Ubisense Group plc Annual Report 2016

Enterprise
LocationIntelligenceUbisense Group Plc
Annual Report 2016

Ubisense is a
global leader inEnterprise Location
Intelligence Solutions
Ubisense Enterprise Location Intelligence Solutions enable customers
with complex operations to track the precise location of assets acrosstheir business in real-time, delivering efficiencies, increasing flexibility
and quality, and reducing costs. We offer in-depth knowledge of thesectors in which we operate and have long-standing relationships withmany of our customers across target markets including automotive,
aerospace, logistics, communications and utilities.

Strategic report
Highlights
Executive Chairman’s statement
What we do – at a glance
Our divisions – at a glance
Chief Executive’s statement
Strategic focus
Strategy in action
Financial review
Principal risks and uncertainties

IV

Corporate governance
1
2
5
6
8
10
12
16
20

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

Financial statements
24
26
30
32
35

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

36
37
38
39
40
41
42
68
69
70
71
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Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Strategic
highlights• 2016: Strong progress was demonstrated in terms of revenue growth,margins, cost management and order book.
• Organisation: Restructured and strengthened the organisation,
appointing Richard Petti as CEO and Tim Gingell as CFO.
• RTLS customer wins: Important RTLS customer wins in automotive
manufacturing including a worldwide corporate software licence,
together with installations at multiple customer locations.
• Geospatial customer wins: Announced in March 2016, $3 million of newcontracts for managed services were sold alongside additional myWorld
licence extensions with key customers.
• RTLS product development: Re-defined the enterprise software platform
to address Industry 4.0 and emerging opportunities for Industrial Internetof Things (“IIoT”) applications.
• Geospatial product development: New myWorld product launches haveextended enterprise geomobility to GIS data via iOS, Android andWindows operating systems in line with our “Any data, Anywhere, Any
device” strategy.
• Partner development: Appointed a new partner for delivery and supportof key RTLS customers – enhanced further with a Value Added Reseller(VAR) relationship. For the Geospatial business, a new partner was
appointed in Q4 and made an early sale of myWorld to a large
communications company in North America.

Financialhighlights• Revenue increased 21% to £26.5 million (2015: £22.0 million) led by
growth in software revenue.
• Order book as at 31 December 2016 of £12.6 million (2015: £9.6 million).
• Gross margin increased to 39% (2015: 35%) due to improved software
revenue mix and focus on cost management.
• Adjusted EBITDA of £0.3 million (2015: £5.2 million loss) reflecting
increased gross profit and the efficient management of our cost base.
• Operating loss reduced to £6.2 million (2015: £17.0 million) due toimproved trading performance and non-recurring income.
• £4.8 million (gross) raised from shareholders in April 2016, stabilising
the balance sheet.
• Cash balance of £3.5 million (2015: £5.4 million) and net cash of£0.2 million (2015: net debt of £0.2 million).

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Ubisense Group plc
Annual Report 2016

Executive Chairman’s statement

How we’ve
performed
We have refocused our sales effort anddevelopment of the two product portfolios –our Real-Time Location System (RTLS) and
myWorld geomobility enterprise software
platforms.
We demonstrated our first success in signing a global
licence agreement for our RTLS enterprise software
platform with a major automotive manufacturer, which will
become the cornerstone of their vision of a paperlessfactory, leading to improved production flexibility,
increased productivity and higher product quality.
Our myWorld geomobility enterprise software platform
also gained excellent references within the telecoms andutility sectors. Demonstrating productivity gains andenabling cost reductions, it has delivered a new level ofconnected mobility and visualisation of GIS data to ourcustomers’ field operations.

“I am pleased to report that,
following the restructuringof the Group, we havemade good progress interms of revenue growth,margins, cost management
and order book. The
business is now operating
at a significantly reduced
cost run-rate from that of2015 and so our increased
revenues during the period
have delivered an adjusted
EBITDA profit.”Peter Harverson
Executive Chairman
2

Reflections on 2016
Going into 2016 we had executed a major cost reduction
programme resulting in substantial reductionsin headcount across the business. We used thisopportunity to review the productivity and direction of
our two core divisions – RTLS solutions and Geospatial’s
myWorld geomobility enterprise platform with its
attached services.
Historically, the RTLS business has been driven by the
hardware element of the solution and the myWorld
platform hidden to some extent by the wider rangeof GIS services delivered by the Geospatial business.
The Company has consistently made investments inboth platforms over a number of years, but has not
succeeded in maximising value creation for the business.
Therefore, a new emphasis has been given to focus on
the platform capability and benefit it can deliver for ourcustomers, leading to a new segmentation of the RTLS
platform (currently termed SmartSpace) and the launchof geomobility enhancing myWorld product releases.

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Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

EuropeWe increased our momentum in Europe with a major
win for our RTLS enterprise location software platform
to the automotive sector, as well as a number of hardware
deployments for that customer which we expect to extend
to additional sites worldwide. We also closed anothersignificant RTLS solution sale with the expectation of
additional orders to expand it into our largest single site
deployment. In Central Europe, we also agreed an
important partner relationship to support and deliver
installation services to our customers in the region.

Board of Directors
In May this year, Richard Green stepped down as CEO
after 14 years in the role and I’d like to thank him forhis contribution. While we searched for a replacement,
my remit was expanded from Non-Executive Chairman
to Executive Chairman, taking on responsibility for the
management and operations of the Company. I am
pleased to welcome Richard Petti to the Board, who was
appointed as Chief Executive Officer in December, and I
anticipate resuming a Non-Executive Chairman positionin the first half of 2017.

North America
We continued our investment in North America andalthough sales cycles have been longer than anticipated,
we believe this is an important territory for both divisions.
We have some excellent customer relationships, withsignificant deployments in production or being expanded,
including a large agricultural equipment manufacturer for
RTLS and leading telecommunication services businesses
for Geospatial. We also appointed a new partner, Frontier
Geotek, and made an early sale of myWorld licences to amajor telecoms operator.

Recognising the support and significant interest of ourlead investor Kestrel, Oliver Scott was invited to join the
Board in May 2016.

Japan
I am pleased to report that our RTLS business grew by
25% from partners including Meiji Denki, as well as new
customers in the automotive industry such as Vuteq.
The Japan business was acquired at the end of 2013 witha 3 year growth plan, built on the existing GIS services
business. At the end of 3 years, a review of the businessacknowledged that while the business showed early signsof progression, anticipated growth had not matched
expectations, and the Board has decided to take a further
impairment charge against the goodwill and customer
intangibles established at the time of acquisition. The
Company also disposed of a small CAD business toimprove productivity.

In August 2016, we appointed Tim Gingell as Chief Financial
Officer and member of the Board. Tim has worked at
Ubisense since February 2015, and since June 2015 asInterim Chief Financial Officer and Company Secretary.
Corporate social responsibility
We are committed to corporate social responsibility
that is tangible, practical and fits with the ethos of thebusiness; this ensures that it is widely adopted, andsupported, globally. We therefore always act in a socially
responsible manner, taking into account relevant socialand environmental factors to facilitate creating tangible
value for all our employees, customers, shareholders
and communities.
During 2016, we introduced a charity day, for employees
to take time off to support their charity of choice as wellas organising local fundraising events. We collaborated
with local and national organisations to engage interns,
industrial placements, apprenticeships and mentoring
schemes, as well as being members of local networks
and clubs.

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Ubisense Group plc
Annual Report 2016

OutlookThe market opportunity for the Company is excellent, withboth our software platforms demonstrating measurable
return on investment for our customers. However, theCompany is in a recovery phase and we continue to be
prudent in managing our operating costs in line with thenear term revenue opportunity.
We will look to build on our successes in the RTLS
business, delivering on deals signed in 2016 and targetingnew opportunities in existing markets and new verticals,
while developing our partner business.
Looking forward on the Geospatial business, we see an
excellent opportunity for the myWorld geomobility
platform and its valuable attached services. However,
we anticipate that the historic GIS services will show
some decline in both revenues and potentially margin.
The highly specialist skills required to deliver myWorld
services have been built on our long history of working
with customers’ GIS databases, and this transition willcontinue, leading to an expected improvement in margins
and better penetration of our current and future customer
base. On this basis, we fully expect some older GIS
consultancy services contracts not to renew and theassociated revenue stream to begin to decline through2017 and 2018, which we will look to offset with higher
margin myWorld software sales and related services.

4

Under the management of our newly appointed CEO,Richard Petti, we will continue to focus on productivity ofthe organisation, with the objective of building a first-classenterprise and support offering, alongside an enhanced
partner programme.
2016 was a challenging year for our staff. I would liketo take this opportunity to thank them for their dedicationand ongoing commitment. Finally, we would like toexpress our gratitude to our shareholders for theircontinued support.
Peter Harverson
Chairman
20 March 2017

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

What we do – at a glanceWorld leading
solutionstransforming location
awareness intobusiness intelligence
Operating through two divisions – Real-Time Location Systems (RTLS) and Geospatial – we deliver
best-in-class enterprise location intelligence to customers. Central to our offering are two powerfulsoftware platforms that significantly improve operational effectiveness and profitability for businesses
around the world.

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Ubisense Group plc
Annual Report 2016

Our divisions – at a glance

6

Real-Time Location
System (RTLS) overview

RTLS key facts

Ubisense’s Real-Time Location System is a flexible
and highly configurable Enterprise Location Solution.
It takes real-time location data from Ubisense’s
best-in-class sensing hardware that connects via
Ultra-Wide Band (“UWB”) radio signals to pinpoint
highly accurate location information in three
dimensions to identify a broad range of assets inreal-time. The data can be used to control and managea variety of industrial processes. The ability to detect
and respond to real-world interactions between people,
assets and the environment delivers enhanced
productivity, improved quality and measurable returnon investments. Our location technology is part ofthe mission-critical operational infrastructure withsome of the world’s leading industrial manufacturers
in automotive, aerospace and agricultural machinery
as well as delivering solutions to other industries
such as logistics, transit, military, healthcare andresearch organisations.

•••

Nine of the world’s top 10 automotive manufacturers use Ubisense(according to Forbes 2015)
Six of the top 10 Fortune 500 manufacturers have deployed
Ubisense solutions at locations around the world
Demonstrated by an automotive customer to meet theirextremely low application-level error rate requirementsof four parts-per-million or less

RTLS customers and market
The Company has a well-established customer base,
operating in a challenging industrial environment.
We have consistently demonstrated high levels of
reliability and scalability demanded by our customers,
and are well positioned to capitalise on newopportunities as industrial enterprises begin to realise
the huge value of real-time location information in
improving productivity. We also offer solutions that
integrate with existing corporate IT infrastructures,a critical factor for many businesses operating in ourtarget markets.
A number of current customers are the early
adopters of Industrial Internet of Things (IIoT)
strategy, particularly in the automotive and aerospacesector, and customers including Airbus, refer to ourtechnology as part of their IIoT platform. This puts
Ubisense in a strong position, with industry expertiseand endorsements from leading players in the field,
to deliver further operational improvements andvalue to those customers, aligned to their corporate
strategy. With the increasing adoption of RTLS
technology and the move towards cross-enterprisesolutions, the application to other verticals and thegrowth of independent services providers increases
the addressable opportunity and strengthens ourposition in vertical markets where we have provenapplications such as logistics, military and transport.

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Corporate governance

Financial statements

Geospatial
overview
Ubisense’s myWorld enterprise geomobility platform
provides utilities and telecoms companies, which
manage large numbers of dispersed assets, with theability to integrate and extend the reach of GIS data toenable maximum operational effectiveness. This iscomplemented by many years of consulting experience.
myWorld integrates data from any source – GIS
databases, real-time asset data, GPS location, corporate
systems, and external cloud-based sources – to deliver
a live geospatial operational view. myWorld is designed
to be integrated and extended across any enterprise,
becoming a key part of day-to-day operations anddelivers intelligence information to everyone – online
or offline, standalone or embedded, in the office or field.
This is supported by a number of applications that havebeen purpose-built to meet the operational needs ofcustomers. Data can be downloaded directly to any
supported mobile device, including phones, tablets andlaptops running Android, iOS or Windows, ensuring easeof implementing and maintenance of a geomobility
solution across the enterprise.

Ubisense Group plc
Annual Report 2016

myWorld key facts• myWorld is used by more than 18,000 operations andengineering professionals every day• We work with more than 20 telecommunications/utility network
operators around the world• myWorld can enable utility field forces to cut storm
restoration time by 20%

Geospatial customers and market
With our geomobility enterprise platform myWorld andits supporting applications, we are working closely withsome of the world’s leading utility and communications
businesses. We are seeing increased interest in thisproduct in Japan and early stage opportunities in
Europe. New releases have been well received, as havethe additional applications launched on the platform.
Alongside the continued focus on increasing salesof the myWorld platform, with its valuable attachedservices contracts, we remain committed to providing
standalone geospatial services to our customers
utilising third-party GIS databases. In some cases thesestandalone services are in decline, resulting in lower
margins, fewer contract renewals and limited growth
opportunities. However, our seasoned industry experts
can equally be applied to delivering higher margin
myWorld geomobility integration and support services,leveraging longer-term value to our customers.

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Ubisense Group plc
Annual Report 2016

Chief Executive’s statement

Positioning
for the future

Richard Petti
CEO“Consumer demand andthe competitive
landscape for all ourcustomers means
digitisation of the
production environment
is moving quickly frombeing ‘future state’ tomission critical becauseof the strong ROI it
generates. Ubisense ispoised to capture this
digitisation growth cycle
which will be thedominant industrial IT
spending theme over the
next decade.”8Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Q&A
What are your first impressionsof the business?

What do you see as the greatest
opportunities for Ubisense?

The depth and quality of Ubisense’s customer portfolio
is impressive. We are a global business with installations
running day in, day out across the world. From automotive
producers in China, Germany, North America andelsewhere, to aerospace customers in Europe and utility
businesses in North America and Japan, we have an
enviable collection of blue-chip customers trusting theirlocation intelligence needs to us. This footprint represents
a huge opportunity for Ubisense to continue working
closely with customers to successfully develop and improvetheir industrial operations through the use of location
information. The Ubisense team has deep knowledge andexperience, which can be harnessed to evolve our productsets to solve issues that have not yet been explored.

The greatest opportunity for Ubisense is the digitisationof the industrial workplace, which is ultimately driven bymore personalised and lower cost products and services.
On the manufacturing side this means paperless factories
which are enabled by machine-to-machine or machineto-human interaction. Digitisation will be the key to flexible
factories that allow our customers to meet ever more
complex production demands while reducing cost andimproving quality. Concerning the Geospatial business,digitisation means greater customer satisfaction, improved
asset management, increased geomobility and lower costof operations. Consumer demand and the competitive
landscape for all our customers means digitisation ismoving quickly from being “future state” to missioncritical. Ubisense is poised to capture this digitisation
growth cycle which will be the dominant theme overthe next decade.

A combination of upskilling our commercial teams,
strengthening market messages and branding, andintelligently targeting opportunities will help to grow ourpipeline. We will continue the trend of acquiring customers
requiring enterprise rather than point solutions, leveraging
partners where appropriate.

What have you observedthat differentiates Ubisensefrom the competition?

In summary, the Company is well positioned to play animportant role in the emerging IIoT world.
Richard Petti
Chief Executive Officer
20 March 2017

Ubisense is a true market leader both with its RTLS and
Geospatial technology. Leadership of this quality comesfrom our in-depth understanding of customers’ needs
through years of working with them. We have competencies
in automotive, utility, logistics, telecoms, aerospace,
healthcare and transit and these have been invested
into our product lines through a process of continuous
improvement. Today, this gives us unique advantages interms of our ability to solve customers’ requirements withultra-reliable, leading-edge location solutions.
Across the verticals that Ubisense serves, we’re seeing
the first generation of Industrial Internet of Things (IIoT)
projects being implemented using our Enterprise Software
platforms, delivering strong ROI to our customers in termsof reduced costs, improved quality and increased
customer satisfaction.
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Annual Report 2016

Strategic focus

Implementing
our strategy
Ubisense provides
Enterprise Location
Intelligence Solutions forcompanies across the world.
Our Vision
To revolutionise the world’s ability to locate,connect and manage assets, making them moreproductive, flexible, profitable and driving quality.
Strategy
It is our belief that real-time location aware
technology is the cornerstone of Industry 4.0,
also known as the fourth industrial revolution,
representing the next phase in the digitisationof production management and enterprise asset
management. This will provide an opportunity
to improve operational processes on an industrial
scale, delivering measurable improvements
in operational flexibility, quality, traceability
and efficiency.
Meeting the demand to deliver real-time
location information, our RTLS platform isproven to be highly scalable and reliable,
operating 24/7 in a production environment.
Our strategy is to leverage our reference
installed base to sell the platform across anumber of vertical markets including
automotive, logistics, healthcare, military andtransit. This will be achieved with the supportof value added resellers and delivery partners.
We will capitalise on the flexibility and scalabilityof the platform, delivering an open platform,and encouraging further third-party integrationof sensors and application development.

Our myWorld geomobility platform continued
to show excellent return on investment for ourcustomers – enabling them to mobilise their GIS
data and significantly improving the efficiencyof their field operations. We have delivered anumber of “upsell” applications on the myWorld
platform, including gas leak survey and damage
assessment, and we will continue to develop the
product portfolio in line with customers’ needs.
Our strategy is one of continued productdevelopment to address a wider client base withfurther functional enhancements. Combinedwith our deep understanding of geospatial
databases this will allow us to be a leading
solution in this market – with our commitment
to delivering “Any data, Any device, Anywhere”.
Our aim is to be the trusted adviser to ourcustomers for all their asset location challenges
in the verticals we are targeting. To do thiswe plan to strengthen our customer-facing
operations, ensuring we have the skills and tools
to provide best-in-class service and technicalsolutions so that our customers can solve theirlocation challenges on time and on budget.
Staying close to our customers will ensure that,whenever an investment decision is planned, weare there ready to offer world-class technology,
helping them to meet and exceed their objectives
for revenue, cost and quality.
Ubisense will become the enterprise solution of
choice for Geospatial and RTLS customers, acrossexisting and new markets.

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Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Key strategic aims

To become the enterprise location
solution of choice for customers

To increase presence inexisting markets

To take our enterprise software
platforms to new vertical markets

Key strategic priorities
Continue to invest in the productroadmap across both sides of thebusiness, adding enterprise capabilities
such as analytics and reporting, deeper
integration with third-party hardwareand enhancing geomobility.
This will enable the enterpriseplatforms to be truly capable oftaking data from any source andoffer real-time visibility.

Be a trusted adviser to our customers
and engage earlier in productcycles to ensure that we can help
them to manage challenges andexploit opportunities.
This will increase our ability to help
drive quality, reduce costs, manage
complexity and increase productivity
across our customers’ operations.

Both directly and through a growing
network of partners, to develop
our offering specifically for newvertical markets.
This will help us to leverage newopportunities for businesses,that can only be realised throughlocation technology.

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Ubisense Group plc
Annual Report 2016

Strategy in action

Real-Time
Location
Systemscase study
Ubisense helps to achieve
vision of a paperlessfactory for premium
vehicle manufacturer

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Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Automotive
manufacturers
Ubisense works with nine of the world’s top 10 automotive
manufacturers and has developed long-standing relationships
with many of these businesses.
Our enterprise software and services enable them to not just meet their customers’
needs for customisation but also meet the need to continually reduce operating
costs. One of our customers is a leading manufacturer of premium vehicles thathas seen first-hand the benefits of our technology, leading to the purchase ofadditional software licences and hardware to help reduce costs across multiple sites

Challenge
Manufacturers of premium vehicles now offer their customers a huge amountof choice in terms of design and features, making assembly lines increasingly
complex to manage. Each vehicle in a line can often be a different model andspecification, requiring a different tool and or torque setting. Our customer
had used barcode scanning to register the vehicle’s VIN, but this time tooktime. In addition, nearly all processes were recorded using paper-based
methods, which were not an efficient use of time and could lead to issues
with accuracy and storage.
The automotive manufacturer launched a new strategy to digitise processes,
removing the use of paper from operations. Its two key goals were to reduce
production time for every car and stop relying on the tonnes of paper used
across plants on an annual basis.

Solution
Ubisense first started working with the manufacturer to deliver a solution to track
tools and manage devices in real-time. Removing barcode scanners fromthe process, Ubisense Smart Factory was used to identify a vehicle’s VIN andautomatically enter the correct tool programs and torque settings for thatspecific vehicle.
The technology has been such a success that the automotive manufacturer
has now purchased more software licences and hardware to install Ubisense’s
SmartSpace IIoT platform with a range of applications to cover the assembly line
and in the finishing and repair section in plants across the world. Ubisense will be
providing the technology to support not just tool control, but all four pillars of the
manufacturer’s strategy: electronic stamping, location system and HMI support
for workers.

Results
Working closely with its customer, Ubisense has ensured an easy integrationof its system into the existing IT infrastructure. Across the assembly lines,
Ubisense’s tool tracking and device management system has saved more thansix minutes per vehicle and protects against the potential for human error.
Already, Ubisense’s technology has delivered dramatic improvement and is well
set to help the manufacturer create factories of the future that rely on digital, as
opposed to paper-based, processes, delivering efficiencies across the operationin order to ramp up production without increasing costs.

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Annual Report 2016

Strategy in action

Geospatial
case study“We’ve been very impressed with
Ubisense, the team has worked
incredibly quickly and been able tocater for our specific business andtechnical requirements. myWorld is
intuitive to use and provides adetailed view of our above and below
ground network, layered on top of
optional base maps including Google
Maps, Google Satellite and Google
Street View.”
Nelson Gillette, Director IS at TELUS

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Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

TELUS
TELUS is Canada’s fastest-growing national telecommunications
company, with $12.7 billion of annual revenue and 12.6 million
subscriber connections, including 8.5 million wireless subscribers,
1.4 million residential network access lines, 1.6 million internet
subscribers and 1.0 million TELUS TV customers. TELUS provides
a wide range of communications products and services including
wireless, data, Internet Protocol (IP), voice, television, entertainment
and video, and is Canada’s largest healthcare IT provider.
Challenge
In early 2015 TELUS needed an updated web and mobile GIS platform to support
critical operational processes with groups such as cable plant locates, field techs
and construction. The new integrated web and mobile GIS solution needed
to be set up quickly and provide teams with up-to-date, accurate informationand enable the operations teams to meet business, deployment and regulatory
requirements. In addition, its strategic fibre network deployment initiativerequired web and mobile GIS tools to meet critical progress timelines andmilestone commitments.

Solution
The TELUS team had evaluated other web/mobile GIS solutions but none ofthem met the essential requirements. Several of the key TELUS stakeholders
were aware of Ubisense myWorld and impressed with the innovative approach,solution capabilities and leading-edge architecture.
Following just four weeks of focused discussions, TELUS and Ubisense embarked
on a four-week live system trial to prove the key requirements in a realistic
environment. The trial was a complete success and led to the selection of
myWorld as the strategic web and mobile GIS platform for TELUS nationally.
The first phase of production rollout was executed in just five weeks.

Results
myWorld has significantly reduced the average time it takes to locate cablesfrom 5-7 minutes to just seconds. Today, approximately 1,400 users access theinformation provided through myWorld and the number is growing. There has
been a lot of positive feedback, with users praising the solution’s performance,
usability and integration with Google. The combined Ubisense and TELUS teamcontinue to release a host of myWorld features with a focus on providing all theinformation and functions that users need to be productive.
Nelson Gillette, Director IS at TELUS said: “The open functionality of the myWorldapplication makes it possible to overlay many other types of data including
forest fire perimeter details and power outage details. For example, in May 2016,it was used to assist with managing our operations in and around Fort McMurray,
Alberta. As a result, response teams were aware of the current location of thefire in relation to our network infrastructure. We have plans to overlay additionalcustomer and business insight details to better manage outage events, ultimately
providing an improved customer experience.”
myWorld has been so successful and well received that TELUS and Ubisense are
now working to roll out additional business-focused applications.

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Ubisense Group plc
Annual Report 2016

Financial review

The restructuring of the business has resulted in stronger
conversion in the sales pipeline alongside the ability to
manage the cost base more efficiently. The impact of thisis an improvement to the Group’s financial performance.
Financial Key Performance Indicators

Revenue
Order book
Adjusted EBITDA
Cash and cash equivalents
Net cash/(debt)“The successful placingin April 2016 provided
stability to the Group’sbalance sheet, allowing
the further development
and growth of thebusiness.”

2016
£m

2015
£m

26.5
12.6
0.3
3.5
0.2

22.0
9.6
(5.2)
5.4
(0.2)

Revenue
The restructuring of the Group into two core divisions in
2015, RTLS and Geospatial, increased the emphasis of sales
leadership and pipeline conversion through the targetingof distinct sets of customers. This strategy, alongside a
positive foreign exchange impact, resulted in increased
revenue during 2016 and strengthening of the order bookas at 31 December 2016.

Tim Gingell
Chief Financial Officer

The revenue composition by division is summarised in the table below:
Revenue by division

2016
£m

% of total
revenue2015£m% of total
revenueYear on year
growth

RTLS
Geospatial

9.1
17.4

34%
66%

6.5
15.5

30%
70%

40%
13%

Total revenue

26.5

100%

22.0

100%

21%

Total revenue increased by 20.7% to £26.5 million (2015: £22.0 million).
Noting that substantially all of the revenues are generated outside of the UK, the significant change in exchange rates for
USD, EUR and JPY against GBP during 2016 enhanced the revenue performance. Restating revenue at 2015 rates would
have produced revenues as follows:
Revenue by division

2016
£m

% of total
revenue2015£m% of total
revenueYear on year
growth

RTLS
Geospatial

8.1
15.3

35%
65%

6.5
15.5

30%
70%

25%
(1%)

Total revenue

23.4

100%

22.0

100%

6%

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Financial statements

Ubisense Group plc
Annual Report 2016

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

2016
£m

% of total
revenue2015£m% of total
revenueYear on year
growthSoftware
Maintenance and support
HardwareServices

3.2
1.4
3.8
18.1

12%
5%
14%
69%

1.4
1.0
3.2
16.4

6%
4%
15%
75%

129%
40%
19%
10%

Total revenue

26.5

100%

22.0

100%

21%

Maintenance and support relates to Ubisense’s RTLS and myWorld products. These revenues are recurring contracts
which can be renewed annually by our customers.
Services revenue includes installation and deployment of Ubisense’s own RTLS and myWorld products, as well as
revenues associated with third-party and non-core products.
RTLS revenue stream
During the year we increased our momentum in Europe with significant contract wins in the automotive sector, closing
a global software platform sale together with contracts for extensions and new deployments at multiple sites for a rangeof customers. The majority of our revenues relate to a small number of large deals, the timing of which is not solely
within our control and can carry a significant impact on results in a single reporting period.
Geospatial revenue stream
The Geospatial revenue stream includes both revenues directly associated with the myWorld enterprise geomobility
platform as well as the provision of services on third-party GIS databases and non-core technologies, which do notdirectly involve the myWorld platform. These revenues are typically multi-year or annually renewed managed service
and maintenance contracts, but also include consultancy and training.
Orders
Improvements in pipeline conversion resulted in a number of significant new contracts being awarded as well as
extensions to existing contracts. Total new orders for the period were £29.3 million (2015: 19.2 million). £10.8 millionof this related to RTLS (2015: £5.1 million) and £18.5 million to Geospatial (2015: £14.1 million).
Order book provides visibility over future revenues. The order book as at 31 December 2016 was £12.6 million(31 December 2015: £9.6 million), most of which will be recognised during 2017.
Gross margin
The Group gross margin increased from 35.0% in 2015 to 38.6% in 2016.
Gross margin by division is summarised as follows:
Gross margin by division

2016
£m

Gross
margin %

2015
£m

Gross
margin %Gross margin %difference

RTLS
Geospatial

4.0
6.2

44%
36%

2.8
4.9

43%
32%

1%
4%

Total gross margin

10.2

39%

7.7

35%

4%

The increase in gross margin is due to the improved sales mix, driven by the increase in software sales, together with thefull year impact of the cost reductions initiated in 2015.
The RTLS gross margin includes a £0.4 million provision against stock of the older version of the sensor and its
components due to the increased speed of adoption of the newer D4 product by customers.

17

Ubisense Group plc
Annual Report 2016

Operating expense and adjusted EBITDA
Operating expenses were £16.4 million (2015: £24.7 million) and are summarised as follows:

2016
£m

2015
£m

Other operating expense
Depreciation
Amortisation and impairment
Non-recurring items

9.9
0.3
8.4
(2.2)

12.9
0.4
7.3
4.1

Total operating expense

16.4

24.7

Other operating expenses include sales, marketing, product development, administration and share based payments
expense. The reduction is primarily due to the continued focus on managing the efficiency of our resources following
the major restructuring programme undertaken in 2015.
Non-recurring items include £1.9 million of unrealised foreign exchange gains on intercompany trading balances(2015: £nil), £0.1 million of reorganisation costs (2015: £3.2 million) and a £0.4 million gain in respect of adjustments todeferred consideration.
Adjusted EBITDA excludes amortisation and impairment, depreciation and non-recurring items and is reported as it
reflects the performance of the Group. Adjusted EBITDA was £0.3 million (2015: £5.2 million loss) with improvements toboth gross margin and a reduction to other operating expenses driving the increase.
Finance costs
Net interest payable for the period was £0.3 million (2015: £0.3 million).
Income tax
The Group has a net tax credit of £1.1 million (2015: £0.6 million) as a result of cash received of £0.6 million under the UK
R&D tax credit regime and £0.5 million of non-cash deferred tax movements. The Group does have substantial tax losses
carried forward but does not currently recognise a deferred tax asset in respect of these losses.
Earnings and dividend
Loss before tax reduced to £6.4 million (2015: £17.3 million) and loss after tax reduced to £5.3 million (2015: £16.6 million).
The adjusted diluted loss per share was 3.9 pence (2015: 25.2 pence loss per share). Reported basic and diluted loss per
share was 10.4 pence (2015: 52.3 pence).
The Board does not propose a dividend for the year.
Consolidated statement of financial position
In March 2016, the Mizuho Bank JPY 200 million facility was repaid.
In April 2016, the Group completed a share placing raising gross proceeds of £4.8 million with the placement of 19,230,000
new ordinary shares at a price of £0.25 per share primarily with existing shareholders. The net proceeds of £4.5 million fromthe placing were used by the Group to repay £0.5 million of the HSBC working capital facility and to provide additional
funding to grow the business.
In October 2016, the £8.0 million HSBC working capital facility was further restructured, becoming a £4.0 million
repayment loan with £0.75 million repayable on or before 31 December each year. £0.75 million of this facility was repaid
in December 2016.
As at 31 December 2016, the Group had a positive net cash position of £0.2 million (2015: £0.2 million net debt) being£3.5 million of cash and £3.3 million of debt.

18

Strategic report

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Financial statements

Non-current assets
Total non-current assets were £4.4 million (2015: £10.7
million).
The goodwill balance was established over 10 years ago
in the combination of Ubisense Limited and the Ten Sails
businesses. The Group undertook a detailed review ofthe historic business rationale and outlook at the point ofacquisition, together with a review of the direction of our
2 divisions following the business restructuring. Resulting
from this review, a £4.3 million goodwill provision(2015: £4.0 million relating to the Geospatial division) was
made. This year has seen a material review of the businessfollowing management changes and the restructuring of
all aspects of the business. While prospects for the businessremain good, it has proven very difficult to assess theseagainst a materially historic position. Therefore the Board
considers it appropriate to make an impairment charge in2016, reducing the goodwill intangible assets covering both
RTLS and Geospatial to £nil (2015: £4.3 million).

Ubisense Group plc
Annual Report 2016

Total assets
Total assets decreased to £22.1 million (2015: £28.2 million).
Current liabilities
Total current liabilities decreased to £9.0 million(2015: £9.8 million). Trade payables reduced to £1.5 million(2015: £2.1 million) which was partly due to reduction of
inventory purchases close to the year end.
Non-current liabilities
Total non-current assets decreased to £3.4 million(2015: £6.5 million) following the reduction in long-term debt
from £4.5 million to £2.5 million as at 31 December 2016.
Net assets
Net assets decreased to £9.8 million (2015: £12.0 million)
following the impairment of historic goodwill.
Cash and cash flow
Operating cash flow before working capital movement
was £0.3 million inflow (2015: £9.2 million outflow).

Impairment charges of £1.0m were made relating to
the acquired customer relationships resulting from theGeoplan acquisition in Japan in 2013, which has notdelivered the growth trajectory originally anticipated.

Operating cash outflows from operating activities
after adjusting for working capital were £2.0 million(2015: £3.5 million). Working capital increased at year end
with an increase in debtors by £4.0 million (2015: £6.3 million
Capitalised development costs represent the key intangible decline) due to end of year contracts being won. This
assets of the Group as this investment in products will deliver working capital decline was offset partially by a reduction
the current and future growth of the business. Capitalised in inventory of £1.8 million (2015: £0.1 million).

development costs of £1.9 million (2015: £2.5 million)
The Group had investment outflows of £2.0 million
were recognised in 2016 reflecting the smaller size of(2015: £2.8 million), which is largely made up oforganisation, and offset by amortisation of £2.6 million
expenditure on product development.
(2015: £2.6 million). The appropriateness of the assessmentof the useful life of current development projects was
Cash inflows from financing activities were £1.8 million
reviewed, but no change has been made to the current(2015: £7.8 million). This included net proceeds fromthree year amortisation period, due to the fast moving
placings of £4.5 million (2015: £9.6 million) offset bynature of the technology and recognising the early stage
repayment of borrowings and interest on those borrowings.
of the emerging IIoT market.
Current assets
Total current assets increased to £17.8 million(2015: £17.5 million).
Trade receivables net of provisions increased to£9.2 million (2015: £5.7 million) driven primarily by orders
received towards the end of the year.
Amounts recoverable on contracts totalled £2.9 million(2015: £2.1 million) which are generated primarily
from services contracts or end of period deliveries,
and invoiced in the following month or as the relevant
milestone is reached.
Hardware inventories were reduced to £1.1 million(2015: £2.8 million) as the Group improves the sales
forecasting process and management of working capital,
noting also that a £0.4 million provision was made against
older sensors and components during the year.

Non-financial key performance indicators
Non-financial key performance indicators for theGroup include:• Quantity and quality of lead generation, pipeline andconversions to deals in the sales pipeline.
• Project duration including installation service days.
• Our reaction and solution times to customer requests.
The Board regularly reviews the KPIs in respect of changes
within periods and changes between the reporting periods.
Tim Gingell
Chief Financial Officer
20 March 201719

Ubisense Group plc
Annual Report 2016

Principal risks and uncertainties

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

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Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Strategic risks
Principal risk and impact

Mitigation of risk

Growth management

 Close monitoring of business development strategy andregular reviews of the opportunity pipeline at Board
meetings.
 Development of systems and processes that can scalewith the business while maintaining good financial
management.

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

Dependence on key customers
The Group has a concentrated customer base, many of which aresubstantially larger enterprises than the Group. The Group is 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 the Group.

Technological risk
The Group operates in an industry where competitive advantage is heavily
dependent on technology. Technological development may reduce theimportance of the Group’s function in the market.

 The Group’s management performs regular reviews of
the opportunity pipeline, including critical stages tocomplete the larger deals with status reported at Board
meetings.
 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.
 Regular monitoring of the industry and advances
through participation in research forums.
 Management of product roadmap to ensurecompetitiveness.
 Continued investment in technologies that meetcustomer needs.
 Monitoring of planned R&D to ensure resources areallocated to deliver advances that are aligned to theCompany strategy.

21

Ubisense Group plc
Annual Report 2016

Principal risks and uncertainties

Operational risks
Principal risk and impact

Mitigation of risk

Customer satisfaction and retention

 Maintain regular communications with customers.
 Deal with issues quickly through a clear
escalation path.

Barriers to entry into the market are high with proof of delivery in customer
environments essential. The Group operates in a market with a small numberof significant customers and reputational damage through poor customer
satisfaction could be significant. The ability to upsell products/services andto renew re-occurring revenue contracts is dependent on maintaining a highlevel of customer service.

Intellectual property (“IP”)
The Group has a patent portfolio filed in territories worldwide. Should athird party successfully demonstrate priority over any of these rights,
it could inhibit the Group, or the Group’s customers, from selling products
in certain territories.

 The Group regularly reviews the patent status of its
intellectual property within its core territories, working
with advisers.

Failure to protect the Group’s IP may result in another party using its
proprietary technology without authorisation. There may not be adequate
protection for the IP in every country in which the Group’s products are
made available and policing unauthorised use is difficult and expensive.
Furthermore, the Group may need to take legal action to enforce its
intellectual property, to protect trade secrets or to determine the validity or
scope of the proprietary rights of others. The costs of protecting IP and thediversion of resources and management time may be substantial, and there
can be no guarantees as to the outcome of litigation.

Staff recruitment and retention
The Group’s success is substantially dependent upon recruiting, retaining
and incentivising senior management and key technically skilled employees,
the loss of whom could have an adverse impact on the performance ofthe business.

Regulatory breaches
The Group is required to comply with local laws, regulations and legislationin each jurisdiction in which it operates.
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 23 June 2016, the UK voted to leave the European union. The risks
associated with Brexit include a potential increase in the level of market
volatility, barriers to trade between the UK and the EU, and may impact theinvestment plans of our customers.
The Group is exposed to economic downturn within the markets in which
it operates.

Digital infrastructure and cyber security
Breaches of the Group’s digital security through cyber attacks or otherwise,or failure of the Group’s digital infrastructure could seriously disrupt
operations, including the provision of customer services and result in theloss or misuse of sensitive information, legal or regulatory breaches resulting
in potential liability, and reputational damage among the customer baseleading to a decline in revenues.

22 The Group has in place appropriate incentive
structures to attract and retain the calibre of employees
necessary to ensure the efficient development andmanagement of the Group.

 The Group monitors new developments taking input
from local advisers.
 The Group regularly reviews its processes to ensurethat the risk of default is minimised.

 European customers enter into contracts with local
subsidiaries of Ubisense Group plc including legal
entities based in France and Germany.
 The Group could consider moving its manufacturinglocation if trade barriers became prohibitively
expensive.
 The Group’s customer sales are spread across multiple
territories which will partially mitigate against adown-turn in any one region.
 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.
 Short and medium-term cyber security plans are
regularly reviewed by the Board.

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Financial risks
Principal risk and impact

Mitigation of risk

Future funding requirements

 Communication of medium and long-term strategy to
our investors and bankers.
 Monitoring of cash flow requirements and adjusting
activities through the business planning process.

The Group may need to raise additional funding beyond that provided by
the share placing in April 2016 and the existing HSBC facility. There is nocertainty that such fundraising will be possible or on acceptable terms. In
addition, the terms of any such financing may be dilutive to, or otherwise
adversely affect shareholders.

Bank covenants
In October 2016, the Group restructured the HSBC working capital loan
facility. As at 31 December 2016, the balance of the facility was £3.3 million.
The Group is required to meet the covenants as explained in note 17 to thefinancial statements. If the Group were unable to meet the covenants ofthe facility the debt would be repayable on demand, which would have asignificant impact on the working capital available to the business.

Taxation
The Group makes claims each year for research and development tax
credits and since it is loss-making, elects to surrender these tax credits for acash rebate with £0.6 million received during 2016. Additionally, the Group
operates globally and is exposed to international tax laws. Changes totaxation legislation such as the withdrawal/reduction of UK tax incentives
to perform R&D, would have an adverse impact on the working capital of
the Group.

Foreign exchange risk
The Group’s international operations expose it to a number of risks that
include the effect of changes in foreign currency exchange rates. A major
proportion of the Group’s receivables and payables is currently
denominated in Canadian dollars, US dollars, Euros and Japanese Yen. The
ongoing uncertainty of the impact of Brexit will continue to add to thevolatility of foreign exchange rates.

Credit risk
As the majority of the Group’s customers are large, blue-chip utilities,
telecoms and manufacturing companies, the risk of non-payment ismore likely to be related to customer satisfaction. Delays in the timingof customer payments would reduce the working capital available to
the Group.

 Improved financial performance over the past 12
months reduced the risk of breach of covenants.
 Monitoring of cash flow requirements and adjusting
activities through the business planning process.
 Monitoring of covenants and testing for actual orforecast breach throughout the year.

 The Group reviews local compliance and upcomingchanges to legislation with its advisers and continues to
update forecasts accordingly.

 The Group relies on a partial natural hedge of Canadiandollar, US dollar, Euro and Japanese Yen receivables
being in the same currency as the local operation’s
payables.
 The Group’s working capital is forecast and monitored
in the local currency of each subsidiary allowing theforeign currency exposure across the Group to bereviewed.
 Maintain regular communications with customers.
 Credit exposure by customer is reviewed regularly by
the Executive management team and the Board.
Provisions are made when there are circumstances orevidence of a likely reduction in the recoverability of thereceivable.

Risks reported in prior year which are no longer considered to be principal risks
Reliance on third parties, including manufacturers was identified as a principal risk in prior periods. While the risks
around procurement continue to be monitored, management no longer believe this to be a principal risk due to thepotential to source key equipment and materials from alternative suppliers.
The Strategic report was approved by the Board of Directors on 20 March 2017 and signed on its behalf by:
Tim Gingell
Chief Financial Officer
20 March 201723

Ubisense Group plc
Annual Report 2016

Board of Directors

Richard Petti

Chief Executive Officer

Peter Harverson
Executive Chairman

Peter has held a number of senior international sales andmarketing roles in the IT industry including Regional
Director, Intel Corporation and Vice President Europe,
Cadence Design Systems. In 1995 he joined Sun
Microsystems where he was responsible for thedevelopment of the company’s European Corporate
Accounts programme. Subsequently he became Director ofServices Sales – EMEA with a charter to develop new areasof business, including professional services. Peter retired
from Sun Microsystems in December 2004. He was
Non-Executive Chairman of Aspex Semiconductors Limited,sold to Ericsson AB in July 2012, and most recently, Senior
Non-Executive Director at Brady plc. Currently, Peter is a
Non-Executive Director CRFS Limited, and Non-Executive
Chairman of enModus Limited.

Richard Petti brings 25 years of experience in developing
market leading businesses for automotive, financial andindustrial customers. Richard has first-hand experience ofgrowing revenues and developing profitable businesses
serving automotive, financial and industrial customers.
He joins Ubisense from his role as CEO of Asset Control, aworldwide supplier of financial data management systems
serving some of the world’s leading financial organisations.
Prior to Asset Control, Richard was COO at WEMA, a leading
provider of diesel and AdBlue sensors within the global
commercial vehicle market. During his career, Richard has
also held senior management and sales leadership roles atOrange Business Services and SunGard Data Systems.

Tim Gingell

Chief Financial Officer and Company Secretary
Tim has over 25 years of commercial and financial
experience across software, wireless and telecoms
industries. Tim qualified as a Chartered Accountant with
Deloitte in London and most recently was CFO or Director
for a number of IBM’s acquired companies having joined IBM
when they acquired i2 from Silver Lake Sumeru. Prior to that
Tim led the finance team at the venture capital backed
company The Cloud Networks and previously spent 10 years
at MFS / Worldcom in commercial roles.

24

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Dr. Robert Sansom

Paul Taylor

An active angel investor and mentor to start-ups, Robert
is founder of the Cambridge Angels, a group of seasoned
technology and bio-technology entrepreneurs who
invest in and mentor start-ups and growth businesses.
Previously, Robert was co-founder, CTO and Director of
FORE Systems, Inc., a leading provider of networking
equipment. FORE was listed on NASDAQ in 1994 andsubsequently acquired by Marconi in 1999. Additionally,
Robert served as the Chief Technology Officer at Marconi
until 2000. Robert is a member of the Board of Directorsof CCS Limited, CRFS Limited, Featurespace Limited, Focal
Point Positioning Limited and Netronome Systems, Inc.
He was elected as a Fellow of the Royal Academy ofEngineering in 2010 and is a trustee of Camfed.

Paul is a Fellow of the Association of Chartered Certified
Accountants. He joined AVEVA Group Plc in 1989 where he
was heavily involved in the flotation process and responsiblefor UK accounting and the development of AVEVA’s overseas
subsidiaries, including adherence to group standards. Between
1998 and 2001, Paul was also UK Director of Human Resources
and was appointed to the position of Finance Director andCompany Secretary of AVEVA Group plc on 1 March 2001. Paul
was a recipient of the Finance Director of the Year award andFTSE250 Finance director of the year in 2008. Before joining
AVEVA, Paul trained within the accountancy profession before
moving to Philips Telecommunications (UK) where he was
responsible for the management accounts of its Public Sectors
division. Paul is a Non-Executive Director of Escher Group
Holdings plc and Digital Barriers plc.

Ian Kershaw

Oliver Scott

Ian has over 30 years’ experience in the automotive,
manufacturing and power industries. He has global
responsibility for both transaction support and operational
performance improvement within Ricardo’s strategic
consulting division. Ian has held management positions
with Caterpillar, Rolls-Royce & Bentley Motor Cars andArthur D. Little.

Oliver co-founded Kestrel in 2009 where he is a partner andfund manager. He has spent over 20 years advising smaller
quoted and unquoted companies and prior to Kestrel
was a director of KBC Peel Hunt Corporate Finance. He isa non-executive director of Ubisense Group plc as wellchairman of ZF Acquisitions Limited and ClearSpeed
Technology Limited.

Non-Executive Director

Non-Executive Director

Non-Executive Director

Non-Executive Director

25

Ubisense Group plc
Annual Report 2016

Corporate governance report

Although not required to do so by the AIM Listing Rules, the Directors have chosen to provide selected corporate
governance disclosures with this report, which they consider to be valuable to the reader.
The Directors believe that effective corporate governance, appropriate to the Group considering its size and stage ofdevelopment, will assist in the delivery of corporate strategy, the generation of shareholder value and the safeguardingof shareholders’ long-term interests. We do not comply with the UK Corporate Governance Code September 2014(“the Code”). However, the Directors are committed, wherever it is reasonably practicable, to ensure that the Group is
managed in accordance with the principles set out in the Code.
Composition of the Board
The Board comprises the Executive Chairman, four Non-Executive Directors and two Executive Directors. Biographicaldetails of all members of the Board are set out on pages 24 and 25. The Chairman moved from a Non-Executive position
to Executive on the departure of the previous CEO. With the appointment of a new CEO, the Chairman expects to resume
a Non-Executive position again in the first half of 2017.
Since the flotation of the Company in 2011, no equity-based incentives have been granted to Non-Executive Directors
and there are no such plans for any such grants in the future. At the end of the year, all Non-Executive Directors except
Oliver Scott held shares directly in Ubisense Group plc. Oliver Scott is a partner and founder of Kestrel Partners who havea significant interest in Ubisense Group plc.
The holding of shares and/or share options by Non-Executive Directors could, among other things, be relevant indetermining whether a Non-Executive Director is independent. Therefore, after detailed consideration, the Board has
determined that Paul Taylor and Ian Kershaw are the only independent Non-Executive Directors within the meaning of
the Code, noting that their shareholdings in the Group are small. Paul Taylor is recognised by the board as the Senior
Independent Director.
The roles of Executive Chairman and Chief Executive Officer are vested in separate individuals, each with a clear
allocation of accountability and responsibility. The Executive Chairman has prime responsibility for running the Boardand the Chief Executive Officer has executive responsibilities for the Group’s strategic development, operations andresults. The structure of the Board and the integrity of each Director ensures that there is no one individual or group
dominating the decision making process.
The role of the Board
The Board holds full meetings at least ten times per year, with attendance required in person whenever possible.
The principal matters that it considers are as follows:• reviewing operating and financial performance;• ensuring that appropriate management development and succession plans are in place;• determining corporate strategy, including consideration and approval of the Company’s annual strategy review;• establishing dividend policy;• approving and accepting all new committed funding facilities;• approving and accepting major changes in the capital structure of the Company;• reviewing and approving formal treasury policies relating to funding, liquidity, transactional foreign exchange
and interest rate risk management;• reviewing the health and safety and environmental performance of the Company;• approving corporate acquisitions, mergers, divestments, joint ventures and major capital expenditure; and• receiving, reviewing and approving recommendations by the designated committee on matters related to audit,
nominations and remuneration.
The Board is supplied with information in a timely manner and in a form and of a quality appropriate to enable it todischarge its duties. The Board has a policy to set out which matters are reserved for the decision of the Board and thoseto which the Executive Directors need not refer for approval. This policy also requires that all recommendations anddecisions by a Board Committee are approved or ratified by the Board.

26

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Summary of Board meeting attendance in 2016
The Board is expected to meet regularly on a formal basis at least 10 times a year. 18 Board meetings were held in 2016.
Attendance at the meetings was as follows:
Total meetings
attended

Tim Gingell
Richard GreenPeter Harverson
Ian Kershaw
Oliver Scott
Robert Sansom
Paul Taylor

5 (5)
9 (9)
18 (18)16 (18)8 (8)15 (18)17 (18)Figures in brackets denote the maximum number of meetings that could have been attended.
Board Committees
The Board has established three Committees: the Audit Committee, the Nomination Committee and the Remuneration
Committee.
Summary of Committee membership
The Committee membership as at 31 December 2016, was as follows;
Peter Harverson
Ian Kershaw
Oliver Scott
Robert Sansom
Paul Taylor

Audit Committee

Nomination
Committee

Remuneration
Committee

–
Yes
–
–
Chair

Yes
–
–
Chair
Yes

–
Chair
Yes
–
Yes

On 1 January 2016, Peter Harverson became Non-Executive Chairman and Ian Kershaw became Chair of theRemuneration Committee. Oliver Scott joined the Remuneration Committee on 29 June 2016.
Summary of Committee meeting attendancePeter Harverson
Ian Kershaw
Oliver Scott
Robert Sansom
Paul Taylor

Audit
Committee

Nomination
Committee

Remuneration
Committee

–
4 (4)
–
–
4 (4)

3 (3)
–
–
3 (3)
3 (3)

–
3 (3)
2 (2)
–
3 (3)

Figures in brackets denote the maximum number of meetings that could have been attended.
The role of each Committee is described in more detail below:

27

Ubisense Group plc
Annual Report 2016

Corporate governance report continued

Audit Committee
The Audit Committee has responsibility for the following matters:• Financial reporting• Review of all financial reports released to the market and shareholders.
• Review of significant reporting issues and key judgements.
• Review of accounting policies selected and their application.
• External audit• Recommending appointment, re-appointment or removal of the external auditors.
• Overseeing the Group’s relationship with the external auditors, including assessing their independence.
• Agreeing the annual audit plan and reviewing the finding and effectiveness of the audit.
• Whistleblowing• Review of the Group’s whistleblowing policies and procedures.
As part of its procedures, the Committee discusses the interim and annual financial statements with the external auditors.
When appropriate, non-Committee members are invited to attend. During the period under review, the Committee has
met four times on a formal basis. The Committee is expected to meet formally four times a year.
Nomination Committee
The Nomination Committee has responsibility for the following matters:• Reviewing the size and composition of the Board to ensure that an appropriate mix of skills, knowledge andexperience is achieved.
• Succession planning for the Board and other key management roles.
• Identifying and recommending to the Board candidates to fill Board vacancies.
• Ensuring Non-Executive Directors are able to make the necessary time commitments to fulfil their role.
• Ensuring Non-Executive Directors receive letters of appointment, detailing their responsibilities.
• Making recommendations to the Board about the appointment, removal or continuation in office of any Director.
During the period under review, the Committee has met three times on a formal basis. The Committee is expected tomeet formally twice a year.
Remuneration Committee
The Remuneration Committee has responsibility for the following matters:• Agreeing the framework for the Group’s remuneration policy for Directors and key management personnel,
including determining individual remuneration policies for Executive Directors.
• Approving the design and targets for short and long term incentive plans.
• Determining the policy and scope of pension arrangements.
• Ensuring contractual terms and payments made on termination are fair to both the individual and the Group.
• Agreeing the policy for authorising expense claims by the Chairman and Chief Executive.
The Group has a formal and transparent procedure for developing policy on Directors’ remuneration. No Director isinvolved in deciding his own remuneration.
The Committee aims to set levels of remuneration for Executive Directors that are sufficient to attract, retain andmotivate directors of the quality required, without paying more than necessary, and that are appropriate for the size andcomplexity of the Group. It aims to see that a significant proportion of each Executive Director’s remuneration package isperformance-related.
During the period under review, the Committee has met three times on a formal basis. The Committee is expected tomeet formally twice a year.

28Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Internal control
The Board of Directors has overall responsibility for the Group’s system of internal control and for reviewing its
effectiveness. The risk managing process and systems of internal control are designed to manage rather than eliminate
the risk of failure to achieve the Group’s objectives. It should be recognised that such systems can only provide reasonable
but not absolute assurance against material misstatement or loss. The Directors acknowledge their responsibilities for theGroup’s system of internal control and for reviewing its effectiveness. The principal features of the system of internalfinancial controls are:• Budgetary control over all operations, measuring performance against pre-determined targets on at least amonthly basis.
• Regular forecasting and reviews covering trading performance, assets, liabilities, cash flows and bank covenants.
• Delegated limits of authority covering key financial commitments including capital expenditure and recruitment.
• Identification and management of key business risks.
The Board continually reviews the effectiveness of other internal controls, including financial, operational, compliance
controls and risk management.

29

Ubisense Group plc
Annual Report 2016

Directors’ report

The Directors present their annual report on the affairs of the Group together with the audited financial statements forthe year to 31 December 2016. The Corporate Governance Statement set out on pages 26 to 29 forms part of this report.
Incorporation and constitution
Ubisense Group plc is domiciled in England and incorporated in England and Wales under Company Number 05589712.
Ubisense Group plc’s Articles of Association are available on the Group’s website at www.ubisense.net.
Capital structure
The Company has one class of ordinary share of two pence each which carries no right to fixed income. Each sharecarries the right to one vote at general meetings of the Company.
Details of the share capital of the Company, including shares issued during the year, can be found in note 19 of theconsolidated financial statements.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by thegeneral provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements
between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.
Details of employee share schemes are set out in note 20.
No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.
With regard to the appointment and replacement of directors, the Company is governed by its Articles of Association, theCompanies Act and related legislation. The Articles themselves may be amended by special resolution of the shareholders.
Substantial shareholdings
On 20 March 2017, the Company had been notified of the following significant interests in its ordinary share capital:

Kestrel Partners
Columbia Threadneedle Investments
Robert Sansom
NFU Mutual Insurance Society Ltd
Henderson Global Investors
Living Bridge
Ruffer LLP
Richard Green

Total holding
Number% of issued sharecapital15,702,993
9,799,163
4,985,899
3,376,490
2,669,021
2,535,594
1,934,671
1,728,845

28.07%
17.54%
8.93%
6.05%
4.78%
4.54%
3.46%
3.10%

Directors
The Directors serving at 31 December 2016 were as follows:
Peter Harverson
Riccardo (Richard) Petti
Timothy (Tim) Gingell
Ian Kershaw
Robert Sansom
Oliver Scott
Paul Taylor
Board changes
On 17 May 2016 Richard Green resigned from the Board. On the same day Oliver Scott was appointed as
Non-Executive Director.
On 9 August 2016 Tim Gingell, who had been the Interim Chief Financial Officer and Company Secretary since
27 July 2015, was appointed as the permanent Chief Financial Officer and made an Executive Director to the Company.
On 14 December 2016 Richard Petti was appointed as the Chief Executive Officer.
30

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Directors’ interests - shares
Directors’ interests in the ordinary shares of Ubisense Group plc at 31 December 2016 were as follows:
2016
Number

2015
NumberPeter Harverson
Ian Kershaw
Robert Sansom
Tim Gingell
Paul Taylor

145,161
2,000
4,985,899
40,000113,334

65,161
2,000
2,985,899–
33,334

Total

5,286,394

3,086,394

Oliver Scott has no direct interest in the ordinary shares of Ubisense Group plc but is a partner with the significant
shareholder Kestrel.
There has been no change in the interests set out above between 31 December 2016 and 20 March 2017.
Directors’ interests
Details of Directors’ remuneration and share options are provided in the Directors’ remuneration report on pages 32 to 34.
There are no loans to or from the Directors.
Directors’ indemnity arrangements
The Group has made qualifying third-party indemnity provisions for the benefit of its Directors which were made during
the year and remain in force at the date of this report.
The Group has purchased and maintained throughout the year Directors’ & Officers’ liability insurance in respect of itself
and its Directors.
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
No adjusting or significant non-adjusting events have occurred between the 31 December reporting date and thedate of authorisation.
Dividends
The Directors do not recommend payment of a dividend for the year (2015: £nil).
AuditorA resolution to re-appoint Grant Thornton UK LLP as the Group’s auditor will be proposed at the forthcoming
Annual General Meeting. In accordance with normal practice, the Directors will be authorised to determine the
Auditor’s remuneration.
Approved by the Board of Directors and signed on behalf of the Board
Tim Gingell
Chief Financial Officer and Company Secretary
20 March 2017
Ubisense Group plc
Registered number: 05589712

31

Ubisense Group plc
Annual Report 2016

Directors’ remuneration report

Introduction
Ubisense Group plc has elected voluntarily to prepare a Directors’ remuneration report. As a company admitted to
trading on the AIM, the Company is not required to provide a formal remuneration report and this is provided to give
greater transparency of the Group’s remuneration policy.
This report is on the activities of the Remuneration Committee for the period to 31 December 2016. It sets out the
remuneration policy and remuneration details for the Executive and Non-Executive Directors of the Company.
Composition of the Remuneration Committee
The Remuneration Committee comprises of Ian Kershaw, Paul Taylor and Oliver Scott who are Non-Executive Directorsof the Company.
The Committee advises the Board on remuneration policy and defines the remuneration and terms and conditions of
employment of the Executive Directors. In addition, it reviews the remuneration policy for the Group as a whole andoversees and approves the Group’s share incentive plans for all participants.
Remuneration practice overview
The Committee believes in pay for performance and that Executive Directors’ remuneration should be designed topromote the long-term success of the Group.
When reviewing and setting remuneration policy, the Committee benchmarks remuneration against quoted companiesof a similar size and considers a range of factors including the Group’s strategy and circumstances, the prevailing
economic environment and best practice guidelines. The policy must also enable Ubisense Group plc to attract, retain
and motivate the talent it needs to ensure success.
The remuneration of the Non-Executive Directors is determined by the Executive Directors, the Senior Independent
Director and the Chairman, rather than the Committee.
Remuneration of Executive Directors
The Executive Directors are entitled to receive base salary, benefits, employer pension contributions and to participate inshare 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.
The appointment of the Executive Chairman is terminable on three months’ notice by either party.
Base salary
Base salaries are reviewed annually and adjustments made if required to reflect Group performance, individual
performance and market rates. Remuneration is through the Group’s flexible benefits scheme under which theindividuals can elect to switch basic salary into pension contributions and other benefits.
Benefits
The Group offers benefits to all employees including life assurance and healthcare solutions.
Bonuses
Executive Directors are eligible to participate in an annual bonus programme, which is calculated by reference to theannual financial targets of operating cash flow as defined by the bank covenant metric with positive cash flow after
accounting for the bonus being a minimum hurdle. Up to 20% of the bonus is payable against goal driven objectives andthe remainder paid on an agreed scale that increases depending on the operating cash flow generated after accounting
for bonuses.
Pensions
The Group operates a defined contribution personal pension scheme. Under the scheme rules the Group pays a matched
contribution of up to 5% of base salary as adjusted for current pension legislation. The scheme is open to Executive
Directors and employees.

32Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Remuneration of Non-Executive Directors
The Non-Executive Directors have entered into letters of appointment with the Company. The appointments are
terminable on one month’s notice by either party. The Non-Executive Directors do not participate in the Group’s
pension scheme.
Directors’ remuneration
The Directors received the following remuneration during the year:

Basic salary£’000

Benefits in
kind
£’000

Performance
payments£’000

Termination
benefits£’000

2016 total
excludingpensions£’000

Pensions
£’000

Total
2016
£’000

Total
2015
£’000

Richard Green1
Tim Gingell2
Peter Harverson3
Richard Petti4
Robert Parker5

84
59
188
7
–

–
1
–
–
–

–
5
–
–
–

149
–
–
–
–

233
65
188
7
–

9
6
7
–
–

242
71
195
7
–

203
–
94
–
220

Executive Directors

338

1

5

149

493

22

515

517

Andrew Hopper
Robert Sansom7
Paul Taylor8
Oliver Scott9
Ian Kershaw

–
–
43
12
25

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
43
12
25

–
–
–
–
–

–
–
43
12
25

30
–
51
–
20

Non-Exec Directors

80

–

–

–

80

–

80

101

Total

418

1

5

149

573

22

595

618

Director

1
2
3

4
5
6
7
8
9

6

Richard Green resigned from the Board on 17 May 2016.
Remuneration for Tim Gingell is included from the date of his appointment as a director on 9th August 2016. His basic salary is £155,000 with a performance
related bonus of £50,000. Performance payments represent the reward for achievement of goals agreed pre-appointment.
Included within Peter Harverson’s reported base salary is £12,000 (2015: £25,000) for Directors fees paid in the role of Non-Executive Chairman for the period to18th May 2016. From 18th May 2016 the salary while acting as Executive Chairman was £185,000 (2015: £Nil). Additionally, fees of £68,000 (2015: £69,000) were
paid during the year for other duties requested by the Board as Non-Executive Chairman.
Remuneration for Richard Petti is included from the date of his appointment as CEO on 14th December 2016. His basic salary is £225,000 with a performance
related bonus of £125,000.
Robert Parker resigned from the Board on 30 June 2015.
Andy Hopper resigned from the Board on 31 December 2015.
Robert Sansom has waived his entitlement to annual remuneration of £25,000 (2015: £20,000 waived).
Included for Paul Taylor is £25,000 (2015: £25,000) for Director’s fees and £18,000 (2015: £26,000) for other duties requested by the Board.
Oliver Scott was appointed Non-Executive Director of the Company on 17 May 2016. The annual remuneration of the appointment is £20,000.

33

Ubisense Group plc
Annual Report 2016

Directors’ remuneration report continued

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

Vests
Years

ExpiresYear

Exercise
price£AwardsOutstandingat 1 January
2016
NumberRichard Green2011 2012-14
2012 2013-15
2013 2014-16
2014 2015-17

2021
2022
2023
2024

1.050
2.125
2.055
2.250

100,000
60,00060,00075,000Peter Harverson

2010 2011-13
2016
2019

2020
2026

0.140
0.020

Director

Richard Petti
Tim Gingell
Total

34

Award
date
Years

2016
2016

2019
2019

2026
2026

0.020
0.020

Lapsed during
the year
NumberAwardsoutstanding at
31 December
2016
NumberAwardsexercisable at
31 December
2016
Number––––(100,000)(60,000)(60,000)(75,000)

–
–
–
–

–
–
–
–

Granted during
the year
NumberExercisedduring theyear
Number––––295,000––(295,000)––

91,333––850,000––––

91,333850,000

91,333–

91,333850,000––

941,333

91,333––1,600,000
700,000––––

1,600,000
700,000––

386,333

3,150,000–(295,000)

3,241,333

91,333

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Directors’ responsibilities statement

The Directors are responsible for preparing the Directors’ report, the Strategic report and the financial statements inaccordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
are required to prepare the consolidated financial statements in accordance with International Financial ReportingStandards (IFRSs) as adopted by the European Union and have elected to prepare the parent company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom AccountingStandards and applicable laws). Under company law the directors must not approve the financial statements unless theygive a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the
consolidated financial statements;• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed
and explained in the Company financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company andenable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible forsafeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Disclosure of information to auditor
Each of the persons who are Directors at the time when this Directors’ report is approved has confirmed that:• so far as that Director is aware, there is no relevant audit information of which the Company’s auditors are unaware;and• that Director has taken all the steps that ought to have been taken as a Director in order to be aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

35

Ubisense Group plc
Annual Report 2016

Independent auditor’s reportto the members of Ubisense Group plc

We have audited the Group financial statements of Ubisense Group plc for the year ended 31 December 2016 which
comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated
statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash
flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the company’s members thosematters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as abody, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 35, the directors are responsible
for the preparation of the group financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website atwww.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the group financial statements:• give a true and fair view of the state of the group’s affairs as at 31 December 2016 and of its loss for the year
then ended;• have been properly prepared in accordance with IFRSs as adopted by the European Union;• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:• the information given in the Strategic Report and Directors’ Report for the financial year for which the group financial
statements are prepared is consistent with the group financial statements.
• the Strategic Report and Directors’ Report has been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic Report and Directors’ Report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report toyou if, in our opinion:• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the parent company financial statements of Ubisense Group plc for the year ended
31 December 2016.
Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
20 March 201736

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Consolidated income statement
For the year ended 31 December 2016

2016
£’000

2015
£’000

26,523(16,280)

21,982(14,290)

Gross profit
Operating expenses

10,243(16,408)

7,692(24,671)

Operating loss

(6,165)(16,979)

Analysed as:
Gross profit
Other operating expenses

10,243(9,919)

7,692(12,914)324(345)(1,223)(7,143)
2,222(5,222)(388)(309)(6,985)(4,075)(6,165)(16,979)

Notes

Revenue
Cost of revenues

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

5

12
11
11
8

Operating loss
Finance income
Finance costs

7
7

44
(323)

12
(301)

Loss before tax
Income tax

9(6,444)
1,136(17,268)
632

Loss for the year

(5,308)(16,636)

Loss attributable to:Equity shareholders of the Company
Non-controlling interest(5,196)(112)(16,569)(67)(5,308)(16,636)(10.4p)(10.4p)(52.3p)(52.3p)Loss per share attributable to the equity shareholders of the parent (pence)
Basic
DilutedThe notes on pages 42 to 67 are an integral part of these consolidated financial statements.

37

Ubisense Group plc
Annual Report 2016

Consolidated statement of comprehensive income
For the year ended 31 December 2016

2016
£’000

2015
£’000

Loss for the year
Other comprehensive income:Items that may be reclassified subsequently to profit and loss
Exchange difference on retranslation of net assets and results of overseas subsidiaries(5,308)(16,636)(1,357)

139

Total comprehensive loss for the year

(6,665)(16,497)

Attributable to:– Equity shareholders of the Company– Non-controlling interest(6,682)
17(16,423)(74)

Total comprehensive loss for the year

(6,665)(16,497)

The notes on pages 42 to 67 are an integral part of these consolidated financial statements.

38

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Consolidated statement of changes in equity
For the year ended 31 December 2016

Attributable to equity shareholders of the parent company

Balance at 1 January 2015
Loss for the year
Exchange difference on retranslationof net assets and results of overseas
subsidiaries

Sharecapital
£’000

Share
premium£’000

Share based
payment
reserve£’000

Translation
reserve£’000

Retainedearnings
£’000

501

28,051

821

(685)

–

–

–

–

–

Sub-total£’000

Noncontrollinginterest
£’000

Total
£’000

(10,427)

18,261

530

18,791–(16,569)(16,569)(67)(16,636)

–

146

–

146

(7)

139

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

–

–

–

146

(16,569)(16,423)(74)(16,497)

–
231
–
–

–
–
9,845
(474)

54
–
–
–

–
–
–
–

–
–
–
–

54
231
9,845
(474)

–
–
–
–

54
231
9,845
(474)

Transactions with owners

231

9,371

54

–

–

9,656

–

9,656

Balance at 31 December 2015

732

37,422875(539)(26,996)

11,494456

11,950––––(5,196)(5,196)(112)(5,308)–––(1,486)–(1,486)129(1,357)

Loss for the year
Exchange difference on retranslationof net assets and results of overseas
subsidiaries
Total comprehensive loss forthe year
Reserve credit for equity-settled
share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs

–

–

–

(1,486)(5,196)(6,682)

17(6,665)

–
386
–
–

–
–
4,427
(295)

(52)
–
–
–

–
–
–
–

–
–
–
–

(52)
386
4,427
(295)

–
–
–
–

(52)
386
4,427
(295)

Transactions with owners

386

4,132

(52)

–

–

4,466

–

4,466

Balance at 31 December 2016

1,118

41,554823(2,025)(32,192)

9,278

473

9,751

The notes on pages 42 to 67 are an integral part of these consolidated financial statements.

39

Ubisense Group plc
Annual Report 2016

Consolidated statement of financial position
For the year ended 31 December 2016

Notes

2016
£’000

2015
£’000

11
12

3,616
745

9,786
943

4,361

10,7291,064
13,221
3,498

2,815
9,277
5,392

Total current assets

17,783

17,484

Total assets

22,14428,213(8,239)(750)(8,629)(1,123)(8,989)(9,752)(683)(42)(2,500)(179)(1,157)(203)(4,500)(651)

Total non-current liabilities(3,404)(6,511)

Total liabilities(12,393)(16,263)

9,751

11,9501,118
41,554823(2,025)(32,192)732
37,422875(539)(26,996)

9,278

11,494

473

456

9,751

11,950AssetsNon-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

13
14
15

Liabilities
Current liabilities
Trade and other payables
Bank loans

16
17

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

9
17
18

Net assets
Equity attributable to owners of the parent company
Ordinary share capital
Share premium
Share based payment reserve
Translation reserves
Retained earnings

19
19

Equity attributable to shareholders of the Company
Non-controlling interests
Total equity
The notes on pages 42 to 67 are an integral part of these consolidated financial statements.

The financial statements were approved by the Board of Directors on 20 March 2017 and signed on its behalf by:

Richard Petti,
Chief Executive Officer		
Ubisense Group plc
Registered Number: 05589712

40

Tim Gingell,
Chief Financial Officer

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Consolidated statement of cash flows
For the year ended 31 December 2016

2016
£’000

2015
£’000

(6,444)(17,268)

345
8,366
(355)
24
(1,877)
(20)
(44)
323

388
7,294
–
–
–
54
(12)
301

Operating cash flows before working capital movement
Change in inventories
Change in receivables
Change in payables

318
1,751
(3,941)(743)(9,243)66
6,264(1,010)Cash used in operations before tax(2,615)(3,923)579

436

Net cash flows from operating activities(2,036)(3,487)

Cash flows from investing activities
Disposal of subsidiaries, net of cash disposed
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Expenditure on intangible assets
Interest received

–
(26)
–
(2,059)
44

(3)
(196)
4
(2,652)
12

Net cash flows from investing activities(2,041)(2,835)

Cash flows from financing activities
Proceeds of borrowings
Repayment of borrowings
Interest paid
Proceeds from the issue of ordinary share capital–(2,373)
(352)
4,518

522
(2,000)
(277)
9,602

Notes

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

8, 12
8, 11
8
8
20
7
7

Net income taxes received

Net cash flows from financing activities

1,793

7,847

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
Exchange differences on cash and cash equivalents(2,284)
5,392
390

1,525
3,697
170

3,498

5,392

Cash and cash equivalents at end of period

15

The notes on pages 42 to 67 are an integral part of these consolidated financial statements.

41

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Notes to the consolidated financial statements

1 General information
Ubisense Group plc (“the Company”) and its subsidiaries (together, “the Group”) deliver Enterprise Location Intelligencesolutions that enable customers with complex operations to track the precise location of assets across their business inreal-time and is proven to deliver efficiencies, increase flexibility, quality, and reduce costs. We offer in-depth knowledgeof the sectors in which we operate and have long-standing relationships with many of our customers across target
markets including automotive, aerospace, logistics, communications and utilities.
The Company is a public limited company which is listed on the Alternative Investment Market (“AIM”) of the London
Stock Exchange (UBI) and is incorporated and domiciled in the United Kingdom. The value of Ubisense Group plc
shares, as quoted on the London Stock Exchange at 31 December 2016, was 41.5 pence per share (31 December 2015:
43.0 pence).
The Company was incorporated as Ubisense Trading Limited on 11 October 2005 and changed its name to UbisenseGroup plc on 31 May 2011 ahead of its initial public offering and listing on AIM on 22 June 2011. The address of its
registered office is St. Andrew’s House, St. Andrew’s Road, Chesterton, Cambridge, CB4 1DL.
The Group has its main operations in the UK, USA, Canada, Germany, France and Japan and sells mainly in North
America, Europe and Asia. The Group legally consists of ten companies headed by Ubisense Group plc. A full list of
subsidiaries is given in note 22 of the financial statements.
These consolidated financial statements have been approved for issue by the Board of Directors on 20 March 2017.
2 New accounting standards
For the purposes of the preparation of these consolidated financial statements, the Group has applied all standards
and interpretations as adopted in the European Union that are effective for accounting periods beginning on or after
1 January 2016.
The accounting policies used are the same as set out in detail in the Report and Accounts 2015 and have been appliedconsistently to all periods presented in these financial statements. No new standards or amendments or interpretations
to existing standards that became effective during the year were material to the Group. No new standards, amendments
or interpretations to existing standards having an impact on these financial statements that have been published and thatare mandatory for the Group’s accounting periods beginning on or after 1 January 2017, or later periods, have been
adopted early.
Standards and interpretations not yet applied by the GroupThe following new Standards and Interpretations, which are yet to become mandatory, have not been applied in theGroup’s financial statements.
• IFRS 9 ‘Financial Instruments’ (effective date financial year commencing on/after 1 January 2018)• IFRS 15 ‘Revenue from contracts with customers’ (effective date financial year commencing on/after 1 January 2018)• IFRS 16 ‘Leases’ (effective date financial year commencing on/after 1 January 2019)
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction
Contracts’, and several revenue-related Interpretations. The new standard establishes a control-based revenue
recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including
how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, andother common complexities. Management intends to adopt the Standard retrospectively, recognising the cumulative
effect of initially applying this Standard as an adjustment to the opening balance of retained earnings on the initial date ofapplication. Under this method, IFRS 15 will only be applied to contracts that are incomplete as at 1 January 2018.
Management has started to assess the impact of the new standard. The Group enters into arrangements which havemultiple performance obligations which may include hardware sales, software sales, maintenance & support, and service
revenues. Therefore, the application of IFRS 15 will impact the Financial Statements.
IFRS 16 will replace IAS 17 and three related interpretations. Leases will be recorded on the statement of financial positionin the form of a right-of-use asset and a lease liability. Management is yet to fully assess the impact of the Standard andtherefore is unable to provide quantified information.
The Directors are of the opinion, that the application of IFRS 9 is unlikely to have a significant impact, other thanincreased disclosures, on the Financial Statements of the Group.
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3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of Ubisense Group plc have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European Union (IFRSs as adopted by the EU) and theCompanies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been
prepared under the historical cost convention. The consolidated financial statements are presented in GBP and all values
are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.
The preparation of these financial statements in conformity with IFRS requires the Directors to make certain criticalaccounting estimates and judgements that affect the amounts reported in the financial statements and accompanying
notes. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements, are disclosed in note 4.
Going concern basis
The Group’s business activities, together with factors likely to affect its future development, performance and position
are set out in the Strategic Report and Directors’ Report on pages 1 to 31.
In determining the basis for preparing the Consolidated Financial Statements, the Directors are required to consider
whether the Company can continue in operational existence for the foreseeable future, being a period of not less thantwelve months from the date of the approval of the Consolidated Financial Statements. In reaching their conclusion theyrecognise that the Group meets its day-to-day working capital requirements through its bank facilities.
The Group had cash of £3.5 million at the balance sheet date. As disclosed in note 17, the Group restructured its working
capital facilities in October 2016, becoming a £4.0 million repayment loan with covenants requiring £0.75 million
repayable on or before 31 December each year, £nil operating cash flow before working capital adjustments in 2017,and £1 million operating cash flow in future years. The balance of this facility as at 31 December 2016 was £3.25 million.
Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis.
The forecasts include assumptions regarding the opportunity funnel from both existing and new clients, growth plans,risks and mitigating actions. In particular, operating cashflow and profitability are highly sensitive to revenue mix and thepositive contribution of continuing growth in software sales.
In reaching their going concern conclusion, the Directors have considered the following points:• It is not anticipated that the Group will breach the covenants of the existing working capital facility which aredescribed in note 17.
• The Group will be in a position to meet the next repayment instalment of £0.75 million on or before 31 December 2017.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, support
the conclusion that there is a reasonable expectation that the Company and the Group have adequate resources tocontinue in operational existence for the foreseeable future, a period of not less than twelve months from the date ofthis report. The Group, therefore, continues to adopt the going concern basis in preparing the Consolidated
Financial Statements.
Consolidation
The Group financial statements include the results, financial position and cash flows of the Company and all of its
subsidiary undertakings. Subsidiary undertakings are those entities controlled directly or indirectly by the Company.
Control arises when the Company has the power to govern the financial and operating policies of an entity, uses thispower to affect the returns from that entity and has exposure to variable returns from its investment in the entity.
Co-terminus financial statements of the subsidiaries are prepared for the same reporting year as the Company, using
consistent accounting policies. Businesses acquired or disposed during the year are accounted for using acquisition
method principles from, or up to, the date control passed. Intra-group transactions and balances are eliminated on
consolidation. All subsidiaries use uniform accounting policies for like transactions and other events andsimilar circumstances.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s
equity therein. Non-controlling interests consist of the amount of those interests at the date of the original businesscombination and the non-controlling interest’s share of changes in equity since the date of combination.

43

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Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Foreign currencies(a) Functional and presentation currency
The functional currency of each Group entity is the currency of the primary economic environment in which each entity
operates. The consolidated financial statements are presented in GBP.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency of each Group entity using the exchange rates
prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at
rates ruling at the period end date. Such exchange differences are included in the income statement within “operating
expenses”. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates as at the dates of the initial transactions.
(c) Consolidation
For the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities(none of which have the currency of a hyperinflationary economy) that have a functional currency other than GBP aretranslated into GBP as follows:• assets and liabilities for each statement of financial position are translated at the exchange rate at the period end date;• income and expenses for each income statement are translated at the exchange rate ruling at the time of each period
the transaction occurred; and• all resulting exchange differences are recognised in other comprehensive income.
Segment reporting
IFRS 8 requires a “management approach” under which information in the financial statements is presented on the same
basis as that used for internal management reporting purposes.
The Group is organised on a global basis into two operating segments based on the Group’s divisions: Real-Time
Location Systems (RTLS) and Geospatial. The Directors believe that the Chief Operating Decision Maker (CODM) is theChief Executive Officer of the Group. The CODM and the rest of the Board are provided with information on a divisional
basis to assess the financial performance of, and allocate resources to, the Group.
The internal management accounting information is prepared on an IFRS basis but has a non-GAAP “Adjusted EBITDA”
as the primary measure of profit and this is reported on the face of the income statement.
Revenue recognition
Revenue represents amounts derived from the provision of goods and services which fall within the Group’s ordinary
activities, exclusive of discounts, value added tax and other similar sales taxes. Revenue is measured by reference to thefair value of consideration received or receivable.
Revenues on product sales are recognised at the time that units are shipped, except for shipments under arrangements
involving significant acceptance requirements. Under such arrangements, revenue is recognised when the Group has
substantially met all its performance obligations.
Revenue earned from sales under licence agreements is recognised when the software is made available. When the saleincludes a period of support and maintenance, a proportion of the revenue is deferred and recognised straight line overthe period of support. For licence rental fees, amounts are recognised over the period of the contract, commencing fromwhen the software is available for use.
Services and training revenue from time and materials contracts is recognised in the period that the services and training
are provided on the basis of time worked at agreed contractual rates and as direct expenses are incurred.
Revenue from fixed price, long-term customer specific contracts, including customisation and modification, is recognisedon the stage of completion of each assignment at the period end date compared to the total estimated service tobe provided over the entire contract where the outcome can be estimated reliably. If a contract outcome cannot be
estimated reliably, revenues are recognised equal to costs incurred, to the extent that costs are expected to be recovered.
An expected loss on a contract is recognised immediately in the income statement.
Where bundled sales including a combination of some or all of the above are made, the revenue attributable to the deal
is apportioned across the constituents of the bundle, and then recognised according to the policies stated above.
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Employee benefits(a) Retirement benefits
The Group operates various defined contribution pension arrangements for its employees.
For defined contribution pension arrangements, the amount charged to the income statement represents thecontributions payable in the period. Differences between contributions payable in the period and contributions actually
paid are shown as either accruals or prepayments in the statement of financial position.
(b) Share-based payments
The Group issues equity-settled share-based payments to certain employees. Vesting conditions are continuing
employment and can include, for senior employees, a diluted EPS performance target or share price target. Equity-settled
share-based payments are measured at fair value at the date of grant using an appropriate pricing model. The fair value
is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity in theshare-based payment reserve, based on the Group’s estimate of the number of shares that will eventually vest.
(c) Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date,or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits
for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it isprobable the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable
more than twelve months after the reporting date, then they are discounted to their present value.
Operating lease income and expense
The Group as the lessor(a) Rental income
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating the lease are recognised straight-line over the lease term.
The Group as the lessee(b) Rental expense
Operating lease rentals are charged as operating expenses to the income statement in equal annual amounts over thelease term. Assets leased under operating leases are not recorded in the statement of financial position because thelessor retains a significant portion of the risks and rewards of ownership.
(c) Lease incentives
The benefit of lease incentives such as rent-free periods or up-front cash payments are spread equally on a straight-line
basis over the lease term.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are material one-off items of income or expense thathave been shown separately due to the significance of their nature or amount and do not reflect the ongoing cost baseor revenue-generating ability of the Group.
Interest income and expense
Interest income and expense is included in the income statement on a time basis, using the effective interest method byreference to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:

45

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Annual Report 2016

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued(a) Current tax
The current tax charge represents an estimate of the amounts payable or receivable to or from tax authorities in respectof the Group’s taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit
before tax as reported in the income statement because it excludes certain items of income and expense that are taxable
or deductible in other years or are never taxable or deductible. Taxation received is recognised only when it is probablethat the Group is entitled to the asset.
(b) Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparisonof the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.
In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed forrecognition as deferred tax assets. However, deferred tax is not provided on the initial recognition of goodwill, nor on
the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax oraccounting profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are recognised to the extent that it is probable thatthe underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax
assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective periodof realisation, provided they are enacted or substantively enacted at the reporting date. Deferred tax is recognised as acomponent of tax expense in the income statement, except where it relates to items charged or credited directly to othercomprehensive income or equity when it is recognised in other comprehensive income or equity.
Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred forthe acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of
the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their provisional fair values at
the acquisition date. Fair values are reassessed during the measurement period and updated if required. The Group
recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at
the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity
interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability isrecognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent
consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of
non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower
than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid andthe net fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses.
Research and development
Expenditure on research activities is recognised as an expense in the period in which it is incurred.

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Development activities involve a plan or design for the production of new or substantially improved products andprocesses. Development expenditure is only capitalised if all of the following conditions are met:
• completion of the intangible asset is technically feasible so that it will be available for use or sale;• the Group intends to complete the intangible asset and use or sell it;• the Group has the ability to use or sell the intangible asset;• the intangible asset will generate probable future economic benefits. Among other things, this requires that there
is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally,
the asset will be used in generating such benefits;• there are adequate technical, financial and other resources to complete the development and to use or sell theintangible asset; and• the expenditure attributable to the intangible asset during its development can be measured reliably.
Internally-generated intangible assets, consisting mainly of direct labour costs, are amortised on a straight-line basis
over their useful economic lives. Amortisation is shown within administrative expenses in the income statement.
The estimated useful lives of current development projects are three years. Upon completion the assets are subject toimpairment testing.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an
expense in the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences that do not form an integral part of related hardware,
are capitalised at cost and amortised on a straight-line basis over their useful economic life which is typically 3 years.
Acquired intangible assets
Intangible assets acquired through a business combination are initially measured at fair value and amortised on a straightline basis over their useful economic lives. Amortisation is shown within operating expenses in the income statement.
The useful economic lives of the intangible assets recognised on acquisition are as follows:• Software products recognised on acquisition: 3 years• Customer relationships recognised on acquisition: 3 years• Order book: based on contract life recognised on acquisition, typically less than 1 year
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged to the income statement so as to write off the cost or valuation less estimated residual values
over their expected useful lives on a straight-line basis over the following periods:• Fixtures and fittings: 3 to 10 years, or period of the lease if shorter• Computer equipment: 3 years
Residual values and useful economic lives are assessed annually. The gain or loss on the disposal or retirement of anasset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised
in operating expenses.
Impairment of non-financial assets
Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject
to amortisation and are tested at least annually for impairment and whenever there is an indication that the asset
may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes ofassessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows(cash-generating units). Impairment losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of theimpairment at each reporting date. Where an impairment loss is reversed, it is reversed to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss beenrecognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

47

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

3 Summary of significant accounting policies continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is the actual cost of third-party components andlabour, and is applied on a first in, first out basis. Net realisable value is based on estimated selling price less additional
cost to completion and disposal. Provision is made for obsolete, slow moving or defective items where appropriate andare recognised as an expense in the period in which the write-down or loss occurs.
Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course ofbusiness. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as
non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Cash and cash equivalents
In the Consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term highly liquid investments with original maturities of three months or less.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of businessfrom suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they
are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried atamortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognisedin the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of debt facilities are recognised as transaction costs of the debt to the extent that it isprobable that some or all of the facility will be drawn-down. In this case, the fee is deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that some or all of the facility will be drawn-down, the fee iscapitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
All borrowing costs are recognised in the income statement in the period they are incurred.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shownin equity as a deduction, net of tax, from the proceeds. The nominal value of shares issued is classified as share capital and theamounts paid over the nominal value in respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect of share options granted by theCompany to the Group’s employees under its employee share option plans.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from theirfunctional currencies to the Group’s presentation currency of GBP, are recognised directly in other comprehensive
income and accumulated in the translation reserve.

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4 Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, bydefinition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Impairment of goodwill and intangible assets
The Group tests goodwill and intangible assets for impairment annually in accordance with the accounting policy statedin note 3. During the year the Group undertook a detailed review of the historic business rationale and outlook at the
point of acquisition, together with a review of the direction of our 2 divisions following the restructure. As a result of
this review, a £4.3 million (2015: £4.0 million relating to the Geospatial division) impairment charge has been made in2016 reducing the goodwill intangible assets net book value in both RTLS and Geospatial to £nil (2015: £4.3 million).
In reaching the conclusion that the underlying business rationale for the historic acquisitions no longer has relevanceto the future direction of our 2 business units requires significant management judgement. Additionally, an impairment
expense of £1.0 million (2015: £nil) was recognised in respect of customer relationships which arose on the acquisitionof the Geoplan group of companies in 2013 and has not delivered the growth trajectory originally anticipated.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s
judgement of the point at which technical and commercial feasibility is demonstrable. The carrying amount of
capitalised development costs at 31 December 2016 is £3.3 million (2015: £4.0 million).
Revenue recognition
Significant management judgement is applied in determining the allocation and timing of the recognition of revenue on
fixed price, long-term customer specific contracts. In this process management takes into account milestones, hardware
supplied, actual work performed, and further obligations and costs expected to complete the work. The carrying value ofamounts recoverable on contracts at 31 December 2016 is £2.9 million (2015: £2.1 million).
Inventories
The provision for obsolete, slow-moving or defective inventory is based on management’s estimation of the commercial
life of inventory lines and is applied on a prudent basis. In assessing this, management takes into consideration the sales
history of products and the length of time that they have been available for resale.
Deferred tax
A deferred tax asset is recognised where the Group considers it probable that future tax profits will be available against
which the tax credit will be utilised in the future. This specifically applies to tax losses and to outstanding vested shareoptions at the statement of financial position date. In estimating the amount of the deferred tax asset that should berecognised, the Directors make judgements based on current budgets and forecasts about the amount of future taxable
profits and the timings of when these will be realised. No deferred tax asset is currently recognised.
5 Segment information
5.1 Operating segments
Management has determined the operating segments to be the Group’s divisions based on the information reported
to the Chief Operating Decision Maker (CODM) for the purpose of assessing performance and allocating resources.
The CODM is the Chief Executive Officer.
The Real-Time Location Systems (RTLS) division takes real-time location data from Ubisense’s own sensing hardware,or from standards based integration with 3rd party hardware, and transforms this data into high value spatial event
information, delivering highly reliable, automatic, adaptive asset identification, precise real-time location and spatialmonitoring to offer meaningful insights that help businesses make smarter decisions.
The Geospatial division delivers software solutions that integrate data from any source – geographic, real-time asset,
GPS, location, corporate and external cloud-based sources – into a live geospatial common operating picture, empowering
all users in the customer’s organisation to access, input and analyse operational intelligence to proactively manage their
networks, respond quickly to emergency events and effectively manage day-to-day operations.
Each operating segment is managed separately by a business unit leader as each deals with different technologies andpredominately a different customer base. The performance of the operating segments is assessed on a measure ofcontribution, being gross profit less sales and business unit marketing expenditure. Assets and liabilities are not presented
to the CODM on a divisional basis.
49

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Annual Report 2016

Notes to the consolidated financial statements continued

5 Segment information continued
Costs incurred centrally or not directly attributable to either the RTLS or Geospatial divisions are reported in the Central
division. The results of each segment are prepared using accounting policies consistent with those of the Group as awhole. No intra-segmental transactions are reported.
RTLS
£’000

Geospatial£’000

Central
£’000

Total
£’000

Revenues
Cost of revenues

9,113(5,097)

17,410(11,183)––

26,523(16,280)

Gross profit

4,016

6,227

–

10,243

Sales and marketing costs(2,931)(1,792)(91)(4,814)Contribution

1,085

4,435

(91)

5,429

Other operating costs(5,105)(5,105)Adjusted EBITDA
Depreciation
Amortisation and impairment of intangibles
Non-recurring items(5,196)(345)(8,366)
2,222

324
(345)
(8,366)
2,222

Operating loss
Finance costs(11,685)(279)(6,165)(279)

Loss before tax
Income tax(11,964)
1,136(6,444)
1,136

Loss after tax(10,828)(5,308)Year ended 31 December 2016

Year ended 31 December 2015

Revenues
Cost of revenues

RTLS
£’000

Geospatial£’000

Central
£’000

Total
£’000

6,445
(3,694)

15,458(10,545)

79(51)

21,982(14,290)

Gross profit

2,751

4,913

28

7,692

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

(59)

3,113

(444)

2,610

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

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

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

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

5.2 Geographical areas
The Board and Management Team also review the revenues on a geographical basis, based around the regions where
the Group has its significant subsidiaries or markets.
The Group’s revenue from external customers in the Group’s domicile, the UK, and its major worldwide markets havebeen identified on the basis of the customers’ geographical location. Non-current assets are allocated based on their
physical location.

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Revenue

UK
FranceGermany
Europe otherUSA
CanadaJapan
Asia Pacific otherRest of World

Non-current assets

2016
£’000

2015
£’000

2016
£’000

2015
£’000

365
313
6,456
936
12,325
1,664
4,328
91
45

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

3,940
3
106
183
129
–
–

6,412
4
1,242
1,008
2
2,061
–
–

26,523

21,982

4,361

10,7295.3 Information about major customers
During 2016, the Group had two customers who generated revenues of greater than 10% of total revenue. £3.7 million
was generated from a European customer and £3.4 million was generated from a US customer.
During 2015, no single customer contributed 10% or more to the Group’s revenue.
6 Employee information
6.1 Employee numbers
The average monthly number of people, including Executive Directors, employed by the Group during the year was:
Actual number of people
as at 31 December
By activity

Technical consultants
Sales & marketing
Research & development
Administration

By geography

United Kingdom
EuropeAmericas
Asia

Average monthly
number of people

2016
Number

2015
Number

2016
Number

2015
Number

59
38
22
23

89
38
31
22

64
42
25
23

103
45
33
27

142

180

154

208

2016
Number

2015
Number

2016
Number

2015
Number

43
19
53
27

44
39
63
34

46
26
57
25

54
44
71
39

142

180

154

208

Notes

2016
£’000

2015
£’000

20

12,392
1,162
521
(20)

15,768
1,362
581
54

14,055

17,765

6.2 Employee benefits
The aggregate employee benefit expense, including Executive Directors, comprised:

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

Included in the wages and salaries figure above are termination benefits of £0.1 million (2015: £2.0 million) which arepresented as non-recurring costs in the income statement – see note 8.2.

51

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

7 Finance income and costs
2016
£’000

2015
£’000

Interest income from cash and cash equivalents

44

12

Finance income

4412Interest payable – bank
Interest payable – other

(302)
(21)

(287)
(14)

Finance costs

(323)

(301)

Net finance costs

(279)

(289)

8 Loss before tax: analysis of expenses by nature
8.1 Expenses by nature
The following items have been charged/(credited) to the income statement in arriving at loss before tax:
2016
£’000

2015
£’000

1,223
7,143
345
24
625
89
1,532
466
(350)
(2,222)
212

309
6,985
388
–
677
63
1,478
581
175
4,075
163

2016
£’000

2015
£’000

Reorganisation costs
Adjustment to contingent consideration
Disposal of subsidiary companies
Unrealised foreign exchange (gains)/losses on intercompany trading balances
Aborted acquisition costs
Others139(355)–(1,877)
–
(129)

3,163
–
809
37
7
59

Total non-recurring items(2,222)

4,075

Notes

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

11
11
12

8.2
8.3

8.2 Non-recurring items

Non-recurring items include £1.9 million of unrealised foreign exchange gains on intercompany trading balances(2015: £nil), £0.1 million of reorganisation costs (2015: £3.2 million) and a £0.4 million gain in respect of adjustments
to deferred consideration (2015: £nil).
During 2015, the Group disposed of two subsidiary companies and incurred costs relating to exits from these markets.

52Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 20168 Loss before tax: analysis of expenses by nature continued
8.3 Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s
auditor and its associates:
2016
£’000

2015
£’000

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

28
89
15

25
90
11

Total audit fees

132

126

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

25
55

24
13

Total non-audit fees

80

37

Total auditors’ remuneration

212

163

2016
£’000

2015
£’000

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

–
(2)
(579)

–
69
(524)

Total current tax credit

(581)

(455)

Deferred tax
Origination and reversal of temporary differences

(555)

(177)

The auditor of Ubisense Group plc is Grant Thornton UK LLP.
9 Income tax
9.1 Income tax recognised in the income statement

Total deferred tax credit

(555)

(177)

Total income tax credit(1,136)(632)

The tax credit differs from the standard rate of corporation tax in the UK for the year of 20.0% (2015: 20.3%) for thefollowing reasons:

Loss before tax
Loss before tax multiplied by the standard rate of corporation tax
in the UK of 20.0% (2015: 20.3%)
Tax effects of:
Expenses not deductible for tax purposes
Utilisation of previously unrecognised tax losses
Tax losses for which no deferred tax asset was recognised
Tax unprovided in prior years
Research & development tax credits – prior years
Difference on tax treatment of share options – unrecognised
Re-measurement of deferred tax – change of tax rate
Differential on overseas tax rates
Other unrecognised temporary differences
Total income tax credit

2016
£’000

2015
£’000

(6,444)(17,268)(1,289)(3,505)

780
(270)
498
–
(579)
(4)
–
(224)
(48)

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

(1,136)(632)

53

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

9 Income tax continued
9.2 Factors that may affect future tax charges
The Group has tax losses of £17.6 million (2015: £10.5 million) that are available for offset against future taxable profits of
those subsidiary companies in which the tax losses arose. Deferred tax assets have not been recognised in respect ofthese 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.
On 26 October 2015, the UK Government substantially enacted reductions to the UK corporation tax rates. Effective from
1 April 2017, the UK corporation tax rate will reduce to 19% from 20% and effective from 1 April 2020, the rate will further
reduce to 18%. As a result, the deferred tax balances have been measured at 19%, the rate of realisation expected.
9.3 Deferred tax
The movement in deferred tax in the Consolidated statement of financial position during the year is as follows:
Deferred income tax assets

Deferred income tax liabilities

2016
£’000

2015
£’000

2016
£’000

2015
£’000

At 1 January
Deferred tax credited to the income statement
Deferred tax charged to the income statement
Foreign exchange movements

–
–
–
–

–
–
–
–

(1,157)
958
(403)
(81)

(1,336)
780
(603)
–

At 31 December

–

–

(683)

(1,157)The components of deferred tax included in the Consolidated statement of financial position are as follows:
2016
£’000

2015
£’000

Development costs capitalised
Intangible assets recognised on acquisition of subsidiaries
Other

(669)
–
(14)

(797)
(360)
–

Total deferred income tax liabilities(683)(1,157)

Deferred tax assets have not been recognised in respect of the following items because it is not probable that futuretaxable profits will be available against which the Group can utilise the benefits:
2016
£’000

2015
£’000

Tax losses carried forward
Equity-settled share options temporary differences

4,823
18

2,864
24

Total unrecognised deferred tax assets

4,841

2,888

54

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

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

2016

2015

(5,196)(16,569)

49,756

31,657211

418

49,96732,075

Basic EPS (pence)(10.4)(52.3)

Diluted EPS (pence)(10.4)(52.3)

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

Basic earnings per share is calculated by dividing profit/(loss) for the period attributable to ordinary shareholders of theCompany by the weighted average number of ordinary shares outstanding during the period. For diluted earnings per
share, the weighted average number of shares is adjusted to allow for the effects of all dilutive share options and warrants
outstanding at the end of the year. Options have no dilutive effect in loss-making years, and hence the diluted loss per
share for the year is the same as the basic loss per share.
The Group also presents an adjusted diluted earnings per share figure which excludes amortisation on acquired
intangible assets, share-based payments charge and non-recurring items/impairment from the measurement of profit forthe period.
2016

2015

(5,196)(16,569)

1,223
4,271
(20)
(2,222)

309
4,043
54
4,075

Net adjustments (£’000)

3,252

8,481

Adjusted earnings (£’000)(1,944)(8,088)Adjusted diluted EPS (pence)(3.9)(25.2)

Notes

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

8, 11
8, 11
20
8

The adjusted EPS information is considered to provide a fairer representation of the Group’s trading performance.
Options have no dilutive effect in loss-making years, and hence the diluted loss per share for the year is the same as thebasic loss per share.

55

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

11 Intangible assets

Acquired software
products£’000

Capitalised
product
development
costs
£’000

Software
£’000

Total
£’000

1,837
63
–
–

885
16
–
(338)

10,417
–
2,499
(511)

1,139
68
152
(59)

23,694238
2,651(2,101)

8,314

1,900

563

12,4051,300

24,482

Exchange difference
Additions
Disposals

491
–
–

340
–
–

87
–
–

–
1,948
–

150
111
(315)

1,068
2,059
(315)

At 31 December 2016

8,805

2,240

650

14,353

1,246

27,294

Goodwill£’000

Acquiredcustomer
relationships andorder backlog
£’000

Cost
At 1 January 2015
Exchange difference
Additions
Disposals

9,416
91
–
(1,193)

At 31 December 2015

Accumulated amortisation
At 1 January 2015
Effects of movement in exchange
rates
Charge for the year
Elimination on disposal
Impairment for the year

(1,192)

(805)

(657)

(6,190)(487)(9,331)––
1,192(4,043)

(24)
(189)
–
–

(11)
(119)
338
–

–
(2,609)
429
(55)

(52)
(279)
57
–

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

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

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

(491)
–
–
(4,271)

(134)
(119)
–
(969)

(66)
(135)
–
–

–
(2,585)
–
–

(240)
(287)
315
–

(931)
(3,126)315(5,240)At 31 December 2016

(8,805)(2,240)(650)(11,010)(973)(23,678)

Net book amountAt 31 December 2016

–

–

–

3,343

273

3,616

At 31 December 2015

4,271

882

114

3,980

539

9,786

Goodwill
The goodwill balance was established over 10 years ago in the combination of Ubisense Limited and Ten Sails
businesses. The Group undertook a detailed review of the historic business rationale and outlook at the point ofacquisition, together with a review of the direction of our 2 divisions following the restructure. As a result of this review,a £4.3 million (2015: £4.0 million relating to the Geospatial division) impairment charge has been made in 2016, reducing
the goodwill intangible assets net book value in both RTLS and Geospatial to £nil (2015: £4.3 million).
Other intangible assets
The acquired software products, customer relationships and order backlog assets arose on the acquisition in 2013 of
the Geoplan group of companies and in 2011 of Integrated Mapping Solutions, Inc. (now merged into Ubisense Inc.)and Realworld OO Systems Limited (now re-named Geospatial Systems Limited).
During the year, an impairment expense of £1.0 million was recognised in respect of customer relationships whicharose on the acquisition of the Geoplan group of companies in 2013 and has not delivered the growth trajectory
originally anticipated.
Capitalised development assets relate to expenditure that can be applied to a plan or design for the production of newor substantially improved products and processes. The impairment of capitalised development costs in 2015 writes off
expenditure on products that will not be launched to the market.
The software assets represent assets purchased from third parties.

56

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 201612 Property, plant and equipment
Fixtures andfittings£’000

Computerequipment
£’000

Total
£’000

Cost
At 1 January 2015
Effect of movements in exchange rates
Transfers
Additions
Disposals
Disposal of subsidiary

891
58
(194)
78
(35)
(12)

887
(71)
194
118
(11)
–

1,778
(13)
–
196
(46)
(12)

At 31 December 2015

786

1,117

1,903

Effect of movements in exchange rates
Additions
Disposals

88
7
(47)

211
19
(131)

299
26
(178)

At 31 December 2016

834

1,216

2,050

Accumulated depreciation
At 1 January 2015
Effect of movements in exchange rates
Transfers
Charge for the year
Elimination on disposals
Disposal of subsidiary

(138)
(1)
181
(233)
35
7

(528)
43
(181)
(155)
10
-

(666)
42
–
(388)
45
7

At 31 December 2015

(149)

(811)

(960)

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

10
–
(197)
41

(164)
–
(148)
113

(154)
–
(345)
154

At 31 December 2016

(295)

(1,010)(1,305)

At 31 December 2016

539

206

745

At 31 December 2015

638

305

943

2016
£’000

2015
£’000

Raw materials
Finished goods

845
219

1,348
1,467

Total inventories

1,064

2,815

Net book amount

13 Inventories

The Group’s inventories are comprised of products which are not generally subject to rapid obsolescence on account ofdeterioration in condition, market trends or technological reasons. The balance as at 31 December 2016 includes an
impairment provision of £0.4 million (2015: £nil).

57

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

14 Trade and other receivables

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

Notes

2016
£’000

2015
£’000

14.1

11,304(2,151)

7,421(1,691)

9,153
2,912
220
933
3
–

5,730
2,067
199
882
1
398

13,221

9,277

14.2

All amounts disclosed are short term. The carrying value of trade receivables is considered a reasonable approximationof fair value.
The following disclosures are in respect of trade receivables that are either impaired or past due. The individually
impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations, and are assessedon a customer-by-customer basis following detailed review of the particular circumstances. To the extent they have notbeen specifically provided against, the trade receivables are considered to be of sound credit rating.
14.1 Movement in allowance for doubtful debts
2016
£’000

2015
£’000

At 1 January
Exchange differences
Amounts recovered in the year
Amounts written off in the year
Allowance made(1,691)
(158)
6
–
(308)

(68)
(10)
–
43
(1,656)

At 31 December(2,151)(1,691)As at 31 December 2016, the allowance for doubtful debts includes £2,065,000 (2015: £1,626,000) in respect of amounts
owed by two entities in the Asia Pacific region. Provision has been made against these balances as their recoverability
is uncertain.
14.2 Ageing of past due but not impaired receivables
2016
£’000

2015
£’000

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

7,179

3,506

1,227
747

920
1,304

Total

9,153

5,730

2016
£’000

2015
£’000

Cash at bank and in hand

3,498

5,392

Cash and cash equivalents

3,498

5,392

15 Cash and cash equivalents

58

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

The carrying amount approximates to fair value because of the short-term maturity of these instruments, being nogreater than three months.
Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term cash deposits earninterest at fixed rates for the term of the deposit.
The composition of cash and cash equivalents by currency is as follows:
2016
£’000

2015
£’000

British Pound (GBP)
Euro (EUR)
US Dollar (USD)
Japanese Yen (JPY)
Canadian Dollar (CAD)

320
675
1,947
335
221

1,718
1,151
2,216
130
177

Cash and cash equivalents

3,498

5,392

2016
£’000

2015
£’000

Payments received on accountTrade payables
Trade accruals
Other taxation and social security
Contingent consideration
Other payables

2,279
1,549
2,919
1,223
197
72

2,017
2,148
3,668
661
–
135

Total trade and other payables

8,239

8,629

16 Trade and other payables

All amounts disclosed are short term. The carrying value of trade payables is considered a reasonable approximation offair value.
Ubisense Group plc acquired the Ubisense Inc (formerly named Geoplan Interworks K.K.) group of companies (“Geoplan”)
in December 2013. The purchase consideration contained a contingent cash element, under which the Group is required
to pay additional amounts to the vendors of Geoplan based on the achievement of two separate performance milestones
that may arise between 2014 and 2016, with a combined undiscounted range of outcomes between JPY nil and JPY
149 million (£nil to £892,000). During 2016, the liability has been reduced to £197,000 (2015: £448,000, presented as a
non-current liability within note 18) with £355,000 released to the consolidated income statement and presented as an
exceptional item.
17 Bank loans
In March 2016, a JPY 200 million facility with the Mizunho Bank was repaid in full.
In October 2016, an £8.0 million HSBC working capital facility was restructured, becoming a £4.0 million repayment loan
with £0.75 million repayable on or before 31 December each year. £0.75 million of this facility was repaid in December 2016.
This loan is secured on the fixed and floating assets of the Group and attracts an interest charge of LIBOR + 3%. The loan
is subject to an operating covenant linked to “operating cash flow” performance (profit or loss before tax adding backany non-recurring items, finance costs, foreign exchange costs, depreciation, amortisation or capitalisation of productdevelopment) as follows: 2016 £2.25 million negative, 2017 £nil, 2018 and beyond £1 million positive.

59

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

18 Other payables
Notes

Contingent consideration
Property provisions
Rent deposit repayable

16

Total other payables

2016
£’000

2015
£’000

–
179
–

448
179
24

179

651

In September 2014, Ubisense Limited entered a new 10 year lease on the Group’s headquarter offices. The property
provision is a dilapidation provision to restore the office to its original state. It is included in fixtures and fittings within
Property, plant and equipment and is being depreciated over the lease term.
19 Share capital and premium

Balance at 1 January 2015

Number ofordinary sharesof £0.02 eachSharecapital
£’000

Share
premium
£’000

Total
£’000

25,062,842

501

28,051

28,552

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

446,293
11,111,112

9
222

67
9,304

76
9,526

Change in year

11,557,405

231

9,371

9,602

Balance at 31 December 2015

36,620,247

732

37,42238,154

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

32,907
19,230,000

1
385

4
4,128

5
4,513

Change in year

19,262,907

386

4,132

4,518

Balance at 31 December 2016

55,883,154

1,118

41,55442,672The Company has one class of ordinary shares which carry no right to fixed income.
During the period, the Company issued 19,262,907 shares, increasing the total number of shares in issue from 36,620,247
to 55,883,154 as follows:• 19,230,000 shares at £0.25 per share for a total gross consideration of £4,808,000 with share issue costs of £295,000
written off against share premium; and• 32,907 shares as a result of options exercised with a weighted average exercise price of £0.14 per share for total cash
consideration of £5,000.
20 Share-based payments: options
20.1 Equity-settled share-based payment arrangements
The Group operates a number of plans to award options over shares in the Company to incentivise high performing key
employees of the Group periodically.
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 theoptions is ten years from the date of grant after which they expire if unexercised.

60

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 201620.2 Analysis of amounts recognised in the financial statementsa) Analysis of amounts recognised in the Consolidated income statement

Total share-based payments charge recognised in operating profit

2016
£’000

2015
£’000

(20)

54

2016
£’000

2015
£’000

(52)

54

2016
£’000

2015
£’000

823

875

b) Analysis of amounts recognised in the Consolidated statement of changes in equity in the year

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

Cumulative reserve credit for share-based payments

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

Arrangement

Options

Award
date
Year

Vests
Years

ExpiresYear

Awardsoutstanding
Exercise
at 1 January
price£ 2015 Number

2007
2010
2011
2012
2013
2014
2016

2008-10
2011-132012-142013-15
2014-16
2015-172017-19

2017
2020
2021
2022
2023
2024
2026

0.900
0.140
1.050
2.125
2.055
2.250
0.020

Total
Weighted average exercise price (£)

Granted during
the year
NumberExercisedduring theyear
NumberForfeited
during theyear
NumberAwardsAwardsoutstanding at exercisable at
31 December 31 December
2016
2016
NumberNumber300–
408,461–
298,200–
201,500–
269,300–
300,000–– 5,600,000

–
(300)
–
(32,907) (25,826) 349,728– (184,000) 114,200– (110,500)
91,000– (160,500) 108,800– (230,000)
70,000–– 5,600,000

349,728
114,200
91,000108,800-

1,477,761 5,600,000(32,907) (711,126) 6,333,728

663,728

1.371

0.020

0.140

1.799

0.135

0.883

On 14 December 2016 Ubisense Group plc implemented a new long-term incentive share option plan for Executive
Directors and key management. Ubisense Group plc granted 5,600,000 options of 2 pence each in the Company
with an exercise price set at the nominal value. The options will vest if the Company’s share price to exceeds 70p for
60 consecutive calendar days between the 2nd and 3rd anniversary of issue and the period of employment continues
for over 3 years.
20.4 Principal assumptions
No charge has been recognised in the 2016 financial statements in respect of share options granted during the year.
The options were granted on 14 December 2016 and the Directors have assessed that the impact on the 2016 financial
statements would be immaterial.

61

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

21 Operating lease commitments
Leases as lessee
At 31 December 2016, the Group has lease agreements in respect of property and equipment for which payments extend
over a number of years. The Group enters into these arrangements as these are a cost-efficient way of obtaining theshort-term benefits of these assets. The Group lease rental charge is disclosed in note 8.1. There are no other material
off-balance sheet arrangements.
The Group’s future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings

Other

2016
£’000

2015
£’000

2016
£’000

2015
£’000

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

664
2,267
527

606
2,320
1,282

53
40
–

59
113
–

Total

3,458

4,208

93

172

Lease ending

The above table reflects the committed cash payments under operating leases, rather than the expected charge to theincome statement in the relevant periods. The effect on the income statement will differ to the above figures due to theamortisation of rent-free and discounted rent periods included in property leases signed in 2012 and 2014. The expectedcharge in 2016 for operating leases is expected to be £105,000 higher than the committed cash payments shown above.
From existing subleasing agreements under non-cancellable operating leases which end in less than one year, the Group
received income of £31,000.
The Group has guaranteed rent bonds issued by its banks on its behalf totalling £122,000 as at 31 December 2016(2015: £122,000). These are not expected to result in any material financial loss.
22 Subsidiaries
The Group consists of the parent company, Ubisense Group plc, incorporated in the UK, and a number of subsidiarycompanies which operate and are incorporated around the world. Information about the composition at the end of thereporting period is as follows:

Subsidiary

Country ofincorporation

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

UK
Germany
FranceUS
Canada
UK
Japan
Japan
Japan

Principal activity

Proportion ofordinary shares
held by Group (%)

Proportion ofordinary shares
held bynon-controllinginterests (%)

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

100
100
100
100
100
100
100
77
100

–
–
–
–
–
–
–
23
–

All subsidiaries are directly held by Ubisense Group plc except those denoted* which are held by the intermediate holding
company, Ubisense Inc.
All subsidiaries prepare local statutory accounts up to 31 December each year except for Geospatial Systems Limited
which prepares accounts up to 31 March and Binary Star Developments K.K. to 31 January. For subsidiaries which have a
different financial year-end to the Group, additional co-terminus accounts are prepared reflecting the same financial
reporting as the Group for the purposes of consolidation.

62

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

23 Related party transactions
23.1 Remuneration of key personnel
Following the group restructure undertaken in 2015, key management have been assessed to be the Directors of theGroup (Executive and Non-Executive) during the 2016 period.
The 2015 comparatives includes Directors (Executive and Non-Executive) and members of the Executive
Management Team.
During the year, there was an average number of 6 key management personnel (2015: 11) and 7 personnel at
31 December 2016 (2015: 12). The compensation paid or payable to key management for employee services isshown below:

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

2016
£’000

2015
£’000

572
48
1

1,371
95
5

621

1,471

22

26

–

3

643

1,500

Included in the wages and salaries figure above are termination benefits of £149,000 (2015: £263,000) which arepresented as non-recurring costs in the income statement.
23.2 Transactions with the Group related parties
There were no other related party transactions with Directors of the Company during 2016 or 2015 other than noted
below.
During 2015, Ubisense Limited contemplated entering into a commercial sub-lease arrangement with a third party.
One of the Directors of Ubisense Group plc, is also a Director of that third party. The arrangement was not completed
although as an outcome the third party paid Ubisense Limited £3,800 plus VAT. As at 31 December 2015, Ubisense
Limited showed that £4,560 was owed by the third party. Full payment of this balance outstanding was subsequently
received in 2016.
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 below. The main types of risks are market risk (including foreign currency risk and interest raterisk), credit risk and liquidity risk.
The Group’s risk management is coordinated at its headquarters, in close cooperation with the Board of Directors, andfocuses on actively securing the Group’s short to medium-term cash flows. The Group does not actively engage in the
trading of financial assets for speculative purposes. The most significant financial risks to which the Group is exposed aredescribed 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 theGroup’s currency transactions are not considered significant enough to warrant this.

63

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

24 Financial risk management continued
Foreign currency denominated monetary assets and liabilities which expose the Group to currency risk are disclosed
below. The amounts shown are those not denominated in the local functional currency, translated into GBP at theclosing rate.
Japanese Yen

AssetsLiabilities

US Dollars

Euros

2016
£’000

2015
£’000

2016
£’000

2015
£’000

2016
£’000

2015
£’000

–
–

–
–

509
(7)

145
(62)

201
–

535
(1)

All foreign currency financial assets and liabilities are classified as current.
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 percentages have been determined basedon the average market volatility in exchange rates in the previous 12 months.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts theirtranslation at the period end. A positive number indicates an increase in profit and equity.
Japanese Yen

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

Euros

2016
£’000

2015
£’000

2016
£’000

2015
£’000

2016
£’000

2015
£’000

(25)
(25)

(43)
(43)

31
31

(27)
(27)

3
3

(95)
(95)

25
25

50
50

(31)
(31)

32
32

(3)
(3)

110
110

Exposure to foreign currency exchange rates varies during the year, depending on the volume of transactions.
Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk.
24.4 Interest rate sensitivity
The Group’s exposure to interest rate risk relates primarily to the Group’s variable rate bank loan facilities of £3.25 million
which are partially offset by cash held at variable rates. Interest is payable at LIBOR plus 3% on the £3.25 million
outstanding at 31 December 2016 (2015: £4.5 million).
The following table illustrates the sensitivity of the net profit of the Group for the year and equity to a reasonably possible
change in interest rates of +/-0.5%. These changes are considered to be reasonably possible based on observation ofcurrent market conditions. The calculations are based on a change in the interest rate with effect from the beginningof the year and the financial instruments held at the reporting date that are sensitive to interest rate changes. All othervariables are held constant. A positive number indicates an increase in profit or equity.

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

64

2016
£’000

2015
£’000

24
24

30
30

(24)
(24)

(30)
(30)

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 201624.5 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 thereporting date, as summarised in note 24.8, which are principally cash and cash equivalents and trade receivables.
Cash and cash equivalents are held at banks with good independent credit ratings in accordance with the Group
Treasury policy. The Group continuously monitors defaults of customers and other counterparties, identified either
individually or by the Group, and incorporates this information into its credit risk controls. Where available 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 arerecoverable and any issues identified as early as possible. In order to manage credit risk the Directors set limits forcustomers based on a combination of payment history and third-party credit references. Credit limits are reviewed by
the credit controller on a regular basis in conjunction with debt ageing and collection history. In addition many of theGroup’s customers, and approximately 80% by balance at any given time, are large utility companies and other blue-chipcompanies that would be considered a low credit risk.
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 2016, one customer individually accounted
for more than 10% of the trade receivables balance (31 December 2015: one).
None of the Group’s financial assets are secured by collateral or other credit enhancements.
Details of certain trade receivables at 31 December 2016 that have not been settled by the contractual due date but are
not considered to be impaired are included in note 14.2.
24.6 Liquidity risk analysis
Liquidity risk is the risk arising from the Group not being able to meet its obligations as they fall due. The Group seeks tomanage this risk by monitoring scheduled debt servicing payments for long-term financial liabilities, regularly reviewing
forecast inflows and outflows due in day-to-day business and investing cash assets safely and profitably. The data used
for analysing these cash flows is consistent with that used in the contractual maturity analysis below.
Cash flow forecasting is performed at the subsidiary level and aggregated by Group finance. Rolling cash flow forecasts
are used by the Group to monitor liquidity requirements to ensure it has sufficient cash to meet operational needs, aswell as maintaining sufficient headroom so that loan covenants are not breached. The Group policy throughout the year
has been to remit surplus working capital balances at the subsidiary level to Group treasury and place on short-term
deposit or interest bearing reserve accounts and to draw down on borrowing facilities and distribute funds locally whenrequired. As disclosed in note 17, the Group has total bank loan facilities of £3.25 million, of which £3.25 million was
drawn-down at 31 December 2016 (2015: £9.1 million facility, £5.6 million drawn-down).
The Group considers expected cash flows from financial assets, predominately cash and trade receivables, in assessing
and managing liquidity risk. The Group’s cash and trade receivable resources at 31 December 2016 (see note 14) exceed
the current cash outflow requirements.

65

Ubisense Group plc
Annual Report 2016

Notes to the consolidated financial statements continued

24 Financial risk management continued
As at 31 December 2016, the Group’s financial liabilities, including interest payments where applicable, have contractual
maturities as summarised below:
Current

As at 31 December 2016
Trade and other payables
Bank loan
Other payables
As at 31 December 2015
Trade and other payables
Bank loans
Other payables

Non-current

Within6 months£’000

Between 6 and12 months£’000

Between1 and 5 years£’000

Later than
5 Years
£’000

7,763
–

476
750
–

42
2,500
–

–
–
179

7,924
1,123
–

705
–
–

203
4,500
472

–
–
179

Financial assets used for managing liquidity risk
Cash flows from trade and other receivables are contractually due within six months in the majority of cases. Extended
credit terms have been agreed with specific customers. Cash is generally held in accounts with immediate notice. Where
surplus cash deposits are identified these are placed in accounts with access terms of no more than three months.
24.7 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 ofcapital. The capital structure of the Group consists of cash and cash equivalents and capital and reserves attributable
to the owners of the Company, and the Group’s borrowing facilities.
In order to maintain or adjust the capital structure, the Group may issue shares, take on debt, sell assets to raise cash,
adjust the amount of dividends payable to shareholders or return capital to shareholders.
The capital structure is continually monitored by the Group. The Group’s strategy is to have a capital structure 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 bank facilities at 31 December 2016 of £3.25 million (31 December 2015: £9.1 million) all dominatedin GBP (2015: £8.0 million GBP, £1.1 million JPY). At 31 December 2015, £3.25 million of the facilities were drawn(31 December 2015: £5.6 million of which £4.5 million GBP, £1.1 million JPY).

66

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 201624.8 Categories of financial instruments
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis ofmeasurement and the basis on which income and expenses are recognised in respect of each class of financial asset,
financial liability and equity instrument, are disclosed in the accounting policies in note 3. The carrying amounts
presented in the Consolidated statement of financial position relate to the following categories of financial instrument:

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

Notes

2016
£’000

2015
£’000

14
14
14
15

9,153
2,912
223
3,498

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

15,786

14,669

1,549
2,919
3,574
179
3,250

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

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

16
16
16
18
17
16

197

448

11,66814,90367

Ubisense Group plc
Annual Report 2016

Independent auditor’s report

Independent auditor’s report to the members of Ubisense Group plc
We have audited the financial statements of Ubisense Group plc for the year ended 31 December 2016 which comprisethe company balance sheet, the company statement of changes in equity and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards(United Kingdom Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the company’s members thosematters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members asa body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 35, the Directors are responsible forthe preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website atwww.frc.org.uk/auditscopeprivate.
Opinion on financial statements
In our opinion the financial statements:• give a true and fair view of the state of the company’s affairs as at 31 December 2016 and its loss for the year thenended;• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:• the information given in the Strategic Report and Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
• the Strategic Report and Directors’ Report has been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic Report and Directors’ Report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report toyou if, in our opinion:• adequate accounting records have not been kept, or returns adequate for our audit have not been received frombranches not visited by us; or• the financial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.
Paul Naylor
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
20 March 201768

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Company balance sheet

For the year ended 31 December 2016

Notes

2016
£’000

2015
£’000

3

9,639

9,691

4

11,874
10

7,056
10

11,884(5,939)7,066(1,849)Net current assets

5,945

5,217

Total assets less current liabilities

15,584

14,908

Net assets

15,584

14,9081,118
41,554823(27,911)732
37,422875(24,121)

15,584

14,908Fixed assets
Investments in subsidiaries
Current assets
Debtors
Cash at bank and in hand
Creditors – amounts falling due within one year

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

5

6
7
7
7

Equity shareholders’ funds
The notes on pages 71 and 72 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. Ubisense Group plc reported a loss for the financial year ended 31 December 2016 of £3,790,000(2015: £22,736,000).
The financial statements were approved by the Board of Directors on 20 March 2017 and signed on its behalf by:

Richard Petti,
Chief Executive Officer		Tim Gingell,
Chief Financial Officer

Ubisense Group plc
Registered Number: 05589712

69

Ubisense Group plc
Annual Report 2016

Company statement of changes in equity
For the year ended 31 December 2016

Attributable to equity shareholders

Balance at 1 January 2015

Sharecapital
£’000

Share
premium£’000

Share based
payment
reserve£’000

Retainedearnings
£’000

Total
£’000

501

28,051821(1,385)27,988

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

–

–

–

(22,736)(22,736)

–
231
–
–

–
–
9,845
(474)

54
–
–
–

–
–
–
–

54
231
9,845
(474)

Transactions with owners

231

9,371

54

–

9,656

Balance at 31 December 2015

732

37,422875(24,121)

14,908–––(3,790)(3,790)

–
386
–
–

–
–
4,427
(295)

(52)
–
–
–

–
–
–
–

(52)
386
4,427
(295)

Total comprehensive loss for the year
Reserve credit for equity-settled
share-based payment
Issue of new share capital
Premium on new share capital
Share issue costs
Transactions with owners
Balance at 31 December 2016

386

4,132

(52)

(3,790)

676

1,118

41,554823(27,911)

15,584

The notes on pages 71 and 72 are an integral part of the Company financial statements.

70Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Notes to the Company financial statements

1 Principal accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. They havebeen prepared under the historical cost convention and in accordance with applicable United Kingdom AccountingStandards and law.
The principal accounting policies are summarised below. They have been applied consistently throughout the year andthe preceding year.
The Company has taken advantage of the following exemptions allowed under FRS 102;• Section 33 “Related party disclosures” not to show transactions with other wholly-owned companies in the Group
headed by Ubisense Group plc.
• Section 7 Statement of Cash Flows not to prepare a cash flow statement for the parent company.
• Section 11/12 financial instrument disclosures
Share-based payments
The Company issues equity-settled share-based payments to certain employees of its subsidiaries. Vesting conditions
are continuing 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 at the date of grant using an appropriate pricing
model. The share-based payment is accounted for as a capital contribution to the subsidiaries. Investments in
subsidiaries are increased by the aggregate amount of share-based payment with a corresponding increase in equity forthe same amount.
Investments in subsidiaries
Fixed asset investments are shown at cost less provision for impairment.
Deferred taxation
Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax,
or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates andlaw. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
2 Loss for the year
The Company does not have any employees (2015: nil). Directors’ emoluments are disclosed in note 23 of theconsolidated financial statements. The Directors were not remunerated by the parent company.
3 Investments in subsidiaries
Investments in
subsidiaries£’000

Cost and net book amountAt 1 January 2016
Additions
Impairment
Capital contribution relating to share-based payments

9,691
2,573
(2,573)(52)

At 31 December 2016

9,639

Additions and impairment
The 2016 additions of £2,573,000 relate to compensation of Ubisense GmbH for losses incurred during the year ended
31 December 2015 under a Domination Agreement. These additions were immediately impaired to reduce the carrying
value of the investment in Ubisense GmbH to £nil (2015: £nil).

71

Ubisense Group plc
Annual Report 2016

Notes to the Company financial statements continued

3 Investments in subsidiaries continued
Capital contribution
The capital contributions relating to share-based payments arise because the Company has granted share options to theemployees of its various subsidiaries.
Further information about subsidiaries is provided in note 20 of the consolidated financial statements.
4 Debtors

Amounts owed by subsidiary undertakings

2016
£’000

2015
£’000

11,874

7,056

11,874

7,056

2016
£’000

2015
£’000

24
5,915

54
1,795

5,939

1,849

5 Creditors: amounts falling due within one year

Trade accruals
Amounts owed to subsidiary undertakings

6 Share capital

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

2016
Number

2015
Number

2016
£’000

2015
£’000

55,883,154

36,620,247

1,118

732

A description of the movements in share capital in the year is given in note 19 of the consolidated financial statements.
7 Reserves
Sharepremium£’000

Share-based
payment
reserve£’000

Profit andloss reserve£’000

Balance at 1 January 2016
Loss for the year
Reserve credit for equity-settled share-based payment
Premium on new share capital
Share issue costs

37,422
–
–
4,427
(295)

875
–
(52)
–
–

(24,121)(3,790)–––Change in year

4,132

(52)

(3,790)41,554(823)(27,911)

Balance at 31 December 201672

Strategic report

Corporate governance

Financial statements

Ubisense Group plc
Annual Report 2016

Advisers

Registered Office
Ubisense Group plc
St. Andrew’s House
St. Andrew’s Road
Chesterton
Cambridge CB4 1DL
Tel: +44 (0)1223 535 170
Fax: +44 (0)1223 535 167
Website: www.ubisense.net
Investor Relations
Redleaf Communications
1st Floor, 4 London Wall Buildings
Blomfield Street
London EC2M 5NT
Nominated Advisors and Brokers
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square,
London EC4M 7LT
Lawyers
Mills & Reeve LLP
Cambridge OfficeBotanic House
98-100 Hills Road
Cambridge CB2 1PH
AuditorGrant Thornton UK LLP
Cambridge Office
101 Cambridge Science Park
Milton Road
Cambridge CB4 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

73

Ubisense Group plc
Annual Report 2016

Shareholder information

Shareholder enquiries
Any shareholder with enquiries should, in the first instance, contact our Registrars,
Computershare, using the address provided in the list of Advisers.
Share price information
London Stock Exchange Alternative
Investment Market (AIM) symbol: UBI
Information on the Company’s share price is available on the Ubisense Investor Relations website at:www.ubisense.net
Investor relations
St. Andrew’s House, St. Andrew’s Road
Chesterton, Cambridge CB4 1DL, UK
Email: corporate@ubisense.net
Tel: + 44 (0) 1223 535 170
Financial calendar
Financial year end 31 December 2016
Full year results announced 21 March 201774

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

www.ubisense.net