Geospatial
productivity &collaboration

IQGeo Group plc Annual Report 2019

Who are we?

IQGeo is a market leading
developer of geospatial
software for the telecoms
and utility industries
IQGeo’s end-to-end geospatial
software for the telecoms and utility
industries accelerates productivity
and collaboration across enterprisesales, planning, design, construction
and maintenance processes.
Our reality‑centric solutions create
and maintain a current, accurate viewof complex network assets, dramatically
improving data quality and currency.

The unique, mobile-first architecture of
the IQGeo software platform streamlines
operational processes using any device,in the office or in the field, enabling
greater departmental collaboration.
We help network operators meet theirdigital transformation ambitions andoperational KPIs by saving time andmoney, while improving safety andenhancing customer satisfaction.

Visit us online

www.iqgeo.com

In 2019, IQGeo won theprestigious Diamond award
for our software products from
Broadband Technology Report.

1. Strategic report

IQGeo Group plc Annual Report 20192.

3.

Highlights
2019 was a productive and successful first year for the new IQGeo following the disposalof the Ubisense RTLS SmartSpace business at the end of 2018. In 2019 IQGeo significantly
grew its own product sales across all our target markets, launched a number of new
products, and established a strong opportunity pipeline for 2020.
IQGeo own product orders(£m)

M&S and subscription orders
(£m)

2019
2018

7.5
3.4

2019
2018

6.8

2017

2017

2.5

Across virtually every
area of the business
we've made good
progress against+213%
strategic objectives.

0.8
0.9

+122%

New logos won(Number)

Recurring M&S andsubscription revenues
(£m)

2019

13
11

2018
2017

Richard Petti
Chief Executive Officer

2019
2018

9

2017

1.6
0.9
0.8

+18%

+78%

Contents
1.

Strategic report

2. Corporate governance

3. Financial statements

1

Highlights

36 Board of Directors

48 Independent auditor’s report2

At a glance

38 Corporate governance report

54 Consolidated income statement

4

Chair’s statement

42 Audit Committee report

6

Chief Executive Officer’s statement

43 	Remuneration Committee report55 	Consolidated statement ofcomprehensive income

10Market opportunity

45 Directors’ report12

Our business model

47 Directors’ responsibilities statement

14

Our strategy

16

Our products

18

Case study – Gigaclear

56 	Consolidated statement of changes
in equity57 	Consolidated statement offinancial position
58 Consolidated statement of cash flows

20 Case study – NW Natural

59 	Notes to the consolidated
financial statements

22 Key performance indicators (KPIs)

84 Company balance sheet

24 Chief Financial Officer’s statement
28 Principal risks and uncertainties

85 	Company statement of changes
in equity32 	Environment, employee engagement
and CSR86 	Notes to the Company financial
statements

34 Section 172 statement

IBC Advisers

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IQGeo Group plc Annual Report 2019

At a glance
In response to increasingly competitive markets and the widespread
deployment of new technology including IoT, smart metering,fibre and 5G, telecoms and utility network operators areundergoing a digital transformation revolution.
Those that embrace IQGeo’s next generation geospatial software are realisingmeasurable business benefits and gaining competitive advantage. IQGeo is helping
customers to successfully meet their KPIs and manage the challenges of a changing
business landscape, with its world-class software and a skilled team delivering
innovative and cost-effective solutions.

Business KPIs for IQGeo customers

Decrease
operatingcosts

Increaserevenues

Improvecustomersatisfaction

Enhance
operationalsafetyROI investment case

Empowerfield crews
with mobilefirst software
to increase
productivity

Enable rapid
decisionmaking withcurrent,
accurate data

Consolidate
applications
to reducecomplexity
and TCOCreate asingle sourceof truth toimprovecollaborationand safety

Reducerepair times
and improvecustomersatisfaction

Accelerate
time-tomarket
with faster
design andconstruction

IQGeo market position
IQGeo is successfully challenging thetechnology and process status quothat has existed at telecoms and utility
network operators for the past 20 to 30
years. Increasingly, these organisations
realise that the fundamental architectureof legacy GIS is no longer fit for purpose
or economically viable for their future
digital transformation requirements.
The old model of specialised, expensive
GIS professionals in the back officecontrolling operational processes
simply cannot deliver a current,2

accurate network view that is essential
to a digitally connected network.
In contrast to legacy GIS that takes
a cartography‑centric approach
designed to create paper maps, IQGeo’s
distributed, mobile‑first architecture uses
a reality-centric approach. We create aliving digital twin of the outside plant andnetwork that incorporates a wide rangeof data streams into a single source of
truth. This accurate, current network view
empowers office-based staff and fieldcrews to easily monitor, capture and edit
network information.

At IQGeo we are helping our customers
to rewrite the geospatial rulebook inorder to meet their ambitious digitaltransformation objectives in a way that
dramatically improves operational
productivity and departmental
collaboration.

Read more about our products
and lifecycle on pages 16 and 17

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IQGeo Group plc Annual Report 2019

2.

3.

The IQGeo global headquarters are in Cambridge, UK
and we have regional sales and service offices in Denver,Frankfurt and Tokyo.

North America

EuropeJapan

New customers inNorth America during 2019

New customers in
Europe during 2019

New customers inJapan during 2019

IQGeo product order growth in 2019

Active end user software licences

Telecoms and utility customers

5

122%

3

45,000+550

New customer logos worldwide

13

Partner ecosystem
IQGeo has a growing partner ecosystem that provides a depth of experience and knowledge in specialist areas and extends
the sales and support network for our software in regions of the world where we do not have a local presence.

3

IQGeo Group plc Annual Report 2019

Chair’s statement

We have made good progress in delivering
sales to new and existing customers
and developing a richer suite of products.
In our first full year of trading since the disposal of the
Ubisense RTLS business and brand, we have made good
progress in delivering sales to new and existing customers
and developing a richer suite of products.
This is also the first year that we have offered our customers
the ability to purchase products under a subscription licensing
model. Whilst this is still at a relatively early stage, it is creating
the opportunity to expand and develop closer relationships
with our customers. This more flexible commercial model has
already provided the business with a good in-year revenue
stream and secured a strong order book and pipeline for
future revenue.
In 2019, the organisation had to quickly establish and build
business focused on its geospatial platform. With an existingcustomer base and wide endorsement of the new businessfocus, the organisation worked hard in the early part of
the year to develop both internal processes and customer
opportunities. Whilst this led to a slower start to the year than
we had anticipated, the second half saw greater stability,
improved execution and better visibility on future growth.
Our three key geographical regions of North America,
Japan and Europe all contributed to the growth of own productrevenue. North America remains our biggest market and offers
the greatest near-term opportunity where the customers are
structured to allow the introduction of new technology
more easily.
2019 also saw the release of several new and strategic
software products. Workflow Manager streamlines ourcustomers' construction and maintenance processes andNetwork Revenue Optimizer enables rapid and efficientquoting for network expansion. Both products weredeveloped in conjunction with real-world requirements fromexisting customers, have already been sold to additionalcustomers, and are included in our 2020 revenue pipeline.
The most significant new product announcement of 2019 was
our new Network Manager product that enables IQGeo to offer
an end-to-end operational solution increasing our addressable
market and revenue potential.

Paul Taylor
Chair
4

1. Strategic report

IQGeo Group plc Annual Report 2019

We have continued to develop ourorganisational capabilities by investing
across all disciplines, providing a greater
focus on sales and product delivery.
We continue to see opportunities toinvest in business growth, organisational
efficiency improvement, and the deliveryof higher margins in future periods.
Investment that drives growth remains
our primary focus.
These are exciting times for IQGeo.
Our markets continue to strive for
improvements in execution, where data
quality and accessibility is key. IQGeo’s
products, customer relationships, andproof of delivery make us well positioned
to benefit from such opportunities.

Results overview
Bookings of orders related to IQGeo
own products increased by over 120%
to £7.5 million during 2019 (2018:£3.4 million) following expansionof our presence in North America
as well as adding new contracts in
Europe and Japan.
IQGeo own product revenue has
increased by 17% to £5.5 million(2018: £4.7 million) with growth
driven predominantly by recurring
revenue streams.
Gross margin for the year isslightly below last year, reflecting
a subscription sales model withgreater revenue deferral to futureyears. Consequently, historic trend
comparisons are not relevant at thisstage as the business transitions tohigher subscription revenues.
Our balance sheet remains strong witha year-end cash position of £13.1 million.
This is after returning £11.0 million
to shareholders in September 2019.
The strength of the balance sheet
allows selective levels of investment andreflects the near-term cash impact on
the business as it transitions to higher
levels of recurring revenues.

Group strategy
We can see a clear opportunity in
our target markets to grow quickly,
enabling customers to realise significant
collaboration and productivity
improvements across their businesses.

Our priority is to deliver growth in ourown product recurring revenue basethrough acquisition of new customers
and further deployments with existingcustomers. We will continue to invest in
developing our software with customer
driven improvements in functionality
including Network Manager.
The investment strategy will continue
to be controlled, balancing growthachievements against the opportunity
available, ensuring improved operating
cash flows that turn positive within a
few years.
Looking further out, we continue toassess the opportunity to significantly
increase the addressable global market
by developing a multi-tenant SaaS
offering. There is an under serviced
global opportunity to supply solutions tosmaller network operators that have nothistorically had the resources or capital
to invest in large-scale GIS systems.

GovernanceAs outlined later in this report,
we continue our commitment to ahigh standard of corporate governanceby maintaining the QCA Corporate
Governance Code in our reporting
structure. The Board continually reviews
its composition and has made three
Board level changes during the year.
As noted in the 2018 Annual Report,
following a period of illness Peter
Harverson resigned in February 2019.
Recognising the need for additional
experience in the target vertical markets,
Andy MacLeod was appointed as anindependent Non-Executive Director
in June last year, bringing a wealth oftelecoms industry experience to IQGeo.
Tim Gingell, CFO, has advised that hewishes to step down from the Board at
the upcoming AGM to focus on his child’s
medical needs. Tim will however staywith the business, including remaining
as Company Secretary, for a period
beyond the AGM to help with anorderly and structured handover to his
replacement. Tim has been with thebusiness since 2015 and has been a key
part of the management team overthat period, developing the finance,
IT and HR functions, executing on theJapan and Ubisense disposals in 2018,
and establishing the IQGeo business.
The Board would like to thank Tim for all
his hard work and, whilst disappointed
to see Tim step down, wish him andhis family the very best for the future.
The Board has instigated a search for a
CFO and whilst this is at an early stage
it is expected that a timely appointment
can be made.

2.

3.

Oliver Scott (Kestrel Partners),
who has been on the Board since
May 2016, stepped down at the endof October 2019 and was replaced by
Max Royde, who is an experienced
non‑executive director and co-founderof Kestrel Partners. I would like to thankOliver for his support and guidanceover the last two and a half years in
helping deliver a well‑funded andfocused business.
The Board desires to improve diversity
including consideration of gender,social and ethnic backgrounds in
its members and the Company as
a whole. However, it is keen, with
its limited resources, to match theskills of available candidates withthe responsibilities of open roles.
Currently, this means that, with my
CFO background, I will continue toact as chair of the Audit Committee,
while Max Royde assumes chair of
the Remuneration Committee andRobert Sansom continues to chair the
Nomination Committee.
The Board recognises that it must evolve
its Committee strategy as it grows in the
future, noting that neither Max Royde nor
Robert Sansom are Independent, andI have been a Non‑Executive Director
for over nine years. With these statedconsiderations, we feel that the skills andmix of its members best serve our current
governance needs at this stage of theGroup’s development.

Organisation
In 2019 IQGeo has achieved rapidchange and I would like to thankour committed staff in delivering anorganisation that has prepared itself
for growth and success. The Company
remains totally focused on delivering
geospatial productivity and collaboration
solutions for our customers.

Future outlook
Opportunities within our markets
continue to develop at pace as theorganisations we serve, grow and evolve
their digital transformation strategies.
Our customer centric approach andfirst‑class products are focused on
closing these increasing opportunities
and positioning IQGeo well for
future growth.

Paul Taylor
Chair
6 March 2020

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IQGeo Group plc Annual Report 2019

Chief Executive Officer’s statement

A strong start for the new IQGeo.

2019 was a strong first year for IQGeo as a geospatial
software-only focused business targeting the telecoms andutility industries. Across virtually every area of the business,
we’ve made good progress against our key strategic objectives
that I set out last year. Our three key goals for 2019 aresummarised below:
1. Expand regional growth and market share
2. Grow subscription and recurring revenue base
3. Invest in product innovation to increase our competitivenessWe have established IQGeo as a leader in geospatial software
focused on the telecoms and utility market, and successfully
challenged our legacy Geospatial Information Systems (GIS)
competitors with an exciting product suite and talented team.
Our target market is now recognising that the previous GIS
approach does not meet their current and future needs ofa dynamic and responsive business. Our major competitors
produce what we term ‘cartography-centric’ software. Thesesystems were built 20 to 30 years ago to create paper maps
using a centralised, proprietary architecture focused on a small
group of geospatial experts. We believe this model is no longer
fit for purpose. Our prospects and customers have shared how
this legacy approach creates process bottlenecks and data
quality issues that compromise a company’s ability to increase
productivity, quality and safety.
IQGeo offers a ‘reality-centric’ approach that reimagines
the role of geospatial software by positioning geospatial
capabilities across all departments that touch the network
lifecycle (i.e. fibre, mobile, gas, water or electric). We can give
all staff the design, survey, construction and maintenancecapabilities they need at any time and in any location.
The versatility of our solution means our products are rapidly
adopted across an enterprise, providing our customers with aplatform that drives transformation throughout their business.
We also see strong growth drivers across all our key markets.
5G and fibre are triggering large investments into telecoms,
while smart grid and IoT technology, as well as the need forincreased safety, is driving investments in utility networks.
Thanks to our track record of strong Return on Investment(ROI) customer stories, we are now extremely well positioned
to capitalise on these exciting industry changes.

Richard Petti
Chief Executive Officer
6

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IQGeo Group plc Annual Report 20192.

3.

Our strategy

Goal 1
Regional
growthGoal 2
Transition to
subscription

Goal 3
Product
innovation

Read more about how we are delivering on our strategy on pages 14 and 15

Strategic goals
Market response to our reality-centric
proposition has been very positive andenabled significant progress with our
first strategic goal of Regional Growth.
We have increased the number of logos(customers) to 50 across all operational
territories and in all segments.
We hired two European sales directors in
the first quarter of 2019 and have alreadysecured new European customers inboth the telecoms and utility sectors.
Our small Japanese team added newcustomers in 2019 through our local
partners in the utility sector. The North
American operation also secured new
telecoms and utility customers who
provide a strong, referenceable installedbase across most geographies in the US
and Canada. We are not just pleased
with the number of new logos but also
their mix. We have secured both verylarge (organisations with over 20 million
customers) and small customers (with up
to 20,000 customers) while shortening
sales lead times through more accurate
solution targeting and opportunity
qualification. This ability to mix customer
sizes is extremely important because itmeans our market opportunity is muchlarger than if we were restricted to asingle customer demographic.

Transition to Subscription is our second
strategic goal. We have made great
progress in transitioning our sales teams
to selling subscriptions and we weredelighted to see that 70% of all new
software deals in 2019 were closed using
a subscription model.
I do not foresee that we will abandon
perpetual sales entirely in the future.
Some new customers may insist on
perpetual licensing and transitioning
current customers away fromtheir existing perpetual licensing
arrangements will be a slower
process. These exceptions aside, 2019
demonstrated that IQGeo can build asolid recurring revenue foundation thatwill reduce volatility of bookings andrevenue in years to come.
Even during this launch year of our
subscription service, customers havealready begun to expand their initialuser counts after successful field
deployments. This model is extremely
promising for IQGeo’s year-on-year
revenue growth potential. To further
support ongoing customer growth,
over the course of 2020 we will beemphasising account management with
our sales team, will continue to develop
our sales model to further acceleratesales, and will improve our customer
procurement processes.

Our third strategic goal of ProductInnovation was amply demonstrated by
the release of several new products in
2019. This includes the highly innovative
Network Revenue Optimizer that helps
customers automate short cycle designs
and quotations and our new Workflow
Manager product (formerly Operations
Manager and Construction Manager)that helps to reduce repair times andaccelerate time-to-market. These new
products have already been sold toexisting and new customers, which is agreat endorsement of IQGeo’s ability
to spot gaps in the market and create
products our customers want to buy.
In recognition for software innovation,
we were very pleased to receive twohighly regarded Diamond Technology
Awards in 2019 from Broadband
Technology Report for our Network
Revenue Optimizer and Capture
products. Customers tell us that we aredelivering world-class technology, but it
is also extremely satisfying for the IQGeo
team to be recognised by our peers in
the industry.
In addition, we also announced in 2019
the impending release of our new
Network Manager product in the firstquarter of 2020 that allows us to tell acomplete end-to-end enterprise solution
story, and is already driving new business
opportunities.

7

IQGeo Group plc Annual Report 2019

Chief Executive Officer’s statement continued

We are pleased to report a very satisfying
120% growth in new orders worldwide.
Financial performance

The IQGeo team2020 and beyond

Our objective for 2019 was to use someof the funds generated in the Ubisense
disposal to invest in the IQGeo geospatial
business and create momentum for
future growth. I am ensuring that ourmanagement team is focused on thefollowing performance KPIs for 2020.

Our accomplishments in 2019
would not have been possible
without an exceptional team ofpeople that create, promote, selland support our award‑winning
products. Over the course of 2019
we strengthened our businessacross a number of key areas toachieve our improved performance.
Organisational focus on sales teams,
product development, services andproduct management, as well as HR
initiatives, creates an attractive andhigh-performance work environmentthat delivers greater focus andhigher productivity.

As I look to the year ahead, I will be
expanding our list of business goals fromthree to five. We will continue our focus
on our initial three business goals while
also concentrating the management
team on account development andoperating margins.

1. Growth in orders. Here we arepleased to report a very satisfying
120% growth in new orders worldwide.
While a high proportion of theseare subscriptions, it means we enter2020 with a backlog that has beenstrengthened by 40% compared tolast year.
2. Growth in logos (aka customers).
We’re very pleased with an increasein customers to a total of 50 at theend of 2019, providing a platform for
future growth.
3. Growth in recurring revenue.
While our large increase insubscriptions has deferred
revenue into future years, wehave nevertheless managed to
grow own‑product recurring
revenue by 78%.
4. Gross profit and margin.
Gross profit and margin have fallen
in 2019 as the business develops
with a stronger subscription revenue
stream that will deliver positive
impact in future periods.
As we look forward to 2020 andbeyond, we remain singularly focusedon creating a business that combineshigh growth with good margins andcash generative capabilities.

8

We have invested time and resources indeveloping our organisation because
it is so central to the execution of
our strategy. For this reason, I havebeen very pleased to see the positive
responses from staff in our annual
staff survey. The survey reflected
improvements that we have made incommunication, training, performance
management and career management.
This also included very positive
responses to the questions ‘Would you
recommend IQGeo to a friend?’ and ‘Do
you understand our vision and strategy?’.

1. Expand regional market
share maintaining the paceof logo acquisition.
2. Grow subscription and recurring
revenue base.
3. Invest in product innovation.
4. Develop existing customer accounts.
Our business model has shown that
customers often spend more on our
products in the second and third years
than in the first. This means that thesurge in new logos in 2019 createsa strong platform for upselling
opportunities in the years ahead.
5. Improve operating margin. In 2019 ourstrategy of growing the organisationand increasing subscriptions has
deferred operating margin to futureyears. It is a strategic priority to
become a cash generative businessin as little time as possible, while
maintaining high growth rates in amarket that has long sales lead times.

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IQGeo Group plc Annual Report 20192.

3.

Market demand

Read more about how we are delivering for our customers on pages 18 to 21

We remain positive
about the prospectsof continuing thisprogress, making
IQGeo a strong
growth businessand attractive
investment.

At IQGeo we are excited about theopportunities ahead of us. We see
strong demand in all our markets
globally and have timed the introductionof our new product offerings to help
capitalise on the upgrade and expansion
opportunities in our target markets.
The markets we target are largely
uncorrelated to many of the global
macro headwinds such as US-China
trade relations, Brexit, UK retail gloom
or declining European industrial
output. The fundamentals in our target
markets are largely isolated from global
macroeconomic trends because network
operators must maintain and upgrade
their networks and outside plant assets,or risk permanently damaging theirbusiness models.

For these reasons, IQGeo isachieving growth in its core businessindependently of other market indicatorsand has excellent momentum entering
the new decade. We remain positive
about the prospects of continuing
this progress, making IQGeo a strong
growth business.

Richard Petti
Chief Executive Officer
6 March 2020

9

IQGeo Group plc Annual Report 2019Market opportunity
IQGeo is actively targeting more than 10,000 contacts
at 1,200 telecoms and utility network operators.

In 2019 IQGeo secured new customers
across all three of our current sales
regions of North America, Europe andJapan. To continue this successful growth,
we have identified the specific markets,companies and individuals that we will
be targeting with our marketing andsales campaigns in 2020. The market
opportunity outlined on this pagereflects the telecoms and utility network
operators that have been identified
as appropriate targets for our 2020
sales and marketing activities, rather
than an attempt to define the total
addressable market.
IQGeo has successfully established morethan 50 telecoms and utility customers
across our three sales regions. With acurrently defined target market of morethan 1,200 named network operatorswith over 10,000 contacts, there issignificant long‑term customer andrevenue growth opportunity for IQGeo.

Future market opportunity
IQGeo’s contact database is not staticand is constantly being expanded
and refined. We expect our market
opportunity list to grow significantly
over time as we identify new companies,
release new products in adjacent areas
and expand the business geographically.

Market segmentation
In this market opportunity analysis,
we have segmented the targetedcompanies into Tier 1, Tier 2 andTier 3 network operators. While thedetailed definition of these three tiers
varies between industries and acrossregions, it is possible to establish ageneral definition for how these tiers
are segmented.

Tier 1
International or dominant national
network operators.

Tier 2
Regional network operators that serve
multiple states or regions.

Tier 3
Local network operators that serve
a city or metropolitan area.

10

Within our database every network
operator is identified by their appropriatetier. This allows the IQGeo sales andmarketing team to deliver customised
messaging and product positioning thatreflects the most critical business issues
for a given industry and tier.

North America

Targeted marketing andsales campaigns
The IQGeo marketing and sales team is
actively engaging with the companies
and contacts outlined in this market
opportunity summary. We reach out
to these individuals through activities
that range from automated digitalmarketing campaigns to onsite personal
meetings. Constantly running multiple
campaigns in parallel, we are focusedon providing high value content thatis carefully targeted to ensure it isrelevant, informative and inspiring.
It is the goal of marketing and sales tonurture and create a long-term working
relationship with our targeted prospects,
while growing our list of contacts
year‑on‑year.

EuropeExample marketing campaign activities• Email campaigns with highvalue content• Tradeshows and customer conferences• Thought leadership andproduct webinars• Industry reports andsponsored research• Participation in industry associations• One-on-one sales meetingsJapan

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IQGeo Group plc Annual Report 20192.

2020 go-to-market strategy

Key

Global total targets

Global utility targets

Global telecoms targets

companies

companies

companies

1,210

10,135contacts

North America
North America is IQGeo’s largest
and most mature sales region witha very healthy ecosystem in both thetelecoms and utility industries. We are
currently targeting more than 600
network operators in this region andsee significant growth potential as we
expand our product line offering into
adjacent markets. We are establishinggood market awareness with our North
American target audience and havereceived positive market feedback on
the momentum we are building.

812

Tier 1

5,510
contacts

Utility targets

398

contacts

130

170
70

companies

Utility targets

companies

35

3,000 contacts
Telecoms targets

15

35

30

275

125

companies

255
companies

95

230

700 contacts
While Japan is IQGeo’s smallest sales
region, they were very successful in
2019, establishing new customers andexpanding our product footprint withexisting customers. Given our small
team and the specifics of the Japanesemarket, we sell our software throughseveral long-standing reseller partners.
A smaller market than Europe and North
America, we are currently targetinga well refined list of over 30 telecoms
and utility network operators. Within
the Japanese market there is significant
revenue growth potential with theseidentified targets, as well as with ourexisting customers.

4,625

25

520

Europe is IQGeo’s newest sales region.
Established in the first quarter of 2019,the sales team has already secured
telecoms and utility reference customers.
We are currently targeting more than
500 network operators in this region
with a particular focus on Central andNorthern Europe. This region is a more
fragmented market than North America
with a different mix of Tier 1, Tier 2
and Tier 3 players, creating significant
opportunity to identify organisations thatare responsive to the IQGeo story.

Japan

Tier 3

Telecoms targets

4,700 contacts
EuropeTier 2

30

320

3.

Utility targets

1,500 contacts
Telecoms targets

3
6

3

17

13

companies

8

companies2

8110 contacts

125 contacts
11

IQGeo Group plc Annual Report 2019

Our business model
IQGeo is successfully transitioning to a recurring software subscription revenue model.
Our software quickly finds a strategic role within a new customer and the number of user
licences and products expands over time with little customer churn. This combination
creates a reliable recurring revenue stream with strong future growth potential.
Competitive advantage

Advantages

Our typical customer lifecycle

At IQGeo we deliverclear and measurable
business benefits
to our customers,
acceleratingproductivity andcollaboration with ourinnovative geospatial
software.

Built forinfrastructurecompanies

Year 1

IQGeo’s total focus on the telecoms
and utility industries enables
us to deliver highly optimised
software solutions that streamline
processes and dramatically improve
operational productivity.

Year 2

One customer reported a 33%
reduction in new construction
survey time.1 Another customer
has reduced yearly construction
hours by 36,200.1

Customer partnerships
Once our software is
installed at a new customer
organisation, it rapidly
finds a strategic role andoften expands across otherdepartments, allowing the
IQGeo service and support
team to form a strong working
partnership. Armed with
our portfolio of professional
services, we routinely workon site with our customers intheir environment and go into
the field with their technicians
to ensure we understand andsupport their unique businessand technical requirements.

12

Mobile-first
software
Key to delivering a current viewof network assets that enhance
departmental collaboration is areality‑centric approach that puts
mobile operations at the heart ofour software architecture. Ourlargest customer deployment to dateexceeds 12,000 users.

Open andflexible platform
Cartography-centric legacy GIS
imposes a proprietary, prescriptivearchitecture that adds complexity andlimits agility. Unlike our competitors thatstill use centralised fat-clients, IQGeo
has created a browser-based software
platform with the latest open source
technology that defines a new standard
for flexibility.

Cost-effective
to deploy
Often seen as the 'only game in town',
legacy GIS vendors have createdbloated, inefficient solutions withonerous partner ecosystems that cost
millions to support. This legacy GIS
model is broken and unsustainable.
By contrast, IQGeo offers a lighter
touch solution that is built for today’s
digital realities, cloud-ready,cost‑effective, rapid to deploy
and simple to maintain.

Customer purchases first productwith a small number of user licences.

Customer expands the number ofusers for Product 1 and adds Product2 with initial users.

Year 3Customer expands the number ofusers for Products 1 and 2.

Year 4
Customer adds Products 3 and 4 while
expanding users on Products 1 and 2.

Year 5
Customer continues to expand users
across the deployed product suite.

Year 1
Software subscription revenue
received from initial customers.

Years 2-5
Additional customers are added
each year while existing customers
expand their installations. This createsa healthy recurring subscription
revenue stream with significant
top‑line revenue growth as new
customers are added each year.

Underpinned by ourculture/purpose
The success of the IQGeo businessmodel depends on the long-term
success of our customers. Our entire
organisation is focused on creating
and maintaining long‑term customer
partnerships.

1. Strategic report

IQGeo Group plc Annual Report 2019

2.

3.

Value created

Business

Single customer revenue
growth model

45,000+

Product 1
Product 2
Product 3
Product 4
Revenue growth

P3

P2

P2

P1

Year 2

P1

Year 4

Year 3

Year 536,200

C6
C5

Customer
C5
C4

C1

Year 2C2

C2
C1Year 3

From a prospect’s first engagementwith IQGeo, we listen, and we seek
to understand their unique businessand technical requirements in orderto deploy a solution that evolves
and grows with their changing
requirements. In a world where
our competitors propose complex,
inflexible and costly configurations,the entire IQGeo team strives to

C2

C1

Year 4

C1

RevenueYear 1

Employees

C3

C3

C2
C1

18%

Reduction in new construction
survey time1

C4

C3
C2

Customers

hours
Reduction in construction project
hours per year 1

Multiple customer revenue
growth model

C4
C3

Telecoms and utility customers

33%

P1

Customer journey

Revenue growth50

Increase in new customer logos

P1

P1

P2

P2

Revenue per user

P4

P3

Year 1

Active users

P4

8.30/10

Employees would recommend
IQGeo as an employer

8.38/10

Employees understand thestrategy and objectives of IQGeo

Year 5deliver innovative, transparent andcost‑effective solutions.
Providing software that exceeds
customer expectations develops thetrust and mutual commitment that
ensures the long-term health of bothour businesses.
1. ROI figures are quoted from specificcustomer deployment examples.

13

IQGeo Group plc Annual Report 2019

Our strategy
In 2020 IQGeo will continue to focus on our three
key growth strategies and build on the significant
progress made in 2019.

The business willremain focusedon developing
the customer
base in our coregeographies,
expanding thescope of our
product portfolio,
and ensuring thelong-term successof our software
subscription
licensing model.

Progress during the year

Goal 1
Regional
growthOur regional growth goals for 2019were to establish an initial customer
base in Europe, build on the strong,but small, utility customer base in Japanand acquire a significant number of
new customers in our already wellestablished North American market.
We have achieved significant successagainst all these objectives.
5 new logos in North America
3 new logos in Europe
5 new logos in Japan

Progress during the year

Goal 2
Transition to
subscription

We made substantial progress during
2019 in our transition from a perpetualto a subscription-based software
licensing model. All software quotes
are now issued with subscription
pricing by default and the response tothis model has been well received by
new customers. Recurring subscription
revenue is showing healthy growthwith 70% of all new sales using our
subscription model.

Progress during the year

Goal 3
Product
innovation

14

We released three new products thatenhance construction, maintenanceand sales productivity. These
products have already been soldto new and existing customers andfeature prominently in our pipeline
development. This is part of our strategy
to build a complete suite of productsthat deliver value across the entire
network lifecycle, allowing IQGeo toattack adjacent market opportunities,
while expanding penetration withexisting customers.

1. Strategic report

IQGeo Group plc Annual Report 2019

Our future goals

New logos plus revenue
growth in existing accounts
In 2020 we will continue to focus on
these three regions with our direct
sales force to acquire new logos
and expand the annual revenue
we received from existing customers
through user growth and the saleof new products. We will explore
reseller partner relationships in2020 as a possible route to market in
geographic territories where IQGeo
does not have a direct sales force.

Our future goals

Grow business based onstrong recurring revenue
In 2020 we issued a revised, andgreatly simplified, price list that makes
the value of a subscription model
more transparent to our customers.
Our sales team understand thevalue subscription pricing brings toour business and will continue to be
incentivised on subscription sales.

Our future goals

Launch schedule for major
new products
In 2020 we will be rolling out therelease of a major new geospatial
design and editing product called
Network Manager. In combination
with the IQGeo software platform,
this disruptive new product creates
an end-to-end enterprise offeringthat enables us to target larger,
long-term deal opportunities with aproduct line and value proposition
that cannot be matched by our legacy
GIS competitors.

2.

3.

Case study

Gigaclear “One source of truth”
Read more on pages 18 and 19

70%
of new customer orders
in 2019 used subscription
pricing

Case study

NW Natural “Reducing technical debt”
Read more on pages 20 and 21

15

IQGeo Group plc Annual Report 2019

Our products
The IQGeo Platform and applications provide powerful
office‑to‑field solutions that enable infrastructure network operators
to reimagine the benefits that geospatial technology brings totheir entire business. Our software is in the field where the action
happens, providing a current view of the network assets that
dramatically streamlines processes and improves data quality.

What makes IQGeo different
Unlike the software from legacy GIS vendors that use a centralised,process‑heavy architecture dependent on highly specialised engineeringresources, IQGeo provides an end-to-end solution with measurable ROI that
increases productivity and collaboration across the entire organisation.
Field and office staff are empowered to monitor, capture, visualise andmanage geospatial network assets without specialised training.

The IQGeo advantage
There are four key business and technical advantages that are recognisedby our customers as critical considerations when choosing to work with the
IQGeo technology and team.

1 – Built for network
operators

2 – Mobile-firstarchitecture

3 – Open and flexible

4 – Fast and costeffective to deploy

IQGeo’s end-to-end
enterprise solutions aredesigned specificallyfor use by telecoms
and utility network
operators. Our optimised
software and industry
experts help customers
to streamline processes
across their network
lifecycle, delivering greater
productivity from the office
to the field.

IQGeo’s mobile-first
software democratises
the use of technology.
We enable approved users
to view, manage and edita current network view
from any mobile device,
anywhere, online or offline.
The easy-to-use interface
is rapidly adopted by field
and office staff, improving
collaboration acrossthe business.

Using the latest browser,
open source and flexible
data model technologies
allows IQGeo customers
to fully leverage a wide
range of GIS, IoT andapplication data sources.
They can also rapidly
configure and customise
their implementation.
In combination this createsa unified geospatial viewof their network that
represents a single sourceof truth for rapid, accurate
decision making.

The IQGeo solutions area fraction of the cost of
deploying and supporting
legacy GIS environments.
Our open and flexible
contemporary architecture
avoids the need for
expensive specialised
training and hardware,and reduces the numberof required applications.

IQGeo’s easy-to-use, flexible software isreadily adopted by IT, office and field staff,
rapidly spreading across the enterprise anddelivering business transformation.

16

Customers often complete
new deployments in amatter of weeks, reducing
technical debt andimproving ROI.

1. Strategic report

IQGeo Group plc Annual Report 20192.

3.

We continue to develop new applications on top of the IQGeo Platform that target
different departments with very specific operational benefits. These range froman integration with Salesforce to accelerate sales response and close‑rates,
to workflow management that improves the efficiency and productivity of
construction and maintenance crews. The IQGeo Platform and applications
work together to deliver an end-to-end, cloud-enabled enterprise solutionthat addresses business critical needs across the entire network lifecycle.
The launch of Network Manager
In 2020 we are releasing a major
new geospatial design and editing
product called Network Manager.
In combination with the IQGeo
software platform, this exciting new
product allows IQGeo to compete
head-to-head with legacy GIS vendors
by offering a complete end‑to‑end
enterprise solution.

It is an easy-to-use, powerful solutionthat enables office staff and field crews
to view, manage and edit network
information, dramatically improving
collaboration, process efficiency,
and network data quality.

Network Manager raises IQGeo’s
market visibility, broadens theaddressable market, while increasing
deal sizes and our potential for
long‑term subscription revenue.
Network Manager is already included
in our 2020 pipeline in a number ofstrategic sales opportunities.

Lifecycle diagram
Sales &
marketing
IQGeo for
Salesforce

Planning &designNetwork
Revenue
Optimizer

Construction
Fiber
Planning

Workflow
Manager

Operation &maintenanceInspection& Survey

Customer
service
DamageAssessment

IQGeo for
Salesforce

Network Manager
IQGeo Platform
Search / Interact / Visualise

Application data sources

Geospatial data sources

17

IQGeo Group plc Annual Report 2019

Case study
Single source of
truth accelerates
construction projects

Introduction
IQGeo is accelerating the speed of
Gigaclear’s construction projects while
improving collaboration and oversightwith external contractors. As one of the
UK’s leading rural full-fibre broadband
providers, Gigaclear selected IQGeo’s
geospatial software following acompetitive search process.

Case study overview
Built for the edge of the network, IQGeo’s
geospatial platform and Capture solution
enables Gigaclear engineers to walkthe route of their broadband networkwith external contractors, recording
data and submitting changes on theirmobile devices.

Goal 1
Regional
growthGiven the rural nature of their network,
the ability to capture field data whileoffline was a major consideration in
the selection of IQGeo. Delivering asingle source of trusted information
improves collaboration with third party
contractors and allows all stakeholders
to monitor status and field updates, while
streamlining processes and increasing
productivity.

Gordon Perry,
Technical Director – Gigaclear
As a rural operator, we have reallystruggled to find products that workfor us so were forced to rely on
printed work orders and field updates.
Offline support, validating designs
and version control were causing us
major headaches. Thanks to IQGeo,
these are now problems of the past!

Customer statistic
Gigaclear designs, builds and operates afull fibre, ultrafast broadband network inrural areas across central and southern
England. Established in 2010, its network
now reaches more than200

communities across many counties.

Find out more:

info.iqgeo.com/customer-stories
18

1. Strategic report

IQGeo Group plc Annual Report 20192.

3.

It was our intent to build a field capture
solution internally, but decided to explore
what was commercially available first.
We were impressed with IQGeo’s solution
from the outset. The team immediately
understood our challenges and delivereda presentation and Proof of Concept that
addressed our biggest concerns. We continue
to be impressed by both the team and thesoftware, which has exceeded our initialexpectations.
Gordon Perry
Technical Director at Gigaclear

19

IQGeo Group plc Annual Report 2019

Case study

Goal 3
Product
innovation

Reducing
technical debt

Introduction

Case study overview

IQGeo’s geospatial software
has enabled North West Natural(NW Natural) to move away from legacy
paper-based processes for back office
and field activities, improving situationalawareness and increasing operational
efficiency. The utility now has real‑time
network data available across theorganisation, accelerating response
times and decision making. The platform
provides a single, consistent network
view that was quickly adopted byfield crews and office staff. The data
consolidation capability of the IQGeo
software also allowed them to eliminate
the use of redundant applications,
reducing the technical debt of their
IT systems.

NW Natural found a partner in IQGeo
that delivered the industry focus, vision,
innovation and agility needed to rapidly
support the specific requirements of
their users. By constantly updating andsharing real-time, accurate network
data, IQGeo’s mobile-first solution gives
NW Natural business critical insights.
They can now make informed decisions
in critical scenarios such as pipelinemanagement, damage prevention,
emergency response, regulatorycompliance, work allocation and routing
and more. The IQGeo Platform andInspection & Survey product also improve
operational efficiencies by removing
complex and manual processes andcutting as-built backlogs.

Jim Downing, CIO – NW Natural
IQGeo has the agility that we werelooking for as well as the leadershipin this space and I think those two
factors sealed the deal for us. We
knew that we would be in good hands.

Customer statistic
North West Natural is one of thelargest natural gas suppliers inthe state of Oregon; it has about

750,000

meters and about 2 million customers.

Find out more:

info.iqgeo.com/customer-stories
20

1. Strategic report

IQGeo Group plc Annual Report 20192.

3.

As a senior leader of our IT&S organisation,
I’m thinking about how I simplify our portfolio,
how I consolidate applications and reduce
the amount of technical debt. By doing that
I’m making a significant investment but I’malso reducing the portfolio of the complexity
and the cost at the same time. If anyone islooking at considering IQGeo, don’t forget
about the horizontal platform. Drive out thetechnical debt, reduce your complexity andgive IQGeo a good look.
Jim Downing
CIO – NW Natural21

IQGeo Group plc Annual Report 2019

Key performance indicators (KPIs)
Progress against strategic objectives.

IQGeo own product orders
(£m)

£7.5m

Software orders
(£m)

+122%

2019
2018

7.5
3.4

£1.5m
2019
2018

6.8

2017

M&S and subscription orders
(£m)

+50%

1.5
1.0

2018
3.0

Software orders have increased by 50%
despite the focus on adding customers
on a subscription basis during 2019.

Link to strategy

£5.5m

+17%

2019
2018

5.5
4.7

2017
IQGeo own product revenue has
increased by 17% with growth driven
predominantly by recurring revenue
streams.

Link to strategy

0.8
0.9

Transition of the licencing model to arecurring revenue subscription basis
has been successful with total M&S andsubscription orders increasing by 213%.

Recurring M&S and subscription
revenues (£m)

Gross margin
(%)

£1.6m

42%

+78%

2019

1.6
0.9

2018
5.8

2017

2.5

Link to strategy

Link to strategy

IQGeo own product revenue
(£m)

2017

0.8

78% growth in recurring revenues with
70% of all new customers being secured
on a subscription basis.

Link to strategy

-2%

2019

42
44

2018
2017

39

While the revenue mix has moved infavour of higher margin software,subscription and maintenance andsupport revenues, the significant
reduction in services revenue which has
a fixed cost of delivery, has led to an
overall decline in the gross margin.

Link to strategy

22

+213%

2019

2017

IQGeo own product orders haveincreased by 122% following expansionof our presence in North America as
well as adding new contracts in Europe
and Japan.

£2.5m

1. Strategic report

IQGeo Group plc Annual Report 2019

New logos won(Number)

Net cash
(£m)

13

+18%

2019

13
11

2018
2017

2017

-58%

13.1

71

+20%

2019
30.9

2018

9

3.

Employee headcount at 31 Dec(Heads)£13.1m
2019

2.

6.6

2018
2017

New logos were won in all operating
regions during 2019, with the regionalcustomer base becoming more diverse
as markets are developed.

Net cash decreased to £13.1 million
following the completion of the share buyback which saw the return of £11.0 million
to shareholders.

Link to strategy

Link to strategy

71
59
83

Headcount has increased as a resultof investment in sales channels in boththe North American and European
telecoms and utility markets, alongwith investment in product development
to create the next generation
geospatial platform.

Link to strategy

Key
Regional growth

Transition to subscription

Product innovation

23

IQGeo Group plc Annual Report 2019

Chief Financial Officer’s statement

The increase in recurring revenues isa significant step towards achieving
sustained profitability.
The Group is focused on growing IQGeo own product revenues
which include generating recurring revenues from software
subscription products, selling perpetual software licences
and the associated maintenance and support contracts, anddelivering consultancy services revenues. Additionally, theGroup has a legacy operation that provides lower margin
consultancy services connected to third party products whichhave declined in the current period – in line with expectations,and may decline in future periods.
During 2019, the commercial model evolved with a strong focus
on building a recurring revenue subscription-based software
business through long-term relationships with customers.
The subscription offering has been attractive to potential
customers with 70% of all new customers being contracted
on a subscription basis.
Increasing Annual Contracted Value (ACV) is the benchmarkof securing recurring revenue growth and achieving sustained
profitability. The ACV won during 2019 from new subscription
contracts was £0.7 million, which, in addition to the ACV
associated with maintenance and support of perpetual licencesales, gives total ACV as at 31 December 2019 of £2.0 million(31 December 2018: £1.1 million) – an increase of over 80%.

OrdersBookings of orders related to IQGeo own products increasedby over 120% to £7.5 million during 2019 (2018: £3.4 million)
following expansion of our presence in North America as wellas adding new contracts in Europe and Japan.
Bookings of orders related to third party Geospatial Services
were £1.6 million (2018: £4.8 million) reflecting the managed
decline in this legacy revenue stream.
IQGeo own product order backlog as at 31 December 2019 was£3.7 million (2018: £1.6 million). Third party Geospatial Services
order backlog was £1.4 million (2018: £2.1 million).

Tim Gingell
Chief Financial Officer24

1. Strategic report

IQGeo Group plc Annual Report 2019

Recurring own product revenue
(£m)
2019
2018
2017

1.6
0.9
0.8

+78%

2.

3.

Revenue
Revenue composition by revenue stream is summarised in the table below:
		2019% of total
2018
Revenue by stream		
£’000
revenue£’000% of total Year‑on‑year
revenue
growthSoftware		
1,589
20%

1,395

14%

14%

Services		
2,328
30%

2,424

24%

(4)%

Non‑recurring own
product revenue		
3,917

50%

3,819

38%

3%

16%

918

9%

36%

Subscription		
381
5%

—

—

N/A

Maintenance and support		

1,251

Recurring own product revenue

1,632

21%

918

9%

78%

Total own product revenue

5,549

71%

4,737

47%

17%

Geospatial services fromthird party products		

2,257

29%

5,242

53%

(57)%

Total revenue		

7,806

100%

9,979

100%

(22)%

The transition of the commercial model to a subscription-based software businessenables more customers to start with smaller deployments which can then be grownover time. Ultimately this approach will provide greater stability to income andoperations in future periods but will have the impact of deferring revenue in the
short term.
Despite 70% of all new customers being contracted on a subscription basis, software
sold as a perpetual licence increased by 14% during 2019. In addition to softwaresales to new customers, IQGeo has sold further user licences and achieved productexpansion within its existing customer base.
Services revenues associated with IQGeo products has decreased by 4% during theyear, largely due to the timing of project delivery.
Maintenance and support revenues associated with perpetual licence sales has
increased by 36% during 2019 due to an increase in users of the software and a strong
renewal rate of annual contracts.
Subscription revenues of £0.4 million have been recognised in respect of contracts
won during the 2019 period. These contracts have an associated ACV of £0.7 million
with committed terms ranging between one and three years.

Gross profit						
Gross
		
2019
Gross
2018
Gross
marginGross profit		
£’000
margin %£’000
margin %variance

Gross profit/gross margin		

3,243

42%

4,380

44%

(2)%

Gross margin percentage has decreased during 2019 by 2%. While the revenue mix
has moved in favour of higher margin software, subscription and maintenance andsupport revenues, the significant reduction in total services revenue which has afixed cost of delivery, has led to an overall decline in the gross margin during 2019.
Increases of recurring subscription and maintenance and support revenues, together
with improved margins on services revenue, are expected to drive an improvement toboth gross profit and gross margin percentage in future reporting periods.

25

IQGeo Group plc Annual Report 2019

Chief Financial Officer’s statement continued
Operating expenses and adjusted EBITDA from continuing operations
Operating expenses were £9.5 million (2018: £6.0 million) and are summarised as follows:									2019									
£’000

2018
£’000

Other operating expenses									
8,091

5,446

Depreciation									
285

273

Amortisation and impairment									
815

774

Share option expense									
102

248

110

(151)

Non-recurring items									
136

(619)

Total operating expense									
9,539

5,971

Unrealised foreign exchange on intercompany trading balances						Other operating expenses of the Group include sales, product development, marketing and administration costs, net of costs
capitalised.
Sales costs have increased during 2019 as a result of headcount being added to develop sales channels in the North American andEuropean utility and telecoms market. Sales headcount has increased by over 25% during the year with all new hires being quota
carriers.
Product management and development headcount has increased by over 120% during the year as the Group focuses on creating
the next generation geospatial platform.
The 2018 other operating costs reported above include an allocation of the administration and marketing costs of the Group which
supported both the Geospatial and discontinued RTLS SmartSpace divisions during 2018. Accordingly, the 2018 other operating
costs reported above do not reflect a realistic cost base to support the standalone IQGeo business. The 2019 other operating
expenses are based on the IQGeo operating model which includes short-term serviced office leases in Cambridge, Frankfurt andTokyo together with a subscription-based IT environment which provides the Group with a flexible cost base from which to develop
with minimal capital expenditure other than product development.
Non-recurring costs in 2019 relate to the cost of completing the capital reduction and subsequent repurchase of share capital.
The operating loss for the period from continuing operations was £6.3 million (2018: £1.6 million).

EPS and dividends
Adjusted diluted loss per share from continuing operations was 8.8 pence (2018: 3.0 pence). Reported basic and diluted loss per
share from continuing operations was 9.4 pence (2018: 2.2 pence). The Board does not feel it appropriate at this time to commence
paying dividends.

Discontinued operations
During 2019, the Group received an additional £1.1 million cash consideration in respect of the RTLS SmartSpace business unit
disposal as a result of the finalisation of the completion accounts. This sum was greater than the £0.8 million asset recognised
within the balance sheet as at 31 December 2018. This cash inflow was offset by the settlement of £1.8 million of costs associatedwith the disposal being paid.
No additional asset has been recognised for potential earn-outs on the disposal which could be up to maximum of £3.0 million.
The earn-out will be triggered if revenue milestones of the RTLS SmartSpace business unit are achieved for the year ended
31 December 2019. As at the date of this report, the final results of the RTLS SmartSpace business unit for the year ended
31 December 2019 are not available.

Repurchase of share capital
On 2 August 2019, the Company announced a proposed tender offer to repurchase up to a maximum of 28,260,869 of theCompany’s Ordinary Shares at a price of 46 pence per Ordinary Share. Following approval of the tender offer by a General
Meeting of shareholders on 22 August 2019, the tender offer completed on 30 August 2019, resulting in the share capital reducing
by 23,803,690 and £11.0 million of surplus funds being returned to shareholders in September 2019.

26

IQGeo Group plc Annual Report 2019

1. Strategic report2.

3.

Consolidated statement of financial position
As at 31 December 2019, the Group had a cash position of £13.1 million with no debt (2018: £30.9 million), noting that £11.0 million
was returned to shareholders in September 2019.
On 20 December 2019, the Group entered into a seven year lease running to February 2028 on new premises in Denver as thelease on the existing premises in Denver ends on 30 April 2020. While the lease agreement has been contracted, a capital asset
for the present value of the future payments, and its associated liability, have not been recognised on the balance sheet inaccordance with IFRS 16, as the lease period will not commence until March or April 2020. In addition, £0.2 million fit‑out costs netof landlord’s contribution will be incurred in the first half of 2020.

Non-current assets
Total non-current assets were £3.8 million (2018: £3.6 million).
Capitalised development costs represent the key intangible assets of the Group, being investment in IQGeo own products,
which will support the future growth of the business. Capitalised development costs at 31 December 2019 were £1.5 million(2018: £1.2 million) with the increase reflecting the investment in the IQGeo product suite. No change has been made to the current
three‑year amortisation period, due to the fast-moving nature of the technology.
The consideration for disposal of the RTLS SmartSpace business included £2 million in a rollover investment into the sold businessand accordingly an investment asset of £2 million is recognised as at 31 December 2019 (2018: £2 million).

Current assets
Total current assets decreased to £15.4 million (2018: £34.5 million) with £11.0 million of cash being returned to shareholders via
the share repurchase during the year.

Total assets
Total assets decreased to £19.2 million (2018: £38.1 million) which includes £13.1 million (2018: £30.9 million) of cash.

Current liabilities
Total current liabilities decreased to £3.3 million (2018: £5.5 million) driven by trade payables decreasing to £0.3 million(2018: £2.2 million).

Non-current liabilities
Total non-current liabilities remained at £0.3 million year‑on‑year.

Net assets
Net assets decreased to £15.6 million (2018: £32.3 million).

Cash and cash flow
Operating cash outflow before working capital movement was £4.9 million (2018: £0.4 million inflow).
Operating cash outflow from operating activities after adjusting for working capital and tax was £4.7 million (2018: £0.9 million
inflow).
The Group had investment outflows of £1.9 million (2018: £24.3 million inflow) due to cash flows associated with the
RTLS SmartSpace business unit disposal and expenditure on capitalised software development costs.
Cash outflow from financing activities was £11.2 million (2018: £3.5 million) primarily due to the repurchase of share capitalin September 2019.

Tim Gingell
Chief Financial Officer
6 March 2020

27

IQGeo Group plc Annual Report 2019

Principal risks and uncertainties
Effective risk management is critical to theachievement of the Group’s long‑term growth.

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 accordancewith our risk management policies.

Effective risk management is criticalto the achievement of the Group’s
long‑term growth. The Board has overall
accountability for ensuring that risk iseffectively managed across the Groupthrough the implementation and reviewof the Group’s risk processes.

The principal risks listed in the table arethose we believe could cause our results
to differ materially from expected andhistorical results. They are also the risks
that may impact the achievement of theGroup’s strategic priorities.

Strategic risks
Principal risk and impact

Mitigation of risk

Growth management• Subscription revenue model provides
greater stability to income and operations
in future periods.

Near-term expansion is expected in the
future to develop existing markets and to
expand into new markets. The risks associatedwith growth include the delivery of market
penetration through the conversion of thesales funnel, and control of increases in fixed
operating costs to support revenue growth.
If the Group is unable to manage expansion
effectively, its business and financial results
could suffer.
If the Group is unable to deliver growth toexceed the costs of operation then ultimately
its cash resources will be fully consumed.

• 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
that can scale with the business while
maintaining good financial management.
• Close monitoring of gross margin including
resource allocation and utilisation on
services projects.
• The costs within the business are closely
monitored to ensure they remain in line withthe growth trajectory, and cash flow outlook,of the business.

Continuing investor confidence
Access to future capital may be required as
the business develops.
Growing market capitalisation and goodinvestor relations coverage will be viewed
positively by existing and potential customers.

Dependence on key customers
The Group has a concentrated customer
base, many of which are substantially larger
enterprises than the Group. The Groupis reliant on significant projects with its
key customers to deliver financial results.
The conversion of opportunities to signed
contracts and then the subsequent timing of
the projects is not fully under the control of theGroup.

28• Clearly defined medium and long‑term
strategy.
• Regular meetings with investors as part of
the financial results reporting cycle.
• Improved communication to articulate
business performance and strategy.
• The Group’s management performs regularreviews of the opportunity pipeline, including
critical stages to complete the larger deals
with status reported at Board meetings.
• Increase the breadth of the opportunity
pipeline through recruitment of morequota‑carrying sales and pre-sales personnel.
• 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 anddiversify its customer base.

ChangeStrategy1. Strategic report

IQGeo Group plc Annual Report 2019

Principal risk and impact

Mitigation of risk

Customer satisfaction and retention• Maintain regular communications
with customers.

The subscription model is attractive to somecustomers as it provides flexibility and reduces
the initial investment required to adopt the
IQGeo Platform. Poor customer satisfaction
would impact renewal of subscription andmaintenance and support contracts.
Expansion of additional users and new products
is anticipated within our typical customer
lifecycle. This strategy would be limited in theevent of poor customer satisfaction.

Change2.

3.

Strategy• Ensure appropriate level of resources areapplied to key customer accounts.
• Deal with issues quickly through a clear
escalation path.
• Investment in product enhancements witha focus on understanding customer needs.

Barriers to entry into the market are high with
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.
Additionally, poor customer satisfaction could
result in delays in the timing of customer
payments which would reduce the working
capital available to the Group.

Technological risk
The Group operates in an industry wherecompetitive advantage is heavily dependent
on technology. Technological development
may reduce the importance of the Group’sfunction in the market.
Slower adaption of disruptive technologies
within the markets we operate will impact
on revenue unless the benefits of the IQGeo
Platform are clearly communicated.

Coronavirus Covid-19 or other pandemics
The ability to build pipeline, develop
opportunities and service customers
needs direct customer interaction which
is often most effective on a face to facebasis requiring travel. The ability to travelis, and may further, be impacted by travel
restrictions. Key trade shows may also
be cancelled.
Customer decision-making may be delayedby operational priorities or a broader
economic downturn.
IQGeo’s offices and those of its customers may
be affected by temporary quarantine measures.
Global economic downturn caused by virus
spread may slow down investment plans for
IQGeo target customers.

• Regular monitoring of the industry andadvances through participation in researchforums.
• Review of the 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 Group strategy, linking
investment to commercial viability and returnon investment.
• Maintain regular communications
with customers.
• Visit customers as normal where travel
policy allows.
• Be aware of potential impact tocustomer operations.
• Maintain Cloud based infrastructure for
IQGeo’s IT systems.
• Implement travel and quarantine policy forstaff as well as comprehensive work fromhome capabilities in the event of extended
office closures.
• Pipeline and forecast will be risk weighted
appropriately to reflect impact of virus.

Key
Increase

Decrease

No change

Regional growth

Transition to subscription

Product innovation

New

29

IQGeo Group plc Annual Report 2019

Principal risks and uncertainties continued
Operational risks
Principal risk and impact

Mitigation of risk

Staff recruitment and retention• 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’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.

• The Group has implemented Employer of
Choice initiatives including career planningand organisational development.
• Succession planning in key positions across thebusiness functions.

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, Health& Safety, Data Protection and anti-Bribery rules.
Failure to comply with local laws may result in the
cessation of the ability to trade in that jurisdiction,fines or the allocation of resources to perform
corrective actions.

International trade
On 31 January 2020, the UK left the European Union.
The risks include a potential increase in the level ofmarket volatility and barriers to trade between the
UK and the EU following the end of the transition
arrangements on 31 December 2020.

• The Group monitors new developments taking input
from local advisers.
• The Group regularly reviews its processes to ensurethat the risk of default is minimised.
• The Group maintains Privacy Shield accreditation
allowing for the sharing of personnel information
between the US and EU.

• IQGeo Germany GmbH, a German based
subsidiary of IQGeo Group plc, will contract
with new customers based in the European Union.
• The Group’s customer sales are spread acrossmultiple territories which will partially mitigate
against a downturn in any one region.

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.

30• The Group continues to invest in resources inenhancing site resilience and defences, improving
network monitoring and reviewing the incident
response processes to mitigate the impact of asecurity breach.
• The Group ensures all employees receive training
and testing to improve their awareness ofcyber‑threats.
• Short and medium-term cyber security plans are
regularly reviewed by the Board.

Change1. Strategic report

IQGeo Group plc Annual Report 2019

2.

3.

Financial risks
Principal risk and impact

Mitigation of risk

Clawback in respect of RTLS SmartSpace sale

• The Group has worked extensively with external
advisers in concluding the transaction.

On 31 December 2018, 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 SmartSpace businessto clawback consideration paid, should additional
liabilities crystallise at a later date.

Taxation
The Group operates globally and is exposed tointernational tax laws. Changes to taxation legislation
would have an adverse impact on the working capitaland profitability of the Group.

Foreign exchange risk
The Group’s international operations expose it to anumber of risks that include the effect of changes inforeign currency exchange rates. A major proportionof the Group’s receivables and payables is currently
denominated in Canadian Dollars and US Dollars.

Financial reporting risk
In preparing the financial statements, the Groupmakes accounting estimates that have a significant
risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next
financial year. These judgements are detailed further
in note 3 to the financial statements and include
revenue recognition and product development costs.

Change• The Group reviews local compliance and upcomingchanges to legislation with its advisers andcontinues to update forecasts accordingly.

• The Group relies on a partial natural hedge ofCanadian Dollar, US Dollar and Japanese Yen
receivables being in the same currency as the local
operation’s payables.
• The Group’s working capital is forecast andmonitored in the local currency of each subsidiary
allowing the foreign currency exposure across theGroup to be reviewed.
• In forming our accounting judgements,
management discuss estimates with internal
experts within the IQGeo Group to ensure all
relevant facts are understood.
• The underlying fact pattern and conclusions
reached in making accounting judgements are
discussed in detail with the Audit Committee of
the Group.

All risks reported in the prior year are still considered to be risks and are reported above.
The Strategic Report was approved by the Board of Directors on 6 March 2020 and signed on its behalf by:

Tim Gingell
Chief Financial Officer
6 March 2020

Key
Increase

Decrease

No change

New

31

IQGeo Group plc Annual Report 2019

Environment, employee engagement and CSR
2019 was a turning point for the businessand it showed in nearly every aspect of
employee experience.

Environment
Acting with environmental responsibility
is part of IQGeo’s daily activity and wetake steps to reduce our impact on theenvironment where we can. We havesignificantly decreased the amount ofprinted material and plastic used acrossall of our offices. For example, our 2019
Annual Meet‑up was a plastic‑free event,
providing reusable water bottles for
all delegates to avoid the use of plastic
cups and bottles. We have also given
all employees these reusable bottles
to help reduce the purchase of plastic
water bottles across our offices. For all
events that we attend, we have cut theuse of printed materials and developed
an online app for people to order digitalcollateral that is delivered as a PDF.

IQGeo global staff distribution

4

For environmental and financial reasons,
we seek to minimise business travelto save costs and reduce the carbon
footprint of the organisation. We look foropportunities to conduct internal andexternal business meetings via conference
calls whenever possible and, when wedo travel, we seek to maximise our onsite
activities in order to reduce future travel
requirements. In 2020 we will be looking
to further expand our environmental
programmes and initiatives.

Employee engagement
2019 was a turning point for thebusiness and it showed in nearly
every aspect of employee experience.
Our recent staff survey showed asurge in energy and confidence that
followed our new product line visionand go‑to‑market strategy.

Key statistics• Interesting and challenging workwith new products such as Network
Manager and engagement withexciting new customers• Career development having
promoted ten employees andtransferring three into new roles withother departments• Recognition during our all-hands
meetings when we thank membersof staff for outstanding achievement

People profiles

8.30

Employees would recommend
working at IQGeo – 8.30/10

4 3

41

17

8.38

Employees feel IQGeo’s strategy
and objectives are clear – 8.38/10

8.96

Employees feel IQGeo has astrong teamwork ethos – 8.96/10

Key
USA

CanadaUK

Japan

Germany

We continue to provide key elements tostaff that support our Employer of Choice
initiative, including

8.84

Employees feel IQGeo operates
with integrity – 8.84/10

8.30

Employees feel IQGeo isfocused on innovation – 8.30/10

Derek Kern
Director of Research
Denver, Colorado, USA
Started working with the business in 2002.
Derek is an expert in system architecture,
software engineering, high performancecomputing, Artificial Intelligence and has apassion for assimilating and understanding
new technology. As Director of Research,
Derek discovers, experiments with, andevaluates next generation technologies forpossible integration into IQGeo products.
His goal is to solve difficult problems for ourcustomers using the latest technology.
What excites you most about IQGeo?
Our persistent desire to solve the next
issue that our customers will experience.
At IQGeo everyone is motivated,knowledgeable and friendly, making ita fantastic place to work.
What’s your favourite thing to dooutside work?
Reading, snowboarding, hiking and travel
are all passions of mine.

32

1. Strategic report

IQGeo Group plc Annual Report 2019

• Community engagement throughour corporate social responsibility
activities (see below) has greatly
improved a sense of collaboration,with Teamwork being ranked as
the most important value in our
staff survey
IQGeo employees are highly
engaged and proud of the work being
accomplished. The annual survey showsthat managers are getting even betterat communicating, and most staff would
recommend IQGeo to their friends andcolleagues as a great place to work.
Top values identified by the staff inaddition to Teamwork include Integrity,
Staff Development and Customer Focus.
With these ideals resonating with ourpeople, we will see even more successas we move into 2020.

Corporate social responsibility
One of our key tenets as an Employer
of Choice is to demonstrate corporatesocial responsibility. By demonstrating
how the Company contributes tosociety at large, we will further attract
and retain high quality talent thatmakes us successful. Our products andservices help customers keep millions
of households safe and provide themwith safer, greener and more affordable
mobile, broadband, gas, water andelectricity services. Knowing that our
products are also helping communities
that have been hit by disasters to rebuild
and get back on their feet is importantand rewarding for everyone at IQGeo.
Our work is benefiting both the businessand the communities in which we live.

2.

3.

We continue to offer each employee theopportunity to participate in their local
community by taking one day a year of
paid leave to assist with a charity of theirchoice. This effort is helping to createstronger employee engagement asshown in our Annual Employee Survey.
In 2020 we’re adding charitable giving
schemes in the UK and the US that give
employees the opportunity to makedonations from their pre-tax pay to local
or international charities of their choice.

Tasneem Jodhpurwala
Solution architect

Yukari Goto
Sales manager

Michael Schoenstein
Director for Utility Solutions – EUCambridge, UKTokyo, Japan

Frankfurt, Germany

Started working with the business in 2013.

Started working with the business in 2002.

Started working with the business in 2019.

Tasneem’s expertise lies in front-end
software development, programmingin JavaScript, HTML, CSS and Python.
She is an expert at creating intuitive andsimple‑to‑use user interfaces.

Yukari’s expertise lies in providing GIS
consultancy services to telecoms and utility
network providers. She has more than ten
years’ experience working with geospatial
solutions.

What excites you most about IQGeo?
It's great to work in a dynamic team.
We are always coming up with new
ideas. What’s exciting about working on
our product is that the work I do today isgoing to be used in the field in only a few
months’ time. IQGeo is changing the way
people work; improving their day-to-day
lives by making them quicker and more
efficient. One of the joys of working in asmall company is that you get visibility andaccolades for the work you do very quickly.

What excites you most about IQGeo?
It is great to be part of the global IQGeo
team. On a local level we are really
starting to make a big impact on Japanese
infrastructure companies and that is very
exciting for us.

Michael has more than 25 years ofexperience in the geospatial business,working with utilities and infrastructure
management software solutions. His
expertise lies in business development,
professional services and accountmanagement. As Director for Utility
Solutions in Europe, he is responsible for thegrowth of IQGeo’s business in this industry.

What’s your favourite thing to dooutside work?
Travelling the world and looking after myhouse plants.

What’s your favourite thing to dooutside work?
Hot yoga and enjoying delicious sake andfish from all over Japan.

What excites you most about IQGeo?
The knowledge and enthusiasm of IQGeo’s
great team that has the skills, commitment
and creativity to solve our customers’
business issues. It’s great to be part of aninternational team, working closely acrosscultures to share practices and experiences
and help deliver innovative, powerfulsolutions worldwide.
What’s your favourite thing to dooutside work?
I love race cycling, mountain biking andwind surfing. I live in the south of Germany,so love to spend time in the Alps.

33

IQGeo Group plc Annual Report 2019

Section 172 statement
As required by Section 172 of the UK’s Companies Act,a director of a company must act in the way he or she
considers, in good faith, would most likely promote thesuccess of the company for the benefit of its shareholders.
In doing this, the director must have regard, amongst othermatters, to the following issues• The company’s reputation for high standards ofbusiness conduct• Likely consequences of any decisions in the long term

• Need to act fairly between members of the company• Interests of the company’s employees

Engagement with stakeholders and consideration of theirrespective interests in the Company’s decision-making
process took place during the year as described below.

• Need to foster the company’s business relationships with
suppliers, customers and others• Impact of the company’s operations on the communityand environment

Shareholders

Customers

During the year, and alongside the updated website,a regular email update was sent to interested investors andprospective investors to provide insights on the Company’s
progress and achievements.

Following the separation from the RTLS business,
the Company engaged on a detailed review of use caseswith its customers, identifying opportunities for productdevelopment and clarifying the competitive advantage that
IQGeo has in its chosen target vertical markets.

The primary mechanism for engaging with shareholders
in more depth is via the annual cycle of investor meetings
associated with financial results for the half year and thefull year, and the AGM. In addition, in 2019, Paul Taylor,the newly confirmed permanent Chair, together withanother Non‑Executive Director, consulted with larger
investors on some of the details of the proposed capital
return and Company strategy, both informally and via theGeneral Meeting.
Investors showed their support of the Board and theCompany’s strategy with all votes cast in favour of theresolutions at the General Meeting and the Annual
General Meeting, apart from one resolution at the AGM.
For the first time, at the 2019 AGM, all Directors were put
up for re-election, which is a practice that the Company
plans to continue. One shareholder voted against the
re-appointment of Oliver Scott in line with the advice
from an institutional governance report as Remuneration
Committees should be formed of independent
Non‑Executive Directors. The Company recognised and fully
disclosed this matter in its 2018 Annual Report noting that,whilst Oliver Scott was not independent given his position at
Kestrel, his perspective representing shareholders together
with his broad business experience with smaller listedcompanies, and the reality of the size and skills of IQGeo’s
Board meant that the Board felt that it was appropriate that
he was the Chair of the Remuneration Committee.
Other than the capital return project, the main topics of
discussion with shareholders were focused on the strategic
shift to a subscription revenue model, the outlook on cash
flow and the desire, in due course when management was
comfortable, for market forecasts to be issued.

34

In October, the Company held its annual 'IQGeo Meet-up'
in Denver to which many of its customers and prospects
attended to share their experiences and successes, aswell as learn about future product development plans.
In addition, the Chair attended the IQGeo Meet-up,
engaging directly with the customers and partners there,
whilst the rest of the Board reviewed the video use cases
captured at the event.
The Board gained insights on customers, other than via
the Executive Directors, through Board meeting sessions
through the year dedicated to North America from the GM
Jay Cadman and then at a separate meeting focused on
Europe and Japan from the GM Christian Wirth.

IQGeo Group plc Annual Report 2019

Employees
We have an experienced, diverse and dedicated workforce
which we recognise as a key asset of our business.
Therefore, it is important that we continue to create the rightenvironment to encourage and create opportunities forindividuals and teams to realise their full potential.
The Board and management team pay close attention to theresults of the employee survey carried out annually in the
fourth quarter, taking note of trends and developments andcreating action plans to address any issues arising.
2019 was such a key transition year for employees in termsof the shape and strategy of the business, that many of theCambridge‑based employees from the finance and IT teams
came to the IQGeo Meet-up to improve their understandingof our business and engage with customers directly.
In 2019, the Denver‑based staff were consulted on theoptions available for, and design of, new office space as
the existing lease will end on 30 April 2020.

1. Strategic report2.

3.

Community andthe environment
Being a software company, the Company tries to minimise
its impact on the environment through a number ofmeasures, including the following• Providing products to customers to improve the safetyof their operations (particularly to reduce the risk of gas
explosions), and restore service after storm damage(specifically in 2019, following Typhoons Faxai and
Hagibis in Japan)• Supporting its customers in improving their collaborationand productivity, thereby reducing travel and waste• Providing public transport season tickets toDenver‑based staff

35

IQGeo Group plc Annual Report 2019

Board of Directors
The Board of Directors has overall responsibility for
the Group. Its aim is to provide the leadership andindustry-specific insight required to develop a successful
business, through utilising the broad range of skills andexperience of the Board members.

Paul Taylor
Chair
Experience

Key

A

A

Audit
Committee* Committee

Chair ofR

Remuneration
Committee

I

N

Nomination
Committee

Independent*R N

Paul Taylor spent over 21 years with AVEVA Group plc and was Group Finance Director
from 2001 to 2011. Paul is a Fellow of the Chartered Association of Certified Accountants
and was recipient of the FTSE 250 Finance Director of the Year in 2008. Paul wasappointed to the IQGeo (then Ubisense) Board on 28 February 2011. Previously,Paul was a non-executive director of Anite plc, KBC Advanced Technologies plc,
Escher Group Holdings plc and Frontier Smart Technologies Group Ltd.

Other appointments
Paul now serves as a non-executive director of Thruvision Group plc and Trustee of
CADCentre Pension Fund.

Richard Petti
Chief Executive Officer
Experience
Richard Petti brings 25 years of experience in 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 to commercial vehicle manufacturers.
Richard joined the IQGeo (then Ubisense) Board on 14 December 2016.

Other appointments
None.

Tim Gingell
Chief Financial Officer
Experience
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, re-negotiating debt finance and closing two
fund raising rounds on London’s AIM stock market and positioned the business forsoftware‑led growth. He has been a member of the IQGeo (then Ubisense) Board
since 9 August 2016. Tim held leadership positions at i2/IBM, The Cloud Networks
and MFS/WorldCom.

Other appointments
None.

36

1.

IQGeo Group plc Annual Report 2019

Dr. Robert Sansom
Non-Executive Director
ExperienceN

2. Corporate governance3.

*

Dr. Robert Sansom co-founded and was CTO of FORE Systems, acquired by
Marconi for $4.5 billion in 1999. Robert joined the IQGeo (then Ubisense) Board on
16 December 2005. He co-founded and was Chairman of the Cambridge Angels
from 2001 to 2010. Robert was elected as a Fellow of the Royal Academy of Engineers
in 2010.

Other appointments
Robert is a non-executive director to enterprises including Arachnys Information
Services Ltd, Myrtle Software Ltd, Featurespace Ltd, Camfed International,
Cambridge Communication Systems Ltd, CRFS Ltd and Netronome Inc.

Ian Kershaw
Non-Executive Director
Experience

A

R

I

Ian has over 30 years’ strategy, engineering and operations experience inthe telecoms, utilities and manufacturing industries. He was appointed as a
Non‑Executive Director to the IQGeo (then Ubisense) Board on 23 May 2014.
Previously, Ian was executive chairman of Coryton Advanced Fuels, the transport
fuels specialists, and a director of Ricardo UK Ltd., the engineering consultants.

Other appointments
Ian is also a non-executive director of Surface Generation Ltd.

Max Royde
Non-Executive Director
ExperienceR*

Max co-founded Kestrel in 2009. He joined the IQGeo Board on 31 October 2019.
Max has been advising and investing in quoted and unquoted UK smaller companies
since 1998 and prior to Kestrel was a managing director of KBC Peel Hunt.

Other appointments
Max is also a fund manager of Kestrel Opportunities, sits on the Investment
Committee for KITS and is a non‑executive Director of Ingenta PLC.

Andy MacLeod
Non-Executive Director
Experience

I

Andy is a professional non-executive director and industry consultant after recently
retiring from Vodafone Group as Regional Technology Director for the Africa, Middle
East and Asia-Pacific Region. Prior to that he was Vodafone’s Group Chief Networks
Officer and CTO of Verizon Wireless in the US. Since the early 1990s he has held CEO,COO and CTO positions at major telecommunications companies and has gained
extensive public and private experience as a Director on the Boards of companies
such as Eircom, Indus Towers, Vodafone Italy and Vodafone Australia. Andy wasappointed to the IQGeo Board on 21 June 2019. Andy holds an MA degree in Materials
Science from Keble College, Oxford and an MBA from Warwick Business School, andwas elected as a Fellow of the Royal Academy of Engineering in 2014.

Other appointments
Andy is currently a non-executive director of Gfinity PLC.

37

IQGeo Group plc Annual Report 2019

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

Principle 1:
Establish a strategy andbusiness model which
promotes long-termvalue for shareholders
IQGeo has defined the telecoms andutility industries as its target verticalmarkets. The business strategy
is to develop and sell its highly
innovative geospatial productivity
and collaboration software to theseindustries, transforming the customers'
ability to plan, design, install and service
networks including 5G, fibre, coaxial,
electricity, gas and water.

The Group is focused on a three-point
strategy to achieve the goal of building
a fast-growing and cash generative
business.

Regional growth• Increase the number of new logos orcustomers signed in our key markets• Build commercial partnerships toaddress specific markets or use‑cases• Increase the Annual Contracted Valuereceived from each existing customer
for IQGeo’s products whilst managing
down the legacy third party service
business

Transition to subscription• Increase the number of new customers
establishing subscription contracts• Create subscription-only productofferings to maximise annual
recurring revenue• Build and retain a significant recurring
Annual Contracted Value (ACV)order base enabling the businessto generate positive cash flow

Product innovation• Develop customer-driven productroadmaps solving enterprise-levelbusiness challenges• Further develop the modular software
platform addressing known customer
issues• Clearly establish with customers theshort-term and long-term benefits
that IQGeo products will deliver

Principle 2:
Seek to understandand meet shareholder
expectations
The Company maintains a dedicatedcontact form which is prominently
displayed on its website together with theCompany’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 Chair and
CEO are responsible for reviewing allcommunications received from members
and determining the most appropriate
response, engaging the executive
team and Board as needed. In addition
to these passive measures, the CEO
typically engages with members throughinvestor roadshows held at least twice
each year following the release of results.

With regard to corporate social
responsibility (CSR), IQGeo is engaged
in a range of CSR programmes throughcorporate activities sponsored by
its regional offices. The Company
encourages employees to participate inlocal activities by giving each employee
an annual charity day to volunteer for
an organisation of their choice. In 2020
IQGeo is also rolling out a charitablegiving initiative that allows employees
to financially support local andinternational charities through direct
payroll contributions.

IQGeo believes that participation in CSR
activities is a fundamental responsibilityof the Company. It encourages the
personal development of employees andgreater community integration, whichhelps contribute to the long-term successof the Company by creating a moreexperienced, passionate and productive
workforce.

Principle 3:
Take into account wider
stakeholder and social
responsibilities andtheir implications forlong‑term successIn addition to members, the Company
believes its main stakeholder groups are
its employees and customers.
The Company devotes significant timeto understanding and acting on theneeds and requirements of these twogroups through dedicated meetings andactivities designed to obtain feedback
directly from the stakeholders.

38

1.

IQGeo Group plc Annual Report 2019

2. Corporate governance3.

Principle 4:
Embed effective
risk management,
considering both
opportunities andthreats, throughout
the organisation
Risk management on pages 28 to 31 of
our 2019 Annual Report details risks tothe business, how these are mitigated
and the change in identified risks overthe last reporting period.
The Board considers risk to thebusiness at every Board meeting andthe risk register is regularly reviewed.
The Company formally reviews anddocuments the principal risks to thebusiness at least annually.
Both the Board and senior managers are
responsible for reviewing and evaluatingrisk and the Executive Directors meet atleast monthly to review ongoing trading
performance and discuss budgets,
forecasts and new risks associated withongoing trading.

• Budgetary control over all operations,
measuring performance against
pre‑determined targets on at least
a monthly basis

Internal control• Regular forecasting and reviews
covering trading performance, assets,
liabilities, headcount and cash flows

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 absolute,assurance against material misstatement
or loss. The Directors acknowledge their
responsibilities for the Group’s system
of internal control and for reviewing its
effectiveness. The principal features ofthe system of internal financial controls
include the following• Authority covering key financial
commitments including, but
not necessarily limited to,capital expenditure, office leasecommitments and recruitment• Identification and managementof key business risks
The Board continually reviews theeffectiveness of other internal controls,
including financial, operational,
and compliance controls and risk
management.

Principle 5:
Maintain the Board
as a well-functioning,balanced team led by
the Chair
The Company is controlled by the Boardof Directors. The Board comprises theNon-Executive Chair, four Non-Executive
Directors and two Executive Directors.
The Non-Executive Chair is responsible
for running the Board and Richard Petti,
the Chief Executive, has responsibility
for running the Group’s business andimplementing Group strategy.
The Non-Executive Directors are
required to be available to attend
Board meetings and to deal with both
regular and ad-hoc matters and they
are expected to commit sufficient time
to fully discharge their responsibilities.
All Non-Executive Directors haveconfirmed and demonstrated that they
have adequate time available to meetthe requirements of the role and thatthey 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 asuitable balance between independence
and knowledge of the business toallow it to discharge its duties andresponsibilities effectively but willcontinue to review the compositionof the Board regularly.
The Board holds full meetings at least ten
times per year, with attendance requiredin person whenever possible.
The principal matters that it considers
are as follows• Reviewing operating and financial
performance• Ensuring that appropriate
management development andsuccession plans are in place• Determining corporate strategy,
including consideration and approvalof the Company’s annual strategy
review• Reviewing the health and safety,
and environmental performanceof the Group• Approving corporate acquisitions,mergers, divestments, joint venturesand major capital expenditure• Receiving, reviewing and approving
recommendations by the designatedcommittee on matters related toaudit, nominations and remuneration
16 Board meetings were held in 2019.
Attendance at the meetings was asfollows:
Total meetings attendedPeter Harverson

0 (2)Paul Taylor

15 (16)

Richard Petti

16 (16)Tim Gingell

16 (16)• Consideration of dividend policy

Robert Sansom

13 (16)• Approving and accepting all newcommitted funding facilities

Ian Kershaw

13 (16)• Approving and accepting majorchanges in the capital structureof the Company

Oliver Scott

11 (13)

Andy MacLeod

5 (8)• Reviewing and approving formal
treasury policies relating to funding,liquidity, transactional foreignexchange and interest rate risk
management

Max Royde

3 (3)Figures in brackets denote the maximum
number of meetings that could havebeen attended by that person.

39

IQGeo Group plc Annual Report 2019

Corporate governance report continued
Principle 6:
Ensure that between
them the Directors
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, personalqualities and capabilities to deliver the
strategy of the Company for the benefitof the shareholders over the medium tolong term.
The roles of the Chair and CEO are splitin accordance with best practice. The
Chair has responsibility of ensuring thatthe Board discharges its responsibilities
and is also responsible for facilitating fulland constructive contributions from eachmember of the Board in determinationof the Group’s strategy and overall
commercial objectives. The CEO leads
the business and the executive teamensuring that strategic and commercial
objectives are met. He is accountable
to the Board for the operational andfinancial 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 evaluation of
its performance annually; taking into
account the Financial Reporting Council’s
Guidance on Board Effectiveness.

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 are aligned to the needs of
the Company at that time. The Chair
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, through its
Remuneration Committee, ensures thatappropriate annual performance targets
are set for Executive Board members.

The Chair routinely reviews the
management and performance of theBoard Committees and will address
any performance concerns directlywith the Chair of, and/or participants of,that Committee.

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 ethical standards at IQGeo are a
key factor in the evaluation of individual
performance and that of the entire
Company.

Principle 8:
Promote a corporate
culture that is basedon ethical values andbehaviours

40

1.

IQGeo Group plc Annual Report 2019

2. Corporate governance3.

Principle 9:
Maintain governancestructures andprocesses that are fit
for purpose and support
good decision making by
the Board
The Board of IQGeo Group plc currently
comprises two Executive Directors,
one Non-Executive Chair and four
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• Chair: The primary responsibilityof the Chair is to lead the Board
effectively and to oversee
the adoption, delivery, andcommunication of the Company’s
corporate governance model. The
Chair has sufficient separation fromthe day-to-day business to be able
to make independent decisions.
The Chair is also responsible
for making sure that the Board
agenda concentrates on the key
issues, both operational andfinancial, with regular reviews of theCompany’s strategy and its overall
implementation• CEO: Charged with the delivery of thebusiness model within the strategy
set by the Board. Works with the
Chair and Non-Executive Directors
in an open and transparent way.
Keeps the Chair and Board up todate with operational performance,
opportunities, risks, and other issues
to ensure that the business remainsaligned with its key objectives• Identifying and recommending to
the Board candidates to fill Board
vacancies

The Board has three sub-committees
as follows• Making recommendations to
the Board about the appointment,
removal or continuation in officeof any Director• Audit Committee: See Audit
Committee report for further details• Remuneration Committee:
See Remuneration Committee
report for further details• Nomination Committee:
The Nomination Committee
will consider the selection andre‑appointment of Board members
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• 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

During the period under review,
the Nomination Committee has met fourtimes on a formal basis. The Nomination
Committee is expected to meet formally
twice a year. A summary of Nomination
Committee composition and attendance
was as follows:
Total meetings attended
Robert Sansom (Chair)

4 (4)Paul Taylor

4 (4)• Succession planning for the Boardand other key management roles

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

The Company keenly engages withcustomers on their use of the products
and their desire for future potential
development. The Company consultswith customers on opportunities for
exploiting, or expanding, features andfunctions of their existing deployment togain the benefits of further productivity
and collaboration.

The Company views shareholders,customers, employees and the wider
community as the key stakeholders.

Each year the Company holds a two-day
customer conference called the IQGeo
Meet-up. During this interactive event,customers share their challenges andexperiences with IQGeo products andengage in workshops and networking
activities that promote collaboration
with IQGeo and between customers.
This provides an opportunity for the
IQGeo team to learn directly from ourcustomers and integrate their input into
our product development roadmap andservice offering.

The Company communicates with its
shareholders through regular emails,
the Annual Report and Accounts,
full‑year and half-year announcements,
the Annual General Meeting (AGM) and
one-to-one meetings with existing andprospective shareholders.

The Company engages with employees
on a regular basis through all-hands
meetings, performance reviewsand employee surveys. There is awell‑established internal communication
process that provides employees with thelatest product development, sales, IT and
HR information, and essential corporate
resources are made available to all
employees on an internal IQGeo portal.
The Board invites senior management toattend specific Board meetings to discussin detail aspects of performance andto gain greater insight on operations.
Members of the Board visit the Denver
and Cambridge offices from time to timeon an informal basis to talk to staff andjoin Company events where appropriate
and possible.

41

IQGeo Group plc Annual Report 2019

Audit Committee report
The Committee continues to be satisfied
that a robust and effective control
environment exists.

The Audit Committee consists of the
Chair and an independent Non‑Executive
Director, who between them have abalance of financial experience andbusiness knowledge. There were nochanges to the Committee membershipduring the year.
During the period under review, theCommittee has met five 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 the financial
statements being approved for release.
When appropriate, non-Committee
members are invited to attend, including
the Chief Financial Officer and membersof the finance team.
As part of its procedures, theCommittee discusses the interim andannual financial statements with theexternal auditor. When appropriate,
non‑Committee members are invited
to attend.
A summary of Committee composition
and attendance is as follows:
Audit Committee
Paul Taylor (Chair)

5 (5)Ian Kershaw

5 (5)In accordance with its terms of reference,
the Audit Committee has responsibility
for the following matters• Financial reporting• Monitor the integrity of thefinancial statements of the Group,
reviewing any significant reporting
issues and judgements they
contain

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• Presentation of the RTLS SmartSpacebusiness unit disposal within the 2018
Annual Report• Advise on the clarity of disclosure
and information contained in the
Annual Report and Accounts• The Group’s revenue recognition
policies in respect of contracts soldunder the subscription model• Ensure compliance with applicableaccounting standards and review
the consistency of methodology
applied• The resolution of significant
accounting judgements or of mattersraised by the external auditor during
the course of their half-year review
and annual statutory audit. These key
matters are stated within the external
auditor’s report included within thisAnnual Report• External audit• Recommending appointment,
re-appointment or removal of
the external auditors• Oversee the relationship withthe external auditor, reviewing
performance and advising
the Board members on their
appointment and remuneration• Whistleblowing• Review of the Group’s
whistleblowing policies
and procedures• Internal control• Review management’s and theinternal auditor’s reports on
the effectiveness of systems forinternal financial control, financial
reporting and risk management;
together with monitoring
management’s responsivenessto their findings• 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 the size of thebusiness, this remains appropriate• Assessment of the independence ofthe 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 innote 9 to the financial statements.
The non‑audit services charged
by Grant Thornton in 2019 relate
to the review of half‑year results,
the provision of tax advisory services,and review of the interim accounts
required for the capital reduction of
the Company. The Audit Committee
was 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 havebeen addressed appropriately within
the Annual Report and that the Group
continues to work and communicate
well together.

42

1.

IQGeo Group plc Annual Report 2019

2. Corporate governance3.

Remuneration Committee report
The Committee focus on ensuring that
Executive remuneration packages reflect
the achievement of the Group’s strategy
and sustained shareholder growth.

The Remuneration Committee has
responsibility for the following matters

A summary of Committee composition
and attendance is as follows:• Agreeing the framework for theGroup’s remuneration policy for
Directors and key management
personnel, including determining
individual remuneration policies for
Executive Directors

Remuneration Committee
Paul Taylor

3 (3)Ian Kershaw

3 (3)Oliver Scott

3 (3)• Approving the design and targets for
short and long‑term incentive plans

Max Royde (Chair)0 (0)• Determining the policy and scope of
pension arrangements

Remuneration practice overview• Ensuring contractual terms andpayments made on termination are
fair to both the individual and theGroup• Agreeing the policy for authorisingexpense claims by the Chair andChief Executive
The Committee aims to set levels of
remuneration for Executive Directorsthat are sufficient to attract, retain
and motivate Directors of the quality
required, without paying more thannecessary, and that are appropriate
for the size and complexity of theGroup. It aims to see that a significant
proportion of each Executive
Director’s remuneration package isperformance‑related.
During the period under review, theCommittee has met three times on aformal basis. The Committee is expected
to meet formally twice a year.
The Remuneration Committee comprisesof Max Royde, Paul Taylor and Ian
Kershaw, who are Non-Executive
Directors of the Company. Max Roydereplaced Oliver Scott as Remuneration
Committee Chair on 31 October 2019.

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 theGroup’s strategy and circumstances, theprevailing economic environment andbest practice guidelines. The policy mustalso enable IQGeo Group plc to attract,
retain and motivate the talent it needs toensure success.
The remuneration of the Non-Executive
Directors is determined by the Executive
Directors, and the Chair, rather than theCommittee.

Remuneration of
Executive Directors
The Executive Directors are entitled toreceive base salary, benefits, employer
pension contributions and to participate
in share option schemes approved by the
Remuneration Committee.
The appointment of the Chief Executive
Officer and the Chief Financial Officer
is terminable 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 andoperational targets including orders,revenue, operating cash flow (excluding
working capital movements) andgoal‑driven objectives.

Pensions
The Group operates a defined
contribution personal pension scheme
in the UK, and similar schemes in othercountries. Under the UK scheme rules
the Group pays a matched contributionof up to 5% of base salary as adjusted
for current pension and tax 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
Chair, may participate in the Group’s
pension scheme.
The appointment of the Non-Executive
Chair is terminable on six months’ noticeby either party.

43

IQGeo Group plc Annual Report 2019

Remuneration Committee report continued
Directors' remuneration
The Directors received the following remuneration during the year:							2019 total
			
Basic
Benefits Performance Termination
excluding		
Total
			
salaryin kindpayments
benefits
pensions
Pensions
2019
Director			£’000
£’000
£’000
£’000
£’000
£’000
£’000

Total
2018
£’000

406

Richard Petti1			225

4

85

—

314

16

330

Tim Gingell2			 149

4

51

—

204

12

216

253

Executive Directors			374

8

136

—

518

28

546

659

Paul Taylor3			79

—

—

—

79

—

79

46

Peter Harverson4			27

—

—

19

46

—

46

78

Robert Sansom5			—

—

—

—

—

—

—

—

Ian Kershaw			20

—

—

—

20

—

20

21

Oliver Scott6			17

—

—

—

17

—

17

20

Andy MacLeod7			13

—

—

—

13

—

13

—

Max Royde 			 3

—

—

—

3

—

3

—

Non-Executive Directors			
159

—

—

19

178

—

178

165

Total			 533

8

136

19

696

28

724

824

6

1. Richard Petti is entitled to a performance related bonus of up to £125,000, and receives a car allowance of £9,000.
2. Tim Gingell is entitled to a performance related bonus of up to £75,000.
3. Paul Taylor was confirmed as Chair of the Company on 19 February 2019. The annual remuneration of the appointment is £75,000 with an additional £5,000 per annum
whilst chair of the Audit Committee.
4. Peter Harverson resigned, and left, as Chair of the Company on 13 February 2019. A final settlement of £18,750 was paid on his departure from the Company
5. Robert Sansom has waived his entitlement to annual remuneration of £25,000 (2018: £25,000 waived).
6. Max Royde was appointed, and Oliver Scott resigned, as Non-Executive Director of the Company on 31 October 2019. The annual remuneration of the appointment
is £20,000.
7. Andy MacLeod was appointed Non-Executive Director of the Company on 21 June 2019. The annual remuneration of the appointment is £25,000.

Share options
The Company issues share options to the Executive Directors and employees to reward performance and to align interests withthose of the shareholders.
The aggregate emoluments disclosed above within Directors’ remuneration does not include any amounts for the value of 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 and key
management. As participants in the new share scheme, IQGeo Group plc granted 3,150,000 options of two pence each in the
Company to the Executive Directors at that time with an exercise price set at the nominal value. The options would vest if theCompany’s share price exceeds 70 pence for 60 consecutive days between the 2nd and 3rd anniversary of issue and the periodof employment continues for over three years – this performance condition was not achieved before the 3rd anniversary.
The Remuneration Committee is in advanced stages of planning to make awards under a new share option scheme, the detailsof which will be confirmed in due course including the cessation of the existing nominal value options. As of the date of this reporthowever, the existing share option scheme remains in place with the Remuneration Committee retaining the right to extend
the scheme into the 4th year and vest the outstanding share options in exceptional circumstances in the event of a corporatetransaction.
					Awards				AwardsAwards					
outstanding				outstanding exercisable					 at
Granted Exercised
Lapsedat 31
at 31
Award 			Exercise
1 January during the during the during theDecember December
date
Vests
Expires
price
2019
year
year
year
2019
2019
Director
Year
Years
Year
£
NumberNumberNumberNumberNumberNumber2010

2011-13

2020

0.14

91,333

—

—

—

—

2016

2019

2026

0.02

850,000—— 850,000

—

—

					
941,333—

91,333 850,000——

Peter Harverson

91,333

Richard Petti

2016

2019

2026

0.02

1,600,000———

1,600,000—

Tim Gingell

2016

2019

2026

0.02

700,000———

700,000—

Total					3,241,333———

2,300,000—

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.

44

1.

IQGeo Group plc Annual Report 2019

2. Corporate governance3.

Directors’ report
The Directors present their Annual Reporton the affairs of the Group together withthe audited financial statements for theyear to 31 December 2019. The corporate
governance report set out on pages 38 to
41 forms part of this report.

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.
Based on the country generating thegreatest revenue, the main country ofoperation is the United States of America.

Principal activity
The Group delivers end-to-end
geospatial software which improves
productivity and collaboration acrossenterprise planning, design, construction
and maintenance processes for telecoms
and utility network operators. Our
mobile-first enterprise solutions create
and maintain an accurate view ofcomplex network assets that is easily
accessible by anyone, wherever andwhenever needed.
Specialised applications combinedwith our open IQGeo Platform help
network operators create a single
source of network truth to meet theirdigital transformation ambitions andoperational KPIs. Our award-winningsolutions save time and money, andimprove safety and productivity, while
enhancing customer satisfaction.

Business review and key
performance indicators
The Group’s results are set out in the
consolidated income statement on
page 54 and are explained in the
Chief Financial Officer’s statement on
pages 24 to 27. A detailed review of thebusiness, its results and future direction
is included in the Non-Executive Chair’s
statement on pages 4 and 5.

Capital structure
The Company has one class of ordinary
share of two 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 theCompany, including shares issued during
the year, can be found in note 20 of theconsolidated financial statements.
There are no specific restrictions on thesize of a holding nor on the transfer ofshares, 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 theCompany’s shares that may result in
restrictions on the transfer of securities
or on voting rights.

With regard to the appointment andreplacement of Directors, the Company
is governed by its Articles of Association,
the Companies Act and related
legislation. The Articles of Association
themselves may be amended by special
resolution of the shareholders.
At the Company Annual General Meetingon 5 June 2019, the Directors obtained
shareholder approval to complete a
capital reduction with the Company’s
share premium account being reducedby £28,948,000. On 16 July 2019 a
Court Order was granted to allow
a capital reduction.
On 2 August 2019, the Company
announced a proposed tender offer
to repurchase up to a maximum of
28,260,869 of the Company’s ordinary
shares at a price of 46 pence per
ordinary share. Following approval of
the tender offer by a General Meetingof shareholders on 22 August 2019, thetender offer completed on 30 August
2019, resulting in the share capital
reducing by 23,803,690 and £10,949,697
of surplus funds being returned toshareholders in September 2019.
As at 31 December 2019, the Company
had 49,503,429 ordinary shares in issue.

Details of employee share schemes are
set out in note 21.
No person has any special rights ofcontrol over the Company’s share capitaland all issued shares are fully paid.

Substantial shareholdings
As at 6 March 2020, the Company had been notified of the following significant interests in its ordinary share capital:																								Totalholding
Number% of issued
sharecapital

Kestrel Partners								 12,283,268

24.8%

Columbia Threadneedle Investments							 8,632,954

17.4%

Canaccord Genuity Group Inc								 6,241,919

12.6%

Robert Sansom								3,831,714

7.7%

NFU Mutual Insurance Society Ltd							 2,658,457

5.4%

Janus Henderson Investors									1,586,250

3.2%

Merian Global Investors									1,515,637

3.1%

45

IQGeo Group plc Annual Report 2019

Directors’ report continued
Directors
The Directors serving at 31 December 2019 were as follows:
Paul Taylor
Riccardo (Richard) Petti
Timothy (Tim) Gingell
Robert Sansom
Max Royde
Ian Kershaw
Andrew MacLeod

Board changes
Peter Harverson resigned as Non‑Executive Chair and member of the Board on 13 February 2019, and was succeeded by
Paul Taylor as Non‑Executive Chair.
Andy MacLeod was appointed as Non‑Executive Director of the Company on 21 June 2019.
Max Royde was appointed, and Oliver Scott resigned, as Non‑Executive Director of the Company on 31 October 2019.
Tim Gingell has advised that he wishes to step down from the Board at the upcoming AGM. Tim will however stay with the business,
including remaining as Company Secretary, for a period beyond the AGM to help with an orderly and structured handover.

Directors’ interests – shares
Directors’ interests in the ordinary shares of IQGeo Group plc at 31 December 2019 were as follows:								2019									Number2018
NumberPaul Taylor									191,459

191,459

Richard Petti									133,661

78,125Tim Gingell									86,87586,875Robert Sansom									3,831,714 6,235,899
Ian Kershaw									
2,000

2,000

Total									4,245,709 6,594,358
Max Royde has no direct interest in theordinary shares of IQGeo Group plc
but is a partner with the significant
shareholder Kestrel Partners. Kestrel
Partners LLP fully participated in theAugust 2019 tender offer and sold7,323,246 shares at a price of 46 pence
per ordinary share.
Robert Sansom, a Director of IQGeo, fully
participated in the August 2019 tender
offer and sold 2,404,185 shares at a priceof 46 pence per ordinary share.
There has been no change in the
Directors’ interests set out above
between 31 December 2019 and
6 March 2020 other than Ian Kershaw
acquiring 17,000 shares at a price of
61.9 pence on 3 February 2020.

Directors’ interests
Details of Directors’ remunerationand share options are provided in the
Remuneration Committee report on
pages 43 and 44. There are no loans toor from the Directors.

Directors’ indemnity arrangements
The Group has made qualifying third
party indemnity provisions for the benefitof its Directors which were made during
the year and remain in force at the dateof this report.

46

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

Financial instruments
Principal financial risks and mitigating
activities have been set out within thestrategic report. Additionally, note 24 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 software. In
the opinion of the Directors, continuity of
the investment in software development
is essential for the long-term growthof the business. The Board regularly
reviews the IQGeo 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(2018: £nil).

AuditorA resolution to re-appoint Grant
Thornton UK LLP as the Group’s auditor
will be proposed at the forthcoming
Annual General Meeting. In accordancewith normal practice, the Directors will
be authorised to determine the auditor’s
remuneration.
Approved by the Board of Directors andsigned on behalf of the Board.

Tim Gingell
Chief Financial Officer
and Company Secretary
6 March 2020
IQGeo Group plc
Registered number: 05589712

1.

IQGeo Group plc Annual Report 2019

2. Corporate governance3.

Directors’ responsibilities statement
The Directors are responsible forpreparing the Annual Report and thefinancial statements in accordance withapplicable law and regulations.
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 haveelected to prepare the parent company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards and applicablelaw, including FRS 102 ‘The Financial
Reporting Standard’ 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 thesefinancial statements, the Directors are
required to• Select suitable accounting policies
and then apply them consistently• Make judgements and estimates thatare reasonable and prudent• State whether applicable IFRSs as
adopted by the European Union havebeen followed, subject to any material
departures disclosed and explained in
the consolidated financial statements

The Directors are responsible for keeping
adequate accounting records thatare sufficient to show and explain the
Company’s transactions and disclosewith reasonable accuracy at any time thefinancial position of the Company andenable them to ensure that the financial
statements comply with the Companies
Act 2006. They are also responsible forsafeguarding the assets of the Company
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities.
The Directors confirm that• So far as each Director is aware,
there is no relevant audit informationof which the Company's auditor isunaware• The Directors have taken all the steps
they ought to have taken as Directors
in order to make themselves aware of
any relevant audit information and toestablish 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 in otherjurisdictions.

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

47

IQGeo Group plc Annual Report 2019

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 theyear ended 31 December 2019
which comprise the Consolidated
income statement, the Consolidated
statement of comprehensive income,the Consolidated statement of changes
in equity, the Consolidated statementof financial position, the Consolidated
statement of cash flows, the Company
balance sheet, the Company statementof 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 andInternational Financial ReportingStandards (IFRSs) as adopted by theEuropean Union. The financial reporting
framework that has been applied in
the preparation of the parent company
financial statements is applicablelaw and United Kingdom AccountingStandards, including Financial ReportingStandard 102 ‘The Financial ReportingStandard applicable in the UK and
Republic of Ireland’ (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:• the financial statements give atrue and fair view of the state of thegroup’s and of the parent company’s
affairs as at 31 December 2019and of the group’s loss for theyear then ended;• the group financial statements
have been properly prepared inaccordance 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 therequirements of the Companies
Act 2006.

Basis for opinion
We conducted our audit in accordancewith International Standards on
Auditing (UK) (ISAs (UK)) and applicablelaw. Our responsibilities under thosestandards are further described in the‘Auditor’s responsibilities for the auditof the financial statements’ section of ourreport. We are independent of the groupand the parent company in accordancewith the ethical requirements 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 otherethical responsibilities in accordancewith these requirements. We believe thatthe audit evidence we have obtained issufficient and appropriate to provide abasis for our opinion.

The impact of uncertainties arisingfrom the UK exiting the European
Union on our audit
Our audit of the financial statements
requires us to obtain an understandingof all relevant uncertainties, including
those arising as a consequence ofthe effects of Brexit. All audits assessand challenge the reasonablenessof estimates made by the directors
and the related disclosures and theappropriateness of the going concern
basis of preparation of the financial
statements. All of these depend on
assessments of the future economic
environment and the group’s future
prospects and performance.
Brexit is one of the most significant
economic events for the UK, and at thedate of this report its effects are subject
to unprecedented levels of uncertainty,
with the full range of possible outcomes
and their impacts unknown. We applieda standardised firm-wide approach inresponse to these uncertainties whenassessing the group’s future prospects
and performance. However, no audit
should be expected to predict theunknowable factors or all possible future
implications for a group associated witha course of action such as Brexit.

Conclusions relating togoing concern
We have nothing to report in respect of
the following matters in relation to which
the ISAs (UK) require us to report toyou where:• the directors’ use of the going concern
basis of accounting in the preparationof the financial statements is not
appropriate; or48• the directors have not disclosed in thefinancial statements any identified
material uncertainties that may castsignificant doubt about the company’s
ability to continue to adopt the going
concern basis of accounting for aperiod of at least twelve months
from the date when the financial
statements are authorised for issue.
In our evaluation of the directors’
conclusions, we considered the risks
associated with the group’s businessmodel, including effects arising from
Brexit, and analysed how those risks
might affect the group’s financial
resources or ability to continue
operations over the period of at least
twelve months from the date when thefinancial statements are authorised for
issue. In accordance with the above, wehave nothing to report in these respects.
However, as we cannot predict all future
events or conditions and as subsequent
events may result in outcomes that areinconsistent with judgements that werereasonable at the time they were made,the absence of reference to a material
uncertainty in this auditor’s report is
not a guarantee that the company willcontinue in operation.

Overview of our audit approach• Overall materiality: £231,000,
which represents 3.7% of theGroup’s earnings before taxation• We performed full scope procedures
at IQGeo Group plc, IQGeo UK
Limited and IQGeo America Inc.,targeted procedures on IQGeo
Solutions Canada Inc, and analyticalprocedures were performed for allother components• Key audit matters were identified as:• improper recognition ofrevenue due to fraud;• capitalisation of intangible
development costs may not
be appropriate; and• carrying value of capitalised
development costs may not
be appropriate• carrying value of investments in
subsidiaries and amounts duefrom subsidiary undertakings.

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

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 judgement.
High
Capitalreorganisation

Potential financial
statement impact
Low

Investments

Carrying value ofinvestment andgroup balances

Revenuerecognition
Deferred andAccrued income

Trade
receivables
and payables

Low

High risk
Medium risk
Low risk

Capitalised
development costs

Extent of management judgement

Management
override ofcontrols

High

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 tofraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy, the allocationof resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of ouraudit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion onthese matters.

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

Risk 1 – Improper recognition of revenue
due to fraud

Our audit work included, but was not restricted to:Under International Standard on Auditing (UK)240 ‘The Auditor’s Responsibilities Relating to
Fraud in an Audit of Financial Statements’, there
is a rebuttable presumed risk that revenue may
be misstated due to the improper recognition ofrevenue due to fraud.
The group has recognised revenues of £7.8m(2018: £10m) for continuing operations. The natureof the Group’s revenue includes sales of software
licences, maintenance and support, labour andinstallation services.
IQGeo Group plc has been transitioning to arecurring software subscription revenue model
to increase its recurring revenue streams.
Subscription contracts are structured as a term
software licence sold together with maintenanceand support.
Revenue recognition is dependent upon
identifying the relevant distinct performanceobligations, ensuring the revenue allocated to theperformance obligation is based on standalone
pricing and appropriate allocation of discount toensure the correct revenue is recognised.
The Group’s revenue is material to the financial
statements and comprises multiple distinct
performance obligations which adds complexity
to how revenue is recognised. We therefore
identified revenue recognition as a significant risk,
which was one of the most significant assessedrisks of material misstatement.

• assessing revenue recognition policies for consistency andcompliance with IFRS 15 ‘Revenue from Contracts with Customers’;• understanding the basis for pricing and considering performanceobligations to assess whether revenue is being recognised inaccordance with IFRS 15;• for software revenue, agreeing a sample of revenue to either
customer confirmation of receipt of access to new licences, orpurchase orders for renewed licences;• for maintenance and support revenue, – obtaining a sample ofpurchase orders, recalculating revenue recognised and checking
the appropriateness of any deferred income at the year-end;• for labour and installation services revenue, agreeing a sample ofrevenue to signed contracts or purchase orders and tracing a sampleof time booked to revenue to timesheets, subcontractor invoices orother supporting documentation;• for a sample of deferred and accrued income balances, recalculating
revenue recognised and checking to invoices and other supporting
documentation;• recalculating the allocation of discounts for a sample of revenue;• performing analytical procedures, disaggregated by revenue
stream, location and month, by identifying key movements andsignificant transactions which have occurred in the year andthen obtaining explanations and corroborating evidence for key
movements and significant transactions identified.
The Group’s accounting policy on revenue recognition is disclosed innote 3 to the financial statements and related disclosures are included
in notes 4 and 5.

Key observations
Our audit work did not identify any material misstatements in theoccurrence of revenue recognised during the year or any instancesof revenue not being recognised in accordance with statedaccounting policies.

49

IQGeo Group plc Annual Report 2019

Independent auditor’s report continued
to the members of IQGeo Group plc
Key audit matters continued
Key Audit Matter – Group
Risk 2 – Capitalisation of intangible
development costs may not be appropriate

How the matter was addressed in the audit – Group
Our audit work included, but was not restricted to:Under IAS 38 ‘Intangible Assets’, development
costs should only be capitalised if the recognition
criteria are met, including determining whether
the project provides a future economic benefit to
the group.

• assessing product development activities alongside the qualifying
nature of the projects, including obtaining an understanding frommanagement of the details of projects capitalised and challenging
whether they relate to additional functionality, enhancements or new
product development, to ensure that capitalisation is in accordancewith the recognition criteria under IAS 38;

During the year, the group capitalised £1.1m (2018:£1.7m) of development costs in relation to various
projects.

• we have assessed managements’ intention to complete new projects
and the availability of resources and corroborated this to future
revenue and cost forecasts;

In capitalising these costs, management makes
judgments and assumptions when assessing eachproject according to IAS 38 ‘Intangible Assets’criteria. Judgement is required to determine
whether the criteria is met, in particular, inrespect of the future economic benefit that will
be generated and the intention of the group
to complete development. There have beenfour new projects capitalised in the year. The
level of judgement involved leads to a riskthat development costs may be capitalised
inappropriately.

• recalculating the mathematical accuracy of capitalised amounts;• agreeing amounts capitalised to supporting evidence including
timesheets.
The Group’s accounting policy on intangible assets is shown in note 3 tothe financial statements and related disclosures are included in note 12.

Key observations
Our testing did not identify any material misstatementsin the capitalisation of intangible development costs.

We therefore identified the capitalisation ofdevelopment costs as a significant risk, which
was one of the most significant assessed risks ofmaterial misstatement.

Risk 3 – Carrying value of capitalised
development costs may not be appropriate
There is a risk, given fast-moving technology, thatdeveloped products could become obsolete andwill not be supported by future cash flows andhence development assets may become impaired.
The net book value of capitalised development
costs at the year-end amounted to £1.5m (2018:£1.2m), including amortisation charged on
capitalised development costs of £0.8m (2018:£1.8m). Capitalised development costs areamortised by the Group to ensure the capitalised
cost reflects the anticipated benefit of thedevelopment project to the Group over time. In
accordance with IAS 36 ‘Impairment of Assets’
the Group is required to assess at the end ofeach reporting period whether there are any
indications that assets may be impaired.
In order to assess whether there are any such
indicators of impairment management haveidentified the contracted and renewal revenues
associated with each identifiable capitalised
project over a three-year forecast period.
There is an inherent uncertainty involved inforecasting and discounting future cash flows.
We therefore identified the carrying value ofcapitalised development costs as a significant risk,
which was one of the most significant assessedrisks of material misstatement.

50

Our audit work included, but was not restricted to:• assessing the amortisation policy applied to capitalised development
costs for consistency with the approach applied in the prior year andchallenging the determination of the useful economic life;• comparing projects against which amounts are capitalised toforecast revenue calculations produced by management, based oncontractual and expected renewal income;• assessing forecast income by agreeing amounts to subscription
agreements or maintenance and support renewal terms;• challenging managements assumptions regarding future revenue
generation;• evaluating and challenging information included in the impairment
models to ensure it is consistent with our knowledge of the businessobtained through reviewing trading plans and discussions withManagement.
The Group’s accounting policy on intangible assets is disclosed in note 3
to the financial statements and related disclosures are included in notes
4 and 12.

Key observations
Our testing did not identify any material misstatements in the carrying
value of the capitalised development costs.

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

Key audit matter – parent

How the matter was addressed in the audit – parent

Risk 1 – Carrying value of investments
in subsidiaries and amounts due fromsubsidiary undertakings

Our audit work included, but was not restricted to:

IQGeo Group plc has investments of £0.4m in
subsidiaries and £19.0m due from subsidiary
undertakings. The net assets of the parent entity
exceed those of the group. There is a risk thatamounts due from subsidiary undertakings may
not be recoverable. We therefore identified thecarrying value of investments in subsidiaries
and amounts due from subsidiary undertakings
as a significant risk, which was one of themost significant assessed risks of material
misstatement.

• obtaining an understanding of how management consider thebalances will be recovered by examining future cash flow projections
and challenging their assumptions;• evaluating and challenging information included in the impairment
models to ensure it is consistent with our knowledge of the businessobtained through reviewing trading plans and discussions withmanagement;• comparing the group’s net assets and market capitalisation to theparent company’s net assets and then challenging management’s
assessment on the quantum of impairment required against amounts
due from subsidiary undertakings.
The Group’s accounting policy on investments and group balances isdisclosed in note 1 to the company financial statements and related
disclosures are included in notes 3 and 4.

Key observations
Our testing did not identify any material misstatements in the carrying
value of investments in subsidiaries and amounts due from subsidiary
undertakings.

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

Materiality measure

Group

ParentFinancial statements
as a whole£231,000 which is 3.7% of the group’s
earnings before tax. This benchmark
is considered the most appropriate
because the Group is a commercially
focused organisation but generating
an operating loss.

£173,000 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 in the prior year was determinedby using revenues as a benchmark. Earnings
before tax has been used as a benchmark
for the current year because this is now
considered to be the principal measurement
used by stakeholders to assess the group’s
financial performance. This has resulted inmateriality for the current year being lower
than the level we determined for the year
ended 31 December 2018.

Materiality for the current year is lower
than the level that we determined forthe year ended 31 December 2018 using
the same basis. This is due to the capitalreorganisation and return of funds toshareholders.

Performance materiality
used to drive the extent of
our testing

75% of financial statement materiality.

75% of financial statement materiality.

Specific materiality

We determined a lower level of specificmateriality for directors’ remuneration andrelated party transactions of £1,000 due tothe inherent sensitivity of these transactions
and related disclosures.

We determined a lower level of specificmateriality for directors’ remuneration andrelated party transactions of £1,000 due tothe inherent sensitivity of these transactions
and related disclosures.

Communication of
misstatements to theaudit committee£12,000 and misstatements below thatthreshold that, in our view, warrant reportingon qualitative grounds.

£10,000 and misstatements below thatthreshold that, in our view, warrant reportingon qualitative grounds.

51

IQGeo Group plc Annual Report 2019

Independent auditor’s report continued
to the members of IQGeo Group plc
Our application of materiality continued
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.

Overall materiality – Group

Overall materiality – Parent

Key
Tolerance for potential	
uncorrected mis‑statements

25

75

An overview of the scopeof our audit
Our audit approach was a risk-based
approach founded on a thoroughunderstanding of the group’s business,
its environment and risk profile andin particular included the following
considerations:• IQGeo Group plc has centralised
processes and controls over the
key areas of audit focus. Groupmanagement are responsible forall judgemental processes andsignificant risk areas. In assessing
the risk of material misstatement to
the group financial statements we
assessed the significance of eachcomponent and determined theplanned audit response based on ameasure of materiality. Significancewas determined with regard to thegroup’s total assets, revenues andearnings before taxation;• full scope audit procedures were
performed on IQGeo Group plc,
IQGeo UK Limited and IQGeo
America Inc.; targeted procedures
were performed on IQGeo Solutions
Canada Inc, and analyticalprocedures were performed forall other components including
IQGeo Germany GbmH and IQGeo
Japan K.K.;• the total percentage coverage offull‑scope and targeted procedures
over the Group’s revenue was 100%;• the total percentage coverage of fullscope and targeted procedures overthe Group’s total assets was 92%; and• our audit approach in the current
year is consistent with the audit
approach adopted for the year ended
31 December 2018 being substantive
in nature.

52

25

Performance materiality

75

Other information
The directors are responsible for theother 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 otherinformation 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 thefinancial statements, our responsibility
is to read the other information and,in doing so, consider whether the otherinformation is materially inconsistent
with the financial statements or our
knowledge obtained in the audit orotherwise appears to be materially
misstated. If we identify such materialinconsistencies or apparent material
misstatements, we are required todetermine whether there is a material
misstatement in the financial statements
or a material misstatement of the otherinformation. If, based on the work wehave performed, we conclude that there
is a material misstatement of this otherinformation, we are required to reportthat fact.
We have nothing to report in this regard.

Our opinion on other mattersprescribed 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’ reportfor the financial year for which thefinancial statements are preparedis consistent with the financial
statements; and• the strategic report and the directors’
report have been prepared inaccordance with applicable legal
requirements.

Matters on which we are required
to report under the Companies
Act 2006
In the light of the knowledge andunderstanding of the Group and theparent company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the strategic reportor the directors’ report.

1.

IQGeo Group plc Annual Report 2019

Matters on which we are required
to report by exception

Auditor’s responsibilities for theaudit of the financial statements

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:

Our objectives are to obtain reasonableassurance about whether the financial
statements as a whole are free frommaterial misstatement, whether due tofraud or error, and to issue an auditor’sreport that includes our opinion.
Reasonable assurance is a high levelof assurance, but is not a guaranteethat an audit conducted in accordancewith 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 decisionsof users taken on the basis of thesefinancial statements.

• adequate accounting records
have not been kept by the parent
company, or returns adequate forour audit have not been received
from branches not visited by us; or• the parent company financial
statements are not in agreement withthe accounting records and returns; or• certain disclosures of directors’
remuneration specified by law
are not made; or• we have not received all theinformation and explanations
we require for our audit.

Responsibilities of directors forthe financial statements
As explained more fully in the directors’
responsibilities statement page 47,
the directors are responsible for the
preparation of the financial statements
and for being satisfied that they give atrue and fair view, and for such internal
control as the directors determine isnecessary to enable the preparation offinancial statements that are free frommaterial misstatement, whether due tofraud or error.

A further description of our
responsibilities for the audit of thefinancial statements is located on the
Financial Reporting Council’s website at:www.frc.org.uk/auditorsresponsibilities.
This description forms part of ourauditor’s report.

2.

3. Financial statements

Use of our report
This report is made solely to thecompany’s members, as a body, in
accordance with Chapter 3 of Part 16of the Companies Act 2006. Our audit
work has been undertaken so that wemight state to the company’s members
those matters we are required to state
to them in an auditor’s report and forno other purpose. To the fullest extent
permitted by law, we do not accept orassume responsibility to anyone otherthan the company and the company’s
members as a body, for our audit work,for this report, or for the opinions wehave formed.

Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
6 March 2020

In preparing the financial statements,
the directors are responsible forassessing 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 ofaccounting unless the directors either
intend to liquidate the Group or theparent company or to cease operations,or have no realistic alternative but todo so.

53

IQGeo Group plc Annual Report 2019

Consolidated income statement
for the year ended 31 December 2019									2019								
Notes
£’000

Revenue								
5

2018
£’000

7,806

9,979

Cost of revenues									(4,563)(5,599)Gross profit									
3,243

4,380

Operating expenses									(9,539)(5,971)

Operating loss									(6,296)(1,591)Analysed as:			Gross profit									
3,243

4,380

Other operating expenses									(8,091)(5,446)

Adjusted EBITDA									(4,848)(1,066)

Depreciation								13, 14

(285)

(273)

Amortisation and impairment of other intangible assets					

(815)

(774)

Share option expense									
(102)

(248)

12

Unrealised foreign exchange gains/(losses) on intercompany trading balances				

(110)

151

Non-recurring items								
9

(136)

619

Operating loss									(6,296)(1,591)

Finance income								
8

72

1

Finance costs								
8

(10)

(14)

Loss before tax									(6,234)(1,604)

64(39)

Loss from continuing operations								(6,170)(1,643)

Profit from discontinued operations							6

40321,485(Loss)/profit for the year									(5,767)

19,842

Income tax 								
10(Loss)/profit attributable to:			Equity shareholders of the Company								(5,767)

19,842

Non-controlling interest									—

—(Loss)/profit for the year									(5,767)

19,842

Loss per share – continuing operations			
Basic								
11(9.4p)(2.2p)

Diluted								
11(9.4p)(2.2p)

54

IQGeo Group plc Annual Report 2019

1.

2.

3. Financial statements

Consolidated statement of comprehensive income
for the year ended 31 December 2019									2019									
£’000

2018
£’000

Loss from continued operations								(6,170)(1,643)

Profit from discontinued operations								
40321,485(Loss)/profit for the year									(5,767)

19,842Other comprehensive income:		
Items that may be reclassified subsequently to profit and loss		
Exchange difference on retranslation of net assets and resultsof overseas subsidiaries from continuing operations							

5Reclassification to income statement for discontinued operations					

—

216Total comprehensive (loss)/profit for the year							(5,762)20,008(50)

Attributable to:		
Equity shareholders of the Company								(5,762)20,008Non-controlling interest									—

—Total comprehensive (loss)/profit for the year							(5,762)20,00855

IQGeo Group plc Annual Report 2019

Consolidated statement of changes in equity
for the year ended 31 December 2019

Attributable to equity shareholders of the parent company
				Share‑based		
Capital			Non		Share
Sharepayment Translation redemption
Retained		
controlling		 capital
premium
reserve
reserve
reserveearnings
Sub-totalinterest
		£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000

Balance at 1 January 2018		

Total
£’000

1,462

46,3751,139(2,037)—(35,260)

11,679434

12,113

Profit for the year		—

—

—

—

—

19,842

19,842—

19,842

Recycled translation reserve		—

—

—

216

—

—

216

—

216

Exchange difference on
retranslation of net assets andresults of overseas subsidiaries

—

—

—

(50)

—

—

(50)

—

(50)

Total comprehensive profit
for the year		—

—

—

166

—

19,84220,008—20,008Lapse of share options		—

—

(725)

—

—

725

—

—

—

Reserve credit for equity-settled
share-based payment		—

—

303

—

—

—

303

—

303
(152)

Acquisition of
non-controlling interest		—

—

—

—

—

282

282

(434)

Transactions with owners		—

—

(422)

—

—

1,007

585

(434)

151

1,462

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

Loss for the year		—

—

—

—

—

(5,767)(5,767)—(5,767)

Exchange difference on
retranslation of net assets andresults of overseas subsidiaries

—

—

5

—

—

5

—

5

Balance at 31 December 2018		

—Total comprehensive loss
for the year		—

—

—

5

—

(5,767)(5,762)—(5,762)

Capital reduction		—(28,948)———

28,948

—

—

—

—

—

476

(10,950)(10,950)—(10,950)

Repurchase andcancellation of shares		

(476)

—

Exercise of share options		

4

27

(6)

—

—

6

31

—

31

Lapse of share options		—

—

(60)

—

—

60

—

—

—

Reserve debit for equity-settled
share-based payment		—

—

(19)

—

—

—

(19)

—

(19)

Transactions with owners		

(472)(28,921)

(85)

—

476

18,064(10,938)—(10,938)

Balance at 31 December 2019		

990

17,454632(1,866)476(2,114)

15,572—

15,57256

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

Consolidated statement of financial position
for the year ended 31 December 2019									2019								
Notes
£’000

2018
£’000

Assets			Intangible assets								
12

1,596

Property, plant and equipment								
13

86

84

Right‑of‑use assets								
14

73

304

Investments								
15

2,000

2,000

Total non-current assets									
3,755

3,623

1,235

Current assets			
Trade and other receivables								
16

2,353

3,586

Corporation tax receivable									16

—13,05330,915

Total current assets									15,42234,501

Total assets 									19,177

38,124

Cash and cash equivalents								
17Liabilities 			Current liabilities			
(3,241)(5,080)Current tax liabilities									
—

(232)

(79)

(232)

Total current liabilities									(3,320)(5,544)

Trade and other payables								18Lease obligation								19Non-current liabilities			
10

(285)

Lease obligation								
19Deferred income tax liabilities							

(231)

—

(77)

Total non-current liabilities									
(285)

(308)

Total liabilities									(3,605)(5,852)

Net assets									15,57232,272Equity attributable to owners of the parent company

		

Ordinary share capital								
20

990

1,462

Share premium 								
2017,454

46,375

Share‑based payment reserve								
21

632

717

Capital redemption reserve									476

—Translation reserve									(1,866)(1,871)Retained earnings									(2,114)(14,411)Equity attributable to shareholders of the Company							32,272

15,572

The financial statements were approved and authorised for issue by the Board of Directors on 6 March 2020 and signed on its
behalf by:

Richard Petti
Chief Executive Officer

Tim Gingell
Chief Financial Officer

IQGeo Group plc
Registered Number: 05589712

57

IQGeo Group plc Annual Report 2019

Consolidated statement of cash flows
for the year ended 31 December 2019									2019								
Notes
£’000

2018
£’000

Operating activities			
Loss before tax from continuing operations							(6,234)Gain/(loss) before tax from discontinued operations							

161

(824)

Loss before tax									(6,073)(2,428)(1,604)

Adjustments for:			
Depreciation								13, 14285

1,081

Amortisation and impairment								
12

815

2,025

Loss on the disposal of property, plant and equipment						

—

14Revaluation of intercompany balances								
110

(151)

Share-based payment charge									
(19)

303

Gain on sale of Japan business									
—

(619)

Finance income								
8

(72)

(8)

Finance costs								
8

10

156

Operating cash flows before working capital movement						(4,944)373

Change in inventories									—

198Change in receivables									
388

2,012

Change in payables									(10)(2,071)(4,566)512

Net income taxes received/(paid)								
(124)

407

Net cash flows from operating activities								(4,690)919

Cash generated from operations before tax							Cash flows from investing activities									
(56)

(316)

Expenditure on intangible assets								(1,176)(1,844)

Cash received on sale of the RTLS SmartSpace business unit						1,06028,882

Cash in RTLS SmartSpace business unit at disposal							

—(2,313)

Disposal costs in relation to the RTLS SmartSpace business unit						(1,839)(704)

Sale of Japan Geospatial third party services business						

—

569Purchases of property, plant and equipment							Interest received									
72

8Net cash flows from investing activities								(1,939)24,282

Cash flows from financing activities			
Repayment of borrowings									
—(2,500)Interest paid									
(2)

(73)

Payment of lease liability									
(238)

(743)

Purchase of non-controlling interest								
—

(152)

Repurchase of ordinary share capital								(10,950)—

31—

Net cash flows from financing activities 							(11,159)(3,468)Net increase in cash and cash equivalents							(17,788)

21,733

Cash and cash equivalents at start of period							30,915

9,114

Exchange differences on cash and cash equivalents							

(74)

68

Cash and cash equivalents at end of period						
1713,05330,915

Proceeds from the issue of ordinary share capital							

58

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

Notes to the consolidated financial statements
for the year ended 31 December 2019
1 General information

2 New accounting standards

IQGeo Group plc (“the Company”)
and its subsidiaries (together, “theGroup”) delivers geospatial 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’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.

For the purposes of the preparation of
the consolidated financial statements,
the Group has applied all standards
and interpretations as adopted in theEuropean Union that are effective
and applicable for accounting periods
beginning on or before 1 January 2019.

The Company is a public limited
company which is listed on the
Alternative Investment Market (AIM) of
the London Stock Exchange (IQG) and isincorporated and domiciled in the United
Kingdom. The value of IQGeo Group plc
shares, as quoted on the London Stock
Exchange at 31 December 2019, was57.5 pence per share (31 December 2018:67.5 pence).
The Company was incorporated as
Ubisense Trading Limited on 11 October2005 and changed its name to UbisenseGroup plc on 31 May 2011 ahead of its
initial public offering and listing on AIM
on 22 June 2011. Following the sale ofits RTLS SmartSpace business unit theCompany changed its name to IQGeo
Group plc on 2 January 2019 with its
subsidiaries also changing name to
IQGeo. The address of its registeredoffice is CB1 Business Centre, 20 Station
Road, Cambridge CB1 2JD.
The Group has its operations in the UK,
USA, Canada, Germany and Japan, andsells its products and services in North
America, Japan, the UK and Europe. The
Group legally consists of six subsidiarycompanies headed by IQGeo Group plc.
A full list of subsidiaries is given in note 22of the financial statements.
The consolidated financial statements
have been approved for issue by the
Board of Directors on 6 March 2020.

The accounting policies used are thesame as set out in detail in the Reportand Accounts 2018 and have been
applied consistently to all periods
presented in the financial statements.
IFRS 16 ‘Leases’ became mandatory for
adoption on 1 January 2019 and was early
adopted from 1 January 2018. There wereno other new standards or amendments
or interpretations to existing standards
that became effective during the yearthat were material to the Group.
No new standards, amendments orinterpretations to existing standards
having an impact on the financial
statements that have been publishedand that are mandatory for the Group’s
accounting periods beginning on or
before 1 January 2020, or later periods,
have been adopted early.

Standards and interpretations
not yet applied by the GroupThe following new standards andinterpretations, which are yet to become
mandatory and have not been applied in
the Group’s financial statements, are notexpected to have a material impact on
the Group’s financial statements• IFRS 17 'Insurance contracts'• Definition of a business(Amendment to IFRS 3)• Definition of material(Amendment to IAS 1 and IAS 8)

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

Basis of preparation
The consolidated financial statements of
IQGeo Group plc have been prepared inaccordance with International Financial
Reporting Standards (IFRS) as adopted
by the European Union (IFRSs as adopted
by the EU) and the Companies Act 2006
applicable to companies reporting
under IFRS. The consolidated financial
statements have been prepared
under the historical cost convention.
The consolidated financial statements
are presented in GBP and all values arerounded to the nearest thousand pounds(£’000) except when otherwise indicated.
The preparation of these financial
statements in conformity with IFRS
requires the Directors to make certain
critical accounting estimates andjudgements that affect the amounts
reported in the financial statements andaccompanying notes. The areas involving
a higher degree of judgement orcomplexity, or areas where assumptions
and estimates are significant to theconsolidated financial statements,
are disclosed in note 4.

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 andDirectors’ report on pages 1 to 46.
In determining the basis for preparing
the consolidated financial statements,
the Directors are required to consider
whether the Company can continue inoperational existence for the foreseeable
future, being a period of not less thantwelve months from the date of theapproval of the consolidated financial
statements.

59

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 2019
3 Summary of significant accounting
policies continued
Going concern basis continued
Management prepares detailed cash
flow forecasts which are reviewed by the
Board on a regular basis. The forecasts
include assumptions regarding theopportunity funnel from both existingand new clients, growth plans, risks
and mitigating actions. In particular,
operating cash flow and profitability
are highly sensitive to revenue mix andthe positive contribution of continuing
growth in software sales whether on aperpetual licence or subscription basis.
In reaching their going concern
conclusion, the Directors haveconsidered that the Group had cashof £13.1 million, with nil bank debt as
at 31 December 2019 and sufficientworking capital to continue operations.

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

Foreign currencies
a. Functional and presentation
currency
The functional currency of each Group
entity is the currency of the primaryeconomic environment in which each
entity operates. The consolidated financial
statements are presented in GBP.

b. Transactions and balances

The Group’s forecasts and projections,taking account of reasonably possible
changes in trading performance, support
the conclusion that there is a reasonable
expectation that the Company and theGroup have adequate resources tocontinue in operational existence for theforeseeable future, a period of not lessthan twelve months from the date of thisreport. The Group, therefore, continues
to adopt the going concern basis inpreparing the consolidated financial
statements.

Foreign currency transactions
are translated into the functional
currency of each Group entity using
the exchange rates prevailing at thedates 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 theexchange rates as at the dates of theinitial transactions.

Consolidationc. Consolidation

The Group financial statements
include the results, financial positionand cash flows of the Company andall of its subsidiary undertakings.
Subsidiary undertakings are thoseentities controlled directly or indirectlyby the Company. Control arises when
the Company has the power to govern
the financial and operating policies ofan entity, uses this power to affect thereturns from that entity and has exposure
to variable returns from its investment in
the entity.
Financial statements of the subsidiaries
are prepared for the same reporting
year as the Company, using consistentaccounting policies. Businesses acquiredor disposed of during the year are
accounted for using acquisition method
principles from, or up to, the date
control passed. Intra-group transactions
and balances are eliminated on
consolidation. All subsidiaries use
uniform accounting policies for liketransactions and other events andsimilar circumstances.

60

For the purpose of presenting
consolidated financial statements, theresults and financial position of all theGroup entities (none of which have thecurrency of a hyperinflationary economy)
that have a functional currency otherthan GBP are translated into GBP as
follows• Assets and liabilities for eachstatement of financial position aretranslated at the exchange rate at theperiod end date
• Income and expenses for each
income statement are translated at
the exchange rate ruling at the time ofeach period the transaction occurred• All resulting exchange differences arerecognised in other comprehensive
incomeBusiness reporting
IFRS 8 requires a “management
approach” under which information in
the financial statements is presented on
the same basis as that used for internalmanagement reporting purposes.

The Group is organised on a global basis
for its Geospatial business following thesale of its RTLS SmartSpace business
unit on 31 December 2018. The Directors
believe that the Chief Operating Decision
Maker (CODM) is the Chief Executive
Officer of the Group. The CODM andthe rest of the Board are provided withinformation on the Geospatial businessas a single business unit to assess its
financial performance.
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 theincome statement.

Revenue recognition
Revenue represents the fair value ofconsideration received or receivablefor the sales of goods and services netof discounts and sales taxes. Revenue
is recognised based on the distinct
performance obligations under the
relevant customer contract as set out
below. Where goods and/or services are
sold in a bundled transaction or on a
subscription basis, the Group allocates
the total consideration under the contract
to the different individual elements basedon actual amounts charged by the Groupon a standalone basis.

Software
Revenue earned from software sales
under perpetual licence agreements withmaintenance and support is recognised
when the software is made available tothe customer for use.
If contracts include performanceobligations which result in software being
customised or altered, the software
cannot be considered distinct from thelabour service. Revenue recognition isdependent on the contract terms andassessment of whether the performanceobligation is satisfied over time. If theconditions of IFRS 15 to recogniserevenue over time are not satisfied,revenue is deferred until the software isavailable for customer use.

Maintenance and support
Maintenance and support is recognised
on a straight-line basis over the termof the contract, which is typically one
year. Revenue not recognised in the
consolidated income statement isclassified as deferred revenue on the
consolidated statement of financial
position.

1.

IQGeo Group plc Annual Report 2019

Subscription
Software sold on a non‑perpetual basis
consists of two performance obligations:a licence obligation for the temporary
right to use the software and a postcontract customer support obligation
for the right to receive updates,
enhancements, error corrections andsupport throughout the contracted
term. The customer obtains the rightto use the software once the licencehas been delivered and the licence
period starts. Revenue for the licenceobligation is recognised at the point
in time when the licence is delivered,
whereas the maintenance and support
obligation is satisfied over time andthe associated revenue recognised ona straight-line basis over the term of
the contract. Revenue not recognisedin the consolidated income statement
is classified as deferred revenue
in the consolidated statement offinancial position.

Services
Services revenue includes consultancy
and training. Services revenue from timeand 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 recognisedon the stage of completion of eachassignment at the period end datecompared to the total estimated service
to be provided over the entire contract
where the outcome can be estimatedreliably. If a contract outcome cannot
be estimated reliably, revenues arerecognised equal to costs incurred, tothe extent that costs are expected tobe recovered. An expected loss on acontract is recognised immediately in
the income statement.

Timing of payment
Maintenance and support income andsubscription income is invoiced annuallyin advance at the commencement of
the contract period. Other revenue isinvoiced based on the contract termsin accordance with performanceobligations. Amounts recoverable incontracts (contract assets) relate to ourconditional right to consideration forcompleted performance obligations
under the contract prior to invoicing.
Deferred income (contract liabilities)
relates to amounts invoiced in advanceof services performed under thecontract.

Employee benefits
a. Retirement benefits
The Group operates various defined
contribution pension arrangements for
its employees.
For defined contribution pension
arrangements, the amount charged tothe income statement represents thecontributions payable in the period.
Differences between contributions
payable in the period and contributions
actually paid are shown as either
accruals or prepayments in thestatement of financial position.

b. Share-based payments
The Group issues equity-settled
share‑based payments to certain
employees. Vesting conditions arecontinuing employment and can include,for senior employees, a diluted EPS
performance target or share pricetarget. Equity-settled share-based
payments are measured at fair value atthe date of grant using an appropriate
pricing model. The fair value is expensed
on a straight-line basis over the vesting
period, together with a corresponding
increase in equity in the share-based
payment reserve. Non‑market vesting
conditions include assumptions about the
number of options expected to vest.

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 arematerial one-off items of income
or expense that have been shown
separately due to the significanceof 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 includedin the income statement on a time basis,using the effective interest method byreference to the principal outstanding.

2.

3. Financial statements

Tax
The tax charge or credit comprises
current tax payable and deferred tax:

a. Current tax
The current tax charge represents anestimate of the amounts payable orreceivable to or from tax authorities inrespect of the Group’s taxable profits
and is based on an interpretation ofexisting tax laws. Taxable profit differsfrom profit before tax as reported in theincome statement because it excludes
certain items of income and expensethat are taxable or deductible in otheryears 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 calculatedusing the liability method on temporary
differences. This involves the comparisonof the carrying amounts of assets andliabilities in the consolidated financial
statements with their respective tax
bases. In addition, tax losses available
to be carried forward as well as otherincome tax credits to the Group areassessed for recognition as deferred
tax assets. However, deferred tax is notprovided on the initial recognition of
goodwill, nor on the initial recognitionof an asset or liability, unless the relatedtransaction is a business combination oraffects tax or accounting profit.
Deferred tax liabilities are always
provided in full. Deferred tax assets
are recognised to the extent that it isprobable that the underlying deductible
temporary differences will be able to
be offset against future taxable income.
Deferred tax assets and liabilities arecalculated, without discounting, at tax
rates that are expected to apply to theirrespective period of realisation, provided
they are enacted or substantively
enacted at the reporting date. Deferred
tax is recognised as a component of tax
expense in the income statement, except
where it relates to items charged or
credited directly to other comprehensive
income or equity when it is recognised inother comprehensive income or equity.

61

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 2019
3 Summary of significant accounting
policies continued
Business combinations
The Group applies the acquisition
method to account for businesscombinations. The considerationtransferred for the acquisition of a
subsidiary is the fair values of theassets transferred, the liabilities
incurred to the former owners of
the acquiree and the equity interests
issued by the Group. The considerationtransferred includes the fair value of
any asset or liability resulting from acontingent consideration arrangement.
Identifiable assets acquired andliabilities and contingent liabilities
assumed in a business combination aremeasured initially at their provisional
fair values at the acquisition date.
Fair values are reassessed during themeasurement period and updated if
required. The Group recognises any
non‑controlling interest in the acquiree
on an acquisition-by-acquisitionbasis, either at fair value or at the
non‑controlling interest’s proportionate
share of the recognised amounts of theacquiree’s identifiable net assets.
If the business combination is achievedin stages, the acquisition date fair valueof the acquirer’s previously held equity
interest in the acquiree is remeasured tofair value at the acquisition date throughprofit or loss.
Any contingent consideration to betransferred by the Group is recognised
at fair value at the acquisition date.
Subsequent changes to the fair valueof the contingent consideration thatis deemed to be an asset or liability isrecognised in accordance with IAS 39
either in profit or loss or as a change toother 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 theconsideration transferred and the fairvalue of non-controlling interest overthe net identifiable assets acquired andliabilities assumed. If this consideration islower than the fair value of the net assetsof the subsidiary acquired, the difference
is recognised in profit or loss.
Goodwill arising on an acquisition ofa business is the difference between
the fair value of the consideration paid
and the net fair value of the assets andliabilities acquired. Goodwill is carried atcost less accumulated impairment losses.

62

Research and development

Property, plant and equipment

Expenditure on research activities isrecognised as an expense in the period
in which it is incurred.

Property, plant and equipment arestated 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 estimatedresidual values over their expected useful
lives on a straight-line basis over thefollowing periods

Development activities involve a planor design for the production of new or
substantially improved products andprocesses. Development expenditureis only capitalised if all of the following
conditions are met• Completion of the intangible asset istechnically feasible so that it will beavailable for use or sale
• The Group intends to complete theintangible 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 requiresthat there is a market for the output
from the intangible asset or for theintangible asset itself, or, if it is to be
used internally, the asset will be usedin generating such benefits• There are adequate technical,
financial and other resources tocomplete the development and touse or sell the intangible asset• The expenditure attributable tothe intangible asset during its
development can be measured
reliably
Internally-generated intangible assets,consisting mainly of direct labourcosts, are amortised on a straight‑line
basis over their useful economic
lives. Amortisation is shown within
administrative expenses in the income
statement. The estimated useful livesof current development projects are
three years. Upon completion the assets
are subject to impairment testing if
impairment triggers are identified,based on expected future sales.
Where no internally-generated
intangible asset can be recognised,development expenditure is recognised
as an expense in the period in which it isincurred.

Other intangible assets
Intangible assets that are purchased
separately, such as software licencesthat do not form an integral part ofrelated hardware, are capitalised at costand amortised on a straight-line basis
over their useful economic life which istypically three years.

• 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 orloss on the disposal or retirement of anasset is determined as the difference
between the sales proceeds and thecarrying amount of the asset and isrecognised in operating expenses.

Leased assets
The Group as a lessee
For any new contracts entered into,
the Group considers whether a contractis, or contains, a lease. A lease is definedas ‘a contract, or part of a contract,that conveys the right to use an asset(the underlying asset) for a period of timein exchange for consideration’. To apply
this definition the Group assesses
whether the contract meets three
key evaluations which are whether• The contract contains an identified
asset, which is either explicitly
identified in the contract or implicitly
specified by being identified at thetime the asset is made available to
the Group• The Group has the right to obtain
substantially all of the economic
benefits from use of the identified
asset throughout the period of use,considering its rights within thedefined scope of the contract• The Group has the right to direct theuse of the identified asset throughout
the period of use. The Group assess
whether it has the right to direct‘how and for what purpose’ the asset
is used throughout the period of use

1.

IQGeo Group plc Annual Report 2019

Measurement and recognitionof leases as a lessee
At lease commencement date, the Group
recognises a right-of-use asset anda lease liability on the balance sheet.
The right-of-use asset is measured
at cost, which is made up of the initial
measurement of the lease liability, any
initial direct costs incurred by the Group,
an estimate of any costs to dismantle
and remove the asset at the end of thelease, and any lease payments made inadvance of the lease commencement
date (net of any incentives received).
The Group depreciates the right-of‑use
assets on a straight-line basis fromthe lease commencement date to theearlier of the end of the useful life of
the right‑of-use asset or the end of thelease term. The Group also assesses theright‑of-use asset for impairment whensuch indicators exist.
At the commencement date, the Groupmeasures the lease liability at thepresent value of the lease payments
unpaid at that date, discounted using
the interest rate implicit in the lease
if that rate is readily available or theGroup’s incremental borrowing rate.
Lease payments included in themeasurement of the lease liability are
made up of fixed payments (including
in substance fixed), variable payments
based on an index or rate, amounts
expected to be payable under a residual
value guarantee and payments arisingfrom options reasonably certain to
be exercised.
Subsequent to initial measurement,
the liability will be reduced for payments
made and increased for interest. It isremeasured to reflect any reassessment
or modification, or if there are changes inin-substance fixed payments.
When the lease liability is remeasured,
the corresponding adjustment isreflected in the right-of-use asset, or
profit and loss if the right-of-use asset
is already reduced to zero.
The Group has elected to account for
short-term leases and leases of low-value
assets using the practical expedients.
Instead of recognising a right-of-use
asset and lease liability, the payments
in relation to these are recognised as an
expense in profit or loss on a straight-line
basis over the lease term.

Impairment of non-financial assets
Assets that have an indefinite usefullife – for example, goodwill – are notsubject to amortisation and are tested
at least annually for impairment andwhenever there is an indication that theasset may be impaired. Assets that are
subject to amortisation are reviewed for
impairment whenever events or changes
in circumstances indicate that thecarrying amount may not be recoverable.
An impairment loss is recognised for theamount by which the asset’s carrying
amount exceeds its recoverable amount.
The recoverable amount is the higherof an asset’s fair value less costs tosell and value in use. For the purposesof assessing impairment, assets aregrouped at the lowest levels for which
there are separately identifiable
cash flows (cash-generating units).
Impairment losses are recognised
immediately in profit or loss.

2.

3. Financial statements

Classification and initial
measurement of financial assets
Except for those trade receivables that
do not contain a significant financing
component and are measured at thetransaction price in accordance withIFRS 15, all financial assets are initiallymeasured at fair value adjusted fortransaction costs (where applicable).
Financial assets, other than those
designated and effective as hedging
instruments, are classified into thefollowing categories• Amortised cost
• Fair value through profit or loss
(FVTPL)• Fair value through othercomprehensive income (FVOCI)The classification is determined by both
• The entity’s business model for
managing the financial asset

Non-financial assets other than
goodwill that suffered an impairment
are reviewed for possible reversalof the impairment at each reporting
date. Where an impairment loss isreversed, it is reversed to the extent thatthe increased carrying amount does
not exceed the carrying amount thatwould have been determined had no
impairment loss been recognised in prioryears. A reversal of an impairment loss isrecognised immediately in profit or loss.

• The contractual cash flow
characteristics of the financial asset

Financial instruments
Recognition and derecognition

Financial assets at amortised cost
Financial assets are measured atamortised cost if the assets meet thefollowing conditions (and are notdesignated as FVTPL)

Financial assets and financial liabilities
are recognised when the Group becomesa party to the contractual provisions of
the financial instrument.
Financial assets are derecognised when
the contractual rights to the cash flows
from the financial asset expire, or when
the financial asset and substantially all
the risks and rewards are transferred.
A financial liability is derecognised when
it is extinguished, discharged, cancelled
or expires.

All income and expenses relating tofinancial assets that are recognised
in profit or loss are presented within
finance costs, finance income or otherfinancial items, except for impairmentof trade receivables which is presented
within other expenses.

Subsequent measurement offinancial assets• They are held within a business model
whose objective is to hold the financial
assets and collect its contractual
cash flows• The contractual terms of the financial
assets give rise to cash flows thatare solely payments of principal andinterest on the principal amountoutstanding
After initial recognition, these aremeasured at amortised cost using theeffective interest method. Discounting isomitted where the effect of discounting
is immaterial. The Group’s cash andcash equivalents, trade and most otherreceivables fall into this category offinancial instruments.

On the statement of financial position,right-of-use assets have been presented
as non-current assets and lease liabilities
have been included in trade andother payables.

63

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 2019
3 Summary of significant accounting
policies continued
Financial instruments continued
Subsequent measurement offinancial assets continued
Financial assets at fair value throughprofit or loss (FVTPL)
Financial assets that are held within adifferent business model other than ‘holdto collect’ or ‘hold to collect and sell’are categorised at fair value throughprofit and loss. Further, irrespective of
business model, financial assets whose
contractual cash flows are not solely
payments of principal and interest are
accounted for at FVTPL.
Assets in this category are measured
at fair value with gains or losses
recognised in profit or loss. 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: 11650137) which,following the transaction, is the parent
company of the RTLS SmartSpacebusiness unit.
The Group has made the irrevocable
election to account for the investment in
Abyssinian Topco Limited at fair value
through other comprehensive income(FVOCI). In the current financial year, thefair value was determined in line with therequirements of IFRS 9, which does notallow for measurement at cost.

Trade receivables
Trade receivables are amounts due from
customers for products sold or services
performed in the ordinary course ofbusiness. If collection is expected in one
year or less, they are classified as current
assets. If not, they are presented as
non‑current assets.

The Group makes use of a simplified
approach in accounting for trade andother receivables as well as contract
assets and records the loss allowanceas 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 expectedcredit losses using a provision matrix.
The Group assesses impairment of tradereceivables on a collective basis as they
possess shared credit risk characteristics
they have been grouped based on thedays past due.

Classification and measurementof financial liabilities
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 atfair value through profit or loss.
Subsequently, financial liabilities aremeasured at amortised cost using
the effective interest method except
for derivatives and financial liabilities
designated at FVTPL, which are carriedsubsequently at fair value with gains
or losses recognised in the profit orloss (other than derivative financial
instruments that are designated andeffective as hedging instruments).

Trade payables
Trade payables are obligations to
pay for goods or services that havebeen acquired in the ordinary courseof business from suppliers. Accounts
payable are classified as current
liabilities if payment is due within one
year or less. If not, they are presented as
non-current liabilities.
Trade payables are recognised initiallyat 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 ofthree months or less.

64

Borrowings
Borrowings are recognised initially at fairvalue, 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 recognisedin the income statement over the periodof the borrowings using the effective
interest method.

Share capital and share premium
Ordinary shares are classified as equity.
Incremental costs directly attributable
to the issue of new shares or options
are shown in equity as a deduction, netof tax, from the proceeds. The nominal
value of shares issued is classified asshare capital and the amounts paid overthe nominal value in respect of shareissues, net of related costs, is classified
as share premium.

Share-based payment reserve
The share-based payment reserve
relates to a cumulative charge madein respect of share options granted by
the Company to the Group’s employees
under its employee share option plans.

Capital redemption reserve
The capital redemption reserve relates
to the repurchase and subsequentcancellation of issued ordinary
share capital.

Translation reserve
Exchange differences relating to thetranslation of the results and net assetsof the Group’s foreign operations
from their functional currencies to
the Group’s presentation currency of
GBP, are recognised directly in othercomprehensive 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 aspart 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-controllinginterests based on their respective
ownership interests.

1.

IQGeo Group plc Annual Report 2019

4 Critical accounting judgements
and key sources of estimation anduncertainty
When preparing the financial statements,
management makes a number ofjudgements, estimates and assumptions
about the recognition and measurementof assets, liabilities, income andexpenses.

In estimating the amount of the deferred
tax asset that should be recognised, theDirectors make judgements based on
current budgets and forecasts about theamount of future taxable profits and thetimings of when these will be realised.
No deferred tax asset is currently
recognised.

Recognition of earn-out
Significant management judgements consideration
The following are the judgements
made by management in applying theaccounting policies of the Group thathave the most significant effect on thefinancial statements.

Capitalisation of development costs
The point at which development costs
meet the criteria for capitalisation is
critically dependent on management’s
judgement of the point at which
technical and commercial feasibility isdemonstrable. The carrying amountof capitalised development costs
at 31 December 2019 is £1.5 million(2018: £1.2 million). After capitalisation,
management monitors whether therecognition requirements continue to be
met and whether there are any indicatorsthat capitalised costs may be impaired.

Revenue recognition
Significant management judgement
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 torecognise revenue over time.
As revenue from fixed price services
agreements is recognised over time,
the amount of revenue recognised in areporting period depends on the extent
to which the performance obligation
has been satisfied. This requires anestimate of the time and value to deliver
the services to be provided, basedon historical experience with similar
contracts. In a similar way, recognising
revenue requires the estimated numberof hours required to complete thepromised work.

Deferred tax
A deferred tax asset is recognised where
the Group considers it probable that
future tax profits will be available against
which the tax credit will be utilised in the
future. This specifically applies to tax
losses and to outstanding vested shareoptions at the statement of financial
position date.

On 31 December 2018 the Group
disposed of its RTLS SmartSpacebusiness unit for a consideration of
up to £35.0 million, with £30.0 million
paid in cash on completion (subject toadjustments 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 of£3.0 million is subject to the RTLS
SmartSpace business unit meeting thefollowing 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 targetof the 2018 period. Accordingly, thefull £3.0 million earn-out would beachieved 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 thestatement of financial position as at
31 December 2019. Management believes
that this is appropriate as achievementof the milestones is dependent on the
new management team’s strategy andperformance, over which IQGeo haveno influence as a minority shareholder.
IQGeo have not been informed of the final
consolidated results for the year ended
31 December 2019 of the RTLS SmartSpacebusiness unit (Ubisense Limited) as at therelease date of this report.

Estimating uncertainty
The Group makes estimates andassumptions concerning the future.
The resulting accounting estimates will,by definition, seldom equal the related
actual results.

2.

3. Financial statements

The estimates and assumptions that havea significant risk of causing a material
adjustment to the carrying amountsof assets and liabilities within the next
financial year are addressed below.

Amortisation and impairmentof development costs
Capitalised development costs areamortised over a three year period
which is management’s estimate of
the useful lives of 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 matters outsideof management's control.
The Group reviews capitalised
development costs for impairment
annually in accordance with theaccounting policy stated in note 3.
In performing the impairment review,
management is required to makeassumptions of the future cash flows
generated from the software products.
This includes consideration of both thecurrent business pipeline and estimations
beyond the existing pipeline. Estimation
uncertainty relates to assumptions
about future operating results and thedetermination of a suitable discount rate.

5 Business information
5.1 Operating segments
Management provides information
reported to the Chief Operating
Decision Maker (CODM) for the purposeof assessing performance and allocating
resources. The CODM is the Chief
Executive Officer.
The 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’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. These
geospatial operations are reported to
the CODM as a single business unit.
The performance of the discontinued
RTLS SmartSpace business unit which
was disposed of on 31 December 2018is disclosed within note 6.

65

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 2019

5 Business information continued
5.2 Revenue by type of the continuing operations
The following table presents the different revenue streams of the Geospatial business unit:							2019Revenue of continuing Geospatial operations						£’000% of total
revenue

2018
£’000

% of total
revenue

Software							
1,589

20%

1,395

14%

Maintenance and support							
1,251

16%

918

9%

381

5%

—

0%

Services							
2,328

30%

2,424

24%

Total revenue generated from IQGeo own products					

5,549

71%

4,737

47%

Geospatial services from third party products					

2,257

29%

5,242

53%

Total revenue							
7,806

100%

9,979

100%

Subscription						5.3 Geographical areas of continuing operations
The Board and Management Team also review the revenues on a geographical basis, based around the regions where the Grouphas 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:
Revenue															20192018						£’000£’000

Non-current assets
2019
£’000

2018
£’000

UK						

95

—

3,630

3,252

Europe						

169

17

1

1

USA						

5,897

7,041

121

364

Canada						

1,164

1,596

2

4

Japan						

461

1,302

1

2

Rest of World						

20

23

—

—

						

7,806

9,979

3,755

3,623

The main country of operation of the Group is the United States of America as this is where the majority of revenue is generated.
2019 revenues include £0.9 million from income deferred at the beginning of the period (2018: £1.4 million) relating to performanceobligations satisfied over time.

5.4 Information about major customers of the continuing operations
During 2019, the Group had one customer who generated revenues of greater than 10% of total Geospatial revenue. £1.8 million
was generated from one US customer.
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.

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 to a £2.0 million
rollover investment and further £3.0 million earn out consideration.
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 the discontinued business.

66

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

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 theshortfall 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 beenrecognised within the statement of financial position as at 31 December 2019. Management believes that this is appropriate asachievement of the milestones is dependent on the new management team’s strategy and performance, over which IQGeo haveno influence as a non‑controlling shareholder. IQGeo have not been informed of the final results for the year ended 31 December
2019 of the RTLS SmartSpace business unit as at the release date of this report.
The following information is attributable to the RTLS SmartSpace business unit:

6.1 Income statement for the year ended 31 December 2019									2019									
£’000

2018
£’000

Revenue								
—15,519

Cost of revenues									
—(7,402)Gross profit									
—

8,117

Operating expenses									161(8,804)

Operating profit/(loss)									
161

(687)

Analysed as:			Gross profit									
—

8,117

Other operating expenses									
—(6,204)

Adjusted EBITDA									
—

1,913

Depreciation									
—

(808)

—

(1,251)

Amortisation and impairment of other intangible assets						Share option expense									
121

(55)

Reorganisation costs									
40

(486)

Operating profit/(loss)(687)								161Finance income									—

7Finance costs									
—

(144)

Profit/(loss) before tax									
161

(824)

Income tax 									
—(57)Profit/(loss) from discontinued operations prior to gain on disposal					
161

(881)

Gain on disposal of the RTLS SmartSpace business unit						
24222,366

Profit/(loss) from discontinued operations

21,485						
403

The gain on disposal of the RTLS SmartSpace business unit discontinued operations is summarised as follows:									2019									
£’000

2018
£’000

Consideration received or receivable:		
—

28,882

Rollover investment in RTLS SmartSpace business unit						

—

2,000

Amounts receivable on finalisation of completion accounts						

214

846

Total disposal consideration 								
21431,728Cash received (as presented within the statement of consolidated cash flows)				

Consideration used to settle HSBC debt on 31 December 2018						

—(1,753)Carrying value of net assets sold 								

—(4,804)

Transaction costs incurred									
38(1,888)

(10)

(701)

			
242

22,582

Reclassification of foreign currency reserve							
—

(216)

Accrued bonuses in respect of the transaction completion						Gain on sale before income tax and reclassification of foreign currency reserve

Gain on disposal of the RTLS SmartSpace business unit						

24222,36667

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued

for the year ended 31 December 2019
6 Discontinued operations continued
6.2 Cash flows from discontinued operations									2019									
£’000

2018
£’000

—

(599)

—

(245)

Net cash inflow/(outflow) from operating activities							Net cash inflow/(outflow) from investing activities:		
Purchase of property, plant and equipment							Expenditure on intangible assets								
—

(985)

Cash received on sale of the RTLS SmartSpace business unit						1,06028,882

Cash in RTLS SmartSpace business unit at disposal							

—(2,313)

Disposal costs in relation to the RTLS SmartSpace business unit						(1,839)(704)

Interest received									
—

7

(779)

24,642

Repayment of bank debt									
—(2,500)

Repayment of lease liability									
—

(518)

Total net cash inflow/(outflow) from investing activities						Net cash inflow/(outflow) from financing activities:		

Interest paid									
—

(71)

—

(3,089)Total net cash inflow/(outflow) from financing activities						7 Employee information
7.1 Employee numbers of continuing operations
The average monthly number of people, including Executive Directors, employed by the Group during the year was:
Actual number ofpeople as at
31 December															2019By activity							Number2018
NumberTechnical consultants							21Sales & marketing							
23Average monthly
number of people
2019
Number2018
Number

24

20

30

18

24

20

Research & development							
16

7

13

7

Administration							
11

10

11

10

							
71

59

68

67

							2019By geography							Number2018
Number

2019
Number2018
NumberUnited Kingdom							
17

15

17

16

Europe							
4

1

4

1

North America							
47

40

44

41

Asia 							
3

3

3

9

							
71

59

68

67

									2019								
Notes
£’000

2018
£’000

Wages and salaries									
7,872

6,395

7.2 Employee benefits of continuing operations
The aggregate employee benefit expense, including Executive Directors, comprised:Social security costs									
523

482

Contributions to defined contribution pension arrangements						

355

288

Share-based payments								
21

102

248

Total aggregate employee benefits								
8,852

7,413

68

IQGeo Group plc Annual Report 2019

1.

2.

3. Financial statements

8 Finance income and costs of continuing operations									2019								
£’000

2018
£’000

72

1

Finance income									
72

1Interest expense for lease arrangements								
(10)

(14)

Finance costs									
(10)

(14)

Net finance costs									
62

(13)

Interest income from cash and cash equivalents							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:									2019								
Notes
£’000

2018
£’000

Amortisation and impairment of other intangible assets					

12

815

774

Depreciation of owned property, plant and equipment					

13

57

57

Depreciation of right‑of‑use assets							
14

228

216

Lease rental charges – land and buildings							221

—Research & development costs expensed								
238

95

19

Net foreign currency (gains)/losses								
(38)

(89)

Unrealised foreign exchange (gains)/losses on intercompany trading balances				

110

(151)

Non-recurring items								
9.2

136

(619)

									2019									
£’000

2018
£’000

9.2 Non-recurring items from continuing operations
Capital reduction									
136

—

—

(619)

Total non-recurring items									
136

(619)

Sale of Japan geospatial third party services business						Capital reduction
On 2 August 2019, the Company announced a proposed tender offer to repurchase up to a maximum of 28,260,869 of theCompany's Ordinary Shares at a price of 46 pence per Ordinary Share. Following approval of the tender offer by a General
Meeting of shareholders on 22 August 2019, the tender offer completed on 30 August 2019, resulting in the share capital reducing
by 23,803,690 and £10,950,000 of surplus funds being returned to shareholders in September 2019.

Sale of Japan geospatial third party services business
On 30 March 2018, the Group sold its Japan third party geospatial services, including the Geoplan brand name, for a grossconsideration 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.
The sale of the Japan geospatial third party services business was not presented as a discontinued operation because thesegeospatial 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 soldgeospatial business did not represent a significant part of the global business at the time of disposal.

69

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 20199 Loss before tax: analysis of expenses by nature continued
9.3 Auditor's remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor andits associates:									2019								
£’000

2018
£’000

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

70Financial statements of subsidiaries, pursuant to legislation						10

70Total audit fees									
80

129

59

Fees payable to the Group’s auditor for other services:		
Tax advisory									
17

7

—

179

Audit related assurance services								
21

14Tax services associated with the Group reorganisation 						Other services									—Total non-audit fees								

—

38

200

Total auditor's remuneration									
118

329

The auditor of IQGeo Group plc is Grant Thornton UK LLP.

10 Income tax
10.1 Income tax recognised in the income statement									2019									
£’000

2018
£’000

Current tax – continuing operations			
Corporation tax									—

—Adjustment in respect of prior year								
118

213

Foreign tax									
—

(238)

Total current tax credit/(charge)								
118

(25)

Deferred tax – continuing operations			
(54)

(14)

								
(54)

(14)

Total income tax credit/(charge) for the year – continuing operations					
64

(39)

									2019									
£’000

2018
£’000

Origination and reversal of temporary differences							Total deferred tax charge

Current tax – discontinued operations		
Corporation tax									—

—Adjustment in respect of prior year								—

300Foreign tax									
—

(407)

Total current tax charge									
—

(107)

Deferred tax – discontinued operations			
—50

Total deferred tax credit									—

50Total income tax charge for the year – discontinued operations					
—(57)Total income tax credit/(charge) for the year							
64

(96)

Origination and reversal of temporary differences							

70

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

The tax credit differs from the standard rate of corporation tax in the UK for the year of 19% (2018: 19%) for the following reasons:									2019									
£’000

2018
£’000

Loss before tax – continuing operations								(6,234)(1,604)403

21,542

Total (loss)/gain before tax									(5,831)

19,938(1,108)

3,788

Gain before tax from discontinued operations							Loss before tax multiplied by the standard rate of corporation tax in the UK of 19.0% (2018: 19%)			
Tax effects of:		

Expenses not deductible for tax purposes								
16

75Income not subject to income tax								(77)(2,138)(24)(1,987)

Unrecognised deferred tax movements								
1,371

256

Tax unprovided/(overprovided) in prior years							
(118)

15

Research & development tax credits – prior years							

—

(513)

Difference on tax treatment of share options – unrecognised						

19

57Differential on overseas tax rates								
(143)

543

Total income tax debit/(credit)				

96

Utilisation of previously unrecognised tax losses							

				
(64)

10.2 Factors that may affect future tax charges
The Group has tax losses of £17.6 million (2018: £8.7 million) that are available for offset against future taxable profits of thosesubsidiary companies in which the tax losses arose. The increase in tax losses from the prior year is partially due to clarificationof the tax implications of the Group reorganisation undertaken in 2018. Deferred tax assets have not been recognised in respectof these losses as they may not be used to offset taxable profits elsewhere in the Group, and they have arisen in subsidiaries
whose future taxable profits are uncertain. No deferred tax has been recognised on the unremitted earnings of overseas
subsidiaries, because the earnings are continually reinvested by the Group and no tax is expected to be payable on themin the foreseeable future.
The deferred tax balances have been measured at 19%, the rate of realisation expected.

10.3 Deferred tax
The movement in deferred tax in the Consolidated statement of financial position during the year is as follows:
Deferred income
tax assets															20192018							
£’000
£’000

Deferred income
tax liabilities
2019
£’000

2018
£’000

At 1 January							
—

—

(231)

(516)

Deferred tax credited to the income statement					

—

—

150

349

Deferred tax charged to the income statement					

—

—

(204)

(313)

Disposal of RTLS SmartSpace business unit					

—

—

—

249

			
—

—

(285)

(231)

									2019									
£’000

2018
£’000

Development costs capitalised									
(285)

(231)

Total deferred income tax liabilities								
(285)

(231)

At 31 December				

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

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:									2019									
£’000

2018
£’000

Tax losses carried forward									
3,396

1,549

Equity-settled share options temporary differences							8

33Total unrecognised deferred tax assets								
3,404

1,582

71

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 201911 Earnings per share (EPS)									
2019

2018

Earnings attributable to Ordinary Shareholders		
Loss from continuing operations (’000) 								(6,170)(1,643)Gain from discontinued operations (’000)								
40321,485(5,767)

19,842

65,97773,088(Loss)/gain from continuing and discontinued operations (’000)						Number of shares		
Weighted average number of ordinary shares for the purposes of basic EPS (’000)				
Effect of dilutive potential ordinary shares: 		

– Share options (’000)									
67

25766,04473,345

Basic and diluted EPS (pence) 									
(9.4)

(2.2)

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

Basic and diluted EPS (pence)									
0.6

29.4

Continuing and discontinued operations EPS		
Basic and diluted EPS (pence)									
(8.7)

27.1

Basic earnings per share is calculated by dividing profit/(loss) for the period attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per share, the weighted
average number of shares is adjusted to allow for the effects of all dilutive share options and warrants outstanding at the endof the year. Options have no dilutive effect in loss-making years and are therefore not classified as dilutive for Discontinued
and Total EPS since their conversion to ordinary shares does not decrease earnings per share or increase loss per share fromcontinuing 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 measurement of loss for theperiod.
Continuing operations								
Notes

2019

2018

Continued earnings for the purposes of diluted EPS being net loss attributable
to equity holders of the parent company (£’000)							(6,170)(1,643)248

Adjustments: 			
21

102

Unrealised foreign exchange gains/(losses) on intercompany trading balances (’000)				

110

(151)

Reversal of non-recurring items (£’000)							
9

136

(619)

Reversal of share-based payments charge (£’000)						Net adjustments (£’000)									
348

(522)

Adjusted earnings (£’000)									(5,822)(2,165)Adjusted diluted EPS from continuing operations (pence)

					
(8.8)

(3.0)

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.

72

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

12 Intangible assets						
Acquired						
customer		
Capitalised						
relationships
Acquiredproduct						and order
software development					
Goodwill
backlog
products
costs					£’000
£’000
£’000
£’000

Software
£’000

Total
£’000

29,038

Cost 						At 1 January 2018					

8,805

2,240

650

15,936

1,407

Exchange difference					—

—

—

—

85

85

Additions					—

—

—

1,650

194

1,844

Disposal of RTLS SmartSpace business unit			(3,256)——(11,139)(355)(14,750)

Disposal of Japan geospatial services business			

(2,579)(2,240)

(650)

—

(403)

(5,872)

Disposal – other					—

—

—

—

(906)

(906)

At 31 December 2018					
2,970

—

—

6,447

22

9,439

Additions					—

—

—

1,074

102

1,176

At 31 December 2019					

—

—

7,521

124

10,615

Accumulated amortisation

2,970

					

At 1 January 2018					(8,805)(2,240)(650)(13,220)(1,161)(26,076)

Effects of movement in exchange rates				

—

—

—

—

(79)

(79)

Charge for the year					

—

—

—

(1,839)(186)(2,025)

Disposal of RTLS SmartSpace business unit			

3,256

—

—

9,825

144

13,225

Disposal of Japan geospatial services business			

2,579

2,240

650

—

376

5,845

Disposal – other					—

—

—

—

906

906

At 31 December 2018					(2,970)——(5,234)—(8,204)Charge for the year					

—

—

—

(788)

(27)

(815)

At 31 December 2019					(2,970)——(6,022)(27)(9,019)Net book amount						At 31 December 2019					

—

—

—

1,499

97

1,596

At 31 December 2018					

—

—

—

1,213

22

1,235

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 software products. On 31 December 2018 the RTLS SmartSpace business unit was disposed of andthe remaining capitalised product development costs relate entirely to geospatial software products. The Group is loss‑making
and this is an indicator for potential impairment of development costs. Management have completed impairment reviews throughestimating 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.
The remaining average amortisation period for capitalised product development costs is two years.
The software assets represent assets purchased from third parties.

73

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 201913 Property, plant and equipment								Fixtures and								fittings								£’000Computerequipment
£’000

Total
£’000

1,292

2,025

Cost 			At 1 January 2018								
733Effect of movements in exchange rates							

19

29

48

Additions								
214

102

316

Disposal of RTLS SmartSpace business unit						

(760)

(864)

(1,624)

Disposals – other								
—

(383)

(383)

At 31 December 2018								
206

176

382

Effect of movements in exchange rates							

(4)

(11)

(7)

Additions								
7

49

56

Disposals – other								
(25)

(35)

(60)

At 31 December 2019								
181

186

367

Accumulated depreciation			At 1 January 2018								(391)(1,141)(1,532)

(15)

(35)

(50)

Charge for the year								
(117)

(95)

(212)

Disposal of RTLS SmartSpace business unit						

343

771

1,114

Disposals – other								
—

382

382

At 31 December 2018								
(180)

(118)

(298)

Effect of movements in exchange rates							Effect of movements in exchange rates							

7

7

14

Charge for the year								
(16)

(41)

(57)

Disposals – other								
25

35

60

At 31 December 2019								
(164)

(117)

(281)

At 31 December 2019								
17

69

86

At 31 December 2018								
26

58

84

Net book amount			

14 Right‑of‑use assets
The Group early adopted IFRS 16 and from 1 January 2018 recognised 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:									2019								
£’000

2018
£’000

Cost			At 1 January									
502

3,002

Effect of movements in exchange rates								(10)

—Additions									
—

63

—

(2,563)

Cost at 31 December									
492

502

Disposal of RTLS SmartSpace business unit							Depreciation			At 1 January									
(198)

—

Effect of movements in exchange rates								7

23Charge for the year									
(228)

(869)

—

648

Depreciation at 31 December									
(419)

(198)

Net book amount at 31 December

304

Disposal of RTLS SmartSpace business unit							74							73

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

15 Investments
At 31 December 2019, the Group holds a rollover investment in Abyssinian Topco Limited as part of the consideration for the sale of
the RTLS SmartSpace business unit on 31 December 2018. Abyssinian Topco Limited is a UK registered company (company number
11650137) and is a parent company of Ubisense Limited (company number 04489603) which, along with its subsidiary companies,
comprise the RTLS SmartSpace business unit.
										£’000Investment as at 31 December 2019 and 31 December 2018		

					
2,000

IQGeo Group plc holds 5.3% (2018: 5.6%) of the ordinary share capital of Abyssinian Topco Limited.

16 Trade and other receivables									2019								
Notes
£’000

2018
£’000

Trade receivables, gross									
1,365

1,535

Allowances for expected credit losses							
16.1

(4)

—

Trade receivables, net								
16.2

1,361

1,535

Amounts recoverable on contracts								
336

610

Other receivables									
68

915Prepayments									
540

485

VAT and taxation receivable									48Total trade and other receivables					

			
2,353

41
3,586

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

16.1 Movement in allowance for expected credit losses									2019									
£’000

2018
£’000

At 1 January									
—(1,460)Exchange differences									
—(25)Amounts recovered in the year									—

204Amounts written off in the year									35

—Allowance released									
—

42

—

1,239

Allowance made									(39)

—At 31 December									(4)

—Provided debts disposed of on 31 December 2018							16.2 Ageing of past due but not impaired receivables									2019									
£’000

2018
£’000

Neither past due nor impaired									
1,173

1,533

Past due but not impaired:			0 to 90 days overdue									
188

2More than 90 days overdue									—

—Total									
1,361

1,535

75

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 201917 Cash and cash equivalents									2019									
£’000

2018
£’000

Cash at bank and in hand									13,05330,915

Cash and cash equivalents									13,05330,915

Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term cash deposits earn interest
at fixed rates for the term of the deposit.
The composition of cash and cash equivalents by currency is as follows:									2019By currency									
£’000

2018
£’000

British Pound (GBP)									10,08329,076

Euro (EUR)									373

—US Dollar (USD)									
1,936

1,030

Japanese Yen (JPY)									
392

5Canadian Dollar (CAD)									
269

804

Cash and cash equivalents									13,05330,91518 Trade and other payables									2019									
£’000

2018
£’000

Deferred income									
1,118

913

Trade payables									
272

2,175

Trade accruals									
1,428

1,734

Other taxation and social security								
317

214

Other payables									
106

44Total trade and other payables								
3,241

5,080

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

19 Lease obligation
The Group early adopted IFRS 16 and from 1 January 2018 has recognised a lease liability for leases previously classified as
operating leases applying IAS 17.
The Group has measured lease liabilities at the present value of the remaining lease payments, discounted using the Group’s
incremental borrowing rate at the date of initial application.
Details of the Group’s liability in respect of right‑of‑use assets and their carrying amount are as follows:									2019									
£’000

2018
£’000

At 1 January									
309

3,002

Effect of movements in exchange rates								1

23

—

63

New leases entered into during the year								Finance costs incurred									7

96Payments made during the year								
(238)

(743)

—

(2,132)						
79

309

Lease liability payable within one year								
79

232Disposal of RTLS SmartSpace business unit							At 31 December			Presented as:		

—77

At 31 December									
79

309Lease liability payable in more than one year							

76IQGeo Group plc Annual Report 2019

1.

2.

3. Financial statements

On 20 December 2019, the Group entered into a seven year lease running to February 2028 on new premises in Denver as thelease on the existing premises in Denver ends on 30 April 2020. While the new Denver lease agreement has been contracted, acapital asset for the present value of the future payments, and its associated liability, have not been recognised on the balance
sheet in accordance with IFRS 16, as the lease period will not commence until March or April 2020. In addition, £0.2 million fit‑out
costs net of landlord’s contribution will be incurred in the first half of 2020.
The lease liability consists of £80,000 of lease payments after deduction £1,000 of future finance charges.

Leases as lessee
The Group maintains short-term office rental agreements within Germany, Japan and the UK. The leases entered into are
twelve months or less and the Group has elected to not apply IFRS 16 to these leases due to their short-term nature. The 2019
operating expense presented within the consolidated income statement includes £221,000 of rent expense in respect of theseleases. The future obligations for the new short-term leases are reported within the table below.
The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets.
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:									Land and									buildings									2019									£’000Land andbuildings
2018
£’000

No later than one year									
231

191

Total									
231

191

The above table reflects the committed cash payments under operating leases, rather than the expected charge to the income
statement in the relevant periods.

20 Share capital and premium							Number of							ordinary							shares							of £0.02 eachSharecapital
£’000

Share
premium
£’000

Total
£’000

Balance at 1 January 2018 and 31 December 2018					73,087,904

1,462

46,37547,837

Issued under share-based payment plans						219,2154

27

31

Capital reduction							—

—(28,948)(28,948)

Repurchase and cancellation of shares						(23,803,690)

(476)

—

(476)

Change in year							(23,584,475)(472)(28,921)(29,393)

Balance at 31 December 2019							49,503,429

990

17,454

18,444The Company has one class of ordinary shares which carry no right to fixed income.
At the Company Annual General Meeting on 5 June 2019, the Directors obtained shareholder approval to complete a Capital
Reduction with the Company’s share premium account being reduced by £28,948,000. On 16 July 2019 a Court Order was granted
to allow a capital reduction.
On 2 August 2019, the Company announced a proposed tender offer to repurchase up to a maximum of 28,260,869 of theCompany’s Ordinary Shares at a price of 46 pence per Ordinary Share. Following approval of the tender offer by a General
Meeting of Shareholders on 22 August 2019, the tender offer completed on 30 August 2019 resulting in the share capital reducing
by 23,803,690 and £10,950,000 of surplus funds being returned to shareholders in September 2019.

77

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued

for the year ended 31 December 201921 Share-based payments: options
21.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over shares in the Company to incentivise high performing key employeesof the Group periodically.
Other than the December 2016 share option award set out in note 21.4, 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.

21.2 Analysis of amounts recognised in the financial statements(a) Analysis of amounts recognised in the consolidated income statement
The allocation between continuing and discontinued operations is as follows:									2019									
£’000

2018
£’000

Share-based payments charge presented as continuing operations					

102

248

Share-based payments credit/(charge) presented as discontinued operations				

(121)

55

Total share-based payments (credit)/charge recognised						
(19)

303

(b) Analysis of amounts recognised in the consolidated statement of changes in equity in the year									2019									
£’000

2018
£’000

(19)

303

									2019									
£’000

2018
£’000

632

717

Net share-based payments (debit)/credit recognised in equity						(c) Cumulative amounts included within equity in the consolidated statement of financial position
Cumulative reserve credit for share-based payments						21.3 Reconciliation of movements in equity-settled share-based payment arrangements in the year					Awards				AwardsAwards					
outstanding
GrantedExercised
Forfeited outstanding exercisable
Award			Exercise
at 1 Janduringduringduringat 31 Dec
at 31 Dec
date
Vests
Expiresprice
2019
the yearthe yearthe year
2019
2019
Arrangement
Year
Years
Year
£
NumberNumberNumberNumberNumberNumberOptions

2010

2011–13

2020

0.140

320,172—

219,215

6,000

94,9572011

2012–14

2021

1.050

100,200——

71,50028,70094,95728,7002012

2013–15

2022

2.125

70,500——42,50028,00028,0002013

2014–16

2023

2.055

77,850——45,10032,75032,7502014

2015–17

2024

2.250

45,000——35,00010,00010,0002016

2017–192026

0.020 5,250,000—— 1,900,000 3,350,000

—

2018

2019–21

2028

0.555

350,000—

Total					6,213,722—

Weighted average exercise price (£)				

—

0.138

350,000

116,666

219,215 2,100,100 3,894,407—

311,073

0.140

—
0.179

0.117

0.828

Weighted average remaining contractual life			 7.5 years				 6.8 years

4.1 years

21.4 Share option scheme details
2010 granted share options
90,657 14 pence share options have been exercised during January 2020. Any remaining 14 pence unexercised share options will
expire during 2020.

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 price set at thenominal value. The options vest if the Company’s share price exceeds 70 pence for 60 consecutive calendar days between the 2nd
and 3rd anniversary of issue and the period of employment continues for over three years.
Due to the LTIP performance condition not being reached in the year to 14 December 2019, the share options have not vested.
Despite the performance condition not being met, the Remuneration Committee retains the right to extend the vesting period
for another twelve months in exceptional circumstances. The Remuneration Committee has not exercised this right to date,and expects to replace this existing LTIP scheme with a new one during 2020.

78

IQGeo Group plc Annual Report 2019

1.

2.

3. Financial statements

The share options were valued using a Monte Carlo valuation model. The expected life is the expected period from grant toexercise based on management’s best estimate of the effects of non-transferability, exercise restrictions and behaviouralconsiderations. The risk-free return is an average yield on the zero-coupon UK Government Bond in issue at the date of grantwith a similar life to the option. Volatility is estimated at the grant date based on the historical daily share price movements of theCompany over a four-year period.
Within the 2019 financial statements a credit of £39,000 (2018: £291,000 charge) has been recognised in respect of share options
granted on 14 December 2016 of which £121,000 credit relates to discontinued operations.

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.
Within the 2019 financial statements a charge of £20,000 (2018: £12,000) has been recognised in respect of share options granted
on 24 May 2018.

22 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:			Proportion			of ordinary			shares held
Country of
Principal
by group
Subsidiary
incorporation
activity(%)

Registered office

IQGeo UK Limited
UK
Geospatial solutions
100
				

CB1 Business Centre, 20 Station Road
Cambridge, CB1 2JD, UK

IQGeo Germany GmbHGermany
Geospatial solutions
100
				

Friedrich-Ebert-Anlage 49,
60308 Frankfurt am Main, Germany

IQGeo America Inc.
US
Geospatial solutions
100
				

999 18th Street, Suite 901, Denver,
CO 80202, United States

IQGeo Solutions Canada Inc.
CanadaGeospatial solutions
100
				

250 Howe Street, Suite 1400,
Vancouver, BC V6C3S7, Canada

IQGeo Systems Limited
UK
Non-trading
100
				

CB1 Business Centre, 20 Station Road
Cambridge, CB1 2JD, UK

IQGeo Japan K.K.
Japan
Geospatial solutions
100
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.

79

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued

for the year ended 31 December 201923 Related party transactions
23.1 Remuneration of key personnel

The key management have been assessed to be the Directors of the Group (Executive and Non-Executive) during the 2019 and2018 period.
During the year, there was an average number of seven key management personnel (2018: seven) and seven key management
personnel at 31 December 2019 (2018: seven). The compensation paid or payable to key management for employee services isshown below:									2019									
£’000

2018
£’000

Short-term employee benefits		
Wages and salaries									
533

519

Social security costs									
87

72Performance payments									
136

247

Termination payment									19

—Other benefits									85									783843Post-employment benefits		
Contributions to defined contribution pension arrangements						

28

53Share-based payments		
Equity-settled share-based payments								
26

175Total key management compensation

1,071							837

23.2 Transactions with the Group related parties
There were no other related party transactions with Directors of the Company during 2019 or 2018 other than acquisition anddisposal of shares described within the Directors' report.

24 Financial risk management24.1 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 24.7. The main types of risks are market risk (including foreign currency risk), credit risk andliquidity risk.
The Group’s risk management is co‑ordinated at its headquarters, in close co‑operation with the Board of Directors, and focuseson actively securing the Group’s short to medium-term cash flows. The Group does not actively engage in the trading of financial
assets for speculative purposes. The most significant financial risks to which the Group is exposed are described below.

24.2 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 notconsidered 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
US Dollars				 		
		
					
2019
2018
2019
2018
					
£’000
£’000
£’000
£’000

Euros
2019
£’000

2018
£’000

Assets					
—

—

413

53

84

—

Liabilities					
(10)

(19)

(1)

(7)

—

(9)

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

80

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

24.3 Foreign currency sensitivity analysis
The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities
and the USD/GBP, EUR/GBP and JPY/GBP exchange rates “all other things being equal”. It assumes a +/- 5% change in the GBP
exchange rate against the relevant foreign currencies.
The 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
US Dollars				 		
		
					
2019
2018
2019
2018
					
£’000
£’000
£’000
£’000

Effect of a 5% appreciation of the local currency:

Euros
2019
£’000

2018
£’000

							

Income statement					
(1)

(1)

22

2

4

—

Equity					
(1)

(1)

22

2

4

—

Effect of a 5% depreciation of the local currency:								Income statement					
—

1

(20)

(2)

(4)

—

Equity					
—

1

(20)

(2)

(4)

—

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.

24.4 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 24.7, 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 only with creditworthy
counterparties.
The Group’s management considers that its financial assets that are not impaired or past due for each of the reporting dates
under review are of good credit quality. All receivables are subject to regular review to ensure that they are recoverable and any
issues identified as early as possible. In order to manage credit risk the Directors set limits for customers based on a combinationof payment history and third party credit references. Credit limits are reviewed by the credit controller on a regular basis inconjunction with debt ageing and collection history. In addition, many of the Group’s customers, and approximately 80% bybalance 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 in respect of trade receivables at
31 December 2019.
The amount of exposure to any single counterparty or a group of counterparties having similar characteristics is subject to a limit,
which is reassessed periodically by management. At 31 December 2019, one customer individually accounted for more than 32% of
the gross trade receivables balance (31 December 2018: more than 51%).
None of the Group’s financial assets are secured by collateral or other credit enhancements.
Details of certain trade receivables at 31 December 2019 that have not been settled by the contractual due date but are notconsidered to be impaired are included in note 16.2.

24.5 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 to manage
this risk by regularly reviewing forecast inflows and outflows due in day-to-day business and investing cash assets safely andprofitably. 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 distribute funds locally when required.
The Group’s existing cash balances exceed the current cash outflow requirements.

81

IQGeo Group plc Annual Report 2019

Notes to the consolidated financial statements continued
for the year ended 31 December 201924 Financial risk management continued
24.5 Liquidity risk analysis continued
As at 31 December 2019, the Group’s financial liabilities have contractual maturities as summarised below:		Current																Between							Within6 and							6 months
12 months							
£’000
£’000

Non-current
Between
1 and
5 years£’000

Later than
5 years£’000

As at 31 December 2019					Trade and other payables							
3,241

—

—

—

Lease obligations							
79

—

—

—

Other payables							
—

—

—

—

As at 31 December 2018					Trade and other payables							
5,312

—

—

—

Lease obligations							
119

113

77

—

Other payables							
—

—

—

—

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. Where surplus
cash deposits are identified these are placed in accounts with access terms of no more than three months.

24.6 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 owners of the Company.
In order to maintain or adjust the capital structure, the Group may issue shares, take on debt, sell assets to raise cash, adjust theamount of dividends payable to shareholders or return capital to shareholders.
The capital structure is continually monitored by the Group. The Group’s strategy is to have a capital structure that allows
investment in long-term profitable growth, takes into account prevailing trading conditions and seeks to improve balance sheet
efficiency over time. The Group is not subject to externally imposed capital requirements.
The Group has no bank loan facilities at 31 December 2019 (31 December 2018: £nil).

82

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

24.7 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 andequity instrument, are disclosed in the accounting policies in note 3. The carrying amounts presented in the consolidated statementof financial position relate to the following categories of financial instrument:									2019								
Notes
£’000

2018
£’000

Financial assets		
Fair value through the profit and loss:			
2,000

2,000

– Trade receivables								
16

1,361

1,535

– Amounts recoverable on contracts							
16

336

610

– Other receivables								
16

68

915

– Cash and cash equivalents								
1713,05330,915

Total financial assets									16,81835,975– Investments								15Amortised cost:			Financial liabilities			
Amortised cost:			– Trade payables								
18

272

2,175

– Trade accruals								
18

1,428

1,734

– Other payables								
18

106

44

– Lease obligation								
19

79

309

					
1,885

4,262

Total financial liabilities				

25 Reconciliation of liabilities arising from financing activities									Lease								HSBC loan
liability								
£’000
£’000

Total
£’000

At 1 January 2018								
2,500

—

2,500

(743)

(3,243)

Cash flows:			
Repayment								(2,500)Non-cash			
Recognition on adoption of IFRS 16							

—

3,002

3,002

Additions								
—

63

63

Effect of moving exchange rates							
—

23

23

Interest applied to principle								
—

96

96

—

(2,132)(2,132)

At 31 December 2018								
—

309

309

(238)

(238)

Disposal of the RTLS SmartSpace business						Cash flows:			

Repayment								—Non-cash			
Effect of moving exchange rates							—

1

1Interest applied to principle							—

7

7At 31 December 2019								
—

79

79

83

IQGeo Group plc Annual Report 2019

Company balance sheet

for the year ended 31 December 2019									2019								
Notes
£’000

2018
£’000

Fixed assets		
Investments 								
3

2,384

2,110

Current assets			
Debtors falling due within one year							

412,95014,027

Debtors falling due after one year							

4

6,076

9,715

Cash at bank and in hand									9,85128,948									28,877

52,690Creditors – amounts falling due within one year						
5

(418)

(6,207)

Net current assets									28,45946,483

Total assets less current liabilities								30,843

48,593

Net assets									30,843

48,593

Capital and reserves

		Called-up share capital								
6

990

1,462

Share premium account								717,454

46,375

Share-based payment reserve								7

632

717

Capital redemption reserve								7476

—Profit and loss reserve								711,29139								30,843

48,593Equity shareholders’ funds

The notes on pages 86 to 88 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 loss for the financial year ended 31 December 2019 of £6.8 million(2018: £27.8 million gain).
The financial statements were approved and authorised for issue by the Board of Directors on 6 March 2020 and signed
on its behalf by:

Richard Petti
Chief Executive Officer
IQGeo Group plc
Registered Number: 05589712

84

Tim Gingell
Chief Financial Officer

1.

IQGeo Group plc Annual Report 20192.

3. Financial statements

Company statement of changes in equity
for the year ended 31 December 2019

Attributable to equity shareholders							Share‑based
Capital
					
Share
Share
payment redemption					capitalpremium
reserve
reserve					£’000
£’000
£’000
£’000

Retainedearnings
£’000

Total
£’000

Balance at 1 January 2018		

46,375

1,139—(28,467)

20,509Total comprehensive profit for the year				

			
1,462
—

—

—

—

27,781

27,781

Lapse of share options					

—

—

(725)

—

725

—

Reserve credit for equity-settled share-based payment		

—

—

303

—

—

303

Transactions with owners					
—

—

(422)

—

28,50628,084

Balance at 31 December 2018					1,46246,375717—

39

48,593

Total comprehensive loss for the year				

—

—

—

—

(6,812)(6,812)

Lapse of share options					

—

—

(60)

—

60

—

Exercise of share options					

4

27

(6)

—

6

31

Capital reduction					—(28,948)——

28,948

—

—

—

476

(10,950)(10,950)

Repurchase and cancellation of shares				(476)

Reserve credit for equity-settled share-based payment		

—

—

(19)

—

—

(19)

Transactions with owners					(472)(28,921)

(85)

476

18,064(10,938)

Balance at 31 December 2019					
99017,454632

476

11,29130,843The notes on pages 86 to 88 are an integral part of the Company financial statements.

85

IQGeo Group plc Annual Report 2019

Notes to the Company financial statements
for the year ended 31 December 2019
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)• 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 plc include the Company’s
cash flows.

Share-based payments
The Company issues equity-settled share-based payments to certain employees of its subsidiaries. Vesting conditions arecontinuing 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 increasedby the aggregate amount of share-based payment with a corresponding increase in equity for the same amount. Information onshare options which have been granted to Directors and employees are given in note 21 to the consolidated financial statements.

Investments
Fixed asset investments are stated at historical cost less any provision for impairment.
The Group assesses investments for impairment whenever events or changes in circumstances indicate that the carrying valueof an investment may not be recoverable. If any such indication of impairment exists, the Group makes an estimate of therecoverable 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.

Debtors
Short-term debtors are measured at transaction price, less impairment. Financial assets are measured subsequently at amortised
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.

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 aright to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing
differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those inwhich 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.

Critical accounting judgements 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 thecarrying 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.

86

IQGeo Group plc Annual Report 2019

1.

2.

3. Financial statements

2 Profit and loss account
The Company does not have any employees (2018: nil). Directors’ emoluments are disclosed within the Remuneration Committee
report on page 44 of the Corporate governance report. The Directors were not remunerated by IQGeo Group plc.
Auditor's remuneration attributable to the Company is as follows:									2019									
£’000

2018
£’000

Audit fee – statutory audit									
70

59Other services									—

—									
70

593 Investments								Investments								
inOther								subsidiaries investments								
£’000
£000

Total
£’000

Cost and net book amount			
At 1 January 2019								
110

2,000

2,110

Additions to subsidiaries								
74

—

74

Capital contribution relating to share-based payments					

200

—

200

At 31 December 2019								
384

2,000

2,384

Capital contribution and impairment
As part of the sale transaction of the RTLS SmartSpace 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 the employeesof its various subsidiaries.
The Group is loss making and this is an indicator for potential impairment of its investments. Management have completed
impairment reviews through estimating the future discounted cash flows to be generated from these assets and concluded thatno further impairment is required as the cash flows are expected to exceed the value of the investment.
Further information about subsidiaries is provided in note 22 of the consolidated financial statements.

4 Debtors									2019									
£’000

2018
£’000

Debtors falling due within one year:		
Amounts owed by subsidiary undertakings							12,95013,180

Other debtors									—847									12,95014,027

Debtors falling due after one year:		
Amounts owed by subsidiary undertakings							
6,076

9,715

									
6,076

9,715

Total debtors									19,02623,742

Interest is charged on debtors falling due after one year at a rate of 3.5% plus LIBOR on the balance owed.
Amounts owed by subsidiary undertakings are unsecured.
During 2019, a provision of £6.8 million was made against amounts owed by subsidiary undertakings due within one year.

87

IQGeo Group plc Annual Report 2019

Notes to the Company financial statements continued
for the year ended 31 December 20195 Creditors: amounts falling due within one year									2019									
£’000

2018
£’000

Trade accruals									
3

1,431

Amounts owed to subsidiary undertakings							
415

4,776

									
418

6,207

6 Share capital				2019		
2018		
2019		2018
				
Number		
Number		
£’000		£’000

Allotted, called up and fully paid				Ordinary shares of £0.02 each				49,503,429		73,087,904		

990		1,462

Movements during the year are disclosed within note 20 to the Group accounts.

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 in equity as
a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and the amounts paid
over the nominal value in 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 the Company to
the Group’s employees under its employee share option plans.

Capital redemption reserve
The capital redemption reserve relates to the repurchase and subsequent cancellation of ordinary share capital.

Retained earnings
Retained earnings include all current and prior period retained profits/losses.

8 Related party transactions
The Company takes advantage of the exemption under FRS 102 for transactions with wholly owned Group companies. There wereno other related party transactions, other than the issue of shares to certain Directors detailed within the Directors' report.

88

Advisers
Registered office
IQGeo Group plc
CB1 Business Centre
20 Station Road
Cambridge CB1 2JD
Tel: +44 (0)1223 606 655
Website: www.iqgeo.com

Nominated advisers and brokers
finnCap Limited
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 BS99 6ZZ

BankerHSBC Bank plc
VitrumSt John’s Innovation Park
Cowley Road
Cambridge CB4 0WS

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network which promotes responsible management of theworld’s forests. Forest certification is combined with a systemof product labelling that allows consumers to readily identify
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United Kingdom
IQGeo Group plc
20 Station Road
Cambridge CB1 2JD

Germany
IQGeo Germany GmbHFriedrich-Ebert-Anlage 49
60308 Frankfurt am Main

Canada
IQGeo Solutions Canada Inc.
#19 - 3034 Edgemont Blvd.
North Vancouver, B.C. V7R 2NO

USA
IQGeo America Inc.
999 18th Street, Suite 901
Denver, CO 80202

Japan
IQGeo Japan KK
Level 20 Marunouchi Trust Tower
1-8-3 Marunouchi Chiyoda-ku Tokyo
100-0005

Youtube/IQGeo@IQGeo_software
LinkedIn/IQGeo

Visit us online

www.iqgeo.com