million(2012: £24.3 million). Of the total revenue for 2013,
an incremental £0.7 million was contributed by
the Geoplan acquisition made at the beginningof December 2013. Excluding Geoplan, organic
revenue increased by 8.2% to £26.3 million.
Solutions revenue grew by 6.7% to £13.4 million(2012: £12.5 million). Services revenue grewby 15.9% to £13.6 million (2012: £11.8 million)
primarily as a result of large contract wins in the
US in the utility and telecoms markets. Recurring
revenues, comprising managed services andmaintenance and support, grew to £7.2 million(2012: £6.1 million) or 26.5% of total revenues(2012: 25.1%) as the installed base of products
increases and more customers adopt ourmanaged services offering.
The majority of our revenues relate to a small
number of large deals, the timing of which is not
solely within our control, and each can carry asignificant impact on our results in any single
reporting period.

Gross margin
The gross margin reduced from 39.5% to 34.2%
in 2013. This was the result of a number of factors:(i) an increase in Services revenue in the revenue
mix, (ii) within those Services revenues a greater
proportion was derived from lower margin data
cleansing services which will ultimately allow us
greater access to sell our solutions as a trusted
partner, and (iii) our Solutions revenues, which are
generally higher margin, were in part delivered
using contractors to fill delivery capacity which
has a direct impact on the margin.

Ubisense Group Plc Annual Report 201313

Strategic report

Operating expenses
Operating expenses of £10.9 million(2012: £10.4 million) increased by 4.8%
year on year. Operating expenses includes
sales and marketing, product marketing,product development, general and administrationand foreign exchange. Gross expenditureon product development increased 26% to£4.0 million (2012: £3.2 million) reflecting
increased investment in our flagship Smart
Factory and myWorld products. Capitalised
product development costs at £3.0 million(2012: £1.8 million) represented 76%(2012: 58%) of gross development spend whilst
amortisation of the capitalised development
costs was £1.2 million (2012: £0.9 million).
The Group incurred exceptional items of£0.8million, of which £0.7 million related
to strategic Asia Pacific market entry costs
comprising £0.5 million acquisition costs relating
to Geoplan and £0.2 million relating to productcertification costs in Japan and South Korea
and the termination of our previous agent
network in the region.
In addition, the Group incurred £0.1 millionof costs, mainly comprising professional fees,in connection with an acquisition which did
not proceed. The Board continues to evaluate
suitable acquisition opportunities to enhance
its geographical footprint, product offerings,
delivery capacity and customer base.

EBITDA and operating profit
Group adjusted EBITDA for the period was£1.1 million (2012: £1.2 million). To provide a
better guide to underlying business performanceadjusted EBITDA excludes share-based
payment charges and exceptional items alongwith depreciation, amortisation, interest andtax from the measure of profit.
Both the operating loss of £1.6 million(2012: £0.8 million) and loss before taxof £1.7 million (2012: £0.7 million) include
amortisation and depreciation charges of£1.9 million (2012: £1.4 million) which haveincreased as a result of the increased amortisationof capitalised product development costs, aswell as the exceptional items noted above of£0.8 million (2012: £0.4 million).

Interest and tax
Net interest payable for the period was£0.1 million (2012: £nil) as a result of drawing
down on our HSBC bank loan.
The Group has a net tax expense of £0.2 million(2012: £0.1 million income), almost entirely aresult of non-cash deferred tax on capitalised
development costs and acquired intangible
assets. Management’s best estimate of theeffective current tax rate is nil due to theavailability of prior years’ losses. The Group
has substantial tax losses carried forwardand expects to benefit from the Patent Box
tax regime being introduced in the UK.

EPS and dividend
Adjusted diluted loss per share was 3.5p
(2012: 0.5p earnings). Reported basic anddiluted loss per share was 8.9p (2012: 2.8p).
The Board does not feel it appropriate at thistime to commence paying dividends.

Balance sheet,cash and cash flow
The Group has a robust balance sheet with
net assets at 31 December 2013 of £19.4 million(31 December 2012: £18.9 million).
In August 2013, the Group agreed a£5.0 million three-year loan to provide
future working capital replacing the previous£2.0 million facility negotiated in 2012 anddrawn down in 2013. £3.5 million of the newloan was drawn as at 31 December 2013(2012: £nil) of which £2.0 million was used
to repay the original facility.

Cash and cash equivalents held in the balance
sheet at 31 December 2013 were £4.0 million(31 December 2012: £2.7 million). With thebank loan outstanding of £3.5 million, net
funds at 31 December 2013 were £0.5 million(31 December 2012: £2.7 million).
The main components to the grosscash increase of £1.3 million for the year
(2012: £3.3 million decrease) were operating cash
outflow of £0.8 million (2012: £0.8 million outflow),
the cash consideration paid for Geoplan of£0.7 million in December 2013 (2012: £0.4 million
outflow on prior acquisitions), the cash acquiredwith Geoplan of £2.5 million, capital investment
in plant and equipment and intangibles
including product development of £3.2 million(2012: £2.3 million) and the receipt of the newbank loan of £3.5 million (2012: £nil).

Capital structure
The issued share capital at 31 December 2013
was 23,079,146 (December 2012: 21,919,744)
ordinary shares of £0.02 each. The increaseof 1,159,402 shares related to 759,809 sharesissued as part of the consideration of acquiring
Geoplan and 399,593 shares as a result of
share option exercises by employees. In addition,
421,500 share options were granted to employees
on 19 April 2013 at an exercise price of £2.055,
being the share price at the time. The total
number of unexercised share options at
31 December 2013 was 2,023,180.

Robert Parker
Chief Financial Officer
24 March 2014

Ubisense Group Plc Annual Report 201314

Strategic report

As the Company’s products become more generally
accepted across its chosen industries, Ubisense expects
to penetrate deeper into its customer base to deploy
multiple applications in each site.

Ubisense expects repeat
business to have a more
profitable product mix anda lower cost of sale which
ultimately will drive up
margins and profitability

Strategy and business model
Ubisense is a market leader in real-time
location intelligence solutions which enable
companies to optimise their businessprocesses. By keeping track of key assets,
Ubisense solutions bring clarity to complex
location-based operations that facilitate
improved human decision making whilst also
improving quality, efficiency and reliability.
Ubisense Real-time Location Intelligence
Solutions are used by a number of blue-chipcustomers across the world, such as AGCO,
Airbus, Aston Martin, BMW, Cablevision,
Daimler, Deutsche Telekom, Duke Energy,
John Deere, MINI and VW.
Ubisense is headquartered in Cambridge, UK,with offices in the US, Canada, France,
Germany, Japan, South Korea, the Philippines
and Singapore.
In recent years, there has been a significant
demand from customers requiring a single
solution which combines indoor and outdoor
components as well as dynamic and static
data. This overlap of our traditional Geospatial
and RTLS businesses enabled us to integrate
both divisions into a single Real-time Location
Intelligence (RTLI) business that brings together
all of our leading location-based technologies.
The enterprise acceptance of our RTLI
solutions has been accelerated by several
factors such as the consumerisation of maps
led by Google, the proliferation of smart
devices and the growth in cloud technologies.
Ubisense’s software products and services
capability benefits from these trends, enabling
enterprises across the high-value manufacturing,utility and telecommunications sectors todeliver significant improvements in efficiency
and cost savings. This also opens up new,adjacent markets for Ubisense.

With the business reorganised, the strategyof the Group is to:»»continue to evolve as a Solutions-based
business with Services capability;»»develop next-generation applications thatdeliver ROI to customers;»»focus direct business on manufacturing,telecoms and utility enterprises;»»drive step and repeat business in automotive
manufacturing across new site locations;»»use channel partners to reach other verticalmarkets at low cost of sale; and»»continue to innovate and provide arewarding work environment to attract
and retain talented staff.

Business review andfuture developments
Business development
A significant increase in customer bookings,
over 30% year on year, validates our new strategy
focused on real-time location intelligence and theinvestment we have made in our next-generation
platforms and sales and marketing infrastructure.
Considerable effort and investment in key strategic
accounts in both Europe and North America
has resulted in Ubisense securing contracts
with three major manufacturing customers with
global presence and reach which will result in
lower cost of sales and increased profitability
going forward. Furthermore, the Group now
has relationships with all three German auto
manufacturers and is targeting repeat orders
across these groups in the coming months.
It is still too early to see the momentum of ourincreased solution sales being reflected in theGroup accounts, but on a regional basis we
can start to see the delivery of our strategy.

Ubisense Group Plc Annual Report 201315

Strategic report

Our European business shows the accelerationof Solutions revenues over Services and resultant
increase in margins and profits whilst the Americas
business is still transitioning and we look forward
to the acceleration of its solutions revenues
this year.
In our telecommunications and utility markets,new mobile technologies, embodied in our
myWorld product, have opened up new business
opportunities for our software products inreal-time operational use, not traditionally an
area of focus for us. Customer wins for theperiod included a leading European telecoms
network operator, a top-five US telecoms
operator and a leading US energy utility.
As the Company‘s products become moregenerally accepted across its chosen industries
and markets, Ubisense expects to be able
to penetrate deeper into its customer baseto deploy multiple applications on each site.
Its acquisition strategy aims to enhance theCompany’s product portfolio, geographicalreach and the ability to service its customers
from a local office. The Company expects
repeat business to have a more profitableproduct mix and a lower cost of sale which
ultimately will drive up margins and profitability.

Partnerships
While our direct sales channel is receiving strong
customer traction, our channel partners havealso contributed to the strong customer bookings
performance. Notably, we became an official
enterprise partner of Google in the year.
Our channel partner relationships have resulted
in an increase in the number of pipeline deals.
This gives us confidence in achieving our growthgoals for 2014. Furthermore, developmentswith partners such as Daifuku in Asia Pacifichave increased our optimism with regards tothe opportunities to significantly increase theCompany’s presence in this key market.

A significant increase in customer bookings,
over 30% year-on-year, validates our new strategy
focused on real-time location intelligence and theinvestment we have made in our next-generation
platforms and sales and marketing infrastructure.”

Key performance indicators
The primary financial key performanceindicator for the Group is adjusted EBITDA,
on which it reports monthly. Adjusted EBITDA
for the year was £1.1 million (2012: £1.2 million).
The Group also monitors the order pipeline
and cash balances. At the close of the year theoutstanding order book totalled 69% of annual
sales (2012: 47%). The closing cash balance for
the Group was £4.0 million (2012: £2.7 million).
Having regularly reviewed the KPIs in respectof changes within periods and changes between
reporting periods the Directors believe that theGroup has made satisfactory progress against
the KPIs, especially the order pipeline, compared
to budget.

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 27 of theconsolidated financial statements.

Principal risks
and uncertainties
The Group faces competitive and strategic risks
that are inherent in a rapidly growing emerging
market. The Board of the Company and the
Executive Management Team review strategy
and risks to the business regularly. Where
possible, processes are in place to monitor
and mitigate the identified risks.
The key business risks affecting the Group are
set out below:

Technological risks
The Group operates in an industry wherecompetitive advantage is heavily dependent
on technology. It is possible that technologicaldevelopment may reduce the importance of
the Group’s function in the market or render
the patents on which it relies redundant. For
instance, the Group’s real-time location systems
rely on ultra-wideband radio signals to operate.

Ubisense Group Plc Annual Report 201316

Strategic report continued

The Group continues to invest in R&D, spending£4.0 million in its R&D programmes in the year
(2012: £3.2 million)

Principal risks
and uncertainties continued
Technological risks continued
There is no guarantee that technologicaladvances will not render systems based on
ultra-wideband radio obsolete. The Group’s
existing reference designs may become
obsolete or may be superseded by newtechnologies or changes in customer
requirements. The technology used in theGroup’s products is still evolving and is highly
complex and may change rapidly.
In order to mitigate this risk, Ubisense invests
in a range of research and development activities
to maintain its competitive advantage andparticipates in industry and research forums inorder to keep abreast of technological advances.

Growth management
and acquisitions
The Directors believe that further expansion,
either organic or via acquisition, will be requiredin the future to capitalise on the anticipatedincrease in demand for the Group’s solutions.
The Group’s future success will depend, inpart, on its ability to manage this anticipatedexpansion. Such expansion is expected toplace demands on management, support
functions, accounting, sales and marketingand other resources. If the Group is unable tomanage its expansion effectively, its businessand financial results could suffer.

The Group has in place appropriate
incentivisation structures to attract and retain
the calibre of employees necessary to ensure
the efficient management and developmentof the Group.

Reliance on third parties,
including manufacturers
The Group relies on third-party equipment
manufacturers in the completion of its products
and, therefore, does not always have complete
control over the equipment and materials it
requires to comply with its obligations undercustomer contracts. To the extent that theGroup 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 the contract or ata profit may be impaired. If a manufacturer isunable to deliver the products for any reason,
the Group may 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 in a financial loss on a particular
contract or a loss of business. In addition, any
resulting failure to fulfil contracts with customers
and other business partners may have an
adverse effect on the Group’s future profitability
and reputation. One key supplier supplies
more than 75% hardware required annuallyby the Group.

In order to mitigate this risk, the Group undertakes
extensive due diligence on acquisition targets
and uses dedicated project teams to integrateacquisitions into the Group.

In order to mitigate this risk, the Group closely
manages and reviews its relationship with key
suppliers on a regular basis.

Staff recruitment and retention

The Group is dependent on a number of key
contracts and customer relationships for its
current and future growth and development.
Ubisense has strong customer relationships
with considerable repeat business from anumber of large international organisations.

The contribution made by Ubisense’s highly
skilled and experienced staff is vital to theGroup’s success. As the Group grows, it isimportant to recruit and retain staff.

Dependence on key customers

In the financial year to 31 December 2013 theGroup’s ten largest customers accounted for
60% of the Group’s revenue (2012: 67%), of
which one customer accounted for in excess
of 10% (2012: 2). The loss of a major customer
could result in a decrease in Group revenues,
margins and profitability.
In order to mitigate this risk, the Group has
extensive sales and account management
processes and procedures.

Contracts
Some of the Group’s commercial contracts
include terms where revenues and/or invoicing
are related to customer acceptance.
The Group’s exposure under such contracts isreview regularly by the Executive Management
Team and the main Board.

Credit
The main credit risk is attributable to tradereceivables owed by customers. As the majorityof the Group’s customers are very large,
blue-chip utilities, telecoms and manufacturing
companies, the risk of non-payment tends tobe less of a traditional credit nature and more
related to customer satisfaction.
Credit exposure by customer is reviewed regularly
by the Executive Management Team and themain Board with provision made for doubtfulreceivables when there are circumstance which,based on experience, are evidence of a likely
reduction in the recoverability of the receivable.

Bank covenants
In August 2013, the Group agreed a£5.0 million loan facility with HSBC Bank plc
to provide future working capital capacity.
The loan is repayable in three years and theoutstanding balance at 31 December 2013was £3.5 million.

Ubisense Group Plc Annual Report 201317

Strategic report

The Group is required to meet certain financial
criteria agreed as covenants for the bank loan.
The financial measures are regularly reviewed
against covenant requirements to ensure theGroup’s obligations can be met. All covenants
tests during the year were met and all tests forthe forthcoming twelve months are forecast to
be met based on our annual operating planand our latest rolling forecast.

Research and development (R&D)
The Group continues to invest in R&D,
spending £4.0 million in its R&D programmes
in the year (2012: £3.2 million), of which£3.0 million (2012: £1.8 million) was capitalised.
In the opinion of the Directors, these investments
will maintain and generate significant revenues
in future years.

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

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

The Group is dependent on a number of key contracts
and customer relationships for its current and future
growth and development. Ubisense has strong customer
relationships with considerable repeat business froma number of large international organisations.”

Employee policies
The Group is committed to following theapplicable employment laws in each territoryin 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 career development needs are carefully
managed. For those employees becoming
disabled during the course of their employment,
every effort is made, whether through retraining
or redeployment, to provide an opportunity forthem to remain with the Group.

Health and safety and environment
The Group is committed to maintaining a safeand healthy working environment for all staff.
To that end it provides appropriate training andsupervision and complies with all applicableregulatory requirements.

The Group seeks wherever possible tominimise its impact on the environment forthe benefit of its staff and the public at large.
The Group is committed to complying withenvironmental regulations, in particular WEEE,
and encourages and supports staff in waste
recycling within its offices.
Approved by the Board of Directors and signed
on behalf of the Board

Gordon Campbell
Company Secretary
24 March 2014
Registered number: 05589712

Ubisense Group Plc Annual Report 201318

Board of Directors

Professor Andrew Hopper CBE

Richard Green

Robert Parker

Non-executive Chairman A R N

Chief Executive Officer N

Chief Financial Officer A R N

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

Richard initially trained as a mechanical engineer
and has over 25 years of experience in the software
industry. After he had established Smallworld
as one of the leading geographic information systemcompanies 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 Yearin 2010. Richard is a Fellow of the Institute of
Mechanical Engineers and sits on the Institute of
Mechanical Engineers Manufacturing Industries Board.

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

Board Committee MembershipA – Audit Committee
R – Remuneration Committee
N – Nominations Committee

Ubisense Group Plc Annual Report 201319

J Keith Lomas

Dr Richard Newell

Non-executive Director R N

Non-executive Director A R N

Non-executive Director A NPeter has held a number of senior international sales
and marketing roles 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 he became
Director of Services Sales – EMEA with a charter todevelop new areas of business, including professional
services. Peter retired from Sun Microsystems in
December 2005. Most recently he was Non-executive
Chairman of Aspex Semiconductors Limited, sold to
Ericsson AB in July 2012. Currently, Peter is a
Non-executive Director of Brady plc , CRFS Limited,
and Chairman of eoSemi Limited. Peter is also anadvisor to Cambridge IP Limited.

Keith has more than 20 years’ senior management
experience in both small and medium sized
entrepreneurial and extensive multinational
companies. Keith was appointed Managing Directorof CLPL in 1996 and, after leading the successfulacquisition of UltraVision International in 2003,
Keith was appointed as President and CEO of the
UltraVision CLPL group. The combined group is
one of the largest independent manufacturers andsuppliers of contact lenses in Europe. Prior to his
involvement in the contact lens world, Keith was
an investment banker at S.G. Warburg, Kleinwort
Benson and Daiwa Europe. Keith is an active investor
in other technology start-up companies. Keith accepted
the Queen’s Award for Enterprise: Innovation 2006
and 2010 on behalf of UltraVision CLPL.

Dick has spent over 45 years in the software industry
in computer-aided design (CAD) and geographic
information systems (GIS). He co-founded his firstcompany, Cambridge Interactive Systems Limited(CIS) in 1977. CIS was part of what became known
as “The Cambridge Phenomenon”. Dick was a
co-founder of Smallworld in 1988. Dick was Chairmanof both CIS and Smallworld. He was the original
project manager of PDMS, a core product of AVEVAGroup plc, and is also a Non-executive Director of
UltraVision CLPL and Digital Spring Limited.

Dr Robert Sansom

Paul Taylor

Non-executive Director R N

Non-executive Director A R N

An active angel investor and mentor to start-ups, Robert
is founder of the Cambridge Angels, a group of seasoned
technology and bio-technology 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 was listedon NASDAQ in 1994 and subsequently acquired by
Marconi for $4.5 billion in 1999. Additionally, Robert
served as the Chief Technology Officer at Marconi in
1999. Robert is a member of the Board of Directorsof Cambridge Communications Systems Limited,
CRFS Limited and Netronome Systems, Inc. He waselected as a Fellow of the Royal Academy of Engineeringin 2010.

Paul is a Fellow of the Association of 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 FinanceDirector and Company Secretary of AVEVA Group plc
on 1 March 2001. Before joining AVEVA, Paul trained
within the accountancy profession before moving toPhilips Telecommunications (UK) where he was
responsible for the management accounts of its
Public Sectors division. Paul was a recipient of the
FTSE250 Finance Director of the Year award and isalso a Non-executive Director of Anite plc, Escher
Group Holdings plc, Digital Barriers plc and KBC
Advanced Technologies plc.

GovernancePeter Harverson

Ubisense Group Plc Annual Report 201320

Directors’ report

The Directors present their annual reporton the affairs of the Group together with theaudited financial statements for the year to
31 December 2013.

Incorporation and constitution
Ubisense Group Plc is domiciled in Englandand incorporated in England and Wales undercompany 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 shareof 2p each which carries no right to fixed income.
Each share carries 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, canbe found in note 21 of the consolidated
financial statements.

Directors
The Directors, who served throughout the year
except as noted, were as follows:
G M Campbell (resigned 10 February 2014)
R T GreenP G Harverson
Prof A Hopper
J K Lomas
R G Newell
R SansomP Taylor

Board changes
In February 2014, after ten years at Ubisense,
Gordon Campbell, Chief Financial Officer, notified
the Board of his intention to step down from hisrole. Gordon Campbell has made a significant
contribution to the growth and development of
the Group, including listing on AIM, and this willcontinue in a new role responsible for mergers
and acquisitions and post-acquisition integration.
On 10 February 2014, Robert Parker was
appointed as CFO of Ubisense Group Plc.
Robert Parker joins Ubisense from Optitune plc
where he had been CFO since 2012. RobertParker brings extensive experience in boththe strategic development and operational
management of high growth, multiculturalbusinesses. He has a proven track recordof driving organic growth, executing M&A
and raising finance in both the private andpublic markets.

Directors’ interests – shares
Directors’ interests in the ordinary sharesof Ubisense Group Plc, at 31 December 2013
and 31 December 2012 are set out below:
There has been no change in the interests
set out below between 31 December 2013
and 24 March 2014.
Paul Taylor and Robert Parker hold no sharesas at 24 March 2014.

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

Directors’ indemnity
arrangements
The Group has made qualifying third-party
indemnity provisions for the benefit of its
Directors which were made during the year
and remain in force at the date of this report.
The Group has purchased and maintained
throughout the year Directors’ & officers’
liability insurance in respect of itself andits Directors.

Corporate governance
The Company’s statement on corporate
governance can be found in the Corporate
Governance Report on pages 22 to 24 of thesefinancial statements. The Corporate Governance
Report forms part of the Directors’ Report andis incorporated into it by cross-reference.

Post balance sheet events
There are no significant events since thebalance sheet date.

Dividends
The Directors do not recommend paymentof a dividend for the year (2012: £nil).

Auditors
A resolution to re-appoint Grant Thornton UK LLP
as the Group’s auditors will be proposed at theforthcoming Annual General Meeting.
In accordance with normal practice, theDirectors will be authorised to determine
the auditors’ remuneration.

R G Parker was appointed on 10 February 2014.

Substantial shareholdings
On 24 March 2014, the Company had been notified of the following significant interests in its ordinary share capital:
Total holding
Number% of issued
share capital

Robert Sansom

2,493,676

10.80%

Richard Green

1,619,289

7.02%

FIL Investment International

1,344,322

5.82%

NFU Mutual Investment Managers

1,155,000

5.00%David Theriault

807,000

3.50%

Threadneedle Investments

805,939

3.49%

BlackRock Investment Management

793,495

3.44%

Unicorn Asset Management

786,800

3.41%

Ruffer LLP

729,115

3.16%

Amati Global Investors

715,691

3.10%

Ubisense Group Plc Annual Report 2013

Annual General Meeting
The Annual General Meeting of the Company is
due to take place at the offices of FTI Consulting,
200 Aldersgate, Aldersgate Street, London
EC1A 4HD on 15 May 2014 at 1.00pm.
The resolutions to be proposed at the AGM
are explained in detail below and are set out
in full in the notice of Annual General Meeting
which is set out on pages 64 to 68 of thisdocument. Resolutions 1, 2, 3, 4, 5 and 6 arebeing proposed as ordinary resolutions (andtherefore need the approval of a simple majorityof those shareholders who are present andvoting in person or by proxy at the AGM) and
resolution 7 is being proposed as a special
resolution (and therefore needs the approvalof at least 75% of those shareholders whoare present and voting in person or by proxyat the AGM).

Resolution 1 deals with the adoption of theannual accounts for the financial year ended
31 December 2013.

Re-election of directors(resolutions 2, 3 and 4)
The Company’s Articles of Association
require that one-third (or the nearest number notexceeding one-third) of the Board retire and seek
re-election at each Annual General Meeting.
At this meeting, Keith Lomas and
Dr Robert Sansom will retire and stand for
re-election as Directors. Having considered
the performance of and contribution madeby Keith Lomas and Robert Sansom, theBoard remains satisfied that their performancecontinues to be effective and that they
demonstrate commitment to the role and,as such, recommends their re-election.

Gordon Campbell
Richard GreenIn addition, the Company’s Articles of
Association require any Director who has
been appointed to the Board since the dateof the Company’s last Annual General Meeting,to retire from office and seek re-election at theAGM. Accordingly, Robert Parker, who was
appointed to the Board on 10 February 2014,
will retire and stand for re-election as a Director
at the AGM.

Re-appointment and remunerationof auditors (resolution 5)
Resolution 5 proposes the re-appointmentof Grant Thornton UK LLP as auditors of theCompany and authorises the Directors to set
the auditors’ remuneration.

Authority to issue new ordinary
shares (resolutions 6 and 7)
The Company is seeking a general shareholder
authority to authorise the Directors to allot andissue shares and/or grant rights to subscribe foror to convert any security into shares up to an
aggregate nominal value of £166,791 (being thenominal value of approximately one-third of thecurrent issued share capital of the Company).
The Company is also seeking a limited
authority to generally disapply pre-emption
rights in relation to an issue of shares for cash.
This limited authority is only being sought inrespect of up to an aggregate nominal value of£75,055 (being the nominal value of approximately
15% of the current issued share capital of theCompany). Accordingly, the Directors will only
be able to issue this smaller amount (and not
the full amount referred to in the paragraphabove) for cash unless, at the time of any issue
of a larger amount, the Company’s then existing
Shareholders are also given the opportunity toparticipate in such larger issue (subject to certain
limited exclusions), pro rata to their respective
holdings of ordinary shares.

It is considered prudent and is widely accepted
practice amongst quoted companies to maintaingeneral authorities such as these so as to enable
the Directors to take advantage of opportunities
to develop the Company’s business.
Resolutions 6 and 7 also ensure that the
Directors maintain sufficient authority to issue
ordinary shares on the exercise of options
that were granted by the Company prior to
the Company’s admission to trading on AIMof the London Stock Exchange.
Resolution 6 provides for the general authority
to allot and issue shares under Section 551
of the Companies Act 2006 and resolution 7
provides for the dis-application of thepre-emption provisions of Section 570
of the Companies Act 2006.
Approved by the Board of Directors and signed
on behalf of the Board
Governance

Presentation of the Company’s
annual accounts (resolution 1)

21

Gordon Campbell
Company Secretary
24 March 2014
Ubisense Group Plc
Registered number: 05589712

2013
Number

2012
Number

87,987

87,987

1,619,289

1,543,011

Peter Harverson

65,161

65,161

Andrew Hopper

225,000

225,000

J Keith Lomas

47,71247,712

Richard Newell643,354643,354

Robert Sansom

2,493,676

2,493,676

Total

5,182,179

5,105,901

Ubisense Group Plc Annual Report 201322

Corporate governance report

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

Non-executive Director is independent. Therefore,
after detailed consideration, the Board has
determined that Mr Taylor is the only independentNon-executive Director within the meaningof the Code.

The Directors believe that effective corporate
governance, appropriate to the Group considering
its size and stage of development, will assist in thedelivery of corporate strategy, the generationof shareholder value and the safeguarding ofshareholders’ long-term interests. We do notcomply with the UK Corporate Governance
Code June 2012 (“the Code”). However, theDirectors are committed, wherever it isreasonably practicable, to ensure that theGroup is managed in accordance with theprinciples set out in the Code.

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 theChief 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.

Composition of the Board
The Board comprises the Non-executive
Chairman, five Non-executive Directors andtwo Executive Directors. Biographical detailsof all members of the Board are set out on
pages 18 and 19.
Since the flotation of the Company in 2011, noequity-based incentives have been granted toNon-executive Directors and there are no suchplans for any such grants in the future. At theend of the year, the only Non-executive Director
with neither shares nor share options is Mr Taylor.
The holding of shares and share options by
Non-executive Directors could, amongst otherthings, be relevant in determining whether a

The role of the Board
The Board holds full meetings at least ten
times per year, with attendance required inperson whenever possible. The principal
matters that it considers are as follows:»»reviewing operating andfinancial performance;»»ensuring that appropriate management

development and succession plans arein 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 andenvironmental performance of the Company;»»approving corporate acquisitions, mergers,
divestments, joint ventures and major
capital expenditure; and»»receiving, reviewing and approving

recommendations by the designatedcommittee on matters related to audit,
nominations and remuneration.

The Board is supplied with information in atimely manner and in a form and of a quality
appropriate to enable it to discharge 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 notrefer for approval. This policy also requires that
all recommendations and decisions by a Board
Committee are approved or ratified by the Board.

Board committees
The Board has established three committees:
the Audit Committee, the Nomination Committee
and the Remuneration Committee.

Summary of Board meeting attendance in 2013
The Board is expected to meet regularly on a formal basis ten times a year. 20 Board meetings were held in 2013. Attendance at the meetings was
as follows:
Scheduledmeetings

Additional
meetings

Total meetings
attendedGordon Campbell

10 (11)8 (9)18 (20)Richard Green

11 (11)9 (9)20 (20)Peter Harverson

11 (11)9 (9)20 (20)Andrew Hopper

11 (11)7 (9)18 (20)J Keith Lomas

10 (11)8 (9)18 (20)Richard Newell

10 (11)7 (9)17 (20)Robert Sansom

8 (11)8 (9)

16 (20)Paul Taylor

10 (11)7 (9)17 (20)Figures in brackets denote the maximum number of meetings that could have been attended.

Ubisense Group Plc Annual Report 201323

Summary of committee membership
Audit
Committee

Nomination
Committee

Remuneration
Committee

Peter Harverson

—

Yes

Chair

Andrew Hopper

Observer

Yes

ObserverJ Keith Lomas

Yes

Observer

Yes

Richard Newell

Yes

Yes

—

Robert Sansom

—

Chair

Yes

Chair

Observer

Yes

ObserverObserverObserver—Observer—

Audit
Committee

Nomination
Committee

Remuneration
Committee

Peter Harverson

—

2 (2)

4 (4)

Andrew Hopper

1 (3)

2 (2)

1 (4)

J Keith Lomas

3 (3)

2 (2)

4 (4)

Richard Newell

3 (3)

2 (2)

—

Robert Sansom

—

2 (2)

4 (4)

Paul Taylor

3 (3)

2 (2)

3 (4)

Gordon Campbell

3 (3)

1 (2)

3 (4)

Richard Green

—

2 (2)

—

Paul Taylor
Gordon Campbell
Richard Green

Summary of committee meeting attendance

The role of each Committee is described in more detail on page 24.

Governance

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

Ubisense Group Plc Annual Report 201324

Corporate governance report continued

Audit Committee»» identifying and nominating suitable candidates

The Audit Committee has responsibility for thefollowing matters:»»reviewing succession planning for both»»reviewing the accounts and the key

judgements and policies underlying themin relation to the interim and annual financial
statements before they are submitted to theBoard for final approval;»»reviewing management’s reports on
internal controls;»»reviewing the Group’s risk management
process, including the adequacy of
insurance cover;to fill vacancies on the Board; andDirectors and the management team.

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

Remuneration Committee
The Remuneration Committee has
responsibility for the following matters:»»setting the basic pay of Executive Directors
and the remuneration of the Chairman;»»reviewing the appointment of the external»»operating the performance related bonus»»monitoring the audit and non-audit work»»agreeing the allocation and term for theauditors together with the audit fee;of the external auditors, including reviewing
any management letters and the Company’s
response; and»»reviewing the arrangements by which staff
may, in confidence, raise concerns about
possible improprieties.

As part of its procedures, the Committee
discusses the interim and annual financial
statements with the external auditors. Whenappropriate, non-Committee members areinvited to attend. During the period underreview, the Committee has met three times
on a formal basis excluding meetings of the
Chairman with external advisors. The Committee
is expected to meet formally four times a year.

Nomination Committee
The Nomination Committee has responsibility
for the following matters:»»reviewing the size and compositionof the Board;plan for the Executive Directors;

granting of share-based incentives to
Executive Directors; and»»overseeing the overall annual staff pay review
and the operation of the equity-based
incentive schemes.

The Group has a formal and transparent
procedure for developing policy on Directors’
remuneration. No Director is involved indeciding his own remuneration.
The Committee aims to set levels of
remuneration for Executive Directors thatare sufficient to attract, retain and motivate
directors of the quality required, without paying
more than necessary, and that are appropriate
for the size and 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, theCommittee has met four times on a formal
basis. The Committee is expected to meetformally twice a year.

Internal control
The Board of Directors has overall responsibility
for the Group’s system of internal control and forreviewing its effectiveness. The risk managing
process and systems of internal control aredesigned to manage rather than eliminate therisk of failure to achieve the Company’s objectives.
It should be recognised that such systems
can only provide reasonable but not absoluteassurance against material misstatement or loss.
The Directors acknowledge their responsibilities
for the Group’s system of internal control andfor reviewing its effectiveness. The principalfeatures of the system of internal financial
controls are:»»budgetary control over all operations,
measuring performance against
pre-determined targets on at least
a monthly basis;»»regular forecasting and reviews covering
trading performance, assets, liabilities,
cash flows and bank covenants;»»delegated limits of authority covering key
financial commitments including capital
expenditure and recruitment; and»»identification and management of key
business risks.

The Board continually reviews theeffectiveness of other internal controls,
including financial, operational, compliance
controls and risk management.

Ubisense Group Plc Annual Report 201325

Statement of Directors’ responsibilities

The Directors are responsible for preparing
the Directors’ Report, the Strategic Report
and the financial statements in accordancewith applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors are required toprepare the consolidated financial statements inaccordance with International Financial ReportingStandards (IFRSs) as adopted by the European
Union and have elected to prepare the parent
company financial statements in accordancewith 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 theygive a true and fair view of the state of affairs
and profit or loss of the Company and Groupfor that period. In preparing these financial
statements, the Directors are required to:apply them consistently;»»make judgements and estimates that arereasonable and prudent;

followed, subject to any material departures
disclosed and explained in the consolidated
financial statements;»»state whether applicable UK AccountingStandards have been followed, subject
to any material departures disclosed
and explained in the Company financial
statements; and»»prepare the financial statements on the going
concern basis unless it is inappropriate topresume 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
and enable them to ensure that the financial
statements comply with the Companies Act 2006.
They are also responsible for safeguarding theassets of the Company and hence for taking
reasonable steps for the prevention anddetection of fraud and other irregularities.

The Directors confirm that:»»so far as each Director is aware, there is

no relevant audit information of which theCompany’s auditors are unaware; and»»the Directors have taken all steps that theyought to have taken as Directors to makethemselves aware of any relevant audit
information and to establish that the 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 preparationand dissemination of financial statements may
differ from legislation in other jurisdictions.

Governance»»select suitable accounting policies and then»»state whether applicable IFRSs have been

Ubisense Group Plc Annual Report 201326

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 2013 which comprise the consolidated
income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statementof financial position, the consolidated statement of cash flows and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s reportand for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company andthe Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 25, the Directors are responsible for the preparation of theGroup 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 Groupfinancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

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

Opinion on financial statements
In our opinion, the Group financial statements:»»give a true and fair view of the state of the Group’s affairs as at 31 December 2013 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 the Group financial
statements are prepared is consistent with the Group financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where under the Companies Act 2006 requires us to report to you if, in our opinion:»»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 2013.

Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
24 March 2014

Ubisense Group Plc Annual Report 201327

Consolidated income statement
for the year ended 31 December 2013

Notes

2012
£’000

27,002

24,292(17,761)(14,690)

9,241

9,602

Operating expenses(10,867)(10,368)

Operating loss

(1,626)(766)

Gross profit

9,241

9,602

Other operating expenses(8,100)(8,445)Adjusted EBITDA

1,141

1,157

Depreciation

(266)

(227)

Revenue

5

2013
£’000

Cost of revenues
Gross profit

Analysed as:

Amortisation of acquired intangible assets

13

Amortisation of other intangible assets

(313)

(257)

(1,332)(953)

Share-based payments charge

21.2

(92)

(63)

Exceptional items

9.2

(764)

(423)

(1,626)(766)

Operating loss
8

10

38

8

(103)

—

Loss before tax

9(1,719)

(728)

10.1

(219)

90

(1,938)(638)(1,968)

(638)

30

—

(1,938)(638)

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

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

11

(8.9p)(2.8p)

Diluted11(8.9p)(2.8p)The notes on pages 33 to 59 are an integral part of these consolidated financial statements.

Financial statements

Finance income
Finance costs

Ubisense Group Plc Annual Report 201328

Consolidated statement of comprehensive income
for the year ended 31 December 2013

Loss for the year

2013
£’000

2012
£’000

(1,938)

(638)

(203)

33

(2,141)(605)(2,141)

(605)

—

—

(2,141)(605)

Other comprehensive income:Items that may be reclassified subsequently to profit and loss
Exchange difference on retranslation of net assets and results of overseas subsidiaries
Total comprehensive loss for the year
Attributable to:– Equity shareholders of the Company– Non-controlling interest
Total comprehensive loss for the year
The notes on pages 33 to 59 are an integral part of these consolidated financial statements.

Ubisense Group Plc Annual Report 201329

Consolidated statement of changes in equity
for the year ended 31 December 2013

Attributable to equity shareholders of the parent company

Subtotal£’000

Noncontrollinginterest
£’000

Total
£’000

(3,736)

19,238—19,238

—

(638)

(638)

—

(638)

—

33

—

33

—

33

—

—

33

(638)

(605)

—

(605)

—

—

63

—

63

—

63

Issue of new share capital

5

—

—

—

5

—

5

Premium on new share capital

—

220

—

—

220

—

220

Transactions with owners

5

220

63

—

288

—

288

Balance at 31 December 2012

438

22,251606(4,374)18,921—

18,921

Loss for the year

—

—

—

(1,968)(1,968)30(1,938)Exchange difference on retranslation of net assets
and results of overseas subsidiaries

—

—

(173)

—

(173)

(30)

(203)

Share
capital
£’000

Share
premium
£’000

Other
reserves£’000

Retainedearnings£’000

Balance at 1 January 2012

433

22,031

510

Loss for the year——

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

Total comprehensive loss for the year
Reserve credit for equity-settled share-based payment

—

—

(173)

(1,968)(2,141)—(2,141)

—

—

92

—

92

—

92

Non-controlling interest in new subsidiary

—

—

—

—

—

704

704

Issue of new share capital

23

—

—

—

23

—

23

Premium on new share capital

—

1,799

—

—

1,799

—

1,799

Transactions with owners

23

1,799

92

—

1,914

704

2,618

Balance at 31 December 2013

461

24,050525(6,342)

18,694704

19,398The notes on pages 33 to 59 are an integral part of these consolidated financial statements.
A reconciliation of the components of other reserves is given in note 22.

Financial statements

Total comprehensive loss for the year
Reserve credit for equity-settled share-based payment

Ubisense Group Plc Annual Report 201330

Consolidated statement of financial position
as at 31 December 2013

Notes

2013
£’000

2012
£’000

Intangible assets

12

15,962

10,319Property, plant and equipment

13

628

621

16,59010,940AssetsNon-current assets

Total non-current assets
Current assets
Inventories

14

3,106

862

Trade and other receivables

15

11,547

10,302

Cash and cash equivalents

16

3,964

2,716

Total current assets

18,617

13,880Total assets

35,207

24,820(10,023)(5,246)(10,023)(5,246)

Liabilities
Current liabilities
Trade and other payables

17

Total current liabilities
Non-current liabilities
Deferred income tax liabilities

10(1,856)(653)

Bank loans

18(3,500)—19, 25(430)—

Total non-current liabilities(5,786)(653)

Total liabilities(15,809)(5,899)Net assets

19,39818,921Other payables

Ubisense Group Plc Annual Report 2013

31

Notes

2013
£’000

2012
£’000

Ordinary share capital

20

461

438

Share premium

20

24,05022,251Other reserves

22

525

606

Retained earnings(6,342)(4,374)Equity attributable to shareholders of the Company

18,69418,921704—

19,39818,921Equity attributable to owners of the parent company

Non-controlling interests
Total equity
The notes on pages 33 to 59 are an integral part of these consolidated financial statements.
The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:

Richard Green			Chief Executive Officer		
Ubisense Group Plc

Robert Parker
Chief Financial Officer

Registered Number: 05589712

Financial statements

Ubisense Group Plc Annual Report 201332

Consolidated statement of cash flows
for the year ended 31 December 2013

Notes

Loss before tax

2013
£’000

2012
£’000

(1,719)(728)

Adjustments for:
Depreciation

9, 13

266

227

Amortisation

9, 12

1,645

1,210

Loss on the disposal of property, plant and equipment

9

—

5

6.2, 21.2

92

63

Finance income

8

(10)

(38)

Finance costs

8

103

—

Operating cash flows before working capital movement

377

739

Change in inventories

(639)

805

Change in receivables

242

(839)

Change in payables(727)(1,691)

Cash used in operations before tax

(747)

(986)

Net income taxes (paid)/received

(7)

203

(754)

(783)

1,846

(400)

(140)

(492)

Share-based payments charge

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

25

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

1(3,085)(1,849)10

38(1,369)(2,702)

Cash flows from financing activities
3,500

—

Interest paid

Proceeds of borrowings

(92)

—

Proceeds from the issue of ordinary share capital

111

225

Net cash flows from financing activities

3,519

225

Net increase/(decrease) in cash and cash equivalents

1,396(3,260)Cash and cash equivalents at start of period

2,716

6,034

Exchange differences on cash and cash equivalents

(148)

(58)

3,964

2,716

Cash and cash equivalents at end of period
The notes on pages 33 to 59 are an integral part of these consolidated financial statements.

16

Ubisense Group Plc Annual Report 201333

Notes to the consolidated financial statements
for the year ended 31 December 2013

1 General information
Ubisense Group Plc (“the Company”) and its subsidiaries (together, “the Group”) deliver mission-critical location-based smart technology whichenables companies to optimise their business processes.
The Company is a public limited company which is listed on the 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 2013, was 246.0p per
share (31 December 2012: 230.0p).
The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to Ubisense Group Plc on 31 May 2011ahead 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, US, Canada, France, Germany, Japan, South Korea, Singapore and the Philippines and sells mainly
in North America, Europe and Asia. The Group legally consists of twelve companies headed by Ubisense Group Plc (UK). A full list of subsidiaries
is given in note 24 of the financial statements.
These consolidated financial statements have been approved for issue by the Board of Directors on 24 March 2014.

2 New accounting standards
For the purposes of the preparation of these consolidated financial statements, the Group has applied all standards and interpretations that are
effective for accounting periods beginning on or after 1 January 2013.
During 2013, the Group has applied several new revised and amended standards and interpretations which became effective in the year:
IFRS 13 “Fair Value Measurement”, the Annual Improvements to IFRS and IAS 1 (amended) “Presentation of Items of Other Comprehensive
Income”. The Group has early adopted “Recoverable Amount Disclosures for Non-Financial Assets” (Amendments to IAS 36). Their adoption has
not had a material impact on the disclosures and amounts reported. Otherwise the accounting policies used are the same as set out in detail in thereport and accounts 2012 and have been applied consistently to all periods presented in these financial statements. No new standards, amendments
or interpretations to existing standards that have been published and that are mandatory for the Group’s accounting periods beginning on or after
1 January 2014, or later periods, have been adopted early. The Directors do not consider that the adoption of these standards and interpretations
would have a material impact on the Group’s financial statements.

Standards and interpretations not yet applied by the GroupThe following new standards and interpretations, which are yet to become mandatory, have not been applied in the Group’s financial statements.

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 the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements are presented
in Sterling and all values are rounded to the nearest thousand Pounds (£’000) except when otherwise indicated.
The preparation of these financial statements in conformity with IFRS requires the Directors to make certain critical accounting estimates and judgementsthat 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 Group meets it day-to-day working capital requirements through its bank facilities. The Group had cash of £4.0 million at the balance sheet datealong with £1.5 million undrawn on its bank facility as well as an order book equivalent to 66% of annual revenue. In this context, the Group’s forecasts
and projections, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectationthat the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of not less thantwelve months from the date of this report. The Group, therefore, continues to adopt the going concern basis in preparing its financial statements.

Financial statements»»IFRS 10 “Consolidated Financial Statements” (effective date financial year commencing on/after 1 January 2014).
»»IAS 27 (revised) “Separate Financial Statements” (effective date financial year commencing on/after 1 January 2014).
»»Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities” (effective date financial year commencing on/after 1 January 2014).
»»Amendments to IFRS 10 “Transition Guide” (effective date financial year commencing on/after 1 January 2014).
»» Amendments to IAS 36 “Recoverable Amount Disclosures for Non-Financial Assets” (effective date financial year commencing on/after 1 January 2014).

Ubisense Group Plc Annual Report 201334

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

3 Summary of significant accounting policies continued
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 so as to obtain benefits from its activities.
Coterminous 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 andother events and similar 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 business combination 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 Sterling, which is the Company’s functional and presentation currency.

(b) Transactions and balances
Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates oftransactions. 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 are translated using the exchange rates as at the dates of the initial transactions.

(c) Consolidation
For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of which have thecurrency of a hyperinflationary economy) that have a functional currency other than Sterling are translated into Sterling as follows:»»assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date;»»income and expenses for each income statement are translated at the exchange rate ruling at the time of each period the transaction occurred; 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 the same basis as that used forinternal management reporting purposes.
The Group is organised on a global basis as a single Real-Time Location Intelligence (RTLI) business. This is the basis of the Group’s externalmarket offering and internal organisational and management structure and is the primary way in which the Chief Executive Officer, who is theChief Operating Decision Maker, receives financial information to assess Group performance. As a result, the Group has therefore determined that it
has only one reportable segment as defined by IFRS 8.
The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “Adjusted EBITDA” as the primary measureof profit and this is reported on the face of the income statement.
In addition, the Board and Management Team consider the business to have two revenue streams with different characteristics, Solutions and Services,which are generated from the same asset and cost base.

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

Ubisense Group Plc Annual Report 201335

3 Summary of significant accounting policies continued
Revenue recognition continued
Revenue from fixed price, long-term customer specific contracts, including customisation and modification, is recognised on the stage of completionof each assignment at the period end date compared to the total estimated service to be provided over the entire contract where the outcome canbe estimated reliably. If a contract outcome cannot be estimated reliably, revenues are recognised equal to costs incurred, to the extent that costs
are expected to be recovered. An expected loss on a contract is recognised immediately in the income statement.
Where bundled sales including a combination of some or all of the above are made, the revenue attributable to the deal is apportioned across theconstituents 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 the contributions payable in the period.
Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the statementof financial position.

(b) Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value atthe date of grant using the Black-Scholes pricing model. The fair value is expensed on a straight-line basis over the vesting period, together with acorresponding increase in equity, 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 aformal 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 madean offer of voluntary redundancy, it is probable the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits arepayable more than twelve months after the reporting date, then they are discounted to their present value.

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

(b) Lease incentives
The benefit of lease incentives such as rent-free periods or up-front cash payments are spread equally on a straight-line basis over the lease term.
Exceptional 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 non-recurring items of income or expense that have been shown separately due to the significance of theirnature or amount.

Interest income and expense
Interest income and expense is included in the income statement on a time basis, using the effective interest method by reference to theprincipal 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 to tax authorities in respect of the Group’s taxable profits and is based on aninterpretation of existing tax laws. Taxable profit differs from profit before tax as reported in the income statement because it excludes certain items
of income and expense that are taxable or deductible in other years or are never taxable or deductible.

(b) Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amountsof assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward
as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. However, deferred tax is not provided on theinitial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects
tax or accounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible
temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting,at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the reporting date.
Deferred tax is recognised as a component of tax expense in the income statement, except where it relates to items charged or credited directly toother comprehensive income or equity when it is recognised in other comprehensive income or equity.

Financial statements

Exceptional items

Ubisense Group Plc Annual Report 201336

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

3 Summary of significant accounting policies continued
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiaryis the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controllinginterest’s proportionate share of the recognised amounts of 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 acquireeis 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 valueof the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change
to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted
for within equity.
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
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the 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 on new or substantially improved products and processes. Development expenditureis only capitalised if all of the following conditions are met:»»completion of the intangible asset is technically feasible so that it will be available for use or sale;»»the Group intends to complete the intangible asset and use or sell it;»»the Group has the ability to use or sell the intangible asset;»»the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from theintangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;»»there are adequate technical, financial and other resources to complete the development and to use or sell the intangible 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 life of current development projects is three years.
Upon completion the assets are subject to impairment testing.
Where no internally generated intangible asset can be recognised, development expenditure is recognised as an 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 typically three to five years.
Intangible assets acquired through a business combination are initially measured at fair value and amortised on a straight-line basis over their useful
economic lives. Amortisation is shown within operating expenses in the income statement. The useful economic lives of the intangible assets recognisedon acquisition are as follows:»»Software products recognised on acquisition: three years»»Customer relationships recognised on acquisition: five to ten years»»Order backlog: based on contract life recognised on acquisition, typically less than one year

Ubisense Group Plc Annual Report 201337

3 Summary of significant accounting policies continued
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged tothe 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: five to eight years, or period of the lease if shorter»»Computer equipment: three years»»Demonstration equipment: one year
Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset is determined as thedifference between the sales proceeds and the carrying amount of the asset and is recognised 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
annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicatethat 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 amountis 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). Non-financial assets other than goodwill that suffered an impairment
are reviewed for possible reversal of the impairment at each reporting date.

Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first out basis. Net realisablevalue is based on estimated selling price less additional cost to completion and disposal. Provision is made for obsolete, slow moving or defective
items where appropriate and are recognised as an expense in the period in which the write down or loss occurs.

Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course of business. If collection is expected
in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,less provision for impairment.

Cash and cash equivalents

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

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost;
any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over theperiod of the borrowings using the effective interest method.
Fees paid on the establishment of debt facilities are recognised as transaction costs of the debt to the extent that it is probable that 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 thatsome 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 are shown in equity as a deduction,
net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and the amounts paid over the nominal value in respectof share issues, net of related costs, is classified as share premium.

Financial statements

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.

Ubisense Group Plc Annual Report 201338

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

4 Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future. Actual results may differ from these estimates. The estimates andassumptions 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. This requires an estimation of the value in use of the cash-generating units to which the goodwill isallocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also
to choose a suitable discount rate in order to calculate the present value of those cash flows. The Group uses pre-tax discount rates of between 10.0%
and 14.5% for this purpose. The carrying amount of goodwill at 31 December 2013 is £9,116,000. Further consideration of the impairment of goodwill
is included in note 12.

Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s judgement of the point at which
technical and commercial feasibility is demonstrable. The carrying amount of capitalised development costs at 31 December 2013 is £3.9 million.

Revenue recognition
Significant management judgement is applied in determining the allocation and timing of the recognition of revenue on 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 amount of amounts recoverable on contracts at 31 December 2013 is £3.3 million.

Inventories
The provision for obsolete, slow moving or defective inventory is based on management’s estimation of the commercial life of inventory lines and isapplied on a prudent basis. In assessing this, management takes into consideration the sales history or products and the length of time that they havebeen available for resale.

Deferred tax
A deferred tax asset is recognised where the Group considers it probable that future tax profits will be available against which the tax credit will
be utilised in the future. This specifically applies to tax losses and to outstanding vested share options at the statement of financial position date.
In estimating the amount of the deferred tax asset that should be recognised, the Directors make judgements based on current budgets andforecasts about the amount of future taxable 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 acquired companies based on the businessmodel produced at the time of acquisition. Earn-out clauses within acquisition agreements typically contain provisions for amounts payable to theformer shareholders based on future financial performance. In order to calculate the expected future payments, the acquisition business model
contains estimates of the future financial performance for the acquired business.
The post-acquisition performance and expected future performance of acquired companies is reviewed throughout the year. Any adjustments required
to contingent consideration arising from a significant departure of financial performance from the original acquisition plan are made as required.
The Directors do not consider that there are any other critical accounting judgements or key sources of estimation uncertainty.

5 Segment information
IFRS 8 requires a “management approach” under which information in the financial statements is presented on the same basis as that used for internalmanagement reporting purposes. As announced in September 2013, the Group is now organised on a global basis as a single Real-Time Location
Intelligence (RTLI) business. This is the basis of the Group’s external market offering and internal organisational and management structure and is
the primary way in which the Chief Executive Officer, who is the Chief Operating Decision Maker, receives financial information to assess Group
performance. As a result, the Group has therefore determined that it has only one reportable segment as defined by IFRS 8. The prior year
disclosures have been restated to reflect these changes.
The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “Adjusted EBITDA” as the primary measureof profit and this is reported on the face of the income statement.
In addition, the Board and Management Team consider the business to have two revenue streams with different characteristics, Solutions and Services,which are generated from the same asset and cost base.

Ubisense Group Plc Annual Report 201339

5 Segment information continued
5.1 Revenue by nature
2013
£’000

2012
£’000

Solutions

13,375

12,537

Services

13,627

11,755

Total revenues

27,002

24,292

In addition 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.

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

Non-current assets

2013
£’000

2012
£’000

2013
£’000

2012
£’000

539

1,441

4,239

2,576

Europe12,478

10,533294

239

Americas11,988

9,585

477

675

Asia Pacific

1,997

2,733

2,464

—

27,002

24,292

7,474

3,490

Revenues from external customers in the Group’s domicile, the UK, as well as its major markets, Europe, Americas and Asia Pacific, have been
identified on the basis of the customer’s geographical location. Non-current assets are allocated based on their physical location.

5.3 Information about major customers
During 2013, revenues of £6.0 million (2012: £2.6 million) derived from one European customer and revenues of £1.1 million (2012: £2.6 million)
from one Americas customer. There were no other customers in 2013 or 2012 who contributed in excess 10% of revenue.

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 asat 31 December

By activity

2013
Number

2012
NumberAverage monthly numberof people
2013
Number

2012
NumberTechnical consultants

130

93

97

96

Sales and marketing

40

32

34

37

Research and development

40

32

35

31

Administration

29

18

20

20

239

175

186

184

Financial statements

6 Employee information

Ubisense Group Plc Annual Report 201340

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

6 Employee information continued
6.1 Employee numbers continued
Actual number of people asat 31 December

By geography

United Kingdom

Average monthly numberof people

2013
Number

2012
Number

2013
Number

2012
Number

53

48

51

51

Europe

54

55

56

58

Americas

72

68

71

71

Asia Pacific

60

4

8

4

239

175

186

184

Notes

2013
£’000

2012
£’000

Wages and salaries

13,152

12,286Social security costs

1,346

1,265

626

562

92

63

15,216

14,176

6.2 Employee benefits

Contributions to defined contribution pension arrangements
Share-based payments
Total aggregate employee benefits

21.2

Included in the above are termination benefits of £nil (2012: £404,000) which are presented as reorganisation costs in the income statement – seenote 9.2.

6.3 Key management compensation
Key management includes Directors (Executive and Non-executive) and members of the Global Management Team. During the year, there were
twelve key management personnel (2012: 13). The compensation paid or payable to key management for employee services is shown below:
2013
£’000

2012
£’000

Wages and salaries

998

879

Social security costs

151

84

Other benefits

28

21

1,177

984

49

52

Equity-settled share-based payments

37

24

Total key management compensation

1,263

1,060

Short-term employee benefits

Post-employment benefits
Contributions to defined contribution pension arrangements
Share-based payments

Ubisense Group Plc Annual Report 201341

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

Performance
payments£’000

Benefits
in kind£’000

Subtotal£’000

Employer’s
contributions
to defined
contribution
pensionarrangements£’000

Gordon Campbell*

93

56

2

151

18

169

124

Richard Green*

132

116

3

251

16

267

201

Peter Harverson

15

—

—

15

—

15

15

Andrew Hopper

25

—

—

25

—

25

25

J Keith Lomas

15

—

—

15

—

15

15

Richard Newell

15

—

—

15

—

15

15

Robert Sansom**

—

—

—

—

—

—

—

Paul Taylor

15

—

—

15

—

15

15

Total

310

172

5

487

34

521

410

Director

Total
2013
£’000

Total
2012
£’000

*	The Directors are remunerated through the Company’s flexible benefits scheme under which they can elect to switch basic salary into pension contributions
and other benefits. The basic salary entitlement in the year was: Richard Green £140,000; Gordon Campbell £105,000.
** Robert Sansom has waived his entitlement to annual remuneration in the year of £15,000.

7.2 Directors’ interests – share options

Director

Award
date
Year

Vests
Years

ExpiresYear

Exercise
price£Awardsoutstandingat 1 January
2013
NumberGordon Campbell

2010

2011–13

2020

0.140

120,500

Peter Harverson

Exercisedduringthe year
NumberLapsedduringthe year
NumberAwardsoutstanding at
31 December
2013
NumberAwardsexercisable at
31 December
2013
Number———120,500

120,5002011

2012–14

2021

1.050

32,500———32,50021,6672012

2013–15

2022

2.125

40,000———40,00013,3332013

2014–16

2023

2.055

—

40,000——40,000—193,000

40,000——233,000

155,500

0.140

76,278—(76,278)

—

—

—

2010

2011–13

2020

2011

2012–14

2021

1.050

100,000———

100,000

66,6672012

2013–15

2022

2.125

60,000———60,00020,0002013

2014–16

2023

2.055

—

60,000——60,000—236,278

60,000(76,278)—

220,000

86,6670.140

91,333———

91,333

91,3332010

2011–132020

Andrew Hopper

2010

2011–13

2020

0.140

20,278———20,27820,278Richard Newell2010

2011–13

2020

0.140

1,056

—

—

—

1,056

1,056

541,945

100,000(76,278)—565,667

354,834

Total

The 2013 grants vest subject to meeting performance criteria set out in the long-term incentive plan (LTIP). No other Directors have been granted shareoptions in the Company or other Group entities. None of the terms and conditions of the share options were varied during the year. All options were granted in
respect of qualifying services. There have been no options granted to or exercised by Directors between 31 December 2013 and 24 March 2014.
The market price of the Company’s shares at the end of the financial year was £2.46. The range of market prices during the year was between£1.82 and £2.50.

Financial statements

Richard Green

Grantedduringthe year
NumberUbisense Group Plc Annual Report 201342

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

7 Directors’ remuneration and interests continued
7.2 Directors’ interests – share options continued
Directors’ gains on share options
Gain onexercise
2013
£’000

Gain onexercise
2012
£’000

155

—

2013
Number

2012
Number

87,987

87,987

Richard Green

1,619,289

1,543,011

Peter Harverson

65,161

65,161

Andrew Hopper

225,000

225,000

J Keith Lomas

47,71247,712

Richard Green

7.3 Directors’ interests – shares
Directors’ interests in the ordinary shares of Ubisense Group Plc, at 31 December 2013 and 31 December 2012, were as follows:

Gordon Campbell

Richard Newell643,354643,354

Robert Sansom

2,493,676

2,493,676

5,182,179

5,105,901

2013
£’000

2012
£’000

Interest income from cash and cash equivalents

10

38

Finance income

1038Interest payable – bank

(103)

—

Finance costs

(103)

—

Net finance (costs)/income

(93)

38

There has been no change in the interests set out above between 31 December 2013 and 24 March 2014.

8 Finance income and costs

Ubisense Group Plc Annual Report 201343

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:
Notes

2013
£’000

2012
£’000

Amortisation of acquired intangible assets

12

313

257

Amortisation of other intangible assets

12

1,332

953

Depreciation of owned property, plant and equipment

13

266

227

Loss on disposal of property, plant and equipment—

5

Operating lease rental charges – land and buildings

445

355

Operating lease rental charges – other

135

124

Inventory recognised as an expense

1,057

1,571

946

1,312

Research and development costs expensed
Net foreign currency (gains)/losses

(153)

153

Exceptional items

9.2

764

423

Auditors’ remuneration

9.3

216

81

2013
£’000

2012
£’000

9.2 Exceptional items

Strategic Asia Pacific market entry costs

650—

Aborted acquisition costs

114—

Reorganisation costs

—

423

764

423

During 2012, the Group incurred reorganisation costs totalling £423,000 comprising mainly redundancy costs in order to integrate acquisitions madein 2011 and to centralise the research and development and sales and marketing functions.

9.3 Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors and their associates:
2013
£’000

2012
£’000

Parent company and consolidated financial statements

16

14

Financial statements of subsidiaries, pursuant to legislation

91

43

107

57

Tax services

26

15

Corporate finance services

75—

Other services

8

9

109

24

216

81

Fees payable to the Group’s auditors for the audit of:Fees payable to the Group’s auditors for other services:

Auditors’ remuneration
The auditors of Ubisense Group Plc are Grant Thornton UK LLP.

Financial statements

During 2013, the Group incurred exceptional items of £764,000 of which £650,000 related to strategic Asia Pacific market entry costs comprising£464,000 acquisition costs relating to Geoplan and £186,000 costs relating to product certification costs in Japan and South Korea and the terminationof the Group’s previous agent network in the region. In addition, the Group incurred £114,000 costs, mainly comprising professional fees, in connection
with an acquisition which did not proceed.

Ubisense Group Plc Annual Report 201344

Notes to the consolidated financial statements continued
for the year ended 31 December 20139 Loss before tax: analysis of expenses by nature continued
9.3 Auditors’ remuneration continued
During the year, the auditors were used for due diligence work as this was considered most beneficial to the Group due to the auditors’ establishedknowledge and experience of the Group’s activities. The auditors’ independence and objectivity was safeguarded through the use of separate
engagement teams. No services were provided pursuant to contingent fee arrangements.

10 Income tax
10.1 Income tax recognised in the income statement
2013
£’000

2012
£’000

UK corporation tax

2—Foreign tax

36

9Research and development tax credits – prior years

(177)

(203)

Total current tax credit

(139)

(194)

Origination and reversal of temporary differences

358

104

Total deferred tax expense

358

104

Total income tax expense/(credit)

219

(90)

Current tax

Deferred tax

The tax expense (2012: credit) differs from the standard rate of corporation tax in the UK for the year of 23% (2012: 24%) for the following reasons:
2013
£’000

2012
£’000

(1,719)

(728)

(395)

(175)

Expenses not deductible for tax purposes

219

21

Accrued contingent consideration released not subject to tax

—

(38)

Utilisation of previously unrecognised tax losses

(96)

(259)

Tax losses for which no deferred tax asset was recognised

708

832

Tax unprovided in prior years

38

9

(188)

(203)

74

—

Loss before tax
Loss before tax multiplied by the standard rate of corporation tax in the UK of 23% (2012: 24%)Tax effects of:

Research and development tax credits – prior years
Difference on tax treatment of share options

(149)

(233)

Remeasurement of deferred tax – change of rate

Differential on overseas tax rates

—

(58)

Other temporary differences

8

14

219

(90)

Total income tax expense/(credit)

10.2 Factors that may affect future tax charges
The Group has tax losses of £8.9 million (2012: £4.4 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 respect of these losses as they may not be used to offset taxable profits
elsewhere in the Group, and they have arisen in subsidiaries whose future taxable profits are uncertain. No deferred tax has been recognised on theunremitted 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.
As a result of the reduction in the UK corporation tax rate to 23% that was substantively enacted on 3 July 2012 and effective from 1 April 2013,
the deferred tax balances have been remeasured. The UK Government has also announced a further reduction in the main rate of corporation tax
to 21% effective from 1 April 2014 and has proposed a further reduction of 1% by 1 April 2015. These further tax rate reductions had not been
substantively enacted at the balance sheet date and, therefore, are not recognised in the financial statements.

Ubisense Group Plc Annual Report 201345

10 Income tax continued
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
2013
£’000

2012
£’000

Deferred income tax liabilities
2013
£’000

2012
£’000

At 1 January

—

—

(653)

(549)

Arising on acquisition of subsidiaries

—

—

(844)

—

Deferred tax credited to the income statement

—

—

57

88

Deferred tax charged to the income statement

—

—

(416)

(192)

At 31 December——(1,856)

(653)

2013
£’000

2012
£’000

Development costs capitalised

(901)

(485)

Intangible assets recognised on acquisition of subsidiaries

(955)

(168)

(1,856)(653)

The components of deferred tax included in the consolidated statement of financial position are as follows:

Total deferred income tax liabilities

Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profits will be available
against which the Group can utilise the benefits:
2012
£’000

2,537

1,343

452

289

2,989

1,632

2013

2012

(1,968)(638)

21,984

21,764– Share options (’000)

1,034

1,383

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

23,01823,147

Basic EPS (pence)(8.9p)(2.8p)

Diluted EPS (pence)(8.9p)(2.8p)Tax losses carried forward
Equity-settled share options temporary differences
Total unrecognised deferred tax assets

11 Earnings per share (EPS)
Basic and diluted earnings per share

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:

Basic earnings per share is calculated by dividing profit for the period attributable to ordinary shareholders of the Company 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 and warrants outstanding at the end of the year. Options have no dilutive effect in loss-making years, andhence 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 exceptional items such as acquisition, integration or reorganisation costs from the measurement of profit forthe period.

Financial statements

2013
£’000

Ubisense Group Plc Annual Report 201346

Notes to the consolidated financial statements continued
for the year ended 31 December 201311 Earnings per share (EPS) continued
Adjusted diluted earnings per share

Notes

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

2013

2012

(1,968)(638)

Adjustments:
Reversal of amortisation on acquired intangible assets (£’000)

9, 12

313

257

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

21

92

63

Reversal of exceptional items (£’000)

9

764

423

Net adjustments (£’000)

1,169

743

Adjusted earnings (£’000)

(799)

105

Adjusted diluted EPS (pence)(3.5p)

0.5p

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

12 Other intangible assets

Goodwill£’000

Acquiredcustomer
relationships
and order
backlog£’000

Acquired
softwareproducts£’000

Capitalised
product
development
costs
£’000

Software
£’000

Total
£’000

7,418

449

529

2,579

295

11,270Effects of movement in exchange rates

—

—

—

—

(12)

(12)

Additions

—

—

—

1,845

16

1,861

7,418

449

529

4,424

299

13,119Cost
At 1 January 2012

At 31 December 2012
Additions

—

—

—

3,037

161

3,198

Acquisition of Geoplan

1,698

1,593

626

—

173

4,090

At 31 December 2013

9,116

2,042

1,155

7,461

633

20,407

—

(68)

(44)

(1,452)(30)(1,594)

Accumulated amortisation
At 1 January 2012
Effects of movement in exchange rates

—

—

—

—

4

4

Charge for the year

—

(80)

(177)

(862)

(91)

(1,210)At 31 December 2012

—

(148)

(221)

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

—

(120)

(193)

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

At 31 December 2013

—

(268)

(414)

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

At 31 December 2013

9,116

1,774

741

3,920

411

15,962

At 31 December 2012

7,418

301

308

2,110

182

10,319Net book amountThe acquired software products, customer relationships and order backlog assets arose on the acquisition in 2013 of the Geoplan Interworks K.K.
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 newor substantially improved products and processes. The software assets represent assets purchased from third parties.

Ubisense Group Plc Annual Report 201347

12 Other intangible assets continued
In assessing whether goodwill has been impaired, the carrying amount of the cash-generating unit (CGU) or groups of CGUs (including goodwill)is compared with the recoverable amount of the CGU or groups of CGUs. The recoverable amount is the higher of fair value less costs to sell andvalue in use. In the absence of readily available information about the fair value of a cash-generating unit, the recoverable amount is deemed to be
the value in use for the purposes of performing an impairment test of goodwill, unless 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. The future cash flows are adjusted for risks specificto the cash-generating unit and are discounted using a pre-tax discount rate. The discount rate is derived from the group’s post-tax weighted average
cost of capital and is adjusted where applicable to take into account any specific risks. Discount rates of 10.0% and 14.5% have been used for goodwill
impairment calculations performed in 2013 (2012: 9.7% and 12.5%). The recoverable amounts of all CGUs have been determined from value-in-use
calculations based on five year forecasts projected from the 2014 annual operating plan approved by the Board for each CGU with an assumed
terminal growth rate of nil and no improvement in relative operating margin after the forecast period. The Board has considered reasonable possible
sensitivities in key assumptions on which the value-in-use calculations are based. If the underlying organic revenue growth rate reduced to 0%, or if
the discount factor increased to 20%, this would not cause the carrying value to exceed estimated recoverable amount. There was no impairmentof goodwill as the estimated recoverable amount exceeded the carrying value for all CGUs.

13 Property, plant and equipment
Fixtures andfittings£’000

Computerequipment
£’000

Total
£’000

221

605

826

(7)

(13)

(20)

Cost
At 1 January 2012
Effect of movements in exchange rates

31

(31)

—

321

174

495

Disposals

(23)

(218)

(241)

At 31 December 2012

543

517

1,060

Effect of movements in exchange rates

(42)

4

(38)

Additions

52

88

140

Acquisition of subsidiaries

136

—

136

Disposals

—

(2)

(2)

At 31 December 2013

689

607

1,296

(128)

(332)

(460)

6

7

13

Charge for the year

(77)

(150)

(227)

Reclassification

(20)

20

—

Disposals

20

215

235

(199)

(240)

(439)

Effect of movements in exchange rates

32

3

35

Charge for the year

(88)

(178)

(266)

Disposals

—

2

2

(255)

(413)

(668)

At 31 December 2013

434

194

628

At 31 December 2012

344

277

621

Accumulated depreciation
At 1 January 2012
Effect of movements in exchange rates

At 31 December 2012

At 31 December 2013
Net book amountFinancial statements

Reclassification
AdditionsUbisense Group Plc Annual Report 201348

Notes to the consolidated financial statements continued
for the year ended 31 December 201314 Inventories
2013
£’000

2012
£’000

Raw materials

811

182

Finished goods

2,295

680

Total inventories

3,106

862

Included in the analysis above are impairment provisions against inventory amounting to £nil (2012: £44,000). The Group’s inventories are comprisedof products which are not generally subject to rapid obsolescence on account of technological trends, deterioration in condition or market trends.

15 Trade and other receivables
Notes

Trade receivables, gross

2013
£’000

2012
£’000

7,072

7,390

Allowances for doubtful debts

15.1

(141)

(80)

Trade receivables, net

15.2

6,931

7,310

3,347

2,439

Amounts recoverable on contracts
Other receivables

285

40

Prepayments and accrued income

645

502

Corporation tax recoverable

177—

VAT and taxation receivable

162

11

11,547

10,302

Total trade and other receivables

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.
Due to having a blue-chip customer base and effective credit control procedures, the Group is not significantly exposed to the risk of bad debt.
The following disclosures are in respect of trade receivables that are either impaired or past due. The individually impaired receivables mainly relate
to customers who are in unexpectedly difficult economic situations. Any impairment is assessed on a customer-by-customer basis following a detailed
review of the particular circumstances. To the extent they have not been specifically provided against, the trade receivables are considered to beof sound credit rating.

15.1 Movement in allowance for doubtful debts
2013
£’000

2012
£’000

(80)

(7)

2

7

Allowance made

(63)

(80)

At 31 December

(141)

(80)

2013
£’000

2012
£’000

5,114

5,360

1,500

1,360

317

590

6,931

7,310

At 1 January
Amounts recovered in the year

15.2 Ageing of past due but not impaired receivables

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

Ubisense Group Plc Annual Report 201349

16 Cash and cash equivalents
2013
£’000

2012
£’000

Cash at bank and in hand

3,848

2,716

Short-term bank deposits

116

—

3,964

2,716

Cash and cash equivalents

The carrying amount approximates to fair value because of the short-term maturity of these instruments, being no greater than three months.
Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term cash deposits earn interest at fixed rates
for the term of the deposit.
The composition of cash and cash equivalents by currency is as follows:
2013
£’000

2012
£’000

British Pound (GBP)

489

723

Euro (EUR)

496

1,101

US Dollar (USD)

739

847

1,718

—

Japanese Yen (JPY)South Korean Won (KRW)352—

Canadian Dollar (CAD)

1145

Turkish Lira (TRY)

159

—

3,964

2,716

2013
£’000

2012
£’000

Payments received on account

2,765

1,002

Trade payables

3,570

1,936

Trade accruals

Cash and cash equivalents

17 Trade and other payables
Notes

1,404

41

—

Other taxation and social security

667

612

Other payables

705

292

Other liabilities – deferred consideration

25

172

—

Other liabilities – contingent consideration

25

355

—

10,023

5,246

Total trade and other payables

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

18 Bank loans
In August 2013, the Group agreed a new three-year bank loan of up to £5.0 million to provide additional future working capital capacity and isrepayable in full in August 2016. Interest is payable at LIBOR plus 3% and the facility is secured on the fixed and floating assets of the Group.
The facility is subject to certain operating performance and net worth covenants of the business. The loan replaced an existing loan which was
drawn down in the year, was due to expire in November 2013 and on which there was an outstanding balance of £2.0 million which had beendrawn down in full in April 2013. The new loan was used pay the outstanding balance on this previous loan. As at 31 December 2013, and as
at 24 March 2014, £3.5 million (31 December 2012: £nil) is outstanding and is repayable by Ubisense Limited to HSBC Bank plc.

Financial statements

1,748

Current tax liability

Ubisense Group Plc Annual Report 201350

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

19 Other liabilities
Notes

2013
£’000

2012
£’000

25

430

—

Number ofordinary sharesof £0.02 eachSharecapital
£’000

Share
premium
£’000

Total
£’000

21,657,698

433

22,031

22,464

Issued under share-based payment plans

154,9373

29

32

Issued on conversion of warrants

107,109

2

191

193

Change in year

262,046

5

220

225

21,919,744

438

22,251

22,689Issued under share-based payment plans

399,593

8

103

111

Issued on acquisition of subsidiary759,809

15

1,696

1,711

Change in year

1,159,402

23

1,799

1,822

Balance at 31 December 2013

23,079,146

461

24,05024,511Other liabilities – contingent consideration

20 Share capital and premium

Balance at 1 January 2012

Balance at 31 December 2012

The Company has one class of ordinary shares which carry no right to fixed income.
During the period, the Company issued 1,159,402 shares, increasing the total number of shares in issue from 21,919,744 to 23,079,146 as follows:»»399,593 shares as a result of options exercised with a weighted average exercise price of £0.28 per share for total cash considerationof £111,000; and»»759,809 shares as a result of the acquisition of the Geoplan Interworks K.K. group of companies at £2.2525 per share for cash consideration of £nil.
21 Share-based payments: options and warrants
21.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over shares in the Company to the best-performing employees of the Group around the world.
Options are generally granted at an exercise price equal to the market price of the shares under option at the date of the grant. The options generally
vest evenly over three years on the anniversary from the date of the grant or entirely on the third anniversary from the date of grant, depending on
continuing service during the vesting period. The contractual life of the options is ten 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
2013
£’000

2012
£’000

92

63

2013
£’000

2012
£’000

92

63

Notes

2013
£’000

2012
£’000

22

746

654

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

Ubisense Group Plc Annual Report 201351

21 Share-based payments: options and warrants continued
21.3 Reconciliation of movements in equity-settled share-based payment arrangements in the year

Arrangement

Award
date
Year

Vests
Years

ExpiresYear

Exercise
price£

Options

2006

2007–09

2016

0.900

Awardsoutstandingat
1 January
2013
NumberGrantedduringthe year
NumberExercisedduringthe year
Number

2,500—(2,500)Forfeited
duringthe year
NumberAwardsoutstandingat
31 December
2013
NumberAwardsexercisableat
31 December
2013
Number

—

—

—

2007

2008–10

2017

0.900

300

—

—

—

300

300

2008

2009–11

2018

0.900

650

—

—

—

650

650

2009

2009

2019

0.900

4,457

—

(707)

—

3,750

3,750

2010

2011–13

2020

0.140

1,243,815—(360,338)(333)

883,144883,1442011

2012–14

2021

1.050

427,466—(14,902)(4,114)408,450

269,9322011

2012–14

2021

1.975

32,532—(21,146)—

11,386

7,591

2012

2013–15

2022

2.125

346,000——(2,000)344,000

33,3342013

2014–16

2023

2.055

—

421,500—(50,000)

371,500—

2,057,720

421,500(399,593)(56,447)

2,023,180

1,198,701

0.695

2.055

0.277

1.973

1.025

0.415

Total
Weighted average exercise price (£)

The weighted average share price at the date of exercise for options exercised during the year was £2.1053 (2012: £2.1026).

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 determinedbased 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 thezero-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 years ended 31 December 2013 and 31 December 2012:
Instrument

Grant date

Option421,500

347,000

19 April 201329 June 2012

Share price at grant date (£)

2.055

2.125

Exercise price (£)

2.055

2.125

Fair value per option (£)

0.3

0.3

Expected life (years)

3.0

3.0

Expected volatility (%)

20

20

0.79

0.87

—

—

Risk-free interest rate (%)
Expected dividends expressed as a dividend yield (%)

Financial statements

Number granted

OptionUbisense Group Plc Annual Report 201352

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

22 Other reserves
Share-based
payment reserve£’000

Translation
reserve
£’000

Total
£’000

Balance at 1 January 2012

591

(81)

510

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

—

33

33

Reserve credit for equity-settled share-based payment

63

—

63

Balance at 31 December 2012

654

(48)

606

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

—

(173)

(173)

Reserve credit for equity-settled share-based payment

92

—

92

Balance at 31 December 2013

746

(221)

525

Share-based payment reserve
The share-based payment reserve relates to cumulative charge made in respect of share options granted by the Company 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 from their functional currencies to theGroup’s presentation currency of Sterling are recognised directly in other comprehensive income and accumulated in the translation reserve.

23 Operating lease commitments
Leases as lessee
At 31 December 2013, 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 of obtaining the short-term benefits of these assets. The Group leaserental charge is disclosed in note 9. There are no other material off-balance sheet arrangements.
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings

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

Other

2013
£’000

2012
£’000

2013
£’000

2012
£’000

433

360

111

111

1,409

1,512

117

91

550

853

—

—

2,392

2,725

228

202

The above table reflects the committed cash payments under operating leases, rather than the expected charge to the income statement, in therelevant periods. The effect on the income statement will differ to the above figures due to the amortisation of rent-free and discounted rent periods
included in a new property lease signed in 2012. The expected charge in 2014 for operating leases is expected to be £30,000 higher than thecommitted cash payments shown above.
The Group has guaranteed rent bonds issued by its banks on its behalf totalling £122,000 as at 31 December 2013 (2012: £125,000). These are notexpected to result in any material financial loss.

Ubisense Group Plc Annual Report 201353

24 Principal subsidiaries
Proportion ofordinaryshares heldby Group (%)

Proportion of ordinary
shares held by
non-controllinginterests (%)

Subsidiary

Country ofincorporation

Principal activity

Ubisense Limited

UK

Location solutions

100—

Ubisense AG

Germany

Location solutions

100—

Ubisense SAS

FranceLocation solutions

100—

Ubisense Inc.

US

Location solutions

100—

Ubisense Solutions Inc.

CanadaLocation solutions

100—

Geospatial Systems Limited

UK

Location solutions

100—

Geoplan Interworks K.K.

Japan

Intermediate holding company

100—

Geoplan Company Limited*Japan

Location solutions

77

23

Binary Star Developments K.K.*

Japan

Non-trading

100—

Geoplan Korea Company Limited*

South Korea

Location solutions

100—

Geoplan Philippines, Inc.*

Philippines

Location solutions

100—

All subsidiaries are directly held by Ubisense Group Plc except those denoted* which are held by intermediate holding companies.
All subsidiaries prepare local statutory accounts up to 31 December each year except for Geospatial Systems Limited which prepares accounts up
to 31 March, Geoplan Company Limited to 30 June and Binary Star Developments K.K. to 31 January. For subsidiaries who which have a different
financial year end to the Group, additional coterminous accounts are prepared reflecting the same financial reporting as the Group for the purposesof consolidation.

25 Business combinations
25.1 Subsidiaries acquired
Subsidiary

Proportion ofequity interest
acquiredJapan Location solutions 3 December 2013100%

Principal
activity

The Geoplan Interworks K.K group of companies (“Geoplan”) was acquired to enhance the Group’s geographic reach into the Asian market to
deploy RTLI solutions to utility, telecoms and manufacturing customers in Japan, South Korea and the Philippines. Geoplan, formerly the master
distributor for the Group in Asia, is a location solutions business providing geospatial software products and consulting, with a focus on the utility
and telecoms sectors. The acquisition will enhance the Group’s product range, customer list, sector presence and geographical footprint, bringing
locally based skills and presence to the Group. The Group expects Japan to be the headquarters for its Asian operations and to develop the markets
in China from there.

Financial statements

Geoplan Interworks K.K.

Date ofacquisition

Country ofincorporation

Ubisense Group Plc Annual Report 2013

54

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

25 Business combinations continued
25.2 Consideration transferred
Total
£’000

Cash consideration paid

635

Consideration satisfied by issue of Ubisense shares

1,711

Deferred consideration

178

Contingent cash consideration arrangement

816

Consideration transferred

3,340

Consideration satisfied by issue of Ubisense shares comprised 759,809 new ordinary shares of nominal value of £0.02 in Ubisense at a price of 225.25p
per ordinary share, being the average of the volume weighted mid-market closing price on each of the preceding five business days.
The deferred consideration was paid in full in January 2014.
Under the contingent cash consideration arrangement, the Group is required to pay additional amounts to the vendors of Geoplan based on theachievement of two separate performance milestones that may arise between 2014 and 2017 with a combined undiscounted range of outcomes
between £nil and £892,000. The fair value of the contingent consideration of £816,000 recognised at the acquisition date was based on management’s
best estimate of the probability-adjusted estimated future cash outflows from the arrangement discounted at 3.5%. The discount rate used is 3.5%,
based in the Group’s estimated incremental borrowing rate for unsecured liabilities at the reporting date, and therefore reflects the Group’s credit
position. The effects on the fair value of risk and uncertainty in future cash flow are dealt with by adjusting the estimated cash flows rather thanadjusting the discount rate.
As at 31 December 2013, the fair value amount recognised for this arrangement was unchanged based on the most recent management estimates,
although as the liability is denominated in Japanese Yen it is subject to the impact of exchange rates:Upon
acquisition£’000

Effect ofexchange
rates
£’000

At
31 December
2013
£’000

Deferred consideration – current

178

(6)

172

Contingent consideration – current

369

(14)

355

Contingent consideration – non-current

447

(17)

430

Total contingent consideration

816

(31)

785

Total

994

(37)

957

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

Ubisense Group Plc Annual Report 201355

25 Business combinations continued
25.3 Assets acquired and liabilities recognised at the date of acquisition
Total
£’000

AssetsNon-current assets
Software products
Customer relationships

626
1,246

Order backlog

347

Other intangible assets

173

Property, plant and equipment

132

Total non-current assets

2,524

Current assets
Inventories

1,605

Trade and other receivables

1,080

Cash and cash equivalents

2,481

Total current assets

5,166

Liabilities
Current liabilities
Trade and other payables(4,500)Total current liabilities(4,500)Non-current liabilities(843)

Total non-current liabilities(843)

Non-controlling interest(704)

Fair value of identifiable net assets acquired

1,643

The fair value of trade and other receivables of £1,080,000 includes trade receivables with a fair value and gross contractual value of £1,080,000 allof which is expected to be collectable.
As at 31 December 2013, the fair values of acquired assets, liabilities and goodwill for Geoplan have been determined on a provisional basis as thesebusinesses were acquired in close proximity to the year end, pending finalisation of the post-acquisition review of the fair value of the acquired net assets.

Financial statements

Deferred income tax liabilities

Ubisense Group Plc Annual Report 2013

56

Notes to the consolidated financial statements continued
for the year ended 31 December 2013

25 Business combinations continued
25.4 Goodwill arising on acquisitions
Total
£’000

Fair value of consideration transferred

3,340

Less: fair value of identifiable net assets acquired

1,643

Goodwill arising on acquisitions

1,697

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

25.5 Net cash inflow on acquisition of subsidiaries
Total
£’000

Cash consideration paid(635)

Less: cash and cash equivalent balances acquired

2,481

Net cash inflow on acquisition of subsidiaries

1,846

25.6 Impact of acquisitions on the results of the GroupThe incremental impact of acquisitions to the Group’s results for the year are set out in the table below:
Beforeacquisitions£’000

Geoplan
£’000

Total
£’000

26,284718

27,002

929

212

1,141

(1,828)109(1,719)Beforeacquisitions£’000

Geoplan
£’000

Total
£’000

26,2845,365

31,649Adjusted EBITDA

929

(59)

870

Loss before tax(1,828)(75)(1,903)

Revenue
Adjusted EBITDA(Loss)/profit before tax

If the acquisitions had been effective from 1 January 2013, the Group’s estimated results would have been as follows:

Revenue

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

27 Financial risk management27.1 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, credit risk and liquidity risk. The Group is exposed to market risk through its use of financial
instruments and specifically to currency risk and interest rate risk, which result from its operating activities.
The Group’s risk management is coordinated at its headquarters, in close co-operation with the Board of Directors, and focuses on actively
securing the Group’s short to medium-term cash flows. The Group does not actively engage in the trading of financial assets for speculative
purposes. The most significant financial risks to which the Group is exposed are described below.

Ubisense Group Plc Annual Report 201357

27 Financial risk management continued
27.2 Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. The Group’s policy is to maintain natural hedges where possible,
by matching foreign currency revenue and expenditure. The Group does not enter into forward exchange contracts to mitigate the exposure toforeign currency risk as the Group’s currency transactions are not considered significant enough to warrant this.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date, not denominated in thelocal functional currency, are as follows:
Japanese Yen

US Dollars

Euros

2013
£’000

2012
£’000

2013
£’000

2012
£’000

2013
£’000

2012
£’000

Assets

—

—

777

752

623

817

Liabilities

—

—

(5)

(16)

(5)

(3)

27.3 Foreign currency sensitivity analysis
The Group is mainly exposed to US Dollars, Euros and Japanese Yen. The Group seeks to manage cash inflows and outflows in each currency tomitigate currency exposure and exchange risk. The following table details the Group’s sensitivity to a 5% increase and decrease in the Sterling exchange
rate against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items andadjusts their translation at the period end for a 5% change in foreign currency rates. A positive number indicates an increase in profit or equity.
Japanese Yen

US Dollars

Euros

2013
£’000

2012
£’000

2013
£’000

2012
£’000

2013
£’000

2012
£’000

Income statement

—

—

41

37

33

39

Equity

—

—

41

37

33

39

Income statement

—

—

(37)

(40)

(30)

(43)

Equity

—

—

(37)

(40)

(30)

(43)

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

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

The Group’s exposure to market risk for the changes in interest rates relates primarily to the Group’s three-year £5.0 million bank loan. Interest is payableat LIBOR plus 3% and £3.5 million of the loan was outstanding as at 31 December 2013 (2012: £nil).
The following table illustrates the sensitivity of the net profit of the Group for the year and equity to a possible change in interest rates of +0.5%
and -0.5%, with effect from the beginning of the year. A positive number indicates an increase in profit or equity.
2013
£’000

2012
£’000

Income statement

17—

Equity17—

Income statement

(17)

—

Equity(17)—

Effect of a 0.5% decrease in interest rate on:

Effect of a 0.5% increase in interest rate on:

Financial statements

27.4 Interest rate sensitivity

Ubisense Group Plc Annual Report 2013

58

Notes to the consolidated financial statements continued
for the year ended 31 December 201327 Financial risk management continued
27.5 Credit risk analysis
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 27.8, 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
continually monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into
its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are
obtained and used.
The Group’s policy is to deal only with creditworthy counterparties. The Group’s management considers that its financial assets that are not impairedor 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
are recoverable and any issues identified as early as possible. In order to manage credit risk the Directors set limits for customers based on a combinationof payment history and third-party credit references. Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt ageing
and collection history. In addition many of the Group’s customers, and approximately 80% by balance at any given time, are large utility companies
and other blue-chip companies that would be considered a low credit risk.
None of the Group’s financial assets are secured by collateral or other credit enhancements.

27.6 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 ensuring
sufficient liquidity is available to meet the foreseeable needs and to invest cash assets safely and profitably. The Group manages its liquidity needs
by carefully monitoring forecast cash inflows and outflows due in day-to-day business. Net cash requirements are compared to balances in orderto determine headroom or any shortfalls. The Group policy throughout the year has been to place surplus funds on short-term treasury deposit
or interest-bearing reserve accounts based on its cash flow forecasting and to draw down on borrowing facilities for when required. As disclosed
in note 18, the Group entered into a £5.0 million bank facility in the year, of which £3.5 million was drawn down as at 31 December 2013.
The Group’s financial liabilities have contractual maturities as summarised below:
Current

Non-current

Within Between 6 and12 months
6 months
£’000
£’000

Between 1
and 5 years£’000

Later than 5
Years
£’000

As at 31 December 2013
Trade and other payables
Bank loan

6,195

355

430

—

—

—

3,500

—

3,632

—

—

—

As at 31 December 2012
Trade and other payables

Financial assets used for managing liquidity risk
Cash flows from trade and other receivables are contractually due within six months. 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.

27.7 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concern whilst maximising the return to stakeholders.
The capital structure of the Group consists of cash and cash equivalents and capital and reserves attributable to the owners of the Company, and theGroup’s borrowing facilities.
The capital structure is continually monitored by the Group. 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 Groupis not subject to externally imposed capital requirements. The Group has entered into a £5.0 million bank facility in 2013 of which £3.5 million
was drawn down as at 31 December 2013 (2012: £nil) in order to provide working capital capacity to fund business growth.

Ubisense Group Plc Annual Report 201359

27 Financial risk management continued
27.8 Categories of financial instruments
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis
on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument, are disclosed
in the accounting policies in note 3. The carrying amounts presented in the consolidated statement of financial position relate to the following
categories of financial instrument:
Notes

2013
£’000

2012
£’000

Financial assets
Loans and receivables:– Trade receivables

15

6,931

7,310

– Amounts recoverable on contracts

15

3,347

2,439

– Other receivables

15

285

40

– Cash and cash equivalents

16

3,964

2,716

14,527

12,505

Total financial assets
Financial liabilities
Amortised cost:– Trade payables

17

3,570

1,936

– Trade accruals

17

1,748

1,404

– Other payables

17

705

292

– Deferred consideration

25.2

172

—

– Contingent consideration

25.2

785

—

18

3,500

—

10,480

3,632– Bank loan
Total financial liabilities

Financial statements

Ubisense Group Plc Annual Report 201360

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 2013 which comprise the parent
company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law andUnited Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s reportand for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company andthe Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 25, the Directors are responsible for the 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 theparent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

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/apb/scope/private.cfm.

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 2013;»»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 the financial statements
are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:»»adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received frombranches 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 2013.

Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
24 March 2014

Ubisense Group Plc Annual Report 2013

61

Company balance sheet
at 31 December 2013

Notes

2013
£’000

2012
£’000

3

17,332

15,906

4

7,540

7,772

288

—

7,828

7,772

(403)

—

Net current assets

7,425

7,772

Total assets less current liabilities

24,757

23,678

Net assets

24,757

23,678Fixed assets
Investments in subsidiaries
Current assets
Debtors
Cash at bank and in hand

Creditors – amounts falling due within one year

5

Capital and reserves
Called-up share capital

6

461

438

Share premium account7

24,05022,251

Share-based payment reserve

7

746

654

Profit and loss reserve

7

(500)

335

Equity shareholders’ funds

8

24,757

23,678The notes on pages 62 to 63 are an integral part of the Company financial statements.
The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:Registered Number: 05589712

Robert Parker
Chief Financial Officer

Financial statements

Richard Green			Chief Executive Officer 		Ubisense Group Plc

Ubisense Group Plc Annual Report 2013

62

Notes to the Company financial statements
for the year ended 31 December 2013

1 Principal accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared under thehistorical cost convention and in accordance with applicable United Kingdom Accounting Standards and law.
The principal accounting policies are summarised below. They have been applied consistently throughout the year and the preceding year.
The Company has taken advantage of the exemption allowed under FRS 8 “Related Party Disclosures” not to show transactions with other wholly
owned companies in the Group headed by Ubisense Group Plc.

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 of non-transferability, exercise restrictions and behavioural considerations. The share-based payment is accounted for
as a capital contribution to the subsidiaries. Investments in subsidiaries are increased by the aggregate amount of share-based payment with acorresponding increase in shareholders’ funds for the same amount.

Investments in subsidiaries
Fixed asset investments are shown at cost less provision for impairment.

Deferred taxation
Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusionof items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets andliabilities are not discounted.

2 Loss for the year
As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss account for the year.
Ubisense Group Plc reported a loss for the financial year ended 31 December 2013 of £835,000 (2012: £122,000).
The Company does not have any employees (2012: nil). Directors’ emoluments are disclosed in note 7 of the consolidated financial statements.
The Directors were not remunerated by the parent company.

3 Investments in subsidiaries
Investments in
subsidiaries£’000

Cost and net book amountAt 1 January 201315,906

Additions

1,334

Capital contribution relating to share-based payments
At 31 December 201392
17,332

Additions
Additions in the year relate to:»»acquisition of Geoplan Interworks K.K. for total consideration of £30,000; and»»subscription of new shares in existing subsidiary companies: Ubisense Solutions Inc. for total consideration of £316,000 and Ubisense Inc.
for total consideration of £988,000.

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.

Ubisense Group Plc Annual Report 201363

4 Debtors

Amounts owed by subsidiary undertakings
Other debtors

2013
£’000

2012
£’000

7,537

7,769

3

3

7,540

7,772

2013
£’000

2012
£’000

403

—

5 Creditors: amounts falling due within one year

Trade accruals

6 Share capital
2013
Number

2012
Number

2013
£’000

2012
£’000

23,079,146

21,919,744

461

438

Share
premium£’000

Share-based
payment
reserve£’000

Profit andloss reserve£’000

22,251

654

335

—

—

(835)

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

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

7 Reserves

Balance at 1 January 2013
Loss for the year
Reserve credit for equity-settled share-based payment

92

—

1,799

—

—

Change in year

1,799

92

(835)

Balance at 31 December 201324,050

746

(500)

2013
£’000

2012
£’000

8 Reconciliation of movements in shareholders’ funds

(835)

(122)

Reserve credit for equity-settled share-based payment

Loss for the year

92

63

Issue of new share capital

23

5

Premium on new share capital

1,799

220

Net change in shareholders’ funds

1,079

166

Shareholders’ funds at 1 January

23,67823,512

Shareholders’ funds at 31 December

24,757

23,678Financial statements—

Premium on new share capitalUbisense Group Plc Annual Report 201364

Notice of Annual General Meeting

Ubisense Group Plc(Incorporated and registered in England and Wales with registered number 05589712)
Notice is hereby given that the Annual General Meeting (“Meeting”) of Ubisense Group Plc (the “Company”) is to be held at the offices
of FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD on 15 May 2014 at 1.00pm.
You will be asked to consider and vote on the resolutions below. Resolutions 1, 2, 3, 4, 5 and 6 will be proposed as ordinary resolutions
and resolution 7 will be proposed as a special resolution.

Ordinary business
Report and accounts
1. THAT the Company’s annual accounts for the financial year ended 31 December 2013, together with the Directors’ Report and Auditors’ Reporton those accounts, be received and adopted.

Re-election of Directors
2. THAT J Keith Lomas, who retires by rotation and offers himself for re-appointment by general meeting, be re-elected as a Directorof the Company.
3. T HAT Dr Robert Sansom, who retires by rotation and offers himself for re-appointment by general meeting, be re-elected as a Directorof the Company.
4. THAT Robert Parker, who offers himself for re-appointment at the Company’s first Annual General Meeting after his appointment to the Board,
be re-elected as a Director of the Company.

Re-appointment of auditors
5. T HAT Grant Thornton UK LLP be re-appointed as the Company’s auditors to hold office from the conclusion of this meeting until the conclusionof the next meeting at which accounts are laid before the Company and that the Directors be authorised to agree the remuneration of the auditors.

Special business
Issue of ordinary shares
6. THAT the Directors be hereby generally and unconditionally authorised and empowered pursuant to and in accordance with Section 551 of theCompanies Act 2006 (the ”Act”) to exercise all the powers of the Company to allot shares and/or grant rights to subscribe for or to convert any
security into shares (“Rights”):
a. u p to an aggregate nominal value of £166,791 (being the nominal value of approximately one-third of the issued share capital of the Company);andb. up to an aggregate nominal value of £26,000 in connection with options granted in accordance with the Company’s Articles of Association
prior to the Company’s admission to trading on AIM of the London Stock Exchange,s uch authorities to expire on the earlier of the next Annual General Meeting of the Company held after the date on which this resolution becomes
unconditional and the date 15 months after the passing of this resolution, save that the Company may at any time before such expiry make any
offer(s) or enter into any agreement(s) which would or might require shares to be allotted or Rights to be granted after such expiry and the Directors
may allot shares or grant Rights in pursuance of any such offer(s) or agreement(s) as if the authority conferred hereby had not expired. This resolution
revokes and replaces all unexercised authorities previously granted to the Directors to allot shares or grant Rights but without prejudice to any
allotment of shares or grant of Rights already made, offered or agreed to be made pursuant to such authorities.

Ubisense Group Plc Annual Report 2013

65

7. THAT subject to and conditional upon the passing of resolution number 6 opposite, the Directors be and are hereby generally authorised in accordancewith Section 570 of the Act to allot equity securities (as defined in Section 560 of the Act) of the Company for cash as if Section 561(1) of the Act
did not apply to any such allotment, provided that this authority shall be limited to:a. the allotment of equity securities in connection with an offer by way of rights in favour of the holders of equity securities in proportion (as nearly
as may be possible) to the respective number of ordinary shares of £0.02 each held by them, but subject to such exclusions or other arrangements
as the Directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems in respect of overseas
holders or otherwise;b. the allotment of equity securities in connection with options granted in accordance with the Company’s Articles of Association prior to theCompany’s admission to trading on the AIM Market of the London Stock Exchange up to an aggregate nominal value of £26,000; andc. the allotment of equity securities (otherwise than pursuant to sub-paragraphs (a) and (b) above) up to a maximum aggregate nominal valueof £75,055 (being the nominal value of approximately 15% of the issued share capital of the Company),	and this authority shall expire on the earlier of the conclusion of the next Annual General Meeting of the Company held after the date on which
this resolution becomes unconditional and the date 15 months after the passing of this resolution save that the Company may make any offer(s)or enter into any agreement(s) before such expiry which would or might require equity securities to be allotted after such expiry and the Directors
may allot equity securities pursuant to any such offer(s) or agreement(s) as if the authority conferred hereby had not expired. This resolution revokes
and replaces all unexercised authorities previously granted to the Directors to allot equity securities but without prejudice to any allotment of equity
securities already made, offered or agreed to be made pursuant to such authorities.
By order of the Board

Gordon Campbell
Company Secretary

Ubisense Group Plc
St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge
CB4 1DL
24 March 2014

Additional Information

Ubisense Group Plc Annual Report 201366

Notice of Annual General Meeting continued

Entitlement to attend and vote
1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the
Company’s register of members at:»»at the time which is 48 hours prior to the Meeting; or»»if this Meeting is adjourned, at the time which is 48 hours prior to the adjourned meeting,shall be entitled to attend and vote at the Meeting.

Appointment of proxies
2. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights toattend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using
the procedures set out in these notes and the notes to the proxy form.
3. If you are not a member of the Company but you have been nominated by a member of the Company to enjoy information rights, you do nothave a right to appoint any proxies under the procedures set out in this “Appointment of proxies” section.
4. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairmanof the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on
your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
5. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint morethan one proxy to exercise rights attached to any one share. To appoint more than one proxy, you may photocopy the proxy form. Please indicate
the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should notexceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple instructions being given. All forms mustbe signed and should be returned together in the same envelope. Failure to specify the number of shares to which each proxy appointment
relates or specifying more shares than the number of shares held by you at the time set out in note 1 above will result in the proxy appointments
being invalid.
6. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting
indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks
fit in relation to any other matter which is put before the Meeting.

Appointment of proxies using hard copy form
7. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.
To appoint a proxy using the proxy form, the form must be:»»completed and signed;»»sent or delivered to the Computershare Investor Services PLC, The Pavilions, Bridgewater Road, Bristol BS99 6ZZ or emailed to theCompany Secretary at companysecretary@ubisense.net; and»»received by the Company Secretary no later than 48 hours prior to the time set for the start of the Meeting.
	CREST members should use the CREST electronic proxy appointment service and refer to note 8 below in relation to the submission of a proxyappointment via CREST.
	In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of thecompany or an attorney for the company.
	Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be
included with the proxy form.
	In each case the proxy appointment must be received not less than 48 hours before the time for the holding of the Meeting or adjourned meeting
together (except in the case of appointments made electronically) with any authority (or notarially certified copy of such authority) under which it
is signed.

Ubisense Group Plc Annual Report 2013

67

Appointment of proxies through CREST
8. As an alternative to completing the hard copy proxy form, CREST members who wish to appoint a proxy or proxies by utilising the CREST
electronic proxy appointment service may do so for the Meeting and any adjournment(s) of it by using the procedures described in the CREST
Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
	In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must
be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications and must contain the information required
for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or anamendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the Company’s
agent (ID: 3RA 50) by not later than 48 hours prior to the time appointed for the Meeting or adjourned meeting. For this purpose, the time of receipt
will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the Company’s
agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions toproxies appointed through CREST should be communicated to the appointee through other means.
	CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special
procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST
Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member orsponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) suchaction as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
	The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.

Appointment of proxy by joint members
9. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the mostsenior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register ofmembers in respect of the joint holding (the first-named being the most senior).

Changing proxy instructions
10. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time forreceipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the
relevant cut-off time will be disregarded.
	Where you have appointed a proxy using the hard copy proxy form and would like to change the instructions using another hard copy proxyform, please contact the Computershare Investor Services PLC, The Pavilions, Bridgewater Road, Bristol BS99 6ZZ.
	If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.

Termination of proxy appointments
11. In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to
revoke your proxy appointment to the Computershare Investor Services PLC, The Pavilions, Bridgewater Road, Bristol BS99 6ZZ. In the case ofa member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company
or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copyof such power or authority) must be included with the revocation notice.
	The revocation notice must be received by the Company Secretary not less than 48 hours before the time for holding the Meetingor adjourned meeting.

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

Additional Information

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

Ubisense Group Plc Annual Report 2013

68

Notice of Annual General Meeting continued

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

Issued shares and total voting rights
13. As at 5.00pm on the day before this notice, the Company’s issued share capital comprised 25,018,652 ordinary shares of £0.02 each.
Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights
in the Company as at 5.00pm on the day before this notice is 25,018,652.

Communication
14. E xcept as provided above, members who have general queries about the Meeting should use the following means of communication:»»calling the Company Secretary on +44 (0) 1223 535165; or»»calling our shareholder helpline on 0870 707 4081 or +44 (0) 870 707 4081 from outside of the UK. Lines are open Monday to Friday, 8.30am
to 5.30pm; or»»emailing the Company Secretary at companysecretary@ubisense.net.
You may not use any electronic address provided either:»»in this notice of Annual General Meeting; or»»any related documents (including the proxy form),to communicate with the Company for any purposes other than those expressly stated.

Corporate directory

Registered office

Solicitor

St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge CB4 1DL
UK

Mills & Reeve LLPFrancis House
112 Hills Road
Cambridge CB2 1PH
UK

WebsiteAuditorwww.ubisense.net

Grant Thornton LLP
Cambridge Office:
101 Cambridge Science Park
Milton Road
Cambridge CB4 0FY
UKRegistered number
05589712

Company Secretary
Gordon Campbell

Registrar

Nominated Advisor and broker
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
UKComputershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
UK

BankerPublic relations advisor

HSBC Bank plc
VitrumSt Johns Innovation Park
Cowley Road
Cambridge CB4 0WS
UK

FTI Consulting
200 Aldersgate Street
LondonEC1A 4HD
UK

Shareholder information

Shareholder enquiries

Investor relations

Any shareholder with enquiries should, in the first instance, contact our
Registrars, Computershare, using the address provided in the
Corporate Directory.

St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge CB4 1DL
UK

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 http://www.ubisense.net/en/investor-relations/Ubisense Group Plc’s commitment to environmental issues is reflectedin this annual report which has been printed on Symbol Freelife Satin, an
FSC® Mix Certified paper, which ensures that all virgin pulp is derived
from well-managed forests and other responsible sources.

Email: corporate@ubisense.net
Tel: + 44 (0) 1223 535 170

Financial calendar
Financial year end		

31 December 2013

Full year results announced

25 March 2014

Annual General Meeting

15 May 2014

St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge CB4 1DL
Tel: +44 (0)1223 535 170
Fax: +44 (0)1223 535 167
www.ubisense.net