Accelerate
your network
operations
IQGeo Group plc Annual Report 2018

What is IQGeo?

IQGeo is a market
leading provider ofgeospatial productivity
and collaboration software
for the telecommunications
and utilities industries.
Our customers include 45 major network operators and partners
with a combined global deployment of more than 35,000 users.
IQGeo offers a unique end-to-end, mobile geospatial solution thatconnects complex field operations with business-critical officeprocesses. Our customers depend on IQGeo to deliver digitaltransformation strategies that enable new technologies, reducing
operational and construction costs, while improving services andcustomer satisfaction.

Major change

Discontinued operations

On 21 November 2018 Ubisense announced an exciting and significant change
to the organisation. The RTLS SmartSpace division and Ubisense brand would
be sold and the Geospatial myWorld division would be rebranded IQGeo™.
Following the completion of the disposal on 31 December 2018, the new IQGeo
branding was formally launched and shares began trading under the name
IQGeo Group plc (AIM: IQG). This strategic separation provides both new
businesses with the management focus and investment they need to achieve
exciting future growth targets.

Revenue

The disposal of the RTLS SmartSpace business
The Group agreed to sell the RTLS SmartSpace business unit and the Ubisensebrand to a company that is owned and controlled by funds managed or advised
by Investcorp Technology Partners. The terms of the disposal were comprisedof £30 million in cash upon completion, £2 million in rollover investment in the soldbusiness and £3 million earn-out tied to 2018 and 2019 revenue performance.
The RTLS SmartSpace business unit takes real-time location data from sensing
hardware products and transforms this data into high value spatial event
information, delivering highly reliable, automatic, adaptive asset identification,
precise real-time location and spatial-monitoring to offer meaningful insightsthat help businesses make smarter decisions.

Gross margin£15.5m
18

15.5

17
16

10.8
9.1

52%
18

52

17

42

16

44

STRATEGIC REPORT

Highlights

Group operations (RTLS SmartSpace & Geospatial)£25.5m18

Own product revenue£25.5m£20.3m18

17£27.3m17

16£26.5m16

Gross margin£20.3m
£16.6m£12.9mNet cash balance

49%

18

£30.9m
18

17

40%

17

£6.6m

16

39%

16

£0.2m

£30.9mCorporate governance“

We have a strong foundation tobuild on for the new IQGeo with ourproven myWorld software, experienced
and focused management team andinvestment capital needed to accelerate
the growth of our business.”
Richard Petti, Chief Executive Officer, IQGeo

Read more about
myWorld in action
on pages 16-17

32 Board of Directors
34 Corporate governance report
38 Audit Committee report
39 Directors’ remuneration report
41 Directors’ report43	
Directors’ responsibilities
statement

Financial statements

44 Independent auditor’s report
51 Consolidated income statement
52 Consolidated statementof comprehensive income
53 Consolidated statementof changes in equity
54 Consolidated statementof financial position
55 Consolidated statementof cash flows
56 Notes to the consolidated
financial statements
90 Company balance sheet
91 Company statementof changes in equity
92 Notes to the Company
financial statements
96 Advisers

Read more about
our products on
pages 14-15

For more information
view our website:www.iqgeo.com

IQGeo Group plc Annual Report 2018

1

FINANCIAL STATEMENTS

49%

1 Highlights
2 At a glance
4 Chairman’s statement
6 Chief Executive’s statement
10 Case study – Cable One
12 Our markets
14 Our products
16 Case study – Unitil
18 Our business model and strategy
20 Key performance indicators (KPIs)
22	
Chief Financial Officer’s
statement
26 Principal risks and uncertainties
30 Our people

CORPORATE GOVERNANCE

Total revenue

Strategic reportAt a glance

Creating business value
IQGeo accelerates digital transformation, improving
productivity and collaboration across enterprise planning,
design, construction and maintenance processes. Our mobile
geospatial software gives field and office staff access to theright information at the right time. Unlocking data previously
hidden away in complex and disconnected systems.
Our vision

We put our customers in control of theirbusiness-critical network operations,
reducing the cost of field construction
and maintenance, increasing customer
satisfaction and enabling the deliveryof high value services.
Read more on pages 12-13

The opportunity

The pressure to rollout new network technology, emerging competitors
and business models, alongside increasing regulatory and environmental
risks are pushing our customers to further enhance their operational strategies.
In order to remain competitive, they must develop digital transformation
strategies that reimage network operations. IQGeo is at the forefront of thisunprecedented challenge.
Read more on pages 14-15

Why customers choose us

Our software and team have thetechnical and industry experience toassist telecommunications and utility
providers with the momentous industry
transformation that is underway.
Strong customer references withproven return on investment clearly
demonstrate why our software
solutions generate long-term,recurring revenue for IQGeo.

Geo operations hub

Our myWorld software creates a ‘geo operations hub’ that is unique tothe ecosystem of each customer, delivering a trusted view of their complex
network infrastructure. This easy-to-use, mobile first technology improves
data quality between office and field operations and business-criticalapplications, reducing operating costs, mitigating risks and supporting
execution of strategic business objectives.

PeopleRead more on pages 10 and 16

Real-time
Crew & Asset
LocationEnterprise
Resource
Planning

35,000+Professionals rely on our
mobile geospatial software
to accelerate their network
operations and deliver strategic
business optimisation.

Workforce
Management
SystemCustomer
RelationshipManagement

Inspections &Compliance

Usability

myWorld

Data

Geo operations hub
Geographical
Information
SystemConstruction&
MaintenanceIntegration

IIoT &
Network
Management

Planning &DesignField Data
CaptureMobility

2

IQGeo Group plc Annual Report 2018

ThingsSTRATEGIC REPORT

Locations

CORPORATE GOVERNANCE

IQGeo’s HQ is in Cambridge, UK, and it hasregional sales and service offices in North
America, Europe and Japan.

FINANCIAL STATEMENTS

3of the Top 10 North
American telecom providers
Our customers include threeof the top 10 North American
telecom providers.

3of the Top 10 North
American utility providers
Our customers include threeof the top 10 North American
utility providers.

11

new customers

45

IQGeo established
11 new telecom andutility customers in 2018.

network operatorsand partners

IQGeo works with
network operatorsand industry partners.

Partner ecosystem

Our partner ecosystem provides a depthof expertise and knowledge in its specialist
areas, delivering innovative operational
solutions to customers around the world.

www.iqgeo.com/our-partner-ecosystem

IQGeo Group plc Annual Report 2018

3

Chairman’s statement

A transformational year

Paul Taylor
Chairman“

The business now has
a sharper market focus,
has strong customer
relationships and a
rapidly developing
market opportunity.”

The announced sale of the RTLS
SmartSpace business to Investcorp
advised funds in November and its
completion on 31 December will betransformational. Rebranding the
Geospatial business line as IQGeo
initiated a sequence of changes forboth newly established businesses.
The response from the market, ourcustomers and our employees has
been overwhelmingly positive, which
is a strong endorsement for theunderlying financial rationale thatdrove our decision to split thetwo businesses.
Since a new executive management
team joined the Company in 2016,
we have continued to evaluate thestrategy, organisation and structureof the continued business. While we are
extremely proud of the technologicaland business success that the
Geospatial myWorld and RTLS
SmartSpace products have achieved,
it became clear that maintaining theright levels of focus on these increasingly
different business opportunities wasproving challenging. This position
made it difficult to provide the levelof investment required for each of thesetwo, largely independent, businesses todevelop the momentum they neededto achieve the ambitious growthtargets established.
Having worked with Ubisense formany years, we are all sad to be saying
goodbye to our Ubisense colleagues.
They are an excellent group of people
that have developed world-classtechnology used in automotive andindustrial manufacturing around theglobe. However, we are confident that
under the leadership and investment
of Investcorp, their technology will bewell positioned to realise its full businesspotential. This report does not focus on
the details of the Ubisense trading results,
but the products and activities of thatbusiness are outlined on their website(www.ubisense.net) and in previous
years’ annual reports.
For the new IQGeo, this is an
exciting change. The freshly branded
Company is developing a unique,customer-focused voice to clearly

4

IQGeo Group plc Annual Report 2018

articulate the compelling benefits
that the myWorld software brings to
the telecommunications and utilities
industries. From the perspectiveof the Board, we are encouragedby the pace of the structural change
at IQGeo. The business now has a
sharper market focus, has strong
customer relationships and a rapidly
developing market opportunity.
Richard’s CEO Statement outlines
more details on the future direction
and strategy for IQGeo.
Results overview
As the RTLS SmartSpace division was
managed throughout the year as partof the combined Group with the disposal
being concluded on 31 December 2018,
it was felt appropriate that the financial
performance is described with reference
to the results of the total operations.
Whilst this data would be considered in
the category of Alternative Performance
Measures, it must be recognised thatthe business was managed on a
combined basis for almost the fullperiod, and significant reorganisation
was required to create clear legal
separation between the two divisions.
Where KPIs are outlined, clear separationof combined Group metrics andcontinuing operations metrics is made.
The combined Group financial resultsfor 2018 were slightly below where we
had hoped, in part impacted by the
distraction of both managing and thendisposing of the RTLS SmartSpacedivision on 31 December. The combinedGroup delivered revenue of £25.5 million
across the Geospatial myWorld and RTLS
SmartSpace businesses. The planned
decline in third party geospatial service
revenues continued, but was offset byincreasing own product revenues of 22%
driven by RTLS SmartSpace growth.
For the continuing operations of
IQGeo, total revenue reduced primarily
due to a £5.4 million expected decline
in third party geospatial service
revenue, but also due to the delay inclosing of certain myWorld contracts.
Gross margin percentage improved
with the increased balance towards
myWorld products, though the grossprofit value was reduced impacting

STRATEGIC REPORTFor the 2018 financial year and 2017
restated comparatives, the RTLS
SmartSpace business is reported within
the consolidated income statementof IQGeo as discontinued operations.
The balance sheet reported is that of
the new IQGeo business only, establishinga clear financial baseline going
into 2019.
Group strategy
Our focus remains on software revenue
growth and the development of a strong
recurring revenue base. Greater focus
and a strong balance sheet will allow
the right level of investments and giveour customers confidence that IQGeo
can support the growing needs of theirbusiness for many years.
To support our growth ambitions,
we are embarking on a controlled
investment strategy to provide theorganisation with additional software
engineering, sales and support
infrastructure. This is being donein direct response to the myWorld
opportunities we are seeing acrossthe telecommunications and utilities
industries. Delivering to our ambitions
brings with it many challenges but wehave never been better positioned
to meet these challenges. We can
now provide IQGeo with the levelsof focus and investment that it needs
to realise the market potential of the
myWorld products.

This year we reinforced our commitment
to a high standard of corporate
governance by adopting the QCA
Corporate Governance Code into ourreporting structure. The Board continuallyreviews its composition and that of its
Committees and feels that, at this stageof the Group’s development, the skills
and mix of its members best serve ourcurrent needs.
Currently this means that I willcontinue to act as Audit Committee
Chair, whilst Oliver Scott assumes chairof the Remuneration Committee.
The Board recognises that it must
evolve its Committee strategy as it
grows in the future.
Future outlook
The disposal of the RTLS SmartSpacebusiness to Investcorp advised funds
and the rebranding of the myWorldbusiness to IQGeo creates exciting
opportunities. The Board is very pleased
that we have been able to negotiate
such a positive outcome for bothbusinesses, giving them the focus andinvestment needed to move forwardwith confidence. We would like to thankthe management team and employees
for all their hard work in executing thistransaction and for completing thehundreds of large and small tasks
required to successfully create thetwo new independent businesses.

This is a truly transformational change
for IQGeo. We have an exciting new
brand with a clear market and technology
focus and, critically important, we havea strong balance sheet which thisbusiness needs. Our customers andprospects have responded withenthusiasm and the market opportunity
for myWorld software is stronger now
that it has ever been.
Our target markets are facing theirown digital transformation journey as
they implement new technology suchas fibre, 5G and smart meters. myWorld
is uniquely positioned to help thesecompanies increase productivity andcollaboration, making sense of theircomplex network environment to enable
rapid, informed decision making.
2019 is a fresh start for the new IQGeo
and we are well positioned to executeon our ambitious growth objectives.

Paul Taylor
Chairman

10 April 2019

IQGeo Group plc Annual Report 2018

5

FINANCIAL STATEMENTS

Following the completion of the RTLS
SmartSpace business unit disposal, theBoard intends to return excess funds
to Shareholders (subject to complying
with all relevant law and regulationin effecting such return which is likely
to include a capital reorganisation).
Further details of the amount andtiming of the return to shareholders
will be made in due course.

GovernanceIn the middle of 2018 I assumed interim
responsibility for Board chairmanshipas a result of a personal health issueof our Chairman, Peter Harverson.
On 13 February 2019, Peter decided
to step down from the Board, at whichtime I was made full-time Chairman.

CORPORATE GOVERNANCE

overall profitability and creating an
operating loss in 2018 having been
profitable in 2017. Our closing orderbook for the IQGeo business amounted
to £3.7 million.

Chief Executive’s statement

A software-first strategy
Dear shareholder,2018 was an important year for us.
Our three-point strategy of refocusing
the overall business, improving sales
execution and repositioning the productportfolio resulted in another year ofincreased own product sales, improved
margins and more new customer logos
to add to our roster.
However, in 2018 we realised that ourability to grow two separate businesslines in diverging markets was a stretch
on both our resources and balance sheet.
Therefore, the decision was taken to focus
the business by disposing of the RTLS
SmartSpace business line.

Richard Petti

Chief Executive Officer“

Our vision for IQGeo is to create
a company that provides the mostadvanced geospatial collaborationand productivity tools for utilities andtelecommunications companies in theworld. Our goal for IQGeo is to transform
ourselves into a software-first businesswith high margins and levels of recurring
revenue. In the rest of this statement I
will explain why I believe that IQGeo
will achieve this.

Our vision for
IQGeo is to create
a company thatprovides the mostadvanced geospatial
collaboration andproductivity tools
for utilities andtelecommunications
companies in
the world.”

The IQGeo market
While the IQGeo brand is new,
our flagship product myWorld iswell established. In the eight years
that this product has been in existence,
it has become recognised as a market
leader in geospatial mobile technology
for utilities companies and ourtechnology has been licensed to over
35,000 users at over 45 companies
worldwide. In North America, ourcustomers include three of the top
ten cable/telecommunicationcompanies, and three of the top
ten energy companies.

What makes us different?
While many high-tech and e-businesses
have come to dominate businessheadlines, few industries rival thesophistication and complexity of utilities
or telecommunications. It is a complex
production and distribution chain thatcan start with a burst of sunshine in
Florida and then transforms anddelivers that energy to a householdthat is tens of thousands of miles away.
Telecommunications data networks
are similarly complex, broadcastinghigh definition movies on demand totens of millions of homes and devices
simultaneously. By any standards theseenergy and data networks are technicaltriumphs. In fact, in telecommunications
and utilities we see one of the mostsophisticated, integrated and enduring
producer-to-consumer relationships inany industry in the world.
These complex producer-to-consumer
relationships are underpinned bynationwide technical infrastructuresthat are being constantly extended,
upgraded and in need of constantcare. This is essential for consumers
to receive the safe and reliable service
that they expect – and for producers
to protect and grow their market share.
This is why analysts are projecting a 60%
increase in 5G small cell infrastructure
investment between 2018 and 2022,
and broadband fibre subscribers areprojected to grow by more than 12%
CAGR in North America and Eastern
Europe and by more than 22% CAGR
in Western Europe and Asia between
2015 and 20201.

1 Source: S&P Global Market Intelligence.

IQGeo timeline

Nov 2018

Plans announced forthe disposal of Ubisense
business line6

Jan 2019

The new IQGeo
is launched

IQGeo Group plc Annual Report 2018

Feb 2019

IQGeo announcesplans for next generation
geospatial platform

Mar 2019

IQGeo launches new
myWorld Construction
Manager and myWorld
Operations Manager products

STRATEGIC REPORT

myWorld geospatial collaborationand productivity
myWorld excels in its ability to bring
together disparate and fragmented datain order to create a single, current viewof the operator’s network. This means
bringing together not just accurate
location information (geospatial data)
but all the correct technical informationof that network, down to individual
switches, fibres, ports and customer
data so that every employee whether
in the office, the field or the call centre
has the specific information they needto carry out an instruction, make adecision or sell a product.

Telus, one of our largest customers
in Canada, has integrated 27 different
data sources into myWorld to create asingle view of its network assets, which
service over 1,000 daily users. This levelof geospatial network integration was
unthinkable even ten years ago.
Accelerating sales
In order to accelerate sales, wemarket myWorld as a series of functional
packages that are specific to eachstage of the network asset lifecycle.
For example, our recently launched
Construction Manager tool helps
companies design network changes,
put these into work packages (thatinclude technical design work, customer
information, permissions, etc.) and whichassign them to engineering teams which
receive these packages on mobile devices
in the field. Once completed, these sameengineers can document any necessary
variations they made to the design andcertify the job as complete.

“

If you were on your way to work and if you knew you didn’t have
myWorld, you would contemplate calling in sick. I can’t remember
how we used to display and get to a lot of the problems before
myWorld. We have been a customer now for seven to eight years
and we’ve pretty much grown with the product. It has been very
well accepted throughout our footprint.”
Bill Vincent, ROC Lead Representative, Altice USA
IQGeo Group plc Annual Report 20187

FINANCIAL STATEMENTS

What consumers will be less awareof is the amount of digitisation that
goes on behind the customer portals.
The utilities networks – be they telephony,cable, electricity, gas or water, are highly
complex production, storage anddistribution networks often combining
many decades of different technology
and standards. These networks do notstand still for a moment – they are
constantly being extended, upgraded,maintained, monitored and, where
necessary, fixed by many hundreds ofengineers, employees and managers.

In fact, one of our largest customers
has over 12,000 employees using
myWorld on a daily basis. From a
digitisation perspective, the challengethese companies face is tremendous– they are dealing with vast amountsof network information, typically in
different formats and often locked deepin legacy systems. Moreover, tens of
thousands of users in the office andin the field need to interact with thisinformation every day or face
frustrating delays or worse, makemistakes that can compromise theirservice. It is a tremendous data
challenge – and it is precisely where
myWorld delivers value.

CORPORATE GOVERNANCE

Digitisation of utilities
and telecommunications
Consumers will be familiar with thetransformation digital tools that havedelivered benefits in their relationshipwith their utility and telecommunications
providers. Today, typical broadband
consumers can log a fault, receive
acknowledgement, be given an expected
fix time and get hourly updates andfinal notification of resolution without
ever speaking to another human.
Similarly, they can order mobile
phones, broadband services, electricity,water and gas online and receive agreat product at a competitive price.
In other words, when companies invest
in digitisation, consumers receive a very
effective service that has been shownto directly increase customer satisfaction.

Chief Executive’s statement continued

Accelerating sales continued
Further along the asset lifecycle
we have also recently launched ourOperations Manager module, which
gives a network operations centre(NOC) the ability to combine allmonitoring data network devices
into a single network view, enabling
it to monitor network performancedegradation, predict outages andprioritise network resolution issues
and assign outages to field operators.
We are unique in providing our customers
a single “office to field” platform.
Our myWorld product line is very wellarticulated. We have more applications
along different parts of the value chainthat are specific to each industry we serve.
In addition, we are changing the way
we price and sell myWorld in order toencourage more long-term subscriptions
and recurring revenue. Specifically,
we are changing our pricing schemes
to more usage-based models thatprovide our customers better pricepoints to start using myWorld andbetter aligns value with increased
usage as system integration and user
adoption grows. Additionally, we haveretrained our salesforce and created
new pricing and marketing tools tofoster a “subscription first” culture.

8

IQGeo Group plc Annual Report 2018

Market opportunity
In 2018 myWorld signed up eleven new
customers, including another top ten
utility in North America and thanks toour own product focus we were able
to increase gross margins. That said,
financial results for the IQGeo businessin the second half of 2018 were outof line with our expectations as deals
we had forecast slipped into 2019.
During the period our sales teamcontinued to mature and improve.
We employed a number of new
quota-carrying personnel andimplemented programmes/training
to optimise performance.
However, the potential of ourtarget markets remains strong.
The telecommunications industry ismaking major investments in fibre
and 5G networks and utility operators
are actively engaged in network upgrade
programmes that include the rolloutof new technologies such as smart
metering. These investment activities
are linked directly to strategic digitaltransformation initiatives that will
improve their profitability, capture
new customers, improve and extend
product offerings and cut operating
costs. Our myWorld and next generation
geospatial platforms are uniquely
positioned to help our customers enable
the digital transformation initiatives
that are mission critical to the growthand competitiveness of their business.

Outlook and competitive positioning
As telecommunications and utilities
customers consider the merits of large
upgrade programmes of their legacy
Geospatial Information Systems (“GIS”),
some of which are more than 20 years
old, they are taking the opportunity tolook at fresh technology. Customers
continue to tell us they need systems
that are cloud ready, mobile readyand very easy to integrate. On thosemeasurements IQGeo is already well
positioned. In response to this windowof opportunity, IQGeo has announced
that it will aim to not only integrate
legacy geospatial data systems butallow them to be replaced byintroducing our own system of record.
This creates a tremendous opportunity
for us to become the alternative forthese well-established GIS vendors.
Initial response to our technology
and business strategy has been positive
with customers and prospects desiring
a fresh approach. While many of theseopportunities remain large, long sales
cycle projects, we are seeing healthy
pipeline growth and we are investingin a modular product roadmap thatallows customers to embark on theselarge projects in a simplified and lower
risk way.

STRATEGIC REPORT

We will expand the product development
team to both deliver our productroadmap and address the systemof record opportunity, expecting todouble the size of the team by theend of 2019, split between Denver andCambridge. To maximise sales activity
and results, we have created dedicatedtelecommunications and utilities sales
teams and in early 2019 added two sales
people in Europe and three in the US.
Resetting the budget for 2019 to include
the expanded organisation, the flexible
support environment and additionallythe corporate costs, such as insurance,that couldn’t be shared with thediscontinued operations means that
operational expenses are expected toincrease by approximately £2 million
over 2018’s figures.

We believe – and our customers tell
us – that our technology is compellingin its ability to accelerate productivity
and collaboration across enterpriseplanning, design, construction andmaintenance processes. We know
we deliver clear business value toour customers as they upgrade andexpand their network assets and thatlarge swathes of our target market areseriously considering what geospatial
technology to adopt for the next
20 years. I can confidently speak forthe entire team when I say that weare all extremely positive about the
future of IQGeo.

Richard Petti

Chief Executive Officer
10 April 2019

Continued operations

Total revenue£10.0m18£10.0m17£16.5m
£17.4m16

myWorld product revenue

£4.7m

£4.7m

18
17

£5.8m

16

£3.8m

Gross margin

44%
18
17

44%
39%

16

36%

Net cash balance£30.9m
18
17

£6.6m

16

£0.2m

£30.9m

IQGeo Group plc Annual Report 2018

9

FINANCIAL STATEMENTS

Reorganising for success
The creation of the new IQGeo has been
well received by employees and has
involved a substantial amount of internal
work to deliver new subscription-based
IT systems, updated internal processes
and a move to serviced offices in
Cambridge, Frankfurt and Tokyo.

Thanks to the hard work of ourteam, we have been able to make asmooth transition and communicatedfrequently through videos, emails andface-to-face meetings. The result has
been to create a strong, shared group
ethos. We are now a smaller and more
focused team that is communicating
more effectively than in the past andthis is a positive culture change thatwill be essential for growth. The new
IQGeo emerges at a very interestingtime for the geospatial market inutilities and telecommunications.

CORPORATE GOVERNANCE

In 2019, we anticipate the managed
decline of the third party geospatialservices revenue to continue, falling tominimal levels by the end of 2019, but
being replaced by growth in, higher
margin, myWorld revenues. In thelonger-term, we anticipate revenues
accelerating underpinned by increased
recurring subscriptions in myWorld. ​​​​​

Case study – Cable One

Enhancing thecustomer experience
myWorld gives Cable One
the ability to rollout futurecable networks across
21 American states.
Phoenix, Arizona

10

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT“

myWorld and Capture give us a simple tool to assist
with network planning and auditing that is easy to use
in the field. Over the 40 plus years that I have spentin the field, I have never found a solution that cando this, not until I found myWorld. We were looking
for something simple to help us get the everyday
work done, while also keeping our network maps as
accurate as possible.
I truly believe that this is the right tool for Cable
One. myWorld and the Capture tool are going toallow me to keep my systems and the network
updated, giving us the availability to build our
future networks.”
Dick Rohm,

Director of Engineering, West​at Cable One

Creating business value
Cable One needed a solution toenhance its as-built data, accelerate
time to market and reduce MeanTime to Repair (MTTR) to improvethe customer experience.
In early 2018 Cable One started
using the myWorld platform.
By creating a single architecture
for geospatial-based applications tomanage Cable One’s geographicallydispersed network assets, myWorld
quickly improved the visibility andquality of outside plant data for
its engineering, planning andfield operations.

myWorld Capture has enabled theCable One field staff and contractors
to deliver high quality walkout surveys,
same day construction as-builts,
red-lines and data corrections fromany mobile device, with a supporting
secure offline data synchronisationthat can scale to thousands of users.
Future plans for myWorld
myWorld will become the complete
GIS platform for Cable One, including
design, project tracking and developing
applications for other business units tomanage network assets.

7th

Largest cable company in the
United States

800,000+
Customers

IQGeo Group plc Annual Report 201811

Our markets

A digital transformation journey
The telecommunications and utilities industries targeted by
IQGeo are undergoing tremendous change driven by economic,
consumer and technological factors. At the root of this change
is increased competition for existing customers, creating constantpressure to provide higher quality, more reliable services.
Remaining competitive means delivering new technology likefibre, 5G and smart meters that demand the efficient planning,
construction and maintenance of major network investments.
Industry transformation drivers• Increasing regulatory oversight.

• Increasing frequency and severity of national disasters.
• Increasing customer expectations.
• Increasing competition from innovative players.
This perfect storm of technology rollout, increasing competitive
pressure, greater regulatory oversights and more frequentand severe natural disasters creates a compelling market
opportunity for IQGeo’s software solutions. To support
essential digital transformation initiatives, more sophisticatedtechnology is being pushed further to the edge of the network,
creating greater data gaps between field operation andlegacy centralised management systems.

The IQGeo solution
IQGeo software creates a geo operations hub that reflects
each customer’s environment, providing a mission-criticalresource for telecommunication and utility operators to takecontrol of the new realities they face. Unlike many of ourcompetitors, the IQGeo software has been built exclusively
for the needs of these industries; its “mobile first” platform
effectively enables them to manage assets at the veryedge of a network and our single common architecturedelivers a highly flexible and extendable solution.

12

IQGeo Group plc Annual Report 2018

The GIS crossroads

In early 2019 IQGeo announced plans for the developmentof a next generation geospatial platform that is tightly
integrated with the existing myWorld platform and applications.
The timing of this announcement reflects major changes
happening in the traditional Geographic Information
Systems (GIS) market.
To date, network operators have used large, complex
and centralised GIS environments as their primary “systemof record” but now struggle with these environments as evergreater data gaps are emerging between siloed systems
and processes. Two of the largest GIS players are now
requiring that their customers undertake major system
upgrades, typically costing millions of dollars.

The IQGeo solution
Our next generation geospatial platform will disrupt thecomplex, legacy GIS status quo, allowing network operators
to reimagine their operational system strategy. Our new
platform will provide a much more agile, integrated andcost-effective solution for our customers and an excellent
mid to long-term opportunity for our business.

STRATEGIC REPORT

Market stats

CAGR broadband fibre subscribers 2015–2020

Total worldwide 5G small cell units 2015-2024 (000)

35

5,000

20
15

12.1%

13.5%

10

0
2017

2018

2019

2020

2021

2022

2023

2024

As of November 2018. Includes small cells units only. Sources: Industry
data and Kagan estimates. Kagan, a media research group within the
TMT offering of S&P Global Market Intelligence. © 2018 S&P Global
Market Intelligence. All rights reserved.

Utilities
Utilities are making major investments in digital infrastructurethat enables high value services and operational automation,
including new technology such as smart meters.

Smart Meters, Global Market Size 2012, 2017, 2022
150

$10.50bn

120$7.07bn90
60$4.02bn
63.4

Source: Deloitte 2019 power and utilities industry outlook.

Western Europe
summary

88.2

14% increase in capital expenditure for the top 50 electricity
and gas companies in North America to a record $133.8 billion

Asia Pacificsummary

135.4$133.8 billion

North America Eastern Europe
summarysummary

Source: Industry data and Kagan estimates. © 2018 S&P Global
Market Intelligence.

Million units

2016

23.5%

22.2%

FINANCIAL STATEMENTS

4,388

4,224

4,403

3,975

1,567

2015

25

5

719

434

0

3,571

2,611

2,000

2,976

3,000

Growth percentage

30

4,000

1,000

CORPORATE GOVERNANCE

Telecommunications
Investment in technology deployment to the edge of the network continues to growas subscriber number for cable and fibre connections remains healthy.

30
0

“

2012

2017

2022‘e’Source: GlobalData, Technology Intelligence Center.

Technology is expanding opportunities to improve operations.
While customer-interface technologies may be the most visible
aspect of technological enhancement of the utility business,they are far from the only aspect. The technology landscapefor utilities, from generation right through to the customer,
has probably never been richer.”
Scott Smith, US Power & Utilities leader, Deloitte LLP

IQGeo Group plc Annual Report 201813

Our products

Integrating complex field operations
and office processes
PeopleReal-time
Crew & Asset
LocationEnterprise
Resource
Planning

Workforce
Management
SystemCustomer
RelationshipManagement

Inspections &Compliance

Usability

myWorld

Data

Geo operations hub
Geographical
Information
SystemConstruction&
MaintenanceIntegration

IIoT &
Network
Management

Planning &DesignField Data
CaptureMobility

IQGeo product offering
IQGeo’s mobile geospatial software solutions accelerate
productivity and collaboration across enterprise planning,
design, construction and maintenance processes for thetelecommunications and utilities industries.
Our flagship myWorld software is at the heart of ourend-to-end mobile geospatial solution strategy. IQGeo
customers use the software to create an easy-to-use geo
operations hub that unlocks the right information at the righttime, accessing data previously hidden away in complex
and disconnected back end systems.
The ability to capture and visualise field information is
mission critical to efficient operations and this is enabled
by our strong mobile capabilities, which are second to none.
myWorld captures field operations information that waspreviously lost, improving data quality for rapid andinformed decision making.
More than 35,000 users from 45 operators and partners
around the globe rely on myWorld software to easily visualise
and manage their operational assets from anywhere, on
any device, online or offline, in the office or in the field.
With our design principles of mobility, usability and integration,
we put our customers in control of their business-criticalprocesses. Our software reduces the cost of field maintenanceand construction and enables our customers to deliver highvalue services that increase customer satisfaction andreduces churn.

14

IQGeo Group plc Annual Report 2018

Things2018 applications
IQGeo offers a range of customer-led applications
that are tightly integrated with the myWorld platform,
supporting each customer’s unique geo operation hub:• Capture — enables field staff and contractors todeliver high quality, same day construction as-builts,
red-lines and data corrections from any mobile device.
• Damage Assessment — improves overall fieldcommunication as well as the speed and qualityof information collected during storms or
emergency events.
• Fibre Planning — the FTTX and N+0 planningand design solution that accelerates time to market
for next generation fibre network projects.
• Inspection & Survey — transforms infrastructurecompanies’ ability to increase field inspection teamproductivity, eliminating regulatory penalties and fines.
• myWorld for Salesforce — gives sales, customer
service and operations staff self-service access toaccurate and reliable network engineering, capacity
and serviceability information.
• Network Insight — delivers an array of simple-to-use
data analytics and visualisation tools that enable
rapid investigation of reliability issues on network
to help determine the root cause of problems andoptimise maintenance.

STRATEGIC REPORT

Platform advantages

Mobile first architecture• View and update data anywhere work is done

Enable• Innovative digital transformation• Rapid technology and network rollout• Higher margin business models

Increase• Service reliability• Network uptime• Customer satisfaction• Operational safety

FINANCIAL STATEMENTS

One common platform• Single flexible development environment

CORPORATE GOVERNANCE

Built for infrastructure networks• Reality-centric and not map centricBusiness advantages

Decrease• Design, build and maintenance costs• Field response times• Cost of ownership for IT systems• Operational and IT risks

Next generation geospatial platform
In early 2019, IQGeo announced development plans for anext generation geospatial platform. Traditional GIS havebeen with us for more than 30 years and these legacy
systems now struggle to deliver the technology, agility
and cost-effective economics that are essential for
network digital transformation.
IQGeo’s next generation geospatial platform is designed
to address the realities of our customers’ rapidly changing
ecosystem. Built on our proven mobile myWorld platform,
its cost-effective and innovative architecture is challenging
the conventional role and capabilities of expensive, complex
GIS environments.
Organisations can take control of their operational assets bycreating, capturing and editing their geospatial data on any
mobile device, online or offline, in the field or in the office. Its
mobile first approach is radically different from any of theofferings from traditional GIS vendors. The future is all about
updating network asset data immediately as work happensin the field, in increasingly automated ways.

2019 applications
Based on direct feedback from our customers and prospects,
IQGeo will also be extending its suite of applications in 2019.
New applications will focus on three areas of planning,
workflow and field and inspection.
• Construction Manager — controls the construction
programme by giving field staff what they need to
get the job done right, first time.
• Operations Manager — simplifies field and network
operations to accelerate repairs and reduce rework.
• Serviceability Manager — project managers canquickly create estimates for high volume simple
projects, using different optimisation models.

IQGeo Group plc Annual Report 201815

Case study – Unitil

Increasing operational
efficiencies
myWorld Inspection & Survey
improves data collection for
Unitil to meet complianceand safety regulations.

Hampton, New Hampshire

16

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT“

After adopting the myWorld Inspection and Survey
product, Unitil has increased operational efficiencies
and has been able to produce verifiable, traceable
and complete audit records in support of mobile
leak survey activities. We look forward to expanding
the use of the myWorld Inspection and Survey
product to other operational areas of the business.
I am excited about our continued partnership.”
Stacey Kilroy, Sr.

Integrity Management and Pipeline Safety Coordinator at Unitil

Creating business value
Unitil, as with all utility companies,
faces a wealth of compliance andsafety regulation. It has an affirmative
obligation to make its systems safer.
To do so it must prioritise risks, which
need to be supported by accurate
data. This data is then used to help
Unitil demonstrate system
improvements over time.
In 2016, Unitil started deploymentof myWorld Inspection & Survey toconduct driving surveys using laptops,
replacing paper-based systems andproviding a simple, clear audit trailthat allows field teams to see whichareas have been surveyed. myWorld
delivers asset data digitally to users in
the field, which has increased accuracy
and enabled them to identify the exact
location of facilities.
myWorld has also enabled Unitil’s
supervisors to easily generatereports of current and historic activity,
including print maps where required.
It also supports walking surveys andinspections such as critical valve,meter and atmospheric corrosion.

2011

2016

Objectives set:

Started working
with myWorld• Increase the amountof collective data on
new installation• Fill in the data gaps
on existing assets• Real time
data collection• Improve leakmanagement program• Ability to respondto field observations
more quickly

Sep 2017

Awarded “NGA
Excellence in Safety
and Health Recognition
Program” in recognitionof Unitil’s safety programthat positively impacted
the lives of employees,
customers or thegeneral public

105,600
Electric customers

82,700Natural gas customers

Dec 2017

Achieved all
operational goals(set in 2011)2018

myWorld used
to survey Unitil’s
distribution network
post-earthquakes toensure its integrity:• February 15, 2018,
earthquake in New
Hampshire• December 21, 2018,
earthquake in
Gardner,
Massachusetts• Aid in compliance

IQGeo Group plc Annual Report 201817

Our business model and strategy

Transition to subscription revenue
IQGeo is transitioning from a perpetual to a
subscription-based software licensing model tocreate a more predictable, recurring revenue stream.

Our subscription gearing model
In 2019 the IQGeo sales teamis quoting subscription pricing
for all new project opportunities.
Under this model, the customers’recurring revenue ‘shifts up a gear’
each time new users, capabilities
and applications are added totheir environment.
Perpetual software licensing
agreements with existing customers
will be retained and they will continue
to be charged an annual recurring
maintenance fee. However, the additionof certain new capabilities andapplications will only be available
through a subscription agreement.

Subscription revenue focus
IQGeo provides a value-based software
subscription model for its customers.
This supports a very cost-effective entry point
to encourage new project deployment, while
generating a predictable revenue stream.

18

IQGeo Group plc Annual Report 2018

Perpetual
One-time, perpetualuse software licence.

Services
Project-based revenue
generated from services
related to software products.

Maintenance
Annual maintenanceand support for perpetual
licence contracts.

Subscription
Annual recurring
right-to-use software
licence fee.

STRATEGIC REPORTRevenue evolution
CORPORATE GOVERNANCE

While we are transitioning to a subscription model for our enterprise software, we will continue to have a mixof non‑recurring and recurring revenue. The business objective is to transition, over time, as much non-recurring
revenue as possible to recurring revenue.
New subscription-only software capabilities will include the addition of myWorld data sources and support forincreased “burst” user licensing during natural disasters such as hurricanes and snow storms.

FINANCIAL STATEMENTS

Non-recurring revenue
Perpetual
Perpetual licences will continue with existing customer
contracts. This will only be possible for new customers
in special cases with executive approval.

Services
Service revenue generated from projects will continue,
focused less on third party products and more on services
for IQGeo software.

Recurring revenue
Subscriptions
All new customer proposals incorporate a software
subscription revenue model.

Maintenance
Recurring maintenanceand support revenue with
continue for customers
with existing perpetual
licence contracts.

IQGeo Group plc Annual Report 201819

Key performance indicators (KPIs)

KPIs of total Group operations

Recurring M&S revenues

Software revenues

£2.5m

£3.8m
£2.5m

18
17

£1.8m

16

Own product revenue

18£20.3m
£3.8m

17

£1.4m

16

£3.9m
£3.2m

18

£20.3m17£16.6m16£12.9mTransformation of the Group intoa software-first business with strong
customer retention has resulted in a
35% increase in recurring M&S revenues.

Software revenues remained consistent
with the prior year with the timing ofpipeline conversion delaying key deals
into 2019.

The Group has been successful
in delivering its strategy of growing
higher margin own product revenue,
achieving an increase of 22% in 2018.

Total revenue

Gross margin

Profit/(loss) for the year

£25.5m18

49%£25.5m£19.8m

18

49%

18

17

£27.3m1740%

17 £(3.1)m

16£26.5m16

39%

16 £(5.3)m

Total revenue decreased by 6% withincreases in own product revenues
largely offsetting the managed decline
in geospatial services associated withthird party products.

Employee headcount at 31 December

120
18

120

17

138

16

142

2018 headcount of 120 includes
61 employees of the RTLS SmartSpacebusiness unit.

20

IQGeo Group plc Annual Report 2018

Gross profit margin increases havebeen delivered through significant
growth in own product revenues.

£19.8mThe 2018 profit includes the profit
on disposal of the RTLS SmartSpacebusiness unit.

STRATEGIC REPORTKPIs of continuing operations

myWorld software revenues

£0.9m
17

£0.8m

£1.4m

18
16

£4.7m

£4.7m

18

17

£0.5m

myWorld product revenue

£2.6m
£1.0m

17
16

£5.8m
£3.8m

Recurring M&S revenues haveincreased by 22% due to a higher
number of software users andcontinued customer retention.

Software revenues decreased by 46%
due to the timing of pipeline conversion.
The Group plans to mitigate the risk
of future revenue volatility throughimproving its business model to growrecurring revenues.

myWorld product revenue decreased
by 18% with the decline in myWorldsoftware revenue partially offset by
the increase in recurring revenues.

Gross margin

Adjusted EBITDA

Net cash44%£(1.1)m

18

44%

17
16

16

Gross profit margin increases are dueto the change in revenue mix between
higher margin own product revenue
and the lower profit margin Geospatialservices from third party products.

£30.9m£(1.1)m 18
17

39%
36%

FINANCIAL STATEMENTS

£0.9m

18
16

£1.4m

CORPORATE GOVERNANCE

Recurring M&S revenues

18
£1.8m
£2.4m

Adjusted EBITDA from continuing
operations has declined due to a
reduction in total revenue and increased
investment during 2018 in sales andproduct development which is anticipatedto generate growth in future periods.

17£30.9m£6.6m

16 £0.2m

Net cash increased to £30.9 million
following the successful sale of the
RTLS SmartSpace business unit
and the repayment of all bank debt.

Employee headcount at 31 December

59
18

59

17

83

16

79

As the business shifts from lower
profit margin service revenues
to having a greater mix of higher
profit margin product revenues,
the headcount requirementsof the business have reduced.

IQGeo Group plc Annual Report 2018

21

Chief Financial Officer’s statement

On 31 December 2018 the Group disposed of its RTLS SmartSpace business unit
for a consideration of up to £35.0 million with £30.0 million paid in cash on completion(subject to adjustments for net debt and net working capital) in addition to a £2.0 million
rollover investment and further £3.0 million earn-out consideration. The earn-out
consideration is dependent on milestones set for the revenues achieved in 2018 and2019, for which the first milestone was not met as outlined in note 6 of the financial
statements. The transaction price reflected the 44% revenue growth achieved
during the 2018 period together with the future anticipated growth of the business.
The delivery of the software strategy that the Board first implemented in 2016 led
to significant improvements in gross profit margin and profitability during 2018.
The trading performance of the RTLS SmartSpace business is summarised as follows:

Tim Gingell

Chief Financial Officer“

The successful
sale of the RTLS
SmartSpace division
will allow the Groupto focus on myWorld
product growth.”

Revenue of discontinued operations

Total revenue
Gross profit
Gross margin

2018
£’000

2017
£’000

Year onyear growth

15,5198,117
52%

10,796
4,486
42%

44%
81%
10%

The successful sale of the RTLS SmartSpace business unit enables the remaining
IQGeo Group to be a focused and well-funded geospatial software operation
working globally with telecommunications and utilities industries. Continued investment
in myWorld products, building an industry-leading offering, alongside the developmentof sales channels, is anticipated to increase recurring own product revenues andgross profit in future periods.
Revenue
The continuing operations of the Group are managed as a single Geospatial
division. The Geospatial division is focused on growing own product myWorld
revenues which include selling perpetual software licences, generating recurring
revenues from software subscription products and maintenance and support
contracts, and delivering consultancy services revenues. Additionally, the Geospatial
division has a legacy operation that provides lower margin consultancy services
connected to third party products which have declined in the current period andare expected to decline in future periods.
Revenue composition by revenue stream is summarised in the table below:
Revenue of continuing operations

Software
Maintenance and support
Services
Total revenue generated from
myWorld products
Geospatial services fromthird‑party products
Total revenue

2018
£’000

% of
total revenue

2017
£’000

% of
total revenue

Year onyear growth

1,395
918
2,424

14%
9%
24%

2,575
750
2,459

16%
5%
15%

(46)%
22%
(1)%

4,737

47%

5,784

35%

(18)%

5,242
9,979

53%
100%

10,675
16,459

65%
100%

(51)%
(39)%

The Group has shown growth in recurring maintenance and support contractsof 22%. Sales of perpetual software licences have declined during the 2018 period
as the division has remained reliant on the timing of completion of a small numberof significant orders. Going forward, the Group plans to evolve its business model
to grow recurring revenues beyond maintenance and support contracts withadditional subscription-based software sales contracts. This will provide greater
stability to income and operations in future periods.

22

IQGeo Group plc Annual Report 2018

STRATEGIC REPORTCORPORATE GOVERNANCE

OrdersTotal bookings of new Geospatial customer orders in 2018 decreased by
31% to £8.2 million (2017: £12.0 million). £3.4 million of this related to myWorld(2017: £6.8 million) and £4.8 million to third party geospatial services(2017: £5.2 million).
The order book backlog as at 31 December 2018 was £3.7 million (2017: £5.1 million),most of which will be recognised during 2019. £1.6 million of this related tomyWorld (2017: £2.9 million) and £2.1 million to third party Geospatial Services(2017: £2.2 million).

Geospatial division

2018
£’000

Gross
margin %

2017
£’000

Gross
margin %Gross margin
movement

4,380

44%

6,371

39%

5%

FINANCIAL STATEMENTS

Gross profit
Gross profit of continuing operations

The gross margin % of the Geospatial division has increased during 2018 due tothe increase in higher profit margin recurring maintenance and support revenues
and the managed reduction in lower profit margin service revenues associatedwith third party products.
Operating expenses and adjusted EBITDA from continuing operations
Operating expenses were £6.0 million (2017: £5.9 million) and are summarised
as follows:
Other operating expenses
Depreciation
Amortisation and impairment
Share option expense
Unrealised foreign exchange on intercompany trading balances
Non-recurring items
Total operating expense

2018
£’000

2017
£’000

5,446
273
774
248
(151)
(619)
5,971

4,602
46
807
237
252
—
5,944

Other operating expenses of the Group include sales and product development
costs directly attributable to the Geospatial division. Other operating costs haveincreased during 2018 due to investment in sales headcount to deliver future growthand investment in product engineering, in line with the strategy outlined last year.
The other operating costs reported above include an allocation of the central
administration and marketing costs of the Group which supported both the
Geospatial and discontinued RTLS SmartSpace divisions during 2018 and 2017.
Accordingly, the figures reported above do not provide a realistic cost base tosupport the continuing operations going forward and other operating costs will
be expected to increase in future periods. Following the separation, the Groupwill maintain flexibility within its cost base and these measures will include utilisingshort-term serviced office leases and a subscription-based IT environment. It is
anticipated that other operating expenses will increase by approximately £2 million
in 2019 from the 2018 expenses reported above. There will be a reduction in capital
expenditure as a result of this strategy.
Non-recurring items relates to the profit on disposal of the third party geospatialservices business of our Japanese subsidiary which occurred on 30 March 2018.
Strategically this sale was part of the managed decline of the Group’s third party
geospatial services business.

IQGeo Group plc Annual Report 201823

Chief Financial Officer’s statement continued

Operating expenses and adjusted
EBITDA from continuing operations
continued
Adjusted EBITDA from continuing
operations excludes amortisation andimpairment, depreciation, share option
expense, foreign exchange gains/losses
on intercompany trading balances andnon-recurring items and is reported as it
reflects the performance of the Group.
Adjusted EBITDA for the period was£1.1 million loss (2017: £1.8 million profit).
The operating loss for the period fromcontinuing operations was £1.6 million(2017: £0.4 million profit).
EPS and dividends
Adjusted diluted loss per share fromcontinuing operations was 3.0 pence(2017: 1.6 pence gain). Reported basic
and diluted loss per share fromcontinuing operations was 2.2 pence(2017: 0.8 pence gain). The Board does
not feel it appropriate at this time tocommence paying dividends.
Impact of IFRS 15 and IFRS 16
IFRS 15 Revenue from Contracts
with Customers has replaced IAS 18
Revenue. The new standard has been
adopted from 1 January 2018. IFRS 15
introduces a number of new concepts
and requirements, and also provides
guidance and clarification on
existing practice.
IFRS 16 Leases will replace IAS 17
and three related interpretations.
Leases will be recorded on thestatement of financial position in
the form of a right-of-use asset anda lease liability. The consolidated
statement of comprehensive income
is impacted through reduced operating
expenses, and higher depreciationand finance costs. The new standard
is applicable from 1 January 2019 but
the Group adopted the standard from
1 January 2018.

24

IQGeo Group plc Annual Report 2018

The impact of the adoption of IFRS 15
and IFRS 16 on the results for the period
ended 31 December 2018 has been
disclosed in detail within note 2 to thefinancial statements. In summary,implementation of IFRS 15 has had
minimal revenue impact, whilst the
impact of IFRS 16 has been to increaseadjusted EBITDA from continuing
operations by £0.2 million for theyear ended 31 December 2018.
Discontinued operations
The profit recognised during 2018from discontinued operations is£21.5 million (2017: £3.5 million loss).
The 2018 results of the RTLS SmartSpacebusiness reflected significant growthwith revenues increasing by 44% fromthe prior period; however, the firstmilestone of the earn-out was notachieved due to the timing of certain
customer orders. The full value of theearn-out would be achieved if the2019 revenue for the RTLS SmartSpacebusiness exceeds £22.9 million.
While the achievement of anadditional £3.0 million earn-out cash
consideration remains possible, nocontingent asset has been recognised
within the statement of financial position
as at 31 December 2018. Management
believes that this is appropriate asachievement of the milestones isdependent on the new management
team’s strategy and performance,over which IQGeo has no influence
as a non-controlling shareholder.
The disposal of the RTLS SmartSpacebusiness unit followed reorganisation
involving the creation of new legal
entities within the UK, USA, Canada,
Germany and Japan regions.
The Group completed a reorganisation
whereby the trade and assets of the
RTLS SmartSpace and Geospatial
business units were separated into
different legal entities in each country.
The restructured RTLS SmartSpace
group of legal entities, headed by
Ubisense Limited, was disposed of on

31 December 2018. Central functions
such as finance and IT were allocatedbetween the RTLS SmartSpace andGeospatial legal entities so that bothdivisions could continue trading
post-disposal. This was supported
through a transition services
agreement between IQGeo andthe discontinued business.
Disposal of Japanese geospatialservices business
On 30 March 2018, the Group
concluded the sale of its Japanese
third party geospatial services businessincluding the Geoplan brand name fora gross consideration of JPY 100 million(£0.7 million). This disposal was consistent
with the Group’s strategy to focus on
higher margin own product revenues
while managing a decline in lower
margin services associated withthird‑party products.
The Japan disposal has not been
included within discontinued operations
as geospatial services connected tothird party products will continue in the
short-term future within our North America
operations, and the net assets disposedof under this transaction were notsignificant to the Group.
Alongside this transaction, the Groupacquired the 23% non-controlling interestof Ubisense Japan K.K. in March 2018.
The acquisition of this non‑controllinginterest gave the Group 100% ownershipof its remaining Japanese operations
prior to its inclusion as part of the saleof the RTLS SmartSpace business unit.
Consolidated statementof financial position
On 31 December 2018 the Group received
a net sum of £27.1 million cash considerationfrom the sale of the RTLS SmartSpacebusiness, after settlement of all outstanding
debt of the Group, including the balanceon the HSBC loan of £1.8 million.

STRATEGIC REPORT

Non-current assets
Total non-current assets were £3.6 million(2017: £3.5 million).

Following the sale of the RTLS
SmartSpace business the working
capital requirements of the Group havesignificantly decreased. Trade receivables
net of provisions decreased to £1.5 million(2017: £6.2 million). Amounts recoverable
on contracts totalled £0.6 million(2017: £2.7 million) which are generated
from services contracts or end of perioddeliveries, and are then invoiced in
the following month or as therelevant milestone is reached.
Hardware inventories decreased to£nil (2017: £1.5 million) as the continuing
operations do not involve hardware.

Capitalised development costs
represent the key intangible assetsof the Group being investment in
IQGeo’s own products which will support
the future growth of the business.
Capitalised development costs at
31 December 2018 were £1.2 million(2017: £2.7 million) with the reduction
during the year being due to the disposalof the RTLS SmartSpace intellectual
property. The remaining book value
relates solely to myWorld products.
The appropriateness of theassessment of the useful life of current
development projects was reviewed,
but no change has been made to thecurrent three-year amortisation period,
due to the fast-moving nature of thetechnology. The recoverable amountof the capitalised development costs
is supported through the anticipatedgrowth in revenues of the
myWorld products.
As a result of the early adoptionof IFRS 16, leases greater thantwelve months have been recordedon the statement of financial positionin the form of a right-of-use asset
with £0.3 million recognised as
at 31 December 2018 (2017: £nil).
The consideration for disposal of the
RTLS SmartSpace business included£2 million in a rollover investment into
the sold business and accordingly
an investment asset of £2 million isrecognised as at 31 December 2018(2017: £nil).

Total assets
Total assets increased to £38.1 million(2017: £24.6 million) which includes£30.9 million of cash.
Current liabilities
Total current liabilities decreased
to £5.5 million (2017: £10.0 million).
Trade payables decreased to£2.2 million (2017: £3.0 million).
Non-current liabilities
Total non-current liabilities decreased to£0.3 million (2017: £2.5 million) following
the repayment of the HSBC loan(£1.8 million) on 31 December 2018.

Operating cash flows from operating
activities after adjusting for working
capital and tax was £0.9 million inflow(2017: £3.6 million inflow).
The Group had investment inflowsof £24.3 million (2017: £2.1 million
outflow), which is largely made up
of cash received following the sale of
the RTLS SmartSpace business unit.
Cash outflows from financing activities
were £3.5 million (2017: £4.3 million
inflows). This included repaymentof the HSBC loan of £2.5 million
during 2018.
Return to shareholders
Following the completion of the RTLS
SmartSpace business unit disposal,
the Board intends to return some of theexcess funds to shareholders (subject
to complying with all relevant law
and regulation in effecting such return
which is likely to include a capitalreorganisation). Further details of theamount and timing of the return toshareholders will be made in due course.

Tim Gingell

Chief Financial Officer
10 April 2019

Net assets
Net assets increased to £32.3 million(2017: £12.1 million) following the disposalof the RTLS SmartSpace business.
Cash and cash flow
Operating cash flow before working
capital movement was £0.4 million
inflow (2017: £0.4 million inflow).

IQGeo Group plc Annual Report 201825

FINANCIAL STATEMENTS

Current assets
Total current assets increased to £34.5 million(2017: £21.1 million) which is driven bya cash increase to £30.9 million(2017: £9.1 million).

CORPORATE GOVERNANCE

As at 31 December 2018, the Group hada cash position of £30.9 million with nodebt (2017: net cash position of £6.6 million
being £9.1 million of cash and £2.5 million
of debt).

Principal risks and uncertainties

Key
Increase
Decrease
No change
New

The Directors of IQGeo Group plc confirm that we have carried out a detailed assessment of the principal risks facing
the Company, including those that would threaten its business model, future performance, solvency or liquidity. Risks that
present a potential material impact are identified and governed in accordance with our risk management policies.
Effective risk management is critical to the achievement of the Group’s long-term growth. The Board has overall
accountability for ensuring that risk is effectively managed across the Group through the implementation and reviewof the Group’s risk processes.
The principal risks listed in the table are those we believe could cause our results to differ materially from expected
and historical results. They are also the risks that may impact the achievement of the Group’s strategic priorities.

Strategic risks
Principal risk and impact

Mitigation of risk

Growth management
Near-term expansion is expected to develop
existing markets and expand into new markets.
The risks associated with growth include thedelivery of market penetration through theconversion of leads to sales, and control ofincreases in fixed operating costs to support
revenue growth. If the Group is unable tomanage expansion effectively, its businessand financial results could suffer.

• Close monitoring of business development
strategy and regular reviews of the sales
opportunity pipeline at Board meetings.
• Head office support of regional officedevelopment in the event of accelerated
regional growth.
• Development of systems and processes thatcan scale with the business while maintaining
good financial management.

Dependence on key customers• The Group’s management performs regularreviews of the opportunity pipeline, including
The Group has a concentrated customer base,critical stages to complete the larger deals
many of which are substantially larger enterprises
with status reported at Board meetings.
than the Group. The Group is reliant on significant
projects with its key customers to deliver financial • Increase the breadth of the opportunity pipeline
results. The conversion of opportunities to signed
through recruitment of more quota-carrying
contracts and then the subsequent timing of thesales and pre-sales personnel.
projects are not fully under the control of the Group.
• The Group continues to invest in the key
customer relationships that it has successfully
retained over many years, while also
maintaining a strategy to extend and diversify
its customer base.
• Development of recurring revenue streams
including M&S and subscription services.
Technological risk
The Group operates in an industry wherecompetitive advantage is heavily dependent
on technology. Technological development may
reduce the importance of the Group’s functionin the market.

• Regular monitoring of the industry and advances
through participation in research forums.
• Review of the myWorld product roadmap
by the Board to ensure competitiveness.
• Continued investment in technologies thatmeet customer needs.
• Monitoring of planned R&D to ensure
resources are allocated to deliver advancesthat are aligned to the Company strategy.

26

IQGeo Group plc Annual Report 2018

Change in the year

STRATEGIC REPORTKey
Increase
Decrease
No change
New

Operational risks
Mitigation of risk

Change in the year

Customer satisfaction and retention
Barriers to entry into the market are highwith proof of delivery in customer environments
essential. The Group operates in a market witha small number of significant customers andreputational damage through poor customer
satisfaction could be significant. Large customers
generate a high proportion of recurring businessas well as upsell and cross-sell opportunities.
These customers also provide solution references
and often trial new products or updates toexisting ones.

• Maintain regular communications
with customers.
• Ensure appropriate level of resources
are applied to key customer accounts.
• Deal with issues quickly through a clear
escalation path.

FINANCIAL STATEMENTS

Additionally, poor customer satisfaction could
result in delays in the timing of customer
payments which would reduce the working
capital available to the Group.
Staff recruitment and retention
The Group’s success is substantially dependent
upon recruiting, retaining and incentivising senior
management and key technically skilled employees,
the loss of whom could have an adverse impact
on the performance of the business.

CORPORATE GOVERNANCE

Principal risk and impact• The Group has in place appropriate incentive
structures to attract and retain the calibre of
employees necessary to ensure the efficientdevelopment and management of the Group.
• The Group has implemented Employer of
Choice initiatives including career planningand organisational development.

IQGeo Group plc Annual Report 201827

Principal risks and uncertainties continued

Key
Increase
Decrease
No change
New

Operational risks continued
Principal risk and impact

Mitigation of risk

Legal and regulatory breaches
The Group is required to comply with local laws,
regulations and legislation in each jurisdiction inwhich it operates. These include compliance withfinancial reporting and conduct requirements
and health and safety, data protection andanti‑bribery rules.

• The Group monitors new developments taking
input from local advisers.
• The Group regularly reviews its processes toensure that the risk of default is minimised.

Failure to comply with local laws may resultin the cessation of the ability to trade in thatjurisdiction, fines or the allocation of resources
to perform corrective actions.
International trade
The UK is anticipated to leave the European
Union. The risks associated with Brexit include a
potential increase in the level of market volatility
and barriers to trade between the UK and the EU
following the end of any transition arrangementsthat come into force post-Brexit, and may impact
the investment plans of our customers.
The Group is exposed to economic downturn
within the markets in which it operates.
Digital infrastructure and cyber security
Breaches of the Group’s digital security throughcyber attacks or otherwise, or failure of the Group’s
digital infrastructure could seriously disrupt
operations, including the provision of customer
services, and result in the loss or misuse of sensitive
information, legal or regulatory breaches resulting
in potential liability and reputational damage
among the customer base leading to a decline
in revenues.

28

IQGeo Group plc Annual Report 2018

• European customers enter into contracts with
IQGeo GmbH, a Germany-based subsidiaryof IQGeo Group plc.
• The Group’s customer sales are spread acrossmultiple territories which may partially mitigate
against a downturn in any one region.
• The nature of the continuing operations
following the disposal of the RTLS SmartSpacebusiness unit will reduce the impact of Brexit
on the Group.
• The Group continues to invest in resources inenhancing its network resilience and defences,through monitoring and reviewing the incident
response processes to mitigate the impact of asecurity breach.
• Short and medium-term cyber security
enhancement plans are regularly reviewed
by the Board.

Change in the year

STRATEGIC REPORTKey
Increase
Decrease
No change
New

Financial risks
Change in the year

RTLS SmartSpace disposal warranties
On 31 December, the Group disposed of its
RTLS SmartSpace business. The sale agreement
included a number of warranties which would
allow the new owners of the RTLS SmartSpacebusiness to make a claim against the Group,
should additional liabilities crystallise at alater date.

• The Group has worked extensively withexternal advisers in concluding the transaction
to minimise the extent of the warranties.

Taxation
The Group has operations in multiple countries
and is exposed to international tax laws.
Changes to taxation legislation could have an
adverse impact on the working capital andprofitability of the Group.

• The Group reviews local complianceand upcoming changes to legislation
with its advisers and continues to update
forecasts accordingly.

Foreign exchange risk
The Group’s international operations expose it to
the effect of changes in foreign currency exchange
rates. A major proportion of the Group’s receivables
and payables are currently denominated in
Canadian dollars and US dollars.

• The Group relies on a partial natural hedge
of Canadian Dollar, US Dollar, Euro andJapanese Yen receivables being in the same
currency as the local operation’s payables.

Financial reporting risk
In preparing the financial statements, theGroup makes accounting estimates that havea significant risk of causing material adjustment
to the carrying amounts of assets and liabilities
within the next financial year. These judgments
are detailed further in note 4 to the financial
statements and include revenue recognition
and myWorld development costs.

• In forming our accounting judgments,
management discusses estimates with internal
experts within the IQGeo Group to ensure all
relevant facts are understood.

FINANCIAL STATEMENTS

Mitigation of risk

• The Group’s working capital is forecast
and monitored in the local currency of eachsubsidiary allowing the foreign currency
exposure across the Group to be reviewed.

• The underlying fact pattern and conclusions
reached in making accounting judgments
are discussed in detail with the Audit Committeeof the Group.

Risks reported in the prior year which are no longer considered to be principal risks
Future funding requirements and meeting covenants associated with bank debt were identified as principal risks in priorperiods. These are no longer risks to the Group following the sale of the RTLS SmartSpace business unit and repaymentof the Group bank debt on 31 December 2018.
The Strategic report was approved by the Board of Directors on 10 April 2019 and signed on its behalf by:

Tim Gingell

Chief Financial Officer
10 April 2019

IQGeo Group plc Annual Report 2018

CORPORATE GOVERNANCE

Principal risk and impact

29

Our people

With staff tenure well above industry averages, IQGeo benefits from
improved business productivity and high employee satisfaction.

IQGeo team in Cambridge

5.8 years

56+g25+865
Average staff tenure

IQGeo global staff distribution

30

IQGeo Group plc Annual Report 2018

USA – 56%
UK – 25%
Germany – 8%
Canada – 6%
Japan – 5%

Culture, Values, and CSR
Our people are expert and passionate
professionals whose commitment to thecompany are essential for our success.
They create compelling and innovativetechnical solutions that solve real world
problems and they thrive on thechallenge of delivering success for ourcustomers. We recruit staff from a wide
range of backgrounds including utilities,
telecommunications, technology andprofessional services companies, and itis this combination of competencies
that enables us to deliver high value
solutions to our core markets.
ValuesWe are a knowledge-based industry,
so staff retention is important for thegrowth and success of the company.
Providing core values that employees
want is key to having an engaged andsuccessful workforce. We believe that
employees want interesting work,

STRATEGIC REPORT

Each employee was given theopportunity to perform work with
input on goals and objectives setting
and had a conversation regarding
their long-term career and career
path that is recorded and used when
considering new roles internally.
We recognised key victories in individual
performance during all-hands meetings.
Additionally, each employee canparticipate in their local community
by taking one day a year of paid leaveto assist with a charity of their choice.
This effort is creating stronger employee
engagement as shown by the Annual
Employee Survey.
In 2018, our staff recorded a renewed
excitement and engagement at workin our confidential annual survey.
By tracking key engagement factors,
we can see where staff perceptions
greatly improved and are indicativeof higher employee satisfaction overthe previous year:

Clarity of Vision:

Up 2 points from 5 to 7

Team Work:Up 1 point from 8 to 9

Business Focus:

Up 1 point from 7 to 8

Innovation:

Up 1 point from 7 to 8

Quality:		

Up 1 point from 7 to 8

These improvements show that staff
morale, confidence in the company
direction and the management teamare at good levels. Even after the splitof the business, we see nearly half(47%) of IQGeo staff have been withthe business five or more years. This ishigher than the industry average of
4.2 years. Our retention programmes
are bearing results.

Everyone receives mid-year andyear-end performance reviews,
aligning activity with engaging work.
Knowing that effective managers
will yield high performing teams, allmanagers received one-on-one
coaching by Human Resources toassess management ability and to
identify individual areas of development.
In addition, staff received professional
training in strategic selling, productmanagement, and pragmatic marketing.
Focusing on talent development,
engaging with employees to create
a positive working environment andrecognising success, all made 2018 a
successful year with a highly dedicatedand confident work force.

Employee Engagement
The Employer of Choice initiative also
provided coaching and training to thestaff, especially focusing on managers
and leaders. All staff received TimeManagement Tips training that waswell received and is available to all
new staff.

1.8 years

4.2 years

5.8 years

the average staff tenure
for the 10 biggest
tech companies*

the average staff tenure
for salaried employees
in the US**an average of 5.8 years
per person across
IQGeo staff* Business insider Top 10 tech company staff tenure https://www.businessinsider.com/employee-retention-rate-top-tech-companies-2017-8?r=US&IR=T** US Bureau of Labor Statistics, 20 September 2018 https://www.bls.gov/news.release/tenure.nr0.htm

IQGeo Group plc Annual Report 201831

FINANCIAL STATEMENTS

Culture and value indicators
measured on a scale of 1 to 10
Motivation:
Up 2 points from 6 to 8

CORPORATE GOVERNANCE

career opportunities, recognition for
their effort, and connection to the local
and global community. Over the courseof 2018 the company provided focused
effort in all these areas, summarised as
our Employer of Choice initiative.

Board of Directors

Guidance and counsel
The Board of Directors has overall responsibility for the Group.
Its aim is to provide the leadership and industry-specific insightrequired to develop a successful business, through utilising thebroad range of skills and experience of the Board members.

Paul Taylor

Richard Petti

Tim Gingell

Experience

Experience

Experience

ChairmanPaul Taylor spent over 21 years with
AVEVA Group plc and was Group FinanceDirector from 2001 to 2011. Paul is a Fellowof the Chartered Association of Certified
Accountants and was recipient of the
FTSE 250 Finance Director of the Year in2008. Paul was appointed to the IQGeo(then Ubisense) Board on 28 February
2011. Previously, Paul was a non-executive
director of Anite plc, KBC Advanced
Technologies plc and Escher Group
Holdings plc.

Other appointments

Paul serves as a non-executive directorof Thruvision Group plc and Frontier Smart
Technologies Group Limited. Paul is alsoa Trustee of CAD Centre Pension Fund.

32

IQGeo Group plc Annual Report 2018

Chief Executive Officer
Richard Petti brings 25 years of experiencein developing market-leading businesses
for automotive, financial and industrial
customers. He was previously CEO
of Asset Control, a supplier of data
management systems to leading
financial institutions, and COO at WEMA,
a leading provider of sensors tocommercial vehicle manufacturers.

Other appointments
None.

Chief Financial Officer
Tim has over 25 years of commercial
and financial experience across software,
wireless and telecoms industries. At IQGeo,
Tim has rebuilt the balance sheet throughdisposals, organisation restructuring,
renegotiating debt finance and closing two
fundraising rounds on London’s AIM stock
market, and positioned the business forsoftware‑led growth. Tim held leadership
positions at i2/IBM, The Cloud Networks
and MFS/WorldCom.

Other appointments
None.

STRATEGIC REPORTCORPORATE GOVERNANCE
FINANCIAL STATEMENTS

Dr. Robert Sansom

Ian Kershaw

Oliver Scott

Experience

Experience

Experience

Non-Executive Director

Dr. Robert Sansom co-founded andwas CTO of FORE Systems, acquired by
Marconi for $4.5 billion in 1999. Robertjoined the IQGeo (then Ubisense) Board
on 16 December 2005. He co‑founded andwas Chairman of the Cambridge Angels
from 2001 to 2010.

Other appointments
Robert is a non-executive director toenterprises including Myrtle Software Ltd,
Focal Point Positioning Ltd, Featurespace
Ltd, Camfed International, Cambridge
Communication Systems Ltd, CRFS Ltd andNetronome Inc. Robert was elected as a
Fellow of the Royal Academy of Engineers
in 2010.

Non-Executive Director
Ian has over 30 years’ experience in theautomotive, manufacturing and powerindustries. Ian was appointed as a
Non‑Executive Director to the IQGeo(then Ubisense) Board on 23 May 2014.
Previously, Ian was a director of Ricardo
UK Ltd. Ian is Executive Chairman ofCoryton Advanced Fuels (Premier Topco
Limited), a supplier of bespoke fuels to
the world’s automotive industry.

Other appointments

Ian is also a non-executive directorof Surface Generation Ltd.

Non-Executive Director
Oliver is a partner of Kestrel Partners LLP,
IQGeo’s largest shareholder. Kestrel invests
in small and microcap UK-listed companies
and has a particular focus on the enterprisesoftware and services sector. Prior to
co-founding Kestrel in 2009, Oliver spent
20 years advising smaller quoted andunquoted companies, latterly as a directorof KBC Peel Hunt Corporate Finance.
He was previously a non-executive directorof KBC Advanced Technologies plc prior
to its takeover by Yokogawa in 2016.

Other appointments

Oliver is a non-executive directorof IDOX plc.

IQGeo Group plc Annual Report 201833

Corporate governance report

On 8 March 2018,
London Stock Exchange
published AIM Notice
50 outlining corporate
governance practices.
In accordance withthe guidance, theGroup has adopted
the Quoted Company
Alliance’s (QCA)
Corporate Governance
Code for Small and
Mid-Sized Quoted
Companies.

Principle 1:
Establish a strategy and businessmodel which promote long-termvalue for shareholders
Following the sale of its RTLS SmartSpacebusiness unit in December 2018,
IQGeo continues to develop theGroup’s activities in a structure thatenables it to develop and execute
its sales and marketing strategies
designed to increase operational
productivity across targeted industries
through its technology. The myWorldbusiness unit is concentrated on thecommunications and utilities industries.
The Group is focused on a three-point
strategy to achieve the performancegoals of the business:
Refocus the business• Target key industries and top 200
global companies•

Develop customer-driven productroadmaps with subscription products•Manage out legacy third party
product service business

Improve sales execution• Strengthen go-to-market capabilities
and geographic coverage•

Deploy metric-driven CRM andmarketing automation resources•

Establish a broader, more consistentbusiness pipeline

Reposition the product portfolio• Solve enterprise-levelbusiness challenges

34

IQGeo Group plc Annual Report 2018•

Create a modular softwarearchitecture addressing known
customer pain points•

Communicate the long-termvalue IQGeo products deliver
to customers

Principle 2:
Seek to understand and meetshareholder expectations
The Company maintains a
dedicated contact form which isprominently displayed on its website
together with the Company’s address
and phone number for investors to use.
The Company holds an Annual General
Meeting (AGM) to which all members
are invited. During the AGM, time is set
aside specifically to allow questions
from attending members to any Board
member. As the Company is too small
to have a dedicated investor relations
department, the CEO is responsible forreviewing all communications received
from members and determining themost appropriate response, engaging
the executive team and Board asneeded. In addition to these passive
measures, the CEO typically engages
with members through investor
roadshows held at least twice eachyear following the release of results.

Principle 3:
Take into account wider stakeholder
and social responsibilities and theirimplications for long-term successIn addition to members, the Company
believes its main stakeholder groups are
its employees, suppliers and customers.
The Company devotes significant time tounderstanding and acting on the needs
and requirements of each of thesegroups via meetings dedicatedto obtaining feedback.
With regards to corporate social
responsibility (CSR), IQGeo is engaged
in a range of CSR programmes throughcorporate activities sponsored by its
regional offices. In addition, the Company
encourages employees to participate
in local activities by giving each employee
an annual charity day to volunteer for
an organisation of their choice. IQGeo
believes that participation in CSR activities
is a fundamental responsibility of theCompany. It encourages the personal
development of employees and greatercommunity integration, which helps
contribute to the long-term success of theCompany by creating a more experienced,
passionate and productive workforce.

STRATEGIC REPORT

Risk management on pages 26 to 29
details risks to the business, howthese are mitigated and the change
in identified risks over the lastreporting period.

Both the Board and senior managers
are responsible for reviewing andevaluating risk and the Executive
Directors meet at least monthly toreview ongoing trading performanceand discuss budgets, forecasts and newrisks associated with ongoing trading.
Internal control
The Board of Directors has overall
responsibility for the Group’s system
of internal control and for reviewing
its effectiveness. The risk management
process and systems of internal control
are designed to manage rather thaneliminate the risk of failure to achieve
the Group’s objectives. It should berecognised that such systems can only
provide reasonable but not absoluteassurance against material misstatement
or loss. The Directors acknowledge their
responsibilities for the Group’s system
of internal control and for reviewing its
effectiveness. The principal features of thesystem of internal financial controls are:
•

•

•

•

budgetary control over all operations,
measuring performance against
pre-determined targets on at least
a monthly basis;
regular forecasting and reviews
covering trading performance,
assets, liabilities, cash flows andbank covenants;
delegated limits of authority
covering key financial commitments
including capital expenditure andrecruitment; andPrinciple 5:
Maintain the board as awell-functioning, balanced
team led by the chair
The Company is controlled by the
Board of Directors. The Board comprises
the Non-Executive Chairman, three
Non-Executive Directors and two
Executive Directors. The Non-Executive
Chairman is responsible for the runningof the Board and Richard Petti, theChief Executive, has responsibility
for running the Group’s businessand implementing Group strategy.
The Non-Executive Directors are required
to be available to attend Board meetings
and to deal with both regular andad-hoc matters and they are expected
to commit sufficient time to fully discharge
their responsibilities. All Non-Executive
Directors have confirmed anddemonstrated that they have adequate
time available to meet the requirementsof the role and they have no conflicts.
Executive Directors work full time in thebusiness and have no other significant
outside business commitments.
All Directors receive regular and timely
information on the Group’s operationaland financial performance. Relevant
information is circulated to the Directors
in advance of meetings.
The Board is satisfied that it
has a suitable balance between
independence and knowledge ofthe business to allow it to discharge
its duties and responsibilities effectively
but will continue to review thecomposition of the Board regularly.

•

ensuring that appropriate
management development andsuccession plans are in place;•determining corporate strategy,
including consideration andapproval of the Company’s
annual strategy review;•

establishing dividend policy;•

approving and accepting all newcommitted funding facilities;•

approving and accepting majorchanges in the capital structureof the Company;•

reviewing and approving
formal treasury policies relating
to funding, liquidity, transactional
foreign exchange and interest
rate risk management;•

reviewing the health and safety
and environmental performanceof the Group;•

approving corporate acquisitions,mergers, divestments, joint venturesand major capital expenditure; and•receiving, reviewing and approving
recommendations by the designatedcommittee on matters related to audit,
nominations and remuneration.

FINANCIAL STATEMENTS

The Board considers risk to thebusiness at every Board meetingand the risk register is regularly
reviewed. The Company formallyreviews and documents the principal
risks to the business at least annually.

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

CORPORATE GOVERNANCE

Principle 4:
Embed effective risk management,
considering both opportunities andthreats, throughout the organisation

20 Board meetings were held in 2018.
Attendance at the meetings was
as follows:Total
meetings attendedPeter Harverson
Paul Taylor
Richard Petti
Tim Gingell
Robert Sansom
Ian Kershaw
Oliver Scott

10 (20)19 (20)20 (20)20 (20)17 (20)14 (20)18 (20)Figures in brackets denote the maximum numberof meetings that could have been attended bythat person.

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

reviewing operating
and financial performance;

identification and managementof key business risks.
IQGeo Group plc Annual Report 201835

Corporate governance report continued

Principle 6:
Ensure that between them thedirectors have the necessary
up-to-date experience, skills
and capabilities
The Board of Directors has overall
responsibility for the Group. Its aim
is to provide the leadership andindustry-specific insight required todevelop a successful business, throughutilising the broad range of skills andexperience of the Board members.
The Board is satisfied that, between
the Directors, it has significant industry,financial, public markets and governanceexperience, possessing the necessary
mix of experience, skills, personal qualities
and capabilities to deliver the strategyof the Company for the benefit of theshareholders over the medium to longterm. The roles of the Chairman and
CEO are split in accordance with bestpractice. The Chairman has responsibilityof ensuring that the Board discharges
its responsibilities and is also responsible
for facilitating full and constructive
contributions from each member of theBoard in determination of the Group’s
strategy and overall commercial
objectives. The CEO leads the businessand the executive team ensuring thatstrategic and commercial objectives
are met. He is accountable to the Boardfor the operational and financial
performance of the business.
The Nomination Committee of theBoard oversees the process and makes
recommendations to the Board on all
new Board appointments. Where new
Board appointments are considered
the search for candidates is conducted,
and appointments are made, on merit,against objective criteria and with
due regard for the benefits of diversity
on the Board, including gender.
The Nomination Committee also
considers succession planning.
The Board carries out an evaluationof its performance annually, taking into
account the Financial Reporting Council’s
Guidance on Board Effectiveness.
Biographical details of all members of theBoard are set out on pages 32 and 33 andalso on the Company website.

36

IQGeo Group plc Annual Report 2018

Principle 7:
Evaluate Board performance basedon clear and relevant objectives,seeking continuous improvement
Board members are appointed withfull consideration of the knowledge
and skills that they will contribute to theBoard and aligned to the needs of theCompany at that time. The Chairman
ensures that full consideration of thedevelopment of the Board is addressedby reviewing the Board composition
annually in consultation with the other
Board members. The Board, throughits Remuneration Committee, ensuresthat appropriate annual performancetargets are set for Executive
Board members.

Principle 9:
Maintain governance structuresand processes that are fit for
purpose and support gooddecision making by the Board
The Board of IQGeo Group plc currently
comprises two Executive Directors, one
Non-Executive Chairman and three
Non-Executive Directors. For now the
Board considers its composition
appropriate given the size of theCompany, its revenues and profitability.
The key Board roles are as follows:•

Chairman: The primary
responsibility of the Chairman is
to lead the Board effectively and tooversee the adoption, delivery andcommunication of the Company’s
corporate governance model.
The Chairman has sufficient
separation from the day-to-day
business to be able to makeindependent decisions. The Chairman
is also responsible for making surethat the Board agenda concentrates
on the key issues, both operationaland financial, with regular reviewsof the Company’s strategy and its
overall implementation.

•

CEO: Charged with the delivery of
the business model within the strategy
set by the Board. Works with the
Chairman and Non-Executive
Directors in an open and transparent
way. Keeps the Chairman and
Board up to date with operational
performance, opportunities, risks
and other issues to ensure that thebusiness remains aligned with its
key objectives.

The Chairman routinely reviews the
management and performance of theBoard Committees and will address
any performance concerns directly with
the Chairman of, and/or participantsof, that Committee. Over the next
twelve months we intend to review theperformance of the team as a unit toensure that the members of the Board
collectively function in an efficient andproductive manner.

Principle 8:
Promote a corporate culturethat is based on ethical values
and behaviours
The Board believes that the promotionof a corporate culture based on soundethical values and behaviours is essential
to maximise shareholder value. These
values are reinforced with employeesby the management team throughannual business review sessions andform the cornerstone of the employee
performance review process. The ethicalstandards at IQGeo are a key factor in
the evaluation of individual performanceand that of the entire Company.

The Board has three sub-committees
as follows:•

Audit Committee: See Audit
Committee report for further details.

•

Remuneration Committee: See
Remuneration Committee reportfor further details.

STRATEGIC REPORT•The Nomination Committee has
responsibility for the following matters:•

reviewing the size and compositionof the Board to ensure that an
appropriate mix of skills, knowledge
and experience is achieved;
succession planning for the Boardand other key management roles;•

identifying and recommending
to the Board candidates to fill
Board vacancies;•

ensuring Non-Executive Directors
are able to make the necessary timecommitments to fulfil their role;•ensuring Non-Executive Directors
receive letters of appointment,
detailing their responsibilities; and•making recommendations to theBoard about the appointment,
removal or continuation in officeof any Director.

The Company communicates withshareholders through the Annual Reportand Accounts, full-year and half-year
announcements, the Annual General
Meeting (AGM) and the one-to-one
meetings with existing andprospective shareholders.

FINANCIAL STATEMENTS•

Principle 10:
Communicate how the
Company is governed and is
performing by maintaining a
dialogue with other relevant
stakeholders

CORPORATE GOVERNANCE

Nomination Committee:
The Nomination Committee
will consider the selection andre-appointment of Board members.

During the period under review, theCommittee has met twice on a formal
basis. The Committee is expected tomeet formally twice a year. A summaryof Nomination Committee composition
and attendance is as follows:
Nomination
Committee

Peter Harverson
Robert Sansom(Chair)Paul Taylor

1 (2)
2 (2)
2 (2)

IQGeo Group plc Annual Report 201837

Audit Committee report

Audit Committee
The Audit Committee consists of two
independent Non-Executive Directors,
who between them have a balanceof financial experience and businessknowledge. There were no changes
to the Committee membership during
the year.
During the period under review, theCommittee has met four times on aformal basis. The Committee is expected
to meet formally four times a year.
The timing of meetings allows the
Audit Committee to consider theexternal auditor’s planned approachto the half-year interim review andfull‑year audit of the Annual Report.
The Committee discusses the auditor’sfindings ahead of financial statements
being approved for release. Whenappropriate, non-Committee members
are invited to attend, including the
Chief Financial Officer and membersof the finance team.
A summary of Committee composition
and attendance is as follows:

External audit
recommending appointment,
re-appointment or removalof the external auditor;•

overseeing the Group’s relationshipwith the external auditor, including
assessing its independence; and•agreeing the annual audit planand reviewing the findings andeffectiveness of the audit.

Whistleblowing• review of the Group’s whistleblowing
policies and procedures.
Internal control• review the adequacy andeffectiveness of the internal control
and risk management systems.
Activities of the Committee
during the year
The Audit Committee has met with boththe auditor and internal management
during the year and discussed thefollowing key matters:•

accounting and audit approach to
the reorganisation of the Group andthe subsequent disposal of the RTLS
SmartSpace legal entities on
31 December 2018;•

adoption of IFRS 15 Revenue fromContracts with Customers effective
1 January 2018, the appropriatenessof revenue recognition policies andapplication of the standard toprior periods;•

the impact and application of theearly adoption of IFRS 16 Leases
effective 1 January 2018, including
the adequacy of disclosure within
the financial statements;•

the resolution of significant
accounting judgments or mattersraised by the external auditor during
the course of its half-year review andannual statutory audit. These key
matters are stated within the external
auditor’s report included within thisAnnual Report;

Audit
Committee

Paul Taylor
Ian Kershaw

4 (4)
4 (4)

The Audit Committee has responsibility
for the following matters:
Financial reporting• review of all financial reports released
to the market and shareholders, toensure that reports provide a fair andbalanced review to shareholders
with clear disclosure to provide anunderstandable view of performance;•

review of significant reporting issues
and key judgments; and•review of accounting policies
selected and their application toensure compliance with reporting
standards and that they are
consistently applied.

38

IQGeo Group plc Annual Report 2018•

the external auditor’s report on any
deficiencies in the internal controlsof the Group identified during thestatutory audit. IQGeo Group plc
does not have an internal audit
function and believes that given thesize of the business, this remains
appropriate; and•assessment of the independenceof the external auditor. As part of thisreview, the Committee monitors theprovision of non-audit services by
the external auditor. An analysis
of non-audit services is disclosed
in note 9 to the financial statements.
The non-audit services charged by
Grant Thornton in 2018 relate to thereview of half-year results and theprovision of tax advisory services
supporting the group reorganisationand disposal of the RTLS SmartSpacebusiness. The Audit Committee
were satisfied that safeguards areadequately observed to ensure noissues arise impacting upon theauditor’s independence.

•

The Audit Committee has satisfied
itself that the key areas discussed above
have been addressed appropriately
within the Annual Report.

•

agreeing the framework for theGroup’s remuneration policy for
Directors and key management
personnel, including determining
individual remuneration policies
for Executive Directors;
approving the design and targets for
short and long-term incentive plans;•

approval of the Group’s shareoption plans for all participants;•

determining the policy and scopeof pension arrangements;•

ensuring contractual terms andpayments made on termination
are fair to both the individual
and the Group; and•agreeing the policy for authorisingexpense claims by the Chairman
and Chief Executive.

The Committee aims to set levels of
remuneration for Executive Directorsthat are sufficient to attract, retain andmotivate directors of the quality required,without paying more than necessary,and that are appropriate for the sizeand complexity of the Group. It aims
to see that a significant proportion ofeach Executive Director’s remuneration
package is performance related.
During the period under review, theCommittee has met twice on a formal
basis. The Committee is expected tomeet formally twice a year.
The Remuneration Committee
comprises of Ian Kershaw, Paul Taylor
and Oliver Scott who are Non-Executive
Directors of the Company.

A summary of Committee composition
and attendance is as follows:
Remuneration
Committee

Paul Taylor
Ian Kershaw
Oliver Scott (Chair)

2 (2)
2 (2)
2 (2)

In February 2019, Oliver Scott wasappointed Chair of the Remuneration
Committee, replacing Paul Taylor
who remains on the Committee.
Remuneration practice overview
The Committee believes in pay for
performance and that Executive
Directors’ remuneration should bedesigned to promote the long-term
success of the Group.
When reviewing and setting
remuneration policy, the Committee
benchmarks remuneration against
quoted companies of a similar size andconsiders a range of factors including
the Group’s strategy and circumstances,the prevailing economic environmentand best practice guidelines. The policy
must also enable IQGeo Group plc to
attract, retain and motivate the talent
it needs to ensure success.
The remuneration of the Non-Executive
Directors is determined by the Executive
Directors and the Chairman, rather
than the Committee.
Remuneration of Executive Directors
The Executive Directors are entitled
to receive base salary, benefits andemployer pension contributions
and to participate in share option
schemes approved by the
Remuneration Committee.

The appointment of the Chief Executive
Officer and Chief Financial Officer isterminable on six months’ notice byeither party.
Base salary
Base salaries are reviewed annually
and adjustments made if required toreflect Group performance, individual
performance and market rates.
Remuneration is through the Group’s
flexible benefits scheme under which
the individuals can elect to switch basic
salary into pension contributions andother benefits.
Benefits
The Group offers benefits to all
employees including life assurance andhealthcare solutions, appropriate to eachof the markets in which it operates.
Bonuses
Executive Directors are eligible
to participate in an annual bonus
programme, which is calculated byreference to the annual financial
and operational targets includingorders, revenue, operating cash flow
(excluding working capital) andgoal‑driven objectives.
Pensions
The Group operates defined
contribution personal pension schemes
appropriate to each of the markets inwhich it operates. Under the UK scheme
rules the Group pays a matched
contribution of up to 5% of base salaryas adjusted for current pension
legislation. The scheme is open to
Executive Directors and employees.
Remuneration of
Non-Executive Directors
The Non-Executive Directors haveentered into letters of appointment
with the Company. The appointments
are terminable on one month’s noticeby either party. The Non-Executive
Directors, including the Non-Executive
Chairman, may participate in theGroup’s pension scheme.
The appointment of the Non-Executive
Chairman is terminable on six months
notice by either party.

IQGeo Group plc Annual Report 2018

39

FINANCIAL STATEMENTS•

Oliver Scott who is not an independent
Director, sits on the Remuneration
Committee. The Board acknowledge
that this is not considered best practice
but feel that it is appropriate for the
scale and structure of the Group at thisstage given his knowledge, experienceand ability to represent interests ofinvestors in general.

CORPORATE GOVERNANCE

The Remuneration Committee has
responsibility for the following matters:

STRATEGIC REPORT

Directors’ remuneration reportDirectors’ remuneration report continued

Directors’ remuneration
The Directors received the following remuneration during the year:

DirectorBasicsalary£’000

Benefits
in kind£’000

Performance
payments£’000

2018 total
excludingpensions£’000

Pensions
£’000

Total
2018
£’000

Total
2017
£’000

Richard Petti1
Tim Gingell2
Executive Directors
Paul Taylor3Peter Harverson
Robert Sansom4
Ian Kershaw5
Oliver Scott
Non-Executive Directors
Total

210
151
361
46
71
—
21
20
158
519

3
2
5
—
—
—
—
—
—
5

156
91
247
—
—
—
—
—
—
247

369
244
613
46
71
—
21
20
158
771

37
9
46
—
7
—
—
—
7
53

406
253
659
46
78
—
21
20
165
824

299
181
480
25
145
—
25
20
215
695

1	The performance related payments of Richard Petti include £125,000 relating directly to the completion of the RTLS SmartSpace business unit disposal.
Additionally, Richard Petti is entitled to a performance related bonus of up to £125,000.
2	The performance related payments of Tim Gingell include £62,500 relating directly to the completion of the RTLS SmartSpace business unit disposal.
Additionally, Tim Gingell is entitled to a performance related bonus of up to £50,000.
3	In April 2018, Paul Taylor’s base remuneration increased from £25,000 to £35,000 per annum after becoming the Remuneration Committee Chairman.
From September 2018, Paul Taylor’s base remuneration increased to £75,000 when he became acting Non-Executive Chairman.
4 Robert Sansom has waived his entitlement to annual remuneration of £25,000 (2017: £25,000 waived).
5	In April 2018, Ian Kershaw’s remuneration reduced from £25,000 to £20,000 per annum after stepping down from being the Remuneration
Committee Chairman.

Share options
The Company issues share options to the Executive Directors and employees to reward performance and to align interests
with those of the shareholders.
The aggregate emoluments disclosed above within Directors’ remuneration does not include any amounts for the valueof options to acquire ordinary shares in the Company granted to or held by the Directors.
On 14 December 2016, IQGeo Group plc implemented a long-term incentive share option plan for Executive Directors andkey management. As participants in the new share scheme, the Company granted 3,150,000 options of 2 pence each in the
Company to the Executive Directors with an exercise price set at the nominal value. The options will vest if the Company’s
share price exceeds 70 pence for 60 consecutive days between the second and third anniversary of issue and the periodof employment continues for over three years.

Director

Peter Harverson

Richard Petti
Tim Gingell

Exercise
price£Awardsoutstandingat 1 January
2018
NumberGrantedduringthe year
NumberExercisedduringthe year
NumberLapsedduringthe year
NumberAwardsoutstanding at
31 December
2018
NumberAwardsexercisable at
31 December
2017
NumberAward date
Year

Vests
Years

ExpiresYear

20102011-13

2020

0.14

91,333———

91,333

91,333

2016

2019

2026

0.02

850,000———

850,000

—

0.02
0.02

941,333
1,600,000
700,000

—
—
—

—
—
—

—
—
—

941,333
1,600,000
700,000

91,333——3,241,333———

3,241,333

91,333

2016
2016

2019
2019

Total

2026
2026

Following his resignation from the Board, Peter Harverson exercised 91,333 options at 14 pence per share on 25 February 2019.
These shares were immediately sold, resulting in a gain of £36,000.

40

IQGeo Group plc Annual Report 2018

Principal activity
Going forward, the Group will befocused on its Geospatial operations.
The Geospatial business delivers
software solutions that integrate datafrom any source – geographic, real-timeasset, GPS, location, corporate andexternal cloud-based sources – into a live
geospatial common operating picture,empowering all users in the customer’sorganisation to access, input and analyse
operational intelligence to proactively
manage their networks, respond quickly
to emergency events and effectively
manage day-to-day operations.
The RTLS SmartSpace business unit
was sold on 31 December 2018 and ispresented as discontinued operations
within this report. The RTLS SmartSpacebusiness unit will continue trading under
the Ubisense brand. The principal activityof the RTLS SmartSpace business unit
was the provision of location solutions
which enabled customers to create areal-time digital twin of their physicaloperations. The RTLS SmartSpacebusiness unit takes real-time location datafrom SmartSpace sensing hardware,or from standards based integration withthird party hardware, and transforms
this data using SmartSpace software
into high value spatial event information,delivering highly reliable, automatic,
adaptive asset identification, precise
real-time location and spatial-monitoring
to provide meaningful insights that help
businesses make smarter decisions.
The main customer base of the RTLS
business unit is the automotive andaerospace manufacturing industry,
however the technology is transferable
to other sectors including defence
and transportation industries.

Capital structure
The Company has one class of ordinary share of 2 pence each which carries noright to fixed income. Each share carries the right to one vote at general meetingsof the Company.
Details of the share capital of the Company, including shares issued during theyear, can be found in note 23 of the consolidated financial statements.

FINANCIAL STATEMENTS

Incorporation and constitution
IQGeo Group plc is domiciled in Englandand incorporated in England and Wales
under company number 05589712.
IQGeo Group plc’s Articles of Association
are available on the Group’s website atwww.iqgeo.com.

Business review and key performance indicators
The Group’s results are set out in the Consolidated income statement on page 51
and are explained in the Chief Financial Officer’s statement on pages 22 to 25.
A detailed review of the business, its results and future direction is included in the
Non-Executive Chairman’s statement on pages 4 and 5.

There are no specific restrictions on the size of a holding nor on the transferof shares, which are both governed by the general provisions of the Articles
of Association and prevailing legislation. The Directors are not aware of any
agreements between holders of the Company’s shares that may result in
restrictions on the transfer of securities or on voting rights.
Details of employee share schemes are set out in note 24.
No person has any special rights of control over the Company’s share capitaland all issued shares are fully paid.
With regard to the appointment and replacement of Directors, the Company isgoverned by its Articles of Association, the Companies Act and related legislation.
The Articles of Association themselves may be amended by special resolutionof the shareholders.
Substantial shareholdings
On 10 April 2019, the Company had been notified of the following significant
interests in its ordinary share capital:
Total holding
Number% of issued
share capital

Kestrel Partners

19,045,493

25.98%

Columbia Threadneedle Investments

13,980,154

19.07%

Robert Sansom

6,235,899

8.51%

NFU Mutual Insurance Society Ltd

4,326,490

5.90%

Canaccord Genuity Group Inc

4,164,853

5.68%

Richard Griffiths and family

3,961,113

5.40%

Old Mutual Global Investors

2,538,221

3.46%

Janus Henderson Investors

2,495,000

3.40%

Directors
The Directors serving at 31 December 2018 were as follows:
Peter Harverson
Paul Taylor
Riccardo (Richard) Petti
Timothy (Tim) Gingell
Robert Sansom
Ian Kershaw
Oliver Scott
Board changes
Peter Harverson resigned as Non-Executive Chairman and member of the Board
on 13 February 2019, and was succeeded by Paul Taylor as Non-Executive Chairman.

IQGeo Group plc Annual Report 2018

CORPORATE GOVERNANCE

The Directors present their annual reporton the affairs of the Group together
with the audited financial statements
for the year to 31 December 2018.
The Corporate governance statement
set out on pages 34 to 37 forms partof this report.

STRATEGIC REPORT

Directors’ report41Directors’ report continued

Directors’ interests – shares
Directors’ interests in the ordinary shares of IQGeo Group plc at 31 December 2018
were as follows:

Peter Harverson
Richard Petti

2018
Number

2017
Number223,286

223,286

78,12578,12586,87586,875

6,235,899

6,235,899

Paul Taylor

191,459

191,459

Ian Kershaw

2,000

2,000

6,817,644

6,817,644

Tim Gingell
Robert Sansom

Total
Oliver Scott has no direct interest in theordinary shares of IQGeo Group plc
but is a partner with the significant
shareholder Kestrel Partners.
On 16 April 2018 Kestrel Partners LLP
sold, on behalf of its discretionary
clients, 1,600,000 ordinary sharesof the Company. The sale was madein response to demand from an
institutional investor that wanted
to acquire a stake in the Company.
The price achieved was 45p per share.
The Directors consider that there isno party that represents a person who
has significant control over the Group.
Despite Kestrel holding greater than
25% of the shares of the Group, theDirectors reached this conclusion
having considered the ownership
structure of Kestrel Partners andcontrol of voting rights.
There has been no change in the
Directors’ interests set out above
between 31 December 2018 and
10 April 2019.
Directors’ interests
Details of Directors’ remunerationand share options are provided in
the Directors’ remuneration reporton pages 39 and 40. There are noloans to or from the Directors.

42

IQGeo Group plc Annual Report 2018

Directors’ indemnity arrangements
The Group has made qualifying
third party indemnity provisions forthe benefit of its Directors which weremade during the year and remain inforce at the date of this report.
The Group has purchased andmaintained throughout the year
Directors’ and Officers’ liability
insurance in respect of itself
and its Directors.
Financial instruments
Principle financial risks and mitigating
activities have been set out within theStrategic report. Additionally, note 28
to the financial statements provides
further details in respect of credit risk,
market risk and liquidity risk.
Research and development
During the year, the Group has been
active in the development of softwarein respect of the continuing Geospatial
operations as well as development ofsoftware and hardware products forthe discontinued RTLS SmartSpacebusiness. In the opinion of the
Directors, continuity of the investment
in software development is essential
for the long-term growth of thebusiness. The Board regularly reviews
the myWorld product roadmap toensure its competitiveness.

Going concern review
The Board has considered the going
concern position of the Group which
is discussed further in note 3 to thefinancial statements.
Post-balance sheet events
There are no post balance sheet
events to report.
Dividends
The Directors do not recommend
payment of a dividend for the year(2017: £nil).
AuditorA resolution to re-appoint
Grant Thornton UK LLP as theGroup’s auditor will be proposed at
the forthcoming Annual General Meeting.
In accordance with normal practice,
the Directors will be authorised todetermine the auditor’s remuneration.
Approved by the Board of Directors
and signed on behalf of the Board.

Tim Gingell

Chief Financial Officer
and Company Secretary
10 April 2019

IQGeo Group plc
Registered number: 05589712

•

select suitable accounting policies
and then apply them consistently;•

make judgments and estimates thatare reasonable and prudent;•

state whether applicable IFRSs
as adopted by the European Union
have been followed, subject to any
material departures disclosed andexplained in the consolidated
financial statements;•

state whether applicable UK
Accounting Standards have been
followed, subject to any material
departures disclosed and explainedin the Company financial
statements; and•prepare the financial statements on
the going concern basis unless it isinappropriate to presume that theCompany will continue in business.

FINANCIAL STATEMENTS

Company law requires the Directors
to prepare financial statements foreach financial year. Under that law the
Directors are required to prepare theconsolidated financial statements inaccordance with International Financial
Reporting Standards (IFRSs) as adopted
by the European Union and have elected
to prepare the parent company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom AccountingStandards and applicable law, including
FRS 102 The Financial ReportingStandard applicable in the UK and
Republic of Ireland). Under company
law the Directors must not approve thefinancial statements unless they give atrue and fair view of the state of affairs
and profit or loss of the Company andGroup for that period. In preparing
these financial statements, theDirectors are required to:

The Directors are responsible forkeeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions anddisclose with reasonable accuracy at
any time the financial position of theCompany and enable them to ensurethat the financial statements comply
with the Companies Act 2006. They arealso responsible for safeguarding theassets of the Company and hence
for taking reasonable steps for theprevention and detection of fraud
and other irregularities.

CORPORATE GOVERNANCE

The Directors are responsible forpreparing the Annual Report and thefinancial statements in accordance withapplicable law and regulations.

STRATEGIC REPORT

Directors’ responsibilities statement

The Directors confirm that:•so far as each Director is aware,
there is no relevant audit informationof which the Company’s auditor isunaware; and•the Directors have taken all the steps
they ought to have taken as Directors
in order to make themselves awareof any relevant audit informationand to establish that the Company’s
auditor is aware of that information.

The Directors are responsible forthe maintenance and integrity of thecorporate and financial information
included on the Company’s website.
Legislation in the United Kingdom
governing the preparation anddissemination of financial statements
may differ from legislation inother jurisdictions.

IQGeo Group plc Annual Report 201843

Independent auditor’s reportto the members of IQGeo Group plc

OpinionOur opinion on the financial statements is unmodified
We have audited the financial statements of IQGeo Group plc (the ‘parent company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2018 which comprise the Consolidated Income Statement, the Consolidated Statement ofComprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position,
the Consolidated Statement of Cash Flows, Company balance sheet, Company statement of changes in equity and notes tothe financial statements, including a summary of significant accounting policies. The financial reporting framework that has
been applied in the preparation of the Group financial statements is applicable law and International Financial ReportingStandards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’(United Kingdom Generally Accepted Accounting Practice).
In our opinion:•

the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at
31 December 2018 and of the Group’s profit for the year then ended;•

the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;•

the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and•the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the Group and the parent company in accordance with the ethicalrequirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:•

the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or•the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s or the parent company’s ability to continue to adopt the going concern basis of accounting fora period of at least twelve months from the date when the financial statements are authorised for issue.

Overview of our audit approach• Overall materiality: £330,000, which represents 1.3% of the Group’s revenues, including that
relating to discontinued activities

44•

We performed full scope procedures at IQGeo Group plc and Ubisense Limited; targeted
procedures on IQGeo America Inc., IQGeo Solutions Canada Inc, Ubisense GmbH, Ubisense Inc(Japan) and Ubisense Japan K.K. and analytical procedures were performed for all other components•

Key audit matters were identified as:•

improper recognition of revenue due to fraud;•capitalisation of intangible development costs may not be appropriate;•

carrying value of capitalised development costs may not be appropriate; and•the disposal of discontinued operations.

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Low	High

5
3
4
6

2
1

Low	
Extent of management judgment

1

Inventory

2

Trade receivables

3

Investments

4

Deferred andaccrued income

5

Revenue

6

Management overrideof controls

7

Intangible assets

8

Discontinued
operationsHigh

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy, theallocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in thecontext of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on these matters.
Key Audit Matter – GroupHow the matter was addressed in the audit – Group

Risk 1 – Improper recognition of revenue due to fraud
Under International Standard on Auditing (UK) 240‘The Auditor’s Responsibilities Relating to Fraud in an
Audit of Financial Statements’, there is a rebuttablepresumed risk that revenue may be misstated due tothe improper recognition of revenue due to fraud.

We completed an assessment of revenue recognition policies
for consistency and compliance with IFRS 15 ‘Revenue fromContracts with Customers’.

The Group has recognised revenues of £25.5m (2017: £27.3m)
in the year including discontinued operations. During the year
the Group was organised into two divisions (RTLS SmartSpaceand Geospatial). The nature of the Group’s revenue includes
sales of hardware, software, maintenance and support, labour
and installation services. Revenue recognition is therefore
dependent upon identifying the relevant distinct performanceobligation and ensuring the correct revenue is allocated.
Contractual agreements with existing customers will generally
be to provide one of the elements on a standalone basis but
new deployments also include a combination of the above
elements. The Group has applied IFRS 15 ‘Revenue fromContracts with Customers’ for the first time within the 2018
financial statements which has required considerationof the detail within contracts.
As the Group’s revenue is material to the financial
statements and comprises distinct performance obligations,revenue recognition is considered to be a significant riskof material misstatement.

We performed substantive testing on each of the revenue
streams within the two divisions, RTLS SmartSpace andGeospatial: for a sample of transactions we obtained
contract and sales order details and our testing overeach performance obligation was as noted below:
Hardware – agreeing to signed contracts and shipping
documentation to ensure occurrence.
Software – agreeing to customer confirmation of receiptof access to new licences, or purchase orders forrenewed licences.
Maintenance and support – obtaining purchase orders,
recalculating revenue recognised and checking theappropriateness of any deferred income at the year end.
Labour and installation services – agreeing to signed
contracts or purchase orders; tracing a sample of timebooked to revenue to timesheets, subcontractor invoices
or other supporting documentation.
Recalculation of any deferred or accrued income balances
recognised and comparison against invoices and othersupporting documentation.
IQGeo Group plc Annual Report 201845

FINANCIAL STATEMENTS

Potential
financialstatement
impact7

8

CORPORATE GOVERNANCE

Key audit matters
The graph below depicts the audit risks identified and their relative significance based on the extent of the financial
statement impact and the extent of management judgment.

Independent auditor’s report continued
to the members of IQGeo Group plc

Key Audit Matter – GroupHow the matter was addressed in the audit – Group

Risk 1 – Improper recognition of revenue due to fraudcontinued

Other audit work included, but was not restricted to:•analytical procedures over revenue in total disaggregatedby revenue stream, operating segment, location and month(month by month analysis of current year against prioryear revenue) to identify and analyse key movements andsignificant transactions which have occurred in the year;•

obtaining explanations and corroborating evidence forkey movements and significant transactions identified.

The Group’s accounting policy on revenue recognition isdisclosed in note 3 to the financial statements and related
disclosures are included in note 5.
Key observations
We did not identify any issues in the application of IFRS 15.
Our audit work did not identify any material misstatements inthe occurrence of revenue recognised during the year or any
instances of revenue not being recognised in accordance withstated accounting policies.
Risk 2 – Capitalisation of intangible development costs may
not be appropriate
Under IAS 38 ‘Intangible Assets’, development costs must
be capitalised if the recognition criteria are met, including
determining whether the project provides a future economic
benefit to the Group.
During the year, the Group capitalised £1.7m (2017: £1.6m)
of development costs in relation to various projects.
The capitalisation of these costs includes judgments andassumptions in determining whether the projects will provide
future economic benefit to the Group and be financially
viable. The level of judgment involved leads to a risk thatthese criteria may not be met.
Due to the judgments and the materiality of the balance,
the capitalisation of intangible development costs has been
identified as a significant risk, which was one of the mostsignificant assessed risks of material misstatement.

46

IQGeo Group plc Annual Report 2018

Our audit work included, but was not restricted to:•assessing product development activities alongside
the qualifying nature of the projects, including obtaining
an understanding from management of the details of
projects capitalised and assessing whether they relate toadditional functionality, to ensure that capitalisation is inaccordance with the recognition criteria under IAS 38;•

recalculating the mathematical accuracy of recordingof capitalised amounts;•

agreeing amounts capitalised to supporting evidence
including timesheets.

The Group’s accounting policy on intangible assets is shownin note 3 to the financial statements and related disclosures
are included in note 12.
Key observations
Our testing did not identify any material misstatements incapitalisation of intangible development costs in accordancewith IAS 38. Intangibles capitalised were found to be inaccordance with stated accounting policies.

STRATEGIC REPORTHow the matter was addressed in the audit – Group

Risk 3 – Carrying value of capitalised development costs
may not be appropriate
There is a risk, given fast-moving technology, that thedeveloped product could become obsolete and will not be
supported by future cash flows so that development assets
may be impaired.

Our audit work included, but was not restricted to:assessing the amortisation policy applied against capitalised
development costs for consistency with prior year anddetermination of the useful economic life;•

comparing projects against which amounts arecapitalised to the net present value calculations producedby management, based on future income generation thetechnology is expected to realise;•

recalculating the mathematical accuracy of theimpairment models;•testing the accuracy of management’s estimates used in
the net present value calculations by comparing the 2018budgeted sales and gross profit to the results achieved forthe year and performing sensitivity analysis of expected
revenue for 2019 onwards;•

performing additional sensitivity analysis relating to thevaluation of intangible assets, specifically around thediscount rate;• evaluating of the information included in the impairment
The impairment review is based on identifiable assets formodels to ensure consistent with our knowledge of thewhich future revenues and gross margins can be assigned
business through reviewing trading plans and discussions
to calculate a value in use based on a discounted cash flow
with Management.
model. Management’s assessment of the potential impairmentof the Group’s development costs incorporates key assumptions The Group’s accounting policy on intangible assets isover the timing and extent of future revenues, gross margin
disclosed in note 3 to the financial statements and related
and the discount rate used.
disclosures are included in note 12.
Due to the inherent uncertainty involved in forecasting
Key observations
and discounting future cash flows, we therefore identified the
Our testing did not identify any material misstatements in the
impairment of the carrying value of capitalised development
carrying value of the capitalised development costs. There werecosts as a significant risk, which was one of the most significant
no additional reasons for impairment of intangible assets orassessed risks of material misstatement.
additional factors to consider that would impact the carrying
value of intangible assets recognised within the financial
statements. We found no material errors in the calculations.
Our audit work included, but was not restricted to:
Risk 4 – Disposal of discontinued operations
On 31 December 2018 the Group completed the sale• inspecting the sale agreement in order to identify keyof the RTLS SmartSpace business for consideration of up
terms of the transaction and how they may impact theto £35 million. Due to the complexity and timing of theaccounting treatment, in particular the profit recognised
transaction there is a risk that this transaction and theon disposal;
associated discontinued operations are not appropriately• examining and challenging the judgments
reflected within the financial statements.
in determining the discontinued operations
Due to the nature and amount involved we identified theand recognition of earn out consideration;
disposal of the RTLS SmartSpace business and the• evaluating the disclosures within the financial statements
associated disclosures as one of the most significant
for consistency with accounting standards.
assessed risks of material misstatement.

The Group’s accounting policy on the disposal is disclosed innote 3 to the financial statements and related disclosures areincluded in note 6.
Key observations
Our testing did not identify any material misstatements in therecognition of the RTLS SmartSpace disposal and we foundno material errors in the calculations or disclosures.
We did not identify any Key Audit Matters relating to the audit of the financial statements of the parent company.
IQGeo Group plc Annual Report 201847

FINANCIAL STATEMENTS

The net book value of capitalised development costs at
the year end amounted to £1.2m (2017: £2.7m), including
amortisation charged on capitalised development costsof £1.8m (2017: £2.2m). Intangibles with a carrying value of£1.5m were sold as part of the disposal of Ubisense Limited.
Capitalised development costs are amortised by the Group to
ensure the capitalised cost reflects the anticipated benefit of thedevelopment project to the Group over time. In accordancewith IAS 36 ‘Impairment of Assets’ an annual review isrequired to assess whether there is any indication that assets
may be impaired. Due to the financial performance of theGroup, an impairment review has been performed bymanagement to determine whether the carrying valueof these assets is appropriate.

•

CORPORATE GOVERNANCE

Key Audit Matter – GroupIndependent auditor’s report continued
to the members of IQGeo Group plc

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that theeconomic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality indetermining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Financial statements as
a wholePerformance materiality
used to drive the extent
of our testingSpecific materiality

Communication of
misstatements to theaudit committee

Group£330,000 which is 1.3% of total Group revenue,
including revenue including that relating todiscontinued activities, excluding rental income
for the year. This benchmark is considered themost appropriate because the Group is acommercially focused organisation but
generating an operating loss.
Materiality for the current year is lower thanthe level that we determined for the year ended
31 December 2017 using the same basis.
75% of financial statement materiality.

We also determine a lower level of specificmateriality for directors’ remuneration andrelated party transactions of £1,000 due tothe inherent sensitivity of these transactions
and related disclosures.
£16,500 and misstatements below thatthreshold that, in our view, warrant reportingon qualitative grounds.

Parent£248,000 which is 0.5% of expected total
assets restricted to Group performancemateriality. This benchmark is considered
the most appropriate because the Parent
Company does not generate revenues or
profits and holds investments in subsidiaries.
Materiality for the current year is lower thanthe level that we determined for the year ended
31 December 2017 using the same basis.
75% of financial statement materiality.

We also determine a lower level of specificmateriality for directors’ remuneration andrelated party transactions of £1,000 due tothe inherent sensitivity of these transactions
and related disclosures.
£12,400 and misstatements below thatthreshold that, in our view, warrant reportingon qualitative grounds.

The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance forpotential uncorrected misstatements.
Overall materiality – Group

Overall materiality – Parent
25%

25%

Tolerance for potential
uncorrected misstatements
Performance materiality
75%

48

75%

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

evaluation by the Group audit team of identified components to assess the significance of that component and to determine
the planned audit response based on a measure of materiality. Significance was determined as a percentage of the Group’s
total assets, revenues and profit before taxation;•

full scope audit procedures were performed on IQGeo Group plc and Ubisense Limited; targeted procedures were performed
on IQGeo America Inc., Ubisense GmbH, IQGeo Solutions Canada Inc, Ubisense Inc (Japan) and Ubisense Japan K.K., andanalytical procedures performed for all other components;•

component auditors were used to complete audit procedures for Ubisense GmbH, Ubisense Inc (Japan) and Ubisense
Japan K.K. The Group audit team sent Group instructions to the component auditors as to the required procedures to becompleted over the significant areas for Group purposes within each component. The Group audit team reviewed theunderlying audit working papers for these significant areas;•

the total percentage coverage of full-scope and targeted procedures over the Group’s revenue was 100%;•

the total percentage coverage of full scope and targeted procedures over the Group’s total assets was 96%; and•our audit approach in the current year is consistent with the audit approach adopted for the year ended 31 December 2017
being substantive in nature.

Other information
The directors are responsible for the other information. The other information comprises the information included in theannual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or amaterial misstatement of the other information. If, based on the work we have performed, we conclude that there is amaterial misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:•

the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and•the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in thecourse of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us toreport to you if, in our opinion:•adequate accounting records have not been kept by the parent company, or returns adequate for our audit have notbeen received from branches not visited by us; or•the parent company financial statements are not in agreement with the accounting records and returns; or•certain disclosures of directors’ remuneration specified by law are not made; or•

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

IQGeo Group plc Annual Report 201849

FINANCIAL STATEMENTS•

CORPORATE GOVERNANCE

An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group’s business,
its environment and risk profile and in particular included the following considerations:Independent auditor’s report continued
to the members of IQGeo Group plc

Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement on page 43, the directors are responsible for the preparationof the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect amaterial misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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 report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.

Alison Seekings

Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
10 April 201950

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Consolidated income statement
for the year ended 31 December 2018

Notes

5

9
8
8
10
6

11
11

9,979
(5,599)4,380(5,971)(1,591)

16,459(10,088)
6,371(5,944)427

4,380(5,446)(1,066)
(273)
(774)
(248)

6,371
(4,602)
1,769
(46)
(807)
(237)

151
619
(1,591)1(14)(1,604)(39)(1,643)
21,485
19,842

(252)
—
427
3
—
430
31
461
(3,534)(3,073)

19,842—
19,842(3,055)(18)(3,073)(2.2p)(2.2p)

0.8p
0.8p

The notes on pages 56 to 89 are an integral part of these consolidated financial statements.

IQGeo Group plc Annual Report 2018

51

FINANCIAL STATEMENTS

13, 14
12
24

2017
£’000

CORPORATE GOVERNANCE

Revenue
Cost of revenues
Gross profit
Operating expenses
Operating (loss)/profit
Analysed as:
Gross profit
Other operating expenses
Adjusted EBITDA
Depreciation
Amortisation and impairment of other intangible assets
Share option expense
Unrealised foreign exchange gains/(losses) on intercompany
trading balances
Non-recurring items
Operating (loss)/profit
Finance income
Finance costs(Loss)/profit before tax
Income tax(Loss)/profit from continuing operations
Profit/(loss) from discontinued operations
Profit/(loss) for the year
Profit/(loss) attributable to:Equity shareholders of the Company
Non-controlling interest
Profit/(loss) for the year
Profit/(loss) per share – continuing operations
Basic
Diluted

2018
£’000

Consolidated statement of comprehensive income
for the year ended 31 December 2018

Profit/(loss) from continued operations
Profit/(loss) from discontinued operations
Profit/(loss) for the year
Other comprehensive income:Items that may be reclassified subsequently to profit and loss
Exchange difference on retranslation of net assets and results of overseas subsidiaries
Reclassification to income statement for discontinued operations
Total comprehensive profit/(loss) for the year
Attributable to:Equity shareholders of the Company
Non-controlling interest
Total comprehensive profit/(loss) for the year
The notes on pages 56 to 89 are an integral part of these consolidated financial statements.

52

IQGeo Group plc Annual Report 2018

2018
£’000

2017
£’000

(1,643)
21,485
19,842461(3,534)(3,073)(50)
216
20,008(33)—(3,106)20,008—20,008(3,067)(39)(3,106)STRATEGIC REPORT

Consolidated statement of changes in equity
for the year ended 31 December 2018

Attributable to equity shareholders of the parent company
Share-based
payment
reserve£’000

Translation
reserve£’000

Retainedearnings£’000

Sub-total£’000

Non-controllinginterest
£’000

Total
£’000

1,118
—

41,554—823—(2,025)—(32,192)(3,055)

9,278(3,055)

473
(18)

9,751
(3,073)

—
—

—
—

—
—

(12)
(12)

—
(3,055)(12)(3,067)

(21)
(39)

(33)
(3,106)

—
344
—
—
344
1,462
—
1,462
—
—

—
—
5,158
(337)
4,821
46,375—46,375
—
—

316
—
—
—
316
1,139
—
1,139
—
—

—
—
—
—
—
(2,037)—(2,037)
—
216

—
—
—
—
—
(35,247)(13)(35,260)
19,842
—

316
344
5,158
(337)
5,481
11,692(13)
11,67919,842
216

—
—
—
—
—
434
—
434
—
—

316
344
5,158
(337)
5,481
12,126(13)
12,113
19,842
216

—
—
—

—
—
—

—
—
(725)

(50)
166
—

—
19,842725(50)
20,008
—

—
—
—

(50)
20,008
—

—
—
—
1,462

—
—
—
46,375

303
—
(422)
717

—
—
—
(1,871)

—
282
1,007
(14,411)

303
282
585
32,272

—
(434)
(434)
—

303
(152)
151
32,272The notes on pages 56 to 89 are an integral part of these consolidated financial statements.

IQGeo Group plc Annual Report 2018

53

FINANCIAL STATEMENTS

Share
premium£’000

CORPORATE GOVERNANCE

Balance at 1 January 2017
Loss for the year
Exchange difference on retranslationof net assets and results ofoverseas subsidiaries
Total comprehensive loss for the year
Reserve credit for equity-settled
share‑based payment
Issue of new share capital
Premium on new share capital
Share issue costs
Transactions with owners
Balance at 31 December 2017
IFRS 15 adjustment
Adjusted balance at 31 December 2017
Profit for the year
Recycled translation reserve
Exchange difference on retranslation of net
assets and results of overseas subsidiaries
Total comprehensive profit for the year
Lapse of share options
Reserve credit for equity-settled
share‑based payment
Acquisition of non-controlling interest
Transactions with owners
Balance at 31 December 2018

Sharecapital£’000

Consolidated statement of financial position
for the year ended 31 December 2018

2018
£’000

2017
£’000

12
13
14
15

1,235
84
304
2,000
3,623

2,962
493
—
—
3,455

16
17
18

—
3,586
30,91534,501
38,124

1,459
10,544
9,114
21,117
24,572

19(5,080)
(232)
(232)
—
(5,544)(9,110)
(101)
—
(750)
(9,961)

(231)
—
(77)
—
—
(308)
(5,852)32,272

(516)
(40)
—
(1,750)(179)(2,485)(12,446)
12,126

1,462
46,375717(1,871)(14,411)32,272—32,272

1,462
46,3751,139(2,037)(35,247)
11,692434
12,126

Notes

AssetsIntangible assets
Property, plant and equipment
Right-of-use assets
Investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Lease obligation
Bank loans
Total current liabilities
Non-current liabilities
Deferred income tax liabilities
Trade and other payables
Lease obligation
Bank loans
Other payables
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to owners of the parent company
Ordinary share capital
Share premium
Share-based payment reserve
Translation reserve
Retained earnings
Equity attributable to shareholders of the Company
Non-controlling interests
Total equity

20
21

10
20
21
22

23
23
24

The notes on pages 56 to 89 are an integral part of these consolidated financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 10 April 2019 and signed on
its behalf by:

Richard Petti		

Chief Executive Officer

Tim Gingell

Chief Financial Officer

IQGeo Group plc
Registered Number: 05589712
54

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Consolidated statement of cash flows
for the year ended 31 December 2018

Notes

13, 1412(1,604)(824)(2,428)430(3,564)(3,134)

1,081
2,025
14
(151)
303
(619)
(8)
156
373
198
2,012
(2,071)
512
407
919

417
2,435
2
252
316
—
(8)
87
367
(395)
2,678
987
3,637
(14)
3,623

—
(316)
(1,844)28,882(2,313)(704)
569
824,282(197)(140)(1,813)————8(2,142)(2,500)
(73)
(743)
(152)
—
(3,468)21,7339,114
68
30,915

(750)
(110)
—
—
5,165
4,305
5,786
3,498
(170)
9,114

The notes on pages 56 to 89 are an integral part of these consolidated financial statements.

IQGeo Group plc Annual Report 201855

FINANCIAL STATEMENTS

18

2017
£’000

CORPORATE GOVERNANCE

Operating activities(Loss)/gain before tax from continuing operations
Loss before tax from discontinued operations
Loss before tax from operating activities
Adjustments for:
Depreciation
Amortisation and impairment
Loss on the disposal of property, plant and equipment
Revaluation of intercompany balances
Share-based payment charge
Gain on sale of Japan business
Finance income
Finance costs
Operating cash flows before working capital movement
Change in inventories
Change in receivables
Change in payables
Cash generated from operations before tax
Net income taxes received/(paid)
Net cash flows from operating activities
Cash flows from investing activities
Payment of contingent consideration
Purchases of property, plant and equipment
Expenditure on intangible assets
Cash received on sale of the RTLS SmartSpace business unit
Cash in RTLS SmartSpace business unit at disposal
Disposal costs in relation to the RTLS SmartSpace business unit
Sale of Japan Geospatial third party services business
Interest received
Net cash flows from investing activities
Cash flows from financing activities
Repayment of borrowings
Interest paid
Payment of lease liability
Purchase of non-controlling interest
Proceeds from the issue of ordinary share capital
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of period
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of period

2018
£’000

Notes to the consolidated financial statements

1 General information
IQGeo Group plc (“the Company”) and its subsidiaries (together, “the Group”) delivers enterprise location intelligence solutions
that enable our customers to create a real-time digital twin of their physical operations. The principal activity going forward
will relate to the Geospatial business (presented as continuing operations within the consolidated income statement), following
the sale of the Group’s RTLS SmartSpace business unit on 31 December 2018 (presented as discontinued operations within
the consolidated income statement).
The Geospatial business delivers software solutions that integrate data from any source – geographic, real-time asset, GPS,location, corporate and external cloud-based sources – into a live geospatial common operating picture, empowering allusers in the customer’s organisation to access, input and analyse operational intelligence to proactively manage their networks,
respond quickly to emergency events and effectively manage day-to-day operations.
The Company is a public limited company which is listed on the Alternative Investment Market (AIM) of the London Stock
Exchange (IQG) and is incorporated and domiciled in the United Kingdom. The value of IQGeo Group plc shares, as quoted
on the London Stock Exchange at 31 December 2018, was 67.5 pence per share (31 December 2017: 45.0 pence).
The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to Ubisense Group plc
on 31 May 2011 ahead of its initial public offering and listing on AIM on 22 June 2011. Following the sale of its RTLS SmartSpacebusiness unit the Company changed its name to IQGeo Group plc on 2 January 2019 with its subsidiaries also changing nameto IQGeo. The address of its registered office is CB1 Business Centre, 20 Station Road, Cambridge CB1 2JD.
The Group has its main operations in the UK, USA, Canada, Germany and Japan and sells its products and services mainly
in North America, Japan and Europe. The Group legally consists of six subsidiary companies headed by IQGeo Group plc.
A full list of subsidiaries is given in note 26 of the financial statements.
The consolidated financial statements have been approved for issue by the Board of Directors on 10 April 2019.
2 New accounting standards
For the purposes of the preparation of the consolidated financial statements, the Group has applied all standards andinterpretations as adopted in the European Union that are effective and applicable for accounting periods beginning on or before
1 January 2018. There are no standards in issue and not yet adopted that will have a material impact on the financial statements.
New standards adopted as at 1 January 2018
The Group has adopted the following new accounting pronouncements as follows:•

IFRS 9 Financial Instruments (effective date financial year commencing on/after 1 January 2018);•

IFRS 15 Revenue from Contracts with Customers (effective date financial year commencing on/after 1 January 2018); and•IFRS 16 Leases (effective date financial year commencing on/after 1 January 2019). The Group have elected to adopt
IFRS 16 ‘Leases’ from 1 January 2018.

IFRS 9IFRS 9 Financial Instruments is the new accounting standard covering classification and measurement for financial
instruments and introduces a new expected credit loss model for impairment of financial assets.
The Group does not enter into hedging arrangements or hold bonds, debentures, or other complex financial assets.
For trade and other receivables, the Group applies a simplified model of recognising lifetime expected credit losses as these
items do not have a significant financing component.
In adopting IFRS 9, no differences in respect of the measurement and impairment of financial assets has been identified forprior periods and accordingly no restatement of prior periods or adjustments to retained earnings have been applied.
Consideration received for the disposal of the RTLS SmartSpace business on 31 December 2018 unit included £2 million
equity investment in Abyssinian Topco Limited. As the investment was recognised at fair value on initial recognition as atthe 31 December 2018, no further adjustment has been made to the value of the asset in preparing the financial statements.
However, in future periods this investment will be measured at fair value through other comprehensive income as disclosed
within note 3.

56

IQGeo Group plc Annual Report 2018

STRATEGIC REPORTThe new standard is applicable from 1 January 2018. IFRS 15 introduces a number of new concepts and requirements relating
to revenue recognition and also provides guidance and clarification on existing practice. The new standard has been applied
retrospectively without restatement, with the cumulative effect of initial application recognised as an adjustment to the opening
balance of retained earnings at 1 January 2018. In accordance with the transition guidance, IFRS 15 has only been applied tocontracts that are incomplete as at 1 January 2018.

The revenue recognition policies of the continuing Geospatial operations are largely unaffected by the adoption of IFRS 15.
The conclusion of management’s assessment of the adoption of IFRS15 on contracts which were incomplete as at 1 January 2018is as follows:•

In applying IFRS 15 to contracts which were incomplete as at 1 January 2018, revenue of £15,000 which had beenpreviously reported within the 2017 financial year would have been deferred into the year ended 31 December 2018
due to the timing of delivery of hardware within the RTLS SmartSpace division.

•

Hardware costs of £3,000 associated with RTLS SmartSpace contracts which were incomplete as at 1 January 2018 would
be deferred into the year ended 31 December 2018.

•

No adjustment has been made to defer the incremental costs of obtaining customer contracts, such as commission payments,
as these costs would be amortised over a period of one year or less. Management has applied the practical expedientpermitted under IFRS 15 in reaching this conclusion.

•

As a result of these adjustments, £12,000 has been recognised as an adjustment to the opening balance of retained
earnings at 1 January 2018. Within the results for the year ended 31 December 2018, revenues have increased £15,000
and the cost of revenues has increased by £3,000.

The Group’s revenue policies under IFRS 15 are presented within note 3 to the financial statements.
IFRS 16IFRS 16 Leases will replace IAS 17 and three related interpretations. Leases will be recorded on the statement of financial
position in the form of a right-of-use asset and a lease liability. The consolidated statement of comprehensive income will be
impacted through reduced operating expenses, and higher depreciation and finance costs. The new standard is applicablefrom 1 January 2019 with an option to adopt it early.
The Group has early adopted IFRS 16 effective from 1 January 2018.
The Group’s accounting policies under IFRS 16 are as follows:
The policy applies to properties and cars where the Group has substantially all of the economic benefits from use of theasset. On adoption of the standard, a right-of-use asset and lease liability has been created.
The right-of-use asset is depreciated over the lease term and if necessary impaired in accordance with applicable standards.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (applicationof the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except whereanother systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.

IQGeo Group plc Annual Report 201857

FINANCIAL STATEMENTS

In applying IFRS 15, hardware and certain software revenues within the discontinued RTLS SmartSpace business unit are
deferred until the customer is in control of both the hardware and software components provided by the Group.

CORPORATE GOVERNANCE

2 New accounting standards continued
New standards adopted as at 1 January 2018 continued
IFRS 15IFRS 15 Revenue from Contracts with Customers has replaced IAS 18 Revenue.

Notes to the consolidated financial statements continued

2 New accounting standards continued
New standards adopted as at 1 January 2018 continued
IFRS 16 continued
The standard allows two options for adoption – fully retrospective and modified retrospective. The Group has elected totake the modified retrospective approach. As a result of this the Group has:•recognised a lease liability at 1 January 2018 for leases previously classified as operating leases applying IAS 17. The Grouphas measured lease liabilities at the present value of the remaining lease payments, discounted using the Group’s
incremental borrowing rate at the date of initial application;•

recognised a right-of-use asset at 1 January 2018 for leases previously classified as operating leases applying IAS 17.
The Group has chosen to measure right-of-use assets at an amount equal to the lease liabilities, adjusted by the amountof any prepaid or accrued lease payments relating to those leases recognised in the statement of financial position as at
31 December 2017; and•2017 comparatives are left unchanged, and any opening adjustment to net assets was recognised on 1 January 2018.

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

As noted above, no comparatives are given for the adoption of IFRS 16. The Group has calculated that the right-of-use asset
recognised and corresponding liability as at 1 January 2018 is £3.0 million.
The lease commitments as at 1 January 2018 were as follows:
No later than one year
Less than one year and no later than five years
Later than five years
Total

Land and buildings
£’000

Other
£’000

Total
£’000

681
1,513
982
3,176

94
10
—
104

775
1,523
982
3,280

The opening lease liability is reconciled to the table of lease commitments as follows:
Total
£’000

Lease commitment as at 1 January 2018
Interest to be unwound over the lease term
Dilapidations liability recognised on adoption of IFRS 16
Opening lease liability and right-of-use asset at 1 January 2018

3,280
(381)
103
3,002

The impact on adoption within the results reported as continued operations for the twelve months ended 31 December 2018is as follows:•

finance costs have increased by £14,000 due to interest charges on the lease liability;•

depreciation expense has increased by £0.2 million due to depreciation of the right-of-use asset;•

EPS has not changed; and•adjusted EBITDA has improved by £0.2 million due to reduction of rental expense.

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STRATEGIC REPORT

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

Going concern basis
The Group’s business activities, together with factors likely to affect its future development, performance and position,
are set out in the Strategic report and Directors’ report on pages 1 to 42.
In determining the basis for preparing the consolidated financial statements, the Directors are required to consider whether
the Company can continue in operational existence for the foreseeable future, being a period of not less than twelve months
from the date of the approval of the consolidated financial statements.
As part of the sale of the RTLS SmartSpace business unit, the Group repaid its outstanding loan balance of £1.75 million on
31 December 2018. The Group has no further loans.
Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis. The forecasts
include assumptions regarding the opportunity funnel from both existing and new clients, growth plans, risks and mitigating
actions. In particular operating cash flow and profitability are highly sensitive to revenue mix and the positive contributionof continuing growth in software sales.
In reaching their going concern conclusion, the Directors have considered the following points:•

the Group had cash of £30.9 million, with nil bank debt as at 31 December 2018 and has sufficient working capital tocontinue operations; and•the Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, support theconclusion that there is a reasonable expectation that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report.
The Group, therefore, continues to adopt the going concern basis in preparing the consolidated financial statements.

Consolidation
The Group financial statements include the results, financial position and cash flows of the Company and all of its subsidiary
undertakings. Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when
the Company has the power to govern the financial and operating policies of an entity, uses this power to affect the returns
from that entity and has exposure to variable returns from its investment in the entity.
Co-terminus financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistentaccounting policies. Businesses acquired or disposed during the year are accounted for using acquisition method principles
from, or up to, the date control passed. Intra-group transactions and balances are eliminated on consolidation. All subsidiaries
use uniform accounting policies for like transactions and other events 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 combinationand the non-controlling interest’s share of changes in equity since the date of combination.

IQGeo Group plc Annual Report 201859

FINANCIAL STATEMENTS

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

CORPORATE GOVERNANCE

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

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Foreign currencies
a. Functional and presentation currency
The functional currency of each Group entity is the currency of the primary economic environment in which each entity operates.
The consolidated financial statements are presented in GBP.
b. Transactions and balances
Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailingat the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates rulingat 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 the currency of a hyperinflationary economy) that have a functional currency other than GBP are translated
into GBP as follows:•

assets and liabilities for each statement of financial position are translated at the exchange rate at the period-end date;•income and expenses for each income statement are translated at the exchange rate ruling at the time of each period
the transaction occurred; and•all resulting exchange differences are recognised in other comprehensive income.

Business reporting
IFRS 8 requires a “management approach” under which information in the financial statements is presented on the same
basis as that used for internal management reporting purposes.
The Group is organised on a global basis for its Geospatial business following the sale of its RTLS SmartSpace business unit
on 31 December 2018. The Directors believe that the Chief Operating Decision Maker (CODM) is the Chief Executive Officerof the Group. The CODM and the rest of the Board are provided with information on the Geospatial business to assess thefinancial performance of, and allocate resources to, the Geospatial business and central resources.
The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “adjusted EBITDA”
as the primary measure of profit and this is reported on the face of the income statement.
Revenue recognition
Geospatial business unit – continuing operations
Software
Revenue earned from myWorld software sales under perpetual licence agreements with maintenance and support is recognised
when the software is made available to the customer for use. Revenue earned from myWorld software sold as a subscription isrecognised over the period of the contract, which is generally one year, commencing from when the software is available for use.
If contracts include performance obligations which result in software being customised or altered, the software cannot be
considered distinct from the labour service. Revenue recognition is dependent on the contract terms and assessment of whether
the performance obligation is satisfied over time. If the conditions of IFRS15 are not satisfied, revenue is deferred until thesoftware is available for customer use.
Maintenance and support
Maintenance and support is recognised on a straight-line basis over the term of the contract, which is typically one year.
Revenue not recognised in the consolidated income statement is classified as deferred revenue on the consolidated statementof financial position.
Services
Services revenue includes consultancy, installation of hardware and training. Services revenue from time and materials
contracts is recognised in the period that the services are provided on the basis of time worked at agreed contractual rates
and as direct expenses are incurred.
Revenue from fixed price, long-term customer specific contracts is recognised on the stage of completion of each assignment at
the period-end date compared to the total estimated service to be provided over the entire contract where the outcome can be
estimated reliably. If a contract outcome cannot be estimated reliably, revenues are recognised equal to costs incurred, to theextent that costs are expected to be recovered. An expected loss on a contract is recognised immediately in the income statement.

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IQGeo Group plc Annual Report 2018

STRATEGIC REPORTFINANCIAL STATEMENTS

RTLS SmartSpace business unit – discontinued operations
Software
SmartSpace operates as standalone software that can be used to identify and manage assets in real time throughthe collection of data. Smartspace integrates with our own hardware or can be used alongside third party products.
Smartspace software is sold under a perpetual licence arrangement and is recognised when the software is madeavailable to the customer for use. Additionally, the Group sells software that is required to allow our own hardware tooperate. Accordingly, this software licence is only sold alongside hardware. Revenue is recognised at the point that thesoftware has been made available to the customer and as the associated hardware becomes under the control of thecustomer, which is generally on delivery to the customer’s premises.
Maintenance and support
Maintenance and support is recognised on a straight-line basis over the term of the contract, which is typically one year.
Revenue not recognised in the consolidated income statement is classified as deferred revenue on the consolidated statementof financial position.
Hardware
Revenue is recognised at the point that the hardware supplied becomes under the control of the customer. This is generally
on delivery to the customer’s premises.
Services
Services revenue includes consultancy, installation of hardware and training. Services revenue from time and materials
contracts is recognised in the period that the services are provided on the basis of time worked at agreed contractual
rates and as direct expenses are incurred.
Revenue from fixed price, long-term customer specific contracts is recognised on the stage of completion of each assignment
at the period-end date compared to the total estimated service to be provided over the entire contract where the outcome
can be estimated reliably. If a contract outcome cannot be estimated reliably, revenues 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 theincome statement.
Timing of payment
Maintenance and support income is invoiced annually in advance at the commencement of the contract period. Other revenue
is invoiced based on the contract terms in accordance with performance obligations. Amounts recoverable in contracts (contract
assets) relate to our conditional right to consideration for completed performance obligations under the contract prior to invoicing.
Deferred income (contract liabilities) relate to amounts invoiced in advance of services performed under the contract.
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 shownas either accruals or prepayments in the statement of financial position.
b. Share-based payments
The Group issues equity-settled share-based payments to certain employees. Vesting conditions are continuing employment
and can include, for senior employees, a diluted EPS performance target or share price target. Equity-settled share-based
payments are measured at fair value at the date of grant using an appropriate pricing model. The fair value is expensed ona straight-line basis over the vesting period, together with a corresponding increase in equity in the share-based payment
reserve, based on the Group’s estimate of the number of shares that will eventually vest.

IQGeo Group plc Annual Report 2018

CORPORATE GOVERNANCE

3 Summary of significant accounting policies continued
Revenue recognition continued
Geospatial business unit – continuing operations continued
Timing of payment
Maintenance and support income is invoiced annually in advance at the commencement of the contract period. Other revenue
is invoiced based on the contract terms in accordance with performance obligations. Amounts recoverable in contracts (contract
assets) relate to our conditional right to consideration for completed performance obligations under the contract prior to
invoicing. Deferred income (contract liabilities) relate to amounts invoiced in advance of services performed under the contract.

61

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are material one-off items of income or expense that havebeen shown separately due to the significance of their nature or amount and do not reflect the ongoing cost base orrevenue-generating ability of the Group.
Interest income and expense
Interest income and expense is included in the income statement on a time basis, using the effective interest methodby reference to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:
a. Current tax
The current tax charge represents an estimate of the amounts payable or receivable to or from tax authorities in respect of
the Group’s taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit before tax
as reported in the income statement because it excludes certain items of income and expense that are taxable or deductible
in other years or are never taxable or deductible. Taxation received is recognised only when it is probable that the Group is
entitled to the asset.
b. Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of
the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition,
tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as
deferred tax assets. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognitionof 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 theunderlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets andliabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the reporting date. Deferred tax is recognised as a component of tax
expense in the income statement, except where it relates to items charged or credited directly to other comprehensive income
or equity when it is recognised in other comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisitionof a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and theequity 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 provisional fair values at the acquisition date.
Fair values are reassessed during the measurement period and updated if required. The Group recognises any non-controllinginterest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s
proportionate share of the recognised amounts of the acquiree’s identifiable net assets.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interestin the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequentchanges to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordancewith 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
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controllinginterest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the
net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the
net fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses.

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IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Development activities involve a plan or design for the production of new or substantially improved products and processes.
Development expenditure is only capitalised if all of the following conditions are met:
completion of the intangible asset is technically feasible so that it will be available for use or sale;•the Group intends to complete the intangible asset and use or sell it;•

the Group has the ability to use or sell the intangible asset;•

the intangible asset will generate probable future economic benefits. Among other things, this requires that there is amarket for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset
will be used 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 overtheir useful economic lives. Amortisation is shown within administrative expenses in the income statement. The estimateduseful lives of current development projects are three years. Upon completion the assets are subject to impairment testing.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expensein the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences that do not form an integral part of related
hardware, are capitalised at cost and amortised on a straight-line basis over their useful economic life which is typicallythree years.
Acquired intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and amortised on a straight-line
basis over their useful economic lives. Amortisation is shown within operating expenses in the income statement. All acquired
intangibles were fully amortised or impaired as at 31 December 2017 and 2018.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged to the income statement so as to write off the cost or valuation less estimated residual values
over their expected useful lives on a straight-line basis over the following periods:•

Fixtures and fittings: three to ten years or period of the lease if shorter.

•

Computer equipment: three years.

Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of an asset
is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised inoperating 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 toamortisation and are tested at least annually for impairment and whenever there is an indication that the asset may be impaired.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes 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 amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment
at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prioryears. A reversal of an impairment loss is recognised immediately in profit or loss.
IQGeo Group plc Annual Report 2018

63

FINANCIAL STATEMENTS•

CORPORATE GOVERNANCE

3 Summary of significant accounting policies continued
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of thefinancial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when thefinancial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished,discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs(where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:•

amortised cost;•fair value through profit or loss (FVTPL); and•fair value through other comprehensive income (FVOCI).

The classification is determined by both:•the entity’s business model for managing the financial asset; and•the contractual cash flow characteristics of the financial asset.

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):•

they are held within a business model whose objective is to hold the financial assets and collect its contractual
cash flows; and•the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on
the principal amount outstanding.

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall
into this category of financial instruments.
Financial assets at fair value through other comprehensive income (FVOCI)
Assets in this category are measured at fair value with gains or losses recognised directly in equity. The cumulative gainor loss arising from changes in fair value, impairment or sale is not recycled to the consolidated income statement. The fairvalues of financial assets in this category are determined by reference to active market transactions or using a valuation
technique where no active market exists.
Investments
As part of the sale transaction of the RTLS business unit on 31 December 2018, the Group holds a rollover equity investment
in Abyssinian Topco Limited (registered number: 11649721) which following the transaction, is the parent company of the
RTLS SmartSpace business unit.
The Group has made the irrevocable election to account for the investment in Abyssinian Topco Limited at fair value throughother comprehensive income (FVOCI). In the current financial year, the fair value was determined in line with the requirementsof IFRS 9, which does not allow for measurement at cost.

64

IQGeo Group plc Annual Report 2018

STRATEGIC REPORTThe Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets
and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows,
considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its
historical experience, external indicators and forward-looking information to calculate the expected credit losses using aprovision matrix.

Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is the actual cost of third party components andlabour, and is applied on a first in, first out basis. Net realisable value is based on estimated selling price less additional
cost to completion and disposal. Provision is made for obsolete, slow moving or defective items where appropriate andare recognised as an expense in the period in which the write-down or loss occurs.
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Group’s financial
liabilities were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless theGroup designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives
and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in
the profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business fromsuppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they arepresented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term highly liquid investments with original maturities of three months or less.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried atamortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in
the income statement over the period of the borrowings using the effective interest method.
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 shownin equity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital andthe amounts paid over the nominal value in respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by theCompany to the Group’s employees under its employee share option plans.

IQGeo Group plc Annual Report 2018

65

FINANCIAL STATEMENTS

The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics
they have been grouped based on the days past due.

CORPORATE GOVERNANCE

3 Summary of significant accounting policies continued
Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course 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.

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from theirfunctional currencies to the Group’s presentation currency of GBP are recognised directly in other comprehensive income
and accumulated in the translation reserve.
Retained earnings
Retained earnings include all current and prior period retained profits/losses.
Non-controlling interests
Non-controlling interests, presented as part of equity, represent a proportion of a subsidiary’s profit or loss and net assetsthat is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the assetsof the parent and the non-controlling interests based on their respective ownership interests.
4 Critical accounting judgments and key sources of estimation and uncertainty
When preparing the financial statements, management makes a number of judgments, estimates and assumptions about
the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgments
The following are the judgments made by management in applying the accounting policies of the Group that have the mostsignificant effect on the financial statements.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s judgmentof the point at which technical and commercial feasibility is demonstrable. The carrying amount of capitalised development
costs at 31 December 2018 is £1.2 million (2017: £2.7 million). After capitalisation, management monitors whether the recognition
requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.
Revenue recognition
Significant management judgment is applied in determining the distinct performance obligations included within contracts
involving multiple deliverables. Additionally, for each identified significant performance obligation management are required
to determine which obligations meet the criteria to recognise revenue over time.
Deferred tax
A deferred tax asset is recognised where the Group considers it probable that future tax profits will be available against which
the tax credit will be utilised in the future. This specifically applies to tax losses and to outstanding vested share options at thestatement of financial position date. In estimating the amount of the deferred tax asset that should be recognised, the Directors
make judgments based on current budgets and forecasts about the amount of future taxable profits and the timings of whenthese will be realised. No deferred tax asset is currently recognised.
Recognition of earn-out consideration
On 31 December 2018 the Group disposed of its RTLS SmartSpace business unit for a consideration of up to £35.0 million
with £30.0 million paid in cash on completion (subject to adjustments for net debt and net working capital) in addition to a
£2 million roll over investment and further £3.0 million earn-out consideration.
The earn-out consideration of £3.0 million is subject to the RTLS SmartSpace business unit meeting the following milestones:•£1.5 million is payable if revenue achieved for the year ended 31 December 2018 is £16.4 million. This milestone was not met.

•

£1.5 million is payable if revenue achieved for the year ended 31 December 2019 is £22.0 million.

•

If the first milestone is not met, the full £3.0 million will be paid if the revenue for the 2019 period meets the 2019 target
plus the shortfall of the target of the 2018 period. Accordingly, the full £3.0 million earn-out would be achieved if the 2019
revenue for the RTLS SmartSpace business exceeds £22.9 million.

While the achievement of an additional £3.0 million earn-out cash consideration remains possible, no contingent asset has
been recognised within statement of financial position as at 31 December 2018. Management believe that this is appropriate
as achievement of the milestones is dependent on the new management team’s strategy and performance, over which IQGeo
have no influence as a minority shareholder.

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STRATEGIC REPORTCORPORATE GOVERNANCE

4 Critical accounting judgments and key sources of estimation and uncertainty continued
Estimating uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Amortisation and impairment of development costs
Capitalised development costs are amortised over a three years period which is management’s estimate of the useful livesof current development projects. In reaching this conclusion, management have made assumptions in respect of future
customer requirements and developments within the industry. These estimates have a high level of uncertainty and are
in respect of matters outside of managements control.

FINANCIAL STATEMENTS

The Group tests capitalised development costs for impairment annually in accordance with the accounting policy statedin note 3. In performing the impairment review, management is required to make assumptions of the future cash flows
generated from the myWorld products. This includes consideration of both the current business pipeline and estimations
beyond the existing pipeline. Estimation uncertainty relates to assumptions about future operating results and thedetermination of a suitable discount rate.
Revenue recognition
As revenue from fixed price services agreements is recognised over time, the amount of revenue recognised in a reporting
period depends on the extent to which the performance obligation has been satisfied. This requires an estimate of thequantity of the services to be provided, based on historical experience with similar contracts. In a similar way, recognising
revenue requires the estimated number of hours required to complete the promised work.
5 Segment information
5.1 Operating segments
Management provides information reported to the Chief Operating Decision Maker (CODM) for the purpose of assessing
performance and allocating resources. The CODM is the Chief Executive Officer.
The continuing Geospatial business delivers software solutions that integrate data from any source – geographic,
real-time asset, GPS, location, corporate and external cloud-based sources – into a live geospatial common operating
picture, empowering all users in the customer’s organisation to access, input and analyse operational intelligence toproactively manage their networks, respond quickly to emergency events and effectively manage day-to-day operations.
The continuing geospatial operations are reported to the CODM as a single business unit.
The performance of the discontinued RTLS SmartSpace business unit is disclosed within note 6.
5.2 Revenue by type of the continuing operations
The following table presents the different revenue streams of the Geospatial business unit:
2018

2017

Revenue of continuing Geospatial operations£’000% of total revenue£’000% of total revenue

Software
Maintenance and support
Services
Total revenue generated from
myWorld products
Geospatial services fromthird‑party products
Total revenue

1,395
918
2,424

14%
9%
24%

2,575
750
2,459

16%
5%
15%

4,737

47%

5,784

35%

5,242
9,979

53%
100%

10,675
16,45965%
100%

Software includes £1.2 million (2017: £2.4 million) from perpetual software licences recognised at a point in time. All otherrevenue is recognised as services are transferred over time.

IQGeo Group plc Annual Report 201867

Notes to the consolidated financial statements continued

5 Segment information continued
5.3 Geographical areas of continuing and discontinued operations
The Board and management team also review the revenues on a geographical basis, based around the regions where theGroup has its significant subsidiaries or markets.
The Group’s revenue from external customers in the Group’s domicile, the UK, and its major worldwide markets have been
identified on the basis of the customers’ geographical location. Non-current assets are allocated based on their physical location.
The following table represents the group’s continuing operational revenue and non-current assets by geographical region:
RevenueUK
Germany
Europe otherUSA
CanadaJapan
Asia Pacific otherRest of world

Non-current assets

2018
£’000

2017
£’000

2018
£’000

2017
£’000

—
14
3
7,041
1,596
1,302
—
23
9,979

1
2,842
7
8,300
2,783
2,496
18
12
16,459

3,252
1
—
364
4
2
—
—
3,623

1,142
—
—
66
3
33
—
—
1,244

2018 revenues include £1.4 million from income deferred at the beginning of the period (2017: £1.9 million) relating
to performance obligations satisfied overtime.
The following table represents the group’s discontinued operational revenue and non-current assets by geographical region:
RevenueUK
Germany
Europe otherUSA
CanadaJapan
Asia Pacific otherRest of world

Non-current assets

2018
£’000

2017
£’000

2018
£’000

2017
£’000

426
4,571
1,640
7,313
137
956
455
21
15,519

271
5,350
850
2,783
71
1,049
168
254
10,796

3,268
411
2
122
—
147
—
—
3,950

1,991
29
5
114
—
72
—
—
2,211

2018 revenues include £1.0 million from income deferred at the beginning of the period (2017: £0.4 million) relating
to performance obligations satisfied overtime.
5.4 Information about major customers of the continuing operations
During 2018, the Group had one customer who generated revenues of greater than 10% of total Geospatial revenue.
£3.1 million was generated from one US customer.
During 2017, the Group had three customers who generated revenues of greater than 10% of total Geospatial revenue. £3.2 million
was generated from one US customer, £2.8 million was generated from one European customer, and £2.4 million was
generated from one Canadian customer.

68

IQGeo Group plc Annual Report 2018

STRATEGIC REPORTThe earn-out consideration of £3.0 million is subject to the RTLS SmartSpace business unit meeting the following milestones:•£1.5 million is payable if revenue achieved for the year ended 31 December 2018 is £16.4 million. This milestone was not met.

•

£1.5 million is payable if revenue achieved for the year ended 31 December 2019 is £22.0 million.

•

If the first milestone is not met, the full £3.0 million will be paid if the revenue for the 2019 period meets the 2019 target
plus the shortfall of the target of the 2018 period. Accordingly, the full £3.0 million earn-out would be achieved if the 2019
revenue for the RTLS SmartSpace business exceeds £22.9 million.

While the achievement of an additional £3.0 million earn-out cash consideration remains possible, no contingent asset has
been recognised within statement of financial position as at 31 December 2018. Management believe that this is appropriate
as achievement of the milestones is dependent on the new management team’s strategy and performance, over which IQGeo
have no influence as a non-controlling shareholder.
The following information is attributable to the RTLS SmartSpace business unit.
6.1 Income statement for the year ended 31 December 2018
Revenue
Cost of revenues
Gross profit
Operating expenses
Operating profit/(loss)
Analysed as:
Gross profit
Other operating expenses
Adjusted EBITDA
Depreciation
Amortisation and impairment of other intangible assets
Share option expense
Reorganisation costs
Operating loss
Finance income
Finance costs
Loss before tax
Income tax
Loss from discontinued operations prior to gain on disposal
Gain on disposal of the RTLS SmartSpace business unit
Profit/(loss) from discontinued operations

2018
£’000

2017
£’000

15,519(7,402)
8,117(8,804)(687)

10,796(6,310)4,486(7,968)(3,482)

8,117(6,204)
1,913(808)(1,251)
(55)
(486)
(687)
7
(144)
(824)
(57)
(881)
22,36621,4854,486(5,890)(1,404)(371)(1,628)(79)—(3,482)
5(87)(3,564)30(3,534)—(3,534)

IQGeo Group plc Annual Report 2018

69

FINANCIAL STATEMENTS

The disposal of the RTLS SmartSpace business followed reorganisation involving the creation of new legal entities within the
UK, USA, Canada, Germany and Japan regions. The Group completed a reorganisation whereby the trade and assets of the
RTLS SmartSpace and Geospatial business units were separated into different legal entities in each country. The restructured
RTLS SmartSpace group of legal entities, headed by Ubisense Limited, was disposed of on 31 December 2018. Central functions
such as finance and IT were allocated between the RTLS SmartSpace and Geospatial legal entities so that both divisions
could continue trading post-disposal. This was supported through a transition services agreement between IQGeo and thediscontinued business.

CORPORATE GOVERNANCE

6 Discontinued operations
On 31 December 2018 the Group disposed of its RTLS SmartSpace business unit for a consideration of up to £35.0 million
with £30.0 million paid in cash on completion (subject to adjustments for net debt and net working capital) in addition toa £2 million roll over investment and further £3.0 million earn-out consideration.

Notes to the consolidated financial statements continued

6 Discontinued operations continued
6.1 Income statement for the year ended 31 December 2018 continued
The gain on disposal of the RTLS SmartSpace business unit discontinued operations is summarised as follows:
2018
£’000

Consideration received or receivable:
Cash received on 31 December 2018 (as presented within the statement of consolidated cash flows)
Roll over investment in RTLS SmartSpace business unit
Amounts receivable on finalisation of completion accounts
Total disposal consideration
Consideration used to settle HSBC debt on 31 December 2018
Carrying value of net assets soldTransaction costs incurred
Accrued bonuses in respect of the transaction completion
Gain on sale before income tax and reclassification of foreign currency reserve
Reclassification of foreign currency reserve
Gain on disposal of the RTLS SmartSpace business unit
6.2 Cash flows from discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash inflow/(outflow) from investing activities:
Purchase of property, plant and equipment
Expenditure on intangible assets
Cash received on sale of the RTLS SmartSpace business unit
Cash in RTLS SmartSpace business unit at disposal
Disposal costs in relation to the RTLS SmartSpace business unit
Interest received
Total net cash outflow from investing activities:
Net cash inflow/(outflow) from financing activities:
Repayment of bank debt
Repayment of lease liability
Interest paid
Total net cash outflow from financing activities:

70

IQGeo Group plc Annual Report 2018

28,8822,000
846
31,728(1,753)(4,804)(1,888)(701)
22,582(216)
22,366
2018
£’000

2017
£’000

(599)

2,037

(245)
(985)
28,882(2,313)(704)
724,642(116)(1,064)———
5(1,175)(2,500)(518)(71)(3,089)

(750)
—
(110)
(860)

STRATEGIC REPORT

2018
£’000

Statement of financial position of the discontinued operations

1,525
510
1,915
1,261
3,932
1,697
2,313
13,153(5,078)(350)(2,132)
(405)
(249)
(135)
(8,349)4,804

7 Employee information
7.1 Employee numbers
The number of employees at the end of the period was as follows:
Actual number of people as at 31 December

Continuing operations
Discontinued operations

Average monthly number of people

2018
Number

2017
Number2018
Number

2017
Number

59
61
120

83
55
138

67
62
129

78
61
139

Employee numbers continuing operations
The average monthly number of people, including Executive Directors, employed by the Group during the year was:
Actual number of people as at 31 December
By activity

Technical consultants
Sales and marketing
Research and development
Administration

By geography

United Kingdom
EuropeAmericas
Asia

Average monthly number of people

2018
Number

2017
Number2018
Number

2017
Number

24
18
7
10
59

44
22
7
10
83

30
20
7
10
67

45
18
6
9
78

2018
Number

2017
Number2018
Number

2017
Number

15
1
40
3
59

16
2
44
21
83

16
1
41
9
67

14
2
41
21
78

IQGeo Group plc Annual Report 2018

71

FINANCIAL STATEMENTS

AssetsIntangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Amounts recoverable on contracts
Cash and cash equivalents
Total assets
Liabilities
Trade and other payables
Deferred income
Lease obligation
Current tax liability
Deferred income tax liabilities
Other payables
Total liabilities
Net assets

CORPORATE GOVERNANCE

6 Discontinued operations continued
6.3 Effect of the disposal on the consolidated statement of financial position
The carrying amount of the assets and liabilities of the RTLS SmartSpace business unit as at 31 December 2018 was as follows:Notes to the consolidated financial statements continued

7 Employee information continued
7.1 Employee numbers continued
Employee numbers discontinued operations
The average monthly number of people employed by the Group during the year was:
Actual number of people as at 31 December
By activity

Technical consultants
Sales & marketing
Research & development
Administration

By geography

United Kingdom
EuropeAmericas
Asia

Average monthly number of people

2018
Number

2017
Number2018
Number

2017
Number

17
20
13
11
61

11
19
13
12
55

17
19
13
13
62

14
20
14
13
61

2018
Number

2017
Number2018
Number

2017
Number

25
17
11
8
61

23
18
6
8
55

26
18
10
8
62

26
19
8
8
61

2018
£’000

2017
£’000

6,395
482
288
248
7,413

7,052
575
270
237
8,134

2018
£’000

2017
£’000

5,636
518
401
55
6,610

4,539
551
314
79
5,483

2018
£’000

2017
£’000

1
1
(14)
(14)
(13)

3
3
—
—
3

7.2 Employee benefits
Employee benefits of continuing operations
The aggregate employee benefit expense, including Executive Directors, comprised:
Notes

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

24

Employee benefits of discontinued operations
The aggregate employee benefit expense comprised:
Notes

Wages and salaries
Social security costs
Contributions to defined contribution pension arrangements
Share-based payments
Total aggregate employee benefits
8 Finance income and costs
Continued operations onlyInterest income from cash and cash equivalents
Finance income
Interest expense for lease arrangements
Finance costs
Net finance costs

72

IQGeo Group plc Annual Report 201824

STRATEGIC REPORT

2018
£’000

2017
£’000

9.2

774
57
216
—
95
(89)
(151)
619

807
46
­—
219
47
(102)
252
—

9.2 Non-recurring items from continuing operations
The following item is associated with the sale on 30 March 2018 of the Group’s Japan third party geospatial services including
the Geoplan brand name for a gross consideration of JPY 100 million (£0.7 million). This has been credited to the income
statement in arriving at a gain before tax.
Alongside this transaction, the 23% non-controlling interest of Geoplan Company Limited was acquired. The acquisition of thisnon-controlling interest gave the Group 100% ownership of its remaining Japanese operations. Geoplan Company Limited
has been renamed IQGeo Japan K.K.
Sale of Japan Geospatial third party services businessTotal non-recurring items

2018
£’000

2017
£’000

619
619

—
—

The sale of the Japan Geospatial third party services business has not been presented as a discontinued operation
because these Geospatial services will be provided to customers based in other regions of the Group’s continuing
operations. Additionally, the Japan Geospatial operations will continue, albeit solely focused on selling IQGeo products
and related services. The sold Geospatial business did not represent a significant part of the global business.
9.3 Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor
and its associates:
Fees payable to the Group’s auditor for the audit of:
Parent company and consolidated financial statements
Financial statements of subsidiaries, pursuant to legislation
Total audit fees
Fees payable to the Group’s auditor for other services:
Tax complianceTax advisory associated with the group reorganisation
Audit related assurance services
Other services
Total non-audit fees
Total auditor’s remuneration

2018
£’000

2017
£’000

59
70
129

39
72
111

7
179
14
—
200
329

30
—
14
2
46
157

The auditor of IQGeo Group plc is Grant Thornton UK LLP, covering both continuing and discontinued operations.

IQGeo Group plc Annual Report 201873

FINANCIAL STATEMENTS

Amortisation and impairment of other intangible assets
Depreciation of owned property, plant and equipment
Depreciation of right-of-use assets
Operating lease rental charges – land and buildings
Research & development costs expensed
Net foreign currency (gains)/losses
Unrealised foreign exchange (gains)/losses on intercompany trading balances
Non-recurring items

Notes

CORPORATE GOVERNANCE

9 Loss before tax: analysis of expenses by nature
9.1 Expenses by nature of continuing operations
The following items have been charged/(credited) to the income statement in arriving at a gain before tax:

Notes to the consolidated financial statements continued

10 Income tax
10.1 Income tax recognised in the income statement
Current tax – continuing operations
Corporation tax
Adjustment in respect of prior year
Foreign tax
Total current tax charge
Deferred tax – continuing operations
Origination and reversal of temporary differences
Total deferred tax charge/(credit)
Total income tax charge/(credit) for the year – continuing operations

Current tax – discontinued operations
Corporation tax
Adjustment in respect of prior year
Foreign tax
Total current tax charge
Deferred tax – discontinued operations
Origination and reversal of temporary differences
Total deferred tax credit
Total income tax charge/(credit) for the year – discontinued operations
Total income tax charge/(credit) for the year

2018
£’000

2017
£’000

—
(213)
238
25

—
—
12
12

14
14
39

(43)
(43)
(31)

2018
£’000

2017
£’000

—
(300)
407
107

—
—
93
93

(50)
(50)
57

(123)
(123)
(30)

96

(61)

The tax credit differs from the standard rate of corporation tax in the UK for the year of 19% (2017: 19.3%) for the following reasons:
Loss before tax – continuing operations
Gain before tax from discontinued operations
Total gain before tax
Loss before tax multiplied by the standard rate of corporation tax in the UK of 19.0%(2017: 19.3%)
Tax effects of:
Expenses not deductible for tax purposes
Income not subject to income tax
Utilisation of previously unrecognised tax losses
Unrecognised deferred tax movements
Tax unprovided in prior years
Research and development tax credits – prior years
Difference on tax treatment of share options – unrecognised
Differential on overseas tax rates
Total income tax debit/(credit)

74

IQGeo Group plc Annual Report 2018

2018
£’000

2017
£’000

(1,604)
21,542
19,938430(3,564)(3,134)

3,788

(605)

75
(2,138)(1,987)
256
15
(513)
57
543
96

131
—
(82)
429
106
—
60
(100)
(61)

STRATEGIC REPORTThe deferred tax balances have been measured at the local rate of realisation expected, which in the UK is 19%.

Deferred income tax assets

At 1 January
Deferred tax credited to theincome statement
Deferred tax charged to theincome statement
Disposal of RTLS SmartSpace business unit
At 31 December

Deferred income tax liabilities

2018
£’000

2017
£’000

2018
£’000

2017
£’000

—

—

(516)

(683)

—

—

349

403

—
—
—

—
—
—

(313)
249
(231)

(236)
—
(516)

The components of deferred tax included in the consolidated statement of financial position are as follows:
Development costs capitalised
Total deferred income tax liabilities

2018
£’000

2017
£’000

(231)
(231)

(516)
(516)

Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable
profits will be available against which the Group can utilise the benefits:
Tax losses carried forward
Equity-settled share options temporary differences
Total unrecognised deferred tax assets

2018
£’000

2017
£’000

1,549
33
1,582

5,637
19
5,656

IQGeo Group plc Annual Report 201875

FINANCIAL STATEMENTS

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

CORPORATE GOVERNANCE

10 Income tax continued
10.2 Factors that may affect future tax charges
The Group has tax losses of £8.7 million (2017: £24.5 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 theselosses as they may not be used to offset taxable profits elsewhere in the Group, and they have arisen in subsidiaries whose
future taxable profits are uncertain. No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries,
because the earnings are continually reinvested by the Group and no tax is expected to be payable on them in theforeseeable future.

Notes to the consolidated financial statements continued

11 Earnings per share (EPS)
Earnings attributable to Ordinary Shareholders
Gain/(loss) from continuing operations
Gain/(loss) from discontinued operations
Gain/(loss) from continuing and discontinued operations
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS (’000)
Effect of dilutive potential ordinary shares:– Share options (’000)
Weighted average number of ordinary shares for the purposes of diluted EPS (’000)
Continuing operations EPS
Basic and diluted EPS (pence)
Discontinued operations EPS
Basic and diluted EPS (pence)Continuing and discontinued operations EPS
Basic and diluted EPS (pence)

2018

2017

(1,643)
21,485
19,842461(3,516)(3,055)73,08858,479257
73,345215
58,694

(2.2)

0.8

29.4

(6.0)

27.1

(5.2)

Basic earnings per share is calculated by dividing profit/(loss) for the period attributable to ordinary shareholders of theCompany by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per share,
the weighted average number of shares is adjusted to allow for the effects of all dilutive share options and warrants outstandingat the end of the year. Options have no dilutive effect in loss-making years or in respect of discontinued operations.
The Group also presents an adjusted diluted earnings per share figure which excludes share-based payments charge,
unrealised foreign exchange gains/(losses) on intercompany trading balances and non-recurring items from the measurementof profit for the period.
Continuing operations

Continued earnings for the purposes of diluted EPS, being net loss
attributable to equity holders of the parent company (£’000)
Adjustments:
Reversal of share-based payments charge (£’000)
Unrealised foreign exchange gains/(losses) on intercompany
trading balances
Reversal of non-recurring items (£’000)
Net adjustments (£’000)
Adjusted earnings (£’000)
Adjusted diluted EPS from continuing operations (pence)

Notes

24

9

2018

2017

(1,643)

461

248

237

(151)
(619)
522
(2,165)
(3.0)

252
—
489
950
1.6

The adjusted EPS information is considered to provide a fairer representation of the Group’s trading performance. Options haveno dilutive effect in loss-making years.

76

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

12 Intangible assets

Capitalised
product
development
costs
£’000

Software
£’000

Total
£’000

8,805
—
—
8,805
—
—
(3,256)(2,579)
—
2,970

2,240
—
—
2,240
—
—
—
(2,240)
—
—

650
—
—
650
—
—
—
(650)
—
—

14,353—
1,583
15,936—
1,650(11,139)
—
—
6,447

1,246
(69)
230
1,407
85
194
(355)
(403)
(906)
22

27,294(69)
1,813
29,03885
1,844(14,750)(5,872)
(906)
9,439

(8,805)——(8,805)
—
—
3,256
2,579
—
(2,970)(2,240)——(2,240)
—
—
—
2,240
—
—

(650)
—
—
(650)
—
—
—
650
—
—

(11,010)—(2,210)(13,220)—(1,839)9,825——(5,234)

(973)
37
(225)
(1,161)
(79)
(186)
144
376
906
—

(23,678)37(2,435)(26,076)(79)(2,025)
13,225
5,845
906(8,204)

—
—

—
—

—
—

1,213
2,716

22
246

1,235
2,962

Capitalised product development costs relate to expenditure that can be applied to a plan or design for the production of
new or substantial improvements to RTLS SmartSpace and myWorld products. On 31 December 2018 the RTLS SmartSpacebusiness unit was disposed of and the remaining capitalised product development costs relate entirely to the myWorld products.
The Group is loss making and this is an indicator for potential impairment of development costs. Management has completed
impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded
that no impairment is required as the cash flows exceeded the carrying value of the asset.
On 30 March 2018, the Group concluded the sale of its Japanese third party geospatial services business including theGeoplan brand name. The disposal of the business included historic and fully written down goodwill, acquired customer
relationships and acquired software products.
The remaining average amortisation period for capitalised product development costs is two years.
The software assets represent assets purchased from third parties.

IQGeo Group plc Annual Report 201877

FINANCIAL STATEMENTS

Acquired
softwareproducts£’000

CORPORATE GOVERNANCE

Cost
At 1 January 2017
Exchange difference
Additions
At 31 December 2017
Exchange difference
Additions
Disposal of RTLS SmartSpace business unit
Disposal of Japan Geospatial services business
Disposal – otherAt 31 December 2018
Accumulated amortisation
At 1 January 2017
Effects of movement in exchange rates
Charge for the year
At 31 December 2017
Effects of movement in exchange rates
Charge for the year
Disposal of SmartSpace business unit
Disposal of Japan Geospatial services business
Disposal – otherAt 31 December 2018
Net book amountAt 31 December 2018
At 31 December 2017

Goodwill£’000

Acquiredcustomer
relationships
and order
backlog£’000

Notes to the consolidated financial statements continued

13 Property, plant and equipment
Cost
At 1 January 2017
Effect of movements in exchange rates
Additions
Disposals
At 31 December 2017
Effect of movements in exchange rates
Additions
Disposal of RTLS SmartSpace business unit
Disposals – otherAt 31 December 2018
Accumulated depreciation
At 1 January 2017
Effect of movements in exchange rates
Charge for the year
Elimination on disposals
At 31 December 2017
Effect of movements in exchange rates
Charge for the year
Disposal of RTLS SmartSpace business unit
Disposals – otherAt 31 December 2018
Net book amountAt 31 December 2018
At 31 December 2017

Fixtures and fittings£’000

Computer equipment
£’000

Total
£’000

834
(9)
30
(122)
733
19
214
(760)
—
206

1,216
(19)
110
(15)
1,292
29
102
(864)
(383)
176

2,050
(28)
140
(137)
2,025
48
316
(1,624)
(383)
382

(295)
3
(221)
122
(391)
(15)
(117)
343
—
(180)

(1,010)52(196)
13(1,141)
(35)
(95)
771
382
(118)

(1,305)
55
(417)
135
(1,532)
(50)
(212)
1,114
382
(298)

26
342

58
151

84
493

14 Right-of-use assets
The Group has early adopted IFRS 16 effective from 1 January 2018 and has recognised a right-of-use assets for leases
previously classified as operating leases applying IAS 17.
Details of the Group’s right-of-use assets and their carrying amount are as follows:
2018
£’000

Cost
Opening right-of-use asset recognised on adoption of IFRS 16
Effect of movements in exchange rates
Additions
Disposal of RTLS SmartSpace business unit
Cost at 31 December 2018
Depreciation
Effect of movements in exchange rates
Charge for the year
Disposal of RTLS SmartSpace business unit
Depreciation at 31 December 2018
Net book amountAt 31 December 201878

IQGeo Group plc Annual Report 2018

3,002
—
63
(2,563)
502
23
(869)
648
(198)
304

STRATEGIC REPORT£’000

Investment as at 31 December 2017
Investment in Abyssinian Topco Limited
Investment as 31 December 2018

—
2,000
2,000

16 Inventories
Raw materials
Finished goods
Total inventories

2018
£’000

2017
£’000

—
—
—

414
1,045
1,459

Inventory recognised as an expense was £2.8 million in 2018 (2017: £2.4 million) and is included within discontinued operations.
At 31 December 2017 the balance included £0.6 million impairment provision. As at 31 December 2018 the inventory wasdisposed of within the sale of the RTLS SmartSpace business.
17 Trade and other receivables
Notes

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

17.1
17.2

2018
£’000

2017
£’000

1,535
—
1,535
610
915
485
—
41
3,586

7,663
(1,460)
6,203
2,666
275
933
4
463
10,544

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximationof fair value.
The above comparative for impairment provisions refers to the IAS 39 measurement basis which applied an incurred loss
model, whereas the current year applies IFRS 9 which is an expected loss model.
Amounts recoverable on contracts as at 31 December 2018 has reduced from the prior period due to the disposal of
the RTLS SmartSpace business unit on 31 December 2018. The disposal balance sheet of the RTLS SmartSpace business
unit includes £1.7 million relating to amounts recoverable on contracts as disclosed within note 6.3.
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, and are assessed on acustomer-by-customer basis following detailed review of the particular circumstances. To the extent they have not been
specifically provided against, the trade receivables are considered to be of sound credit rating.

IQGeo Group plc Annual Report 2018

79

FINANCIAL STATEMENTS

IQGeo Group plc holds approximately 5.6% of the ordinary share capital of Abyssinian Topco Limited.

CORPORATE GOVERNANCE

15 Investments
At 31 December 2018, the Groups holds a rollover investment in Abyssinian Topco Limited as part of the consideration forthe sale transaction of the RTLS SmartSpace business unit. Abyssinian Topco Limited is a UK registered company (company
number 11649721) and is the parent company of Ubisense Limited which along with its subsidiary companies, comprise the
RTLS SmartSpace business unit.

Notes to the consolidated financial statements continued

17 Trade and other receivables continued
17.1 Movement in allowance for expected credit losses
At 1 January
Exchange differences
Amounts recovered in the year
Amounts written off in the year
Allowance released
Provided debts disposed of on 31 December 2018
Allowance madeAt 31 December

2018
£’000

2017
£’000

(1,460)
(25)
204
—
42
1,239
—
—

(2,151)
50
519
217
30
—
(125)
(1,460)As at 31 December 2017, the allowance includes £1,326,000 in respect of amounts owed by two entities in the Asia Pacific region.
These debts were disposed of as part of the sale of the RTLS SmartSpace business unit on 31 December 2018.
17.2 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
18 Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents

2018
£’000

2017
£’000

1,533

4,784

2
—
1,535

1,084
335
6,203

2018
£’000

2017
£’000

30,91530,915

9,114
9,114

Included in the above figure is an amount of £27.1 million held on account with the Company’s lawyers following thecompletion of the sale of the RTLS SmartSpace business unit. The funds meet the IAS 7 definition of cash being short-term,
highly liquid investments and readily convertible into known amounts of cash. Cash held on account with the Company’s
lawyers was transferred to the IQGeo GBP bank account on 2 January 2019.
Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term cash deposits earninterest at fixed rates for the term of the deposit.
The composition of cash and cash equivalents by currency is as follows:
By currency

British Pound (GBP)
Euro (EUR)
US Dollar (USD)
Japanese Yen (JPY)
Canadian Dollar (CAD)
Cash and cash equivalents

80

IQGeo Group plc Annual Report 2018

2018
£’000

2017
£’000

29,076
—
1,030
5
804
30,915

4,474
1,829
1,693
480
638
9,114

STRATEGIC REPORT

19 Trade and other payables

2017
£’000

913
2,175
1,734
214
44
5,080

2,386
3,040
2,840
768
76
9,110

Deferred income as at 31 December 2018 has reduced from the prior period partially due to the disposal of the RTLS SmartSpacebusiness unit on 31 December 2018. The disposal balance sheet of the RTLS SmartSpace business unit includes £0.4 million
relating to deferred income as disclosed within note 6.3.
20 Lease obligation
The Group has early adopted IFRS 16 effective from 1 January 2018 and has recognised a lease liability at 1 January 2018 forleases previously classified as operating leases applying IAS 17. The Group has measured lease liabilities at the present valueof the remaining lease payments, discounted using the Group’s incremental borrowing rate at the date of initial application.
Details of the Group’s liability in respect of right-of-use assets and their carrying amount are as follows:
2018
£’000

Opening lease liability recognised on adoption of IFRS 16
Effect of movements in exchange rates
New leases entered into during the year
Finance costs incurred
Payments made during the year
Disposal of RTLS SmartSpace business unit
At 31 December 2018

3,002
23
63
96
(743)
(2,132)
309

Presented as:
Lease liability payable within 1 year
Lease liability payable in more than 1 year
At 31 December 2018

232
77
309

21 Bank loans
In October 2016, an £8.0 million HSBC working capital facility was restructured, becoming a £4.0 million repayment loan
with £0.75 million repayable each year. £0.75 million of this facility was repaid in each of December 2016, December 2017
and 1 January 2018.
This loan was secured on the fixed and floating assets of the Group, attracted an interest charge of LIBOR + 3% and was subject
to an operating covenant linked to “operating cash flow” performance (profit or loss before tax adding back any non-recurring
items, finance costs, foreign exchange costs, share-based payments, depreciation, amortisation or capitalisation of productdevelopment). Following the placing in November 2017, the terms of the operating covenant were amended as follows: 2017
– from nil to £2 million negative; 2018 – from £1 million positive to £2 million negative; 2019 – from £1 million positive to £1 million
negative, 2020 and beyond – remained at £1 million positive.
On 31 December 2018, the debt and all outstanding interest in respect of the debt was fully settled and the bank’s security
was released. The Group has no other bank debt.

IQGeo Group plc Annual Report 201881

FINANCIAL STATEMENTS

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

CORPORATE GOVERNANCE

Deferred income
Trade payables
Trade accruals
Other taxation and social security
Other payables
Total trade and other payables

2018
£’000

Notes to the consolidated financial statements continued

22 Other payables
Property provisions
Total other payables

2018
£’000

2017
£’000

—
—

179
179

The property provision is a dilapidation provision to restore the UK offices to their original state. On 31 December 2018, the UKlease was held by the RTLS SmartSpace business and so the provision is no longer required following the sale of that business.
23 Share capital and premium

Balance at 1 January 2017
Issued under share-based payment plans
Issued on placing to institutional shareholders
Change in year
Balance at 31 December 2017and 31 December 2018

Number ofordinary sharesof £0.02 each

Share capital£’000

Share premium
£’000

Total
£’000

55,883,154
17,25017,187,500
17,204,750

1,118
—
344
344

41,554
2
4,819
4,821

42,672
2
5,163
5,165

73,087,904

1,462

46,37547,837The Company has one class of ordinary shares which carry no right to fixed income.
24 Share-based payments: options
24.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over shares in the Company to incentivise high performing key
employees of the Group periodically.
Other than the December 2016 share option award set out in note 24.4, 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.
24.2 Analysis of amounts recognised in the financial statements(a) Analysis of amounts recognised in the consolidated income statement
Total share-based payments charge recognised in operating profit

2018
£’000

2017
£’000

303

316

2018
£’000

2017
£’000

248
55
303

237
79
316

2018
£’000

2017
£’000

303

316

2018
£’000

2017
£’000

717

1,139

The allocation between continuing and discontinued operations is as follows:
Share-based payments charge presented as continuing operations
Share-based payments charge presented as discontinued operations
Total share-based payments charge recognised in operating profit(b) Analysis of amounts recognised in the consolidated statement of changes in equity in the year
Net share-based payments credit recognised in equity(c) Cumulative amounts included within equity in the consolidated statement of financial position
Cumulative reserve credit for share-based payments

82

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Arrangement

Options

Vests
Years

Expires
Year

2010
2011
2012
2013
2014
2016
2018

2011–13
2012–142013–15
2014–16
2015–172017–192019–21

2020
2021
2022
2023
2024
2026
2028

Total
Weighted average exercise price (£)

Awardsoutstandingat 1 Jan 2018
NumberGrantedduringthe year
NumberExercisedduring theyear
Number0.140
322,672
1.050
108,700
2.125
75,5002.055
93,6002.250
65,0000.020 5,600,000
0.555—
6,265,472
0.123

—
—
—
—
—
—
350,000
350,000
0.555

—
—
—
—
—
—
—
—
—

Exercise
price£Forfeited
during theyear
NumberAwardsoutstandingat 31 Dec 2018
NumberAwardsexercisable
at 31 Dec 2018
Number2,500
320,172
8,500
100,200
5,000
70,50015,75077,85020,00045,000350,000 5,250,000—
350,000
401,750 6,213,722
0.260
0.138

320,172
100,200
70,50077,85045,000——613,7220.914

24.4 Principal assumptions
2016 granted share options
On 14 December 2016 IQGeo Group plc implemented a new long-term incentive share option plan for Executive Directors
and key management. IQGeo Group plc granted 5,600,000 options of two pence each in the Company with an exercise priceset at the nominal value. The options vest if the Company’s share price exceeds 70 pence for 60 consecutive calendar days
between the second and third anniversary of issue and the period of employment continues for over three years.
The share options were valued using a Monte Carlo valuation model during 2017. 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 andbehavioural considerations. The risk-free return is an average yield on the zero-coupon UK Government bond in issue at thedate of grant with a similar life to the option. Volatility is estimated at the grant date based on the historical daily share pricemovements of the Company over a four-year period.
Within the 2018 financial statements a charge of £291,000 (2017: £316,000) has been recognised in respect of share options
granted on 14 December 2016.
2018 granted share options
On 24 May 2018, 350,000 share options were issued at market value. The new share options were valued using a Black Scholes
valuation model. The expected life is the expected period from grant to exercise based on management’s best estimate of theeffects of non-transferability, exercise restrictions and behavioural considerations. The risk-free return is an average yield on
the zero-coupon UK Government Bond in issue at the date of grant with a similar life to the option.
One third of the options will vest each anniversary of the grant date with 350,000 options being fully vested on 24 May 2021.
The vesting conditions are that the individual must remain an employee of the Group on each vesting date.
The following assumptions were used in the model for options granted:
Instrument

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

Option350,000
24 May 2018
0.57
0.56
0.17
3
43.00
0.92
—

Within the 2018 financial statements a charge of £12,000 has been recognised in respect of share options granted on
24 May 2018.

IQGeo Group plc Annual Report 201883

FINANCIAL STATEMENTS

Award
date
Year

CORPORATE GOVERNANCE

24 Share-based payments: options continued
24.3 Reconciliation of movements in equity-settled share-based payment arrangements in the year

Notes to the consolidated financial statements continued

25 Operating lease commitments
Leases as lessee
The Group signed new short-term office rental agreements within Germany, Japan and the UK during November andDecember 2018. Pre-existing office premises within these regions were exited as part of the RTLS SmartSpace business unit
disposal. The new leases entered into are 12 months or less and the Group will elect to not apply IFRS 16 to these leases dueto their short-term nature. The 2019 operating expense presented within the consolidated income statement will include£191,000 of rent expense in respect of these leases. The obligations for the new short-term leases are reported within thetable below.
The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets.
IFRS 16 was adopted on 1 January 2018. The 2017 comparatives include operating lease commitments which have beenclassified as a lease liability within the consolidated statement of financial position during the 2018 period.
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:

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

Land andbuildings
2018
£’000

Land andbuildings
2017
£’000

Other
2018
£’000

Other
2017
£’000

183
8
—
191

681
1,513
982
3,176

—
—
—
—

94
10
—
104

The above table reflects the committed cash payments under operating leases, rather than the expected charge to theincome statement in the relevant periods.
26 Subsidiaries
The Group consists of the parent company, IQGeo Group plc, incorporated in the UK, and a number of subsidiary companies
which operate and are incorporated around the world. Information about the composition at the end of the reporting
period is as follows:

Subsidiary

IQGeo UK Limited
IQGeo Germany GmbH
IQGeo America Inc.
IQGeo Solutions Canada Inc.
IQGeo Systems Limited
IQGeo Japan K.K.

Country ofincorporation

Principal activity

Proportionof ordinary
shares heldby Group(%)

UK

Geospatial solutions

100

Germany

Geospatial solutions

100

US

Geospatial solutions

100

CanadaGeospatial solutions

100

UK

Non-trading

100

Japan

Geospatial solutions

100

Registered office

CB1 Business Centre, 20 Station Road
Cambridge CB1 2JD, UK
Friedrich-Ebert-Anlage 49, 60308
Frankfurt am Main, Germany
999 18th Street, Suite 901, Denver,
CO 80202, United States
250 Howe Street, Suite 1400,
Vancouver, BC V6C3S7, Canada
CB1 Business Centre, 20 Station Road
Cambridge CB1 2JD, UK
Level 20 Marunouchi Trust Tower– Main 1-8-3 Marunouchi Chiyoda-ku,
Tokyo, 100-005, JapanAll subsidiaries are directly held by IQGeo Group plc. All subsidiaries are 100% owned by the Group.
All subsidiaries prepare local statutory accounts up to 31 December each year. For subsidiaries which have a different
financial year end to the Group, additional co-terminus accounts are prepared reflecting the same financial reportingas the Group for the purposes of consolidation.

84

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Entity former name

Effective date

IQGeo Group plc
IQGeo Systems Ltd
IQGeo Group Ltd
IQGeo America Inc.
IQGeo Solutions Canada Inc

Ubisense Group plc
IQGeo Group Ltd
Geospatial Systems Ltd
Ubisense Inc
Ubisense Solutions Inc

2 January 2019
2 January 20194 December 2018
1 January 201930 November 2018

FINANCIAL STATEMENTS

Entity name

CORPORATE GOVERNANCE

26 Subsidiaries continued
Following the sale of the RTLS SmartSpace business, the following entities were renamed to form part of the IQGeo groupof companies:

Disposed subsidiaries
The below table represents the list of group entities that were disposed of on 31 December 2018 as part of the sale of the
RTLS SmartSpace business unit.

Country ofincorporation

Principal activity

Proportionof ordinary
shares held
prior todisposal(%)

Ubisense SAS

FranceLocation solutions

100

Ubisense GmbHGermany

Location solutions

100

Ubisense Limited

UK

100

Ubisense America LLC

US

Location solutionsand Holding
Company
Location solutions

Ubisense Canada Inc

CanadaLocations solutions

Ubisense Inc

Japan

Ubisense Japan K.K.
(previously Geoplan Company Ltd)Japan

Intermediateholding company
Location solutions

Binary Star Developments K.K.

Japan

Non-trading

Subsidiary

Registered office

52 Boulevard de Sébastopol,
75003 Paris, France
Franz-Rennefeld-Weg 6,40472 Düsseldorf, Germany
90 St Andrews House, St Andrews Street
Cambridge CB4 1DL, UK

100

999 18th Street, Suite 901, Denver,
CO 80202, United States
100
250 Howe Street, Suite 1400,
Vancouver, BC V6C3S7, Canada
100 2nd Floor, Hongo TK Bldg. 1-28-10 Hongo
Bunkyo-ku, Tokyo 113-0033, Japan
100 2nd Floor, Hongo TK Bldg. 1-28-10 Hongo
Bunkyo-ku, Tokyo 113-0033, Japan
100 2nd Floor, Hongo TK Bldg. 1-28-10 Hongo
Bunkyo-ku, Tokyo 113-0033, JapanOn 30 March 2018, the Group concluded the sale of its Japanese third party geospatial services business including the Geoplan
brand name for a gross consideration of JPY £100 million (£0.7 million). Alongside this transaction, the Group acquired the 23%
minority interest of Ubisense Japan K.K. in March 2018. The acquisition of this non-controlling interest gave the Group 100%
ownership of its remaining Japanese operations prior to its inclusion as part of the sale of the RTLS SmartSpace business unit.
Prior to the disposal, the Group owned 100% of all subsidiaries sold.

IQGeo Group plc Annual Report 201885

Notes to the consolidated financial statements continued

27 Related party transactions
27.1 Remuneration of key personnel
The key management has been assessed to be the Directors of the Group (Executive and Non-Executive) during the 2018and 2017 period.
During the year, there was an average number of seven key management personnel (2017: seven) and seven key management
personnel at 31 December 2018 (2017: seven). The compensation paid or payable to key management for employee services
is shown below:
Short-term employee benefits
Wages and salaries
Social security costs
Performance payments
Other benefits
Post-employment benefits
Contributions to defined contribution pension arrangements
Share-based payments
Equity-settled share-based payments
Total key management compensation

2018
£’000

2017
£’000

519
72
247
5
843

565
71
70
4
710

53

56

175
1,071

178
944

27.2 Transactions with the Group related parties
There were no other related party transactions with Directors of the Company during 2018 or 2017 other than acquisitionand disposal of shares described within the Directors’ report.
28 Financial risk management28.1 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 within note 28.7. The main types of risks are market risk (including foreign currency risk), credit risk and liquidity
risk. Interest rate risk is no longer considered a risk following the repayment of the HSBC loan on 31 December 2018.
The Group’s risk management is co-ordinated 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 aredescribed below.
28.2 Foreign currency risk management
The Group operates globally and undertakes certain transactions denominated in foreign currencies, predominantly in
US Dollars (USD), Euros (EUR) and Japanese Yen (JPY), exposing the Group to foreign currency risk. The Group’s risk management
policy is to maintain natural hedges where possible, by matching foreign currency revenue and expenditure. The Group does
not enter into forward exchange contracts to mitigate the exposure to foreign currency risk as the Group’s currency transactions
are not considered significant enough to warrant this.
Foreign currency denominated monetary assets and liabilities which expose the Group to currency risk are disclosed below.
The amounts shown are those denominated in the local functional currency, translated into GBP at the closing rate.
Japanese Yen

AssetsLiabilities

IQGeo Group plc Annual Report 2018

Euros

2017
£’000

2018
£’000

2017
£’000

2018
£’000

2017
£’000

—
(19)

—
—

53
(7)

142
—

—
(9)

194
(2)

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

86

US Dollars

2018
£’000

STRATEGIC REPORTThe sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation
at the period end. A positive number indicates an increase in profit and equity.
Japanese Yen

Euros

2017
£’000

2018
£’000

2017
£’000

2018
£’000

2017
£’000

3
3

41
41

181
181

179
179

—
—

164
164

(3)
(3)

(37)
(37)

(144)
(144)

(162)
(162)

—
—

(148)
(148)

Exposure to foreign currency exchange rates varies during the year, depending on the volume of transactions. Nonetheless, theanalysis above is considered to be representative of the Group’s exposure to currency risk.
28.4 Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge a contractual obligation resulting in financial loss to the Group.
The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting
date, as summarised in note 28.7, which are principally cash and cash equivalents and trade receivables.
Cash and cash equivalents are held at banks with good independent credit ratings in accordance with the Group Treasury
policy. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by
the Group, and incorporates this information into its credit risk controls. Where available 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 onlywith creditworthy counterparties.
The Group’s management considers that its financial assets that are not impaired or past due for each of the reporting
dates under review are of good credit quality. All receivables are subject to regular review to ensure that they are recoverable
and any issues identified as early as possible. In order to manage credit risk the Directors set limits for customers based on
a combination of payment history and third party credit references. Credit limits are reviewed by the credit controller ona regular basis in conjunction with debt ageing and collection history. In addition many of the Group’s customers, andapproximately 80% by balance at any given time, are large utility companies and other blue-chip companies that would
be considered a low credit risk. As a consequence management have determined that there is no expected credit loss inrespect of trade receivables at 31 December 2018.
The amount of exposure to any single counterparty or a group of counterparties having similar characteristics is subject to alimit, which is reassessed periodically by management. At 31 December 2018, one customer individually accounted for morethan 51% of the gross trade receivables balance which has been collected during 2019 (31 December 2017: more than 14%).
None of the Group’s financial assets are secured by collateral or other credit enhancements.
Details of certain trade receivables at 31 December 2018 that have not been settled by the contractual due date but are notconsidered to be impaired are included in note 17.2.

IQGeo Group plc Annual Report 201887

FINANCIAL STATEMENTS

Effect of a 5% appreciation of the local currency:
Income statement
EquityEffect of a 5% depreciation of the local currency:
Income statement
EquityUS Dollars

2018
£’000

CORPORATE GOVERNANCE

28 Financial risk management continued
28.3 Foreign currency sensitivity analysis
The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities
and the USD/GBP, EUR/GBP and JPY/GBP exchange rates “all other things being equal”. It assumes a +/-5% change in the
GBP exchange rate against the relevant foreign currencies.

Notes to the consolidated financial statements continued

28 Financial risk management continued
28.5 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 tomanage this risk by regularly reviewing forecast inflows and outflows due in day-to-day business and investing cash assets
safely and profitably. The data used for analysing these cash flows is consistent with that used in the contractual maturity
analysis below.
Cash flow forecasting is performed at the subsidiary level and aggregated by Group finance. Rolling cash flow forecasts areused by the Group to monitor liquidity requirements to ensure it has sufficient cash to meet operational needs. The Group policy
throughout the year has been to remit surplus working capital balances at the subsidiary level to Group treasury and place
on short-term deposit or interest bearing reserve accounts and to draw down on borrowing facilities and distribute funds
locally when required. As disclosed in note 21, the Group has no bank loan facilities as at 31 December 2018 (2017: £2.5 million
facility, £2.5 million drawn down).
The Group considers expected cash flows from financial assets, predominantly cash and trade receivables, in assessing
and managing liquidity risk. The Group’s cash and trade receivable resources at 31 December 2018 (see note 17) exceed thecurrent cash outflow requirements.
As at 31 December 2018, the Group’s financial liabilities, including interest payments where applicable, have contractual
maturities as summarised below:
Current

As at 31 December 2018
Trade and other payables
Lease obligations
Other payables
As at 31 December 2017
Trade and other payables
Bank loan
Other payables

Non-current

Within6 months£’000

Between 6 and12 months£’000

Between1 and 5 years£’000

Later than
5 years
£’000

5,312
119
—

—
119
—

—
79
—

—
—
—

9,211
750
—

—
—
—

40
1,750
—

—
—
179

Financial assets used for managing liquidity risk
Cash flows from trade and other receivables are contractually due within three months in the majority of cases. 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.
28.6 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders and to maintain an optimal capital structure to reduce the long-term cost of capital.
The capital structure of the Group consists of cash and cash equivalents and capital and reserves attributable to the ownersof the Company, and the Group’s borrowing facilities.
In order to maintain or adjust the capital structure, the Group may issue shares, take on debt, sell assets to raise cash, adjust
the amount of dividends payable to shareholders or return capital to shareholders.
The capital structure is continually monitored by the Group. The Group’s strategy is to have a capital structure that allows
investment in long-term profitable growth, takes into account prevailing trading conditions and seeks to improve balance
sheet efficiency over time. The Group is not subject to externally imposed capital requirements.
The Group has no bank facilities at 31 December 2018 (31 December 2017: £2.5 million).

88

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

2018
£’000

2017
£’000

15

2,000

—

17
17
17
18

1,535
610
915
30,91535,975

6,203
2,666
275
9,114
18,258

19
19
19
20
22
21

2,175
1,734
44
309
—
—
4,262

3,040
2,840
116
—
179
2,500
8,675

29 Post-balance sheet events
On 13 February 2019 Peter Harverson, Chairman and non-executive director, resigned as a director of the business. On thesame day Paul Taylor was appointed as Chairman.
IQGeo Group plc (AIM: IQG) announced that an application has been made to the London Stock Exchange for an extension
to its block listing scheme in respect of 174,073 ordinary shares of 2p each (“Ordinary Shares”) to be admitted to trading on
AIM. The admission became effective on 21 February 2019.
Under the Company’s block listing scheme, new Ordinary Shares are issued from time to time in order to satisfy the grantof awards under the Company’s 2006 Employers’ Share Option Scheme, Unapproved Options Agreement and US Incentive
Stock Option Agreement.
30 Reconciliation of liabilities arising from financing activities
1 January 2018
Cash flows:– Repayment
Non-cash– Recognition on adoption of IFRS 16– Additions– Effect of moving exchange rates– Interest applied to principle– Disposal of the RTLS SmartSpace business

HSBC loan£’000

Lease liability
£’000

Total
£’000

2,500

—

2,500

(2,500)(743)(3,243)

—
—
—
—
—
—

3,002
63
23
96
(2,132)
309

3,002
63
23
96
(2,132)309

IQGeo Group plc Annual Report 201889

FINANCIAL STATEMENTS

Financial assets
Fair value through other comprehensive income:– Investments
Amortised cost: Loans and receivables:– Trade receivables– Amounts recoverable on contracts– Other receivables– Cash and cash equivalents
Total financial assets
Financial liabilities
Amortised cost:– Trade payables– Trade accruals– Other payables– Lease obligation– Provisions– Bank loans
Total financial liabilities

Notes

CORPORATE GOVERNANCE

28 Financial risk management continued
28.7 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:

Company balance sheet

for the year ended 31 December 2018

Fixed assets
Investments
Current assets
Debtors falling due within one year
Debtors falling due after one year
Cash at bank and in hand
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium accountShare-based payment reserve
Profit and loss reserve
Equity shareholders’ funds

Notes

2018
£’000

2017
£’000

3

2,110

9,808

4
4

14,027
9,715
28,94852,690(6,207)46,483
48,593
48,593

10,1891,059
1011,258(557)
10,701
20,50920,5091,462
46,375717
39
48,593

1,462
46,375
1,139(28,467)
20,50956
7
7
7The notes on pages 92 to 95 are an integral part of the Company financial statements.
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. IQGeo Group plc reported a gain for the financial year ended 31 December 2018 of £27,781,000(2017: £556,000 loss).
The financial statements were approved and authorised for issue by the Board of Directors on 10 April 2019 and signed on
its behalf by:

Richard Petti

Chief Executive Officer

Tim Gingell

Chief Financial Officer

IQGeo Group plc
Registered Number: 05589712

90

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

Company statement of changes in equity
for the year ended 31 December 2018

Attributable to equity shareholders
Share-based
payment
reserve£’000

Retainedearnings
£’000

Total
£’000

1,118
—
—
344
—
—
344
1,462
—
—
—
—
1,462

41,554
—
—
—
5,158
(337)
4,821
46,375————46,375

823
—
316
—
—
—
316
1,139
—
(725)
303
(422)
717

(27,911)
(556)
—
—
—
—
(556)
(28,467)
27,781
725—
28,50639

15,584
(556)
316
344
5,158
(337)
4,925
20,50927,781—
303
28,084
48,593The notes on pages 92 to 95 are an integral part of the Company financial statements.

IQGeo Group plc Annual Report 201891

FINANCIAL STATEMENTS

Share
premium£’000

CORPORATE GOVERNANCE

Balance at 1 January 2017
Total comprehensive loss for the year
Reserve credit for equity-settled share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs
Transactions with owners
Balance at 31 December 2017
Total comprehensive profit for the year
Lapse of share options
Reserve credit for equity-settled share-based payment
Transactions with owners
Balance at 31 December 2018

Sharecapital£’000

Notes to the Company financial statements

1 Principal accounting policies
Basis of preparation
The financial statements of IQGeo Group plc have been prepared in compliance with United Kingdom accounting standards,
including Financial Reporting Standard 102 (FRS 102) and the Companies Act 2006. A summary of the significant accounting
policies which have been reviewed by the Board of Directors is set out below.
The financial statements are prepared under the historical cost convention.
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as
permitted by FRS 102, as it is a qualifying entity and its financial statements are included in the consolidated financial
statements of IQGeo Group plc:•

the requirements of Section 4 Statement of Financial Position 4.12(a)(iv);•the requirements of Section 7 Statement of Cash Flows;•

the requirements of Section 3 Financial Statement Presentation, paragraph 3;•

the requirements of financial instruments paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.44, 11.47, 11.48(a)(iii), 11.48(iv),11.48(b) and 11.48(c); and•the requirements of Section 33 Related Party Disclosures, paragraph 33.7.

The Company has taken advantage of the exemption under FRS 102 paragraph 1.12(b), from preparing a statement of cash flows,on the basis that it is a qualifying entity and the consolidated financial statements of IQGeo Group includes the Company’s
cash flows.
Share-based payments
The Company issues equity-settled share-based payments to certain employees of its subsidiaries. Vesting conditions
are continuing employment and can include, for senior employees, a diluted EPS performance target or share price target.
Equity-settled share-based payments are measured at fair value at the date of grant using an appropriate pricing model.
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 a corresponding increase in equity for the sameamount. Information on share options which have been granted to Directors and employees are given in note 24 tothe consolidated financial statements.
Investment in subsidiary companies
Fixed asset investments in subsidiary companies are stated at historical cost less provision for impairment. The Company
assesses subsidiary investments for impairment whenever events or changes in circumstances indicate that the carrying
value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimateof the recoverable amount. If the recoverable amount of the cash-generating unit is less than the value of the investment,
the investment is considered to be impaired and is written down to its recoverable amount. An impairment loss is recognised
immediately in the profit and loss account.
Other investments
As part of the sale transaction of the RTLS SmartSpace business unit on 31 December 2018, the Group holds a rollover equity
investment in Abyssinian Topco Limited (registered number: 11649721) which following the transaction, is the parent companyof the RTLS SmartSpace business unit.
The Group has made the irrevocable election to account for the investment in Abyssinian Topco Limited at fair value throughother comprehensive income (FVOCI). In the current financial year, the fair value was determined in line with the requirementsof IFRS 9, which does not allow for measurement at cost.
Gains and losses arising from changes in fair value are recognised directly in equity. The cumulative gain or loss arising fromchanges in fair value, impairment or sale is not recycled to profit and loss.
Debtors
Short-term debtors are measured at transaction price, less impairment. Financial assets are measured subsequently atamortised cost using the effective interest method less any impairment.
Creditors
Short-term trade creditors are measured at transaction price. Other financial liabilities, including bank loans, are measured
initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest rate.

92

IQGeo Group plc Annual Report 2018

STRATEGIC REPORTCORPORATE GOVERNANCE

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

FINANCIAL STATEMENTS

Critical accounting judgments and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
The Group is loss making and this is an indicator for potential impairment of the investments in the trading subsidiaries
of IQGeo Group plc. In undertaking impairment reviews, management is required to make assumptions of the future cash
flows generated from its subsidiaries. This includes consideration of both the current business pipeline and estimations
beyond the existing pipeline.
2 Profit and loss account
The Company does not have any employees (2017: nil). Directors’ emoluments are disclosed in note 27 of the consolidated
financial statements. The Directors were not remunerated by the parent company.
Auditor’s remuneration attributable to the Company is as follows:
2018
£’000

2017
£’000

59
—
59

39
2
41

Investments in
subsidiaries
£’000

Other
investments
£’000

Total
£’000

9,808
1,474
—
252
(11,424)
110

—
—
2,000
—
—
2,000

9,808
1,474
2,000
252
(11,424)
2,110

Audit fee – statutory audit
Other services

3 Investments

Cost and net book amountAt 1 January 2018
Additions to subsidiaries
Investment in Abyssinian Topco Limited
Capital contribution relating to share-based payments
Disposal
At 31 December 2018

Capital contribution and impairment
The 2018 additions of £1.5 million relate to compensation of Ubisense GmbH for losses incurred during the year ended
31 December 2017 under a domination agreement. Direct ownership of Ubisense GmbH was transferred to Ubisense Limited
on 7 December 2018 as part of a group reorganisation. Ubisense Limited and its subsidiaries were sold as part of the RTLS
SmartSpace business unit disposal on 31 December 2018.
As part of the sale transaction of the RTLS business unit, the Group holds a rollover investment in Abyssinian Topco Limited.
Capital contributions relating to share-based payments arise because the Company has granted share options to theemployees of its various subsidiaries.
The Group is loss making and this is an indicator for potential impairment of its investments. Management has completed
impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded
that no further impairment is required as the cash flows exceed the value of the investment.
Further information about subsidiaries is provided in note 26 of the consolidated financial statements.

IQGeo Group plc Annual Report 201893

Notes to the Company financial statements continued

4 Debtors
Debtors falling due within one year:
Amounts owed by subsidiary undertakings
Other debtors
Debtors falling due after one year:
Amounts owed by subsidiary undertakings
Total debtors

2018
£’000

2017
£’000

13,180847
14,027

10,189—10,1899,715
9,715
23,742

1,059
1,059
11,248

2018
£’000

2017
£’000

1,431
4,776
6,207

24
533
557

Interest is charged on debtors falling due after one year at a rate of 3% on the balance owed.
Amounts owed by subsidiary undertakings are unsecured.
5 Creditors: amounts falling due within one year
Trade accruals
Amounts owed to subsidiary undertakings

6 Share capital
Allotted, called up and fully paid
Ordinary shares of £0.02 each2018
Number

2017
Number

2018
£’000

2017
£’000

73,087,904

73,087,904

1,462

1,462

There have been no movements in share capital during the year.
7 Reserves
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown inequity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital andthe amounts paid over the nominal value in respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by theCompany to the Group’s employees under its employee share option plans.
Retained earnings
Retained earnings include all current and prior period retained profits/losses.

94

IQGeo Group plc Annual Report 2018

STRATEGIC REPORT

9 Post-balance sheet events
On 13 February 2019 Peter Harverson, Chairman and Non-Executive Director, resigned as a director of the business. On thesame day Paul Taylor was appointed Chairman.
IQGeo Group plc (AIM: IQG) announced that an application has been made to the London Stock Exchange for an extension
to its block listing scheme in respect of 174,073 ordinary shares of 2p each (“Ordinary Shares”) to be admitted to trading on AIM.
The admission became effective on 21 February 2019.

IQGeo Group plc Annual Report 201895

FINANCIAL STATEMENTS

Under the Company’s block listing scheme, new Ordinary Shares are issued from time to time in order to satisfy the grantof awards under the Company’s 2006 Employers’ Share Option Scheme, Unapproved Options Agreement and US Incentive
Stock Option Agreement.

CORPORATE GOVERNANCE

8 Related party transactions
The Company takes advantage of the exemption under FRS 102 for transactions with wholly owned Group companies.
There were no other related party transactions, other than the disposal of shares detailed within the Directors’ report.

Advisers

Registered office
IQGeo Group plc
20 Station Road
Cambridge CB1 2JD
Tel: +44 1223 606 655
Website: www.iqgeo.com
Nominated advisers and brokers
finnCap
60 New Broad Street
London EC2M 1JJ
Lawyers
Mills & Reeve LLP
Cambridge OfficeBotanic House
98-100 Hills Road
Cambridge CB2 1PH
AuditorGrant Thornton UK LLP
Cambridge Office
101 Cambridge Science Park
Milton Road
Cambridge CB4 0FYRegistrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
BankerHSBC Bank plc
VitrumSt John’s Innovation Park
Cowley Road
Cambridge CB4 0DS

96

IQGeo Group plc Annual Report 2018

IQGeo’s commitment to environmental issues is reflected in this annual report which has been
printed on Novatech Silk, made from an FSC® certified and ECF (Process Chlorine Free) material.
Printed in the UK by Proco using their environmental printing technology. Both manufacturing
mill and the printer are registered to the Environmental Management System ISO14001 and are
Forest Stewardship Council® (FSC) chain-of-custody certified.

IQGeo Group plc
20 Station Road
Cambridge CB1 2JD
www.iqgeo.com