REG - IQGeo Group PLC - Final results for the year ended 31 December 2023
20/03/2024 08:30
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RNS Number : 5852H IQGeo Group PLC 20 March 2024
20 March 2024
IQGeo Group plc
(the "Company" or the "Group")
Final results for the year ended 31 December 2023
Record global growth and product innovation
IQGeo Group plc (AIM: IQG), a leading developer of geospatial productivity and
collaboration software for telecoms and utility network operators, is pleased
to announce its final audited results for the year ended 31 December 2023.
Operational highlights:
· Substantial progress in all regions with in excess of 500 exit
customer logos by the end of the year, a record for the Group
· Net retention* for the period of 133% (2022: 108%) on a constant
currency basis
· Significant new logo wins, including a North American tier 1
telecom operator and a North American tier 1 utility, as well as a significant
new tier 1 national utility and broadband operator in Southern Europe
· Launch of Integrated Network solution for telecom operators, the
Adaptive Grid solution for electrical operators, and the Insight,
Professional, and Enterprise editions of our Network Manager products.
· New Malaysian office opened at the end of 2023 to support
expansion in APAC in 2024
· Payment of £1.3m of deferred consideration, the first earn-out,
for the acquisition of Comsof (acquired August 2022) with the 2(nd) earn-out
of a further £1.3m due to be paid at the end of March 2024. These
demonstrate the success and integration of the Comsof acquisition
Financial highlights:
· Headline figures have continued to exceed market expectations
· Record order intake of £57.2 million representing 40% growth
(2022: £41.0 million)
· Total revenue growth of 67% to £44.5 million (2022: £26.6
million), with organic growth** of 64%
· Recurring revenue growth of 48% to £15.7 million (2022: £10.6
million)
· Exit ARR*** of £21.3 million representing an increase of 41%
(2022: £15.1 million) (50% on a constant currency basis)
· Gross profit margin of 60% (2022: 59%)
· Substantial growth in adjusted EBITDA**** of £6.6 million (2022:
£1.9 million) demonstrating operational leverage
· Breakeven for the year (2022 loss of £0.9 million)
· Free cash flow positive (2022: negative) with net cash of £11.0
million as at 31 December (2022: £8.1 million)
Outlook:
The growth in exit ARR*** of 50% in 2023, combined with a strong pipeline and
underpinned by the record order intake of £57.2 million, gives improved
visibility and confidence as we head into 2024. We have started the new
financial year in line with our expectations and we remain very confident with
the opportunities we have in front of us, and in our ability to deliver on our
targets for 2024 and beyond.
Gross margins are expected to improve in coming periods as more high gross
margin (85%+) recurring revenue is recognised. The Group continues to focus
on growing recurring revenue with its "Editions" strategy, which provides a
flexible solution dependent on the demands and budgets of various sized
customers and is proving successful in broadening the Group's customer base
with solutions with lower associated implementation and service costs.
IQGeo's growth is underpinned by strong momentum in our two key verticals:
Telecoms and Utilities. Record growth in the rollout of fibre networks is
being driven by commercial broadband operators competing for market share and
by national and local governments seeking to provide universal broadband
services. In parallel, electric utilities are making major investments to
redesign and modernise their grids for renewable and distributed energy
generation and to meet government targets for net-zero carbon emissions. With
these global megatrends set to continue for many years, they provide a strong
long-term market opportunity for IQGeo's network management solutions.
Richard Petti, CEO, commented that: "I am delighted with our performance in
2023. We have delivered a very strong set of results and at the same time we
have strengthened both our product competitiveness and our organisation.
On 1 January 2024 we celebrated our 5-year anniversary as IQGeo over which
time we've delivered two successful acquisitions and dramatically reshaped our
software technology portfolio and global presence. Our Integrated Network
solution is now well established as a market leader in the telecom industry,
and we are building similar momentum in the electric utility industry for our
Adaptive Grid solution.
Our record order intake, strong growth in exit ARR*** and more than three-fold
growth in adjusted EBITDA**** demonstrate the strength of our proposition, our
position in our chosen markets and the innovation of our technology. Our
future is underpinned by global megatrends that will deliver long-term
sustainable growth in our end markets for many years to come.
I would like to acknowledge the hard work and commitment of the IQGeo team
that performed so well in 2023 and we look forward to an exciting 2024."
* Net Retention is Recurring Revenue Net Retention defined as the growth in
recurring revenue from customers at the start of the financial period to the
end of the financial period, net of any recurring revenue churn
** Organic growth is growth in the underlying IQGeo business, excluding growth
generated as a result of the Comsof acquisition.
*** Exit ARR is defined as the current go forward run rate of annually
renewable subscription and M&S agreements.
****Adjusted EBITDA excludes amortisation, depreciation, share option expense,
foreign exchange gains/losses on intercompany trading balances and
non-recurring items and is reported as it reflects the performance of the
Group
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014 which is part of UK law by virtue of the European Union (withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
For further information contact:
IQGeo Group
plc
+44 1223 606655
Richard Petti
Haywood Chapman
Cavendish Capital Markets Limited
+44 20 7220 0500
Henrik Persson, Seamus Fricker (Corporate Finance)
Tim Redfern (ECM)
Notes to Editors
About IQGeo
Telecommunication, fiber, and utility operators are "Building better networks"
with IQGeo's award-winning network management software. The ability to
powerfully model any network requirement, integrate every system and data
source, and support field and office teams with continual innovation is
helping operators create the networks of the future. Our solutions ensure
greater cross-team collaboration and process efficiency throughout the network
lifecycle, from planning and design to construction, operations, and sales.
Whether it's highly competitive fiber and 5G broadband rollouts or complex
utility grid modernization projects, customers trust IQGeo's Integrated
Network and Adaptive Grid solutions. We partner with large multinationals and
smaller regional operators to deliver the digital innovation they need to
accelerate time-to-revenue, increase network resilience, improve operational
safety, and deliver ROI.
For more information visit: www.iqgeo.com/ (http://www.iqgeo.com/)
Copyright © 2024, IQGeo UK Limited. IQGeo is a registered ® trademark
Chair's statement
I am delighted to report that 2023 proved to be an extremely successful year
for IQGeo, delivering strong financials, material product developments and an
organisation which is now rapidly accelerating and broadening its market
opportunity.
This year we celebrated five years since the launch of the IQGeo brand and
operational focus. We started this process with some best in breed products
but needed to establish organisational readiness to truly address the
opportunities that we felt would develop. Over that period, we have remained
focussed on our industry segments, developing our products and people aimed at
addressing the pressing industry needs for Integrated Network and Adaptive
Grid solutions in the telecom and utility sectors. These industries have
continued to grow and demand modern tools to solve new and existing
problems.
Our new customer wins and retention rates across all our markets from global
blue-chip customers to smaller regional providers remain very high. In
addition many of those same customers continue to expand the number of
software users and range of products and applications. All of which provides
positive testament to our strategy.
We continue to see the markets we serve demanding modern adaptable tools to
support field and back-office solutions. Customer wins invariably come from
those needs and requirements with many seeing material solution replacements
where those current strategies are no longer capable of meeting either
external or internal requirements. As such our customer profile typically
develops as demand for more users, new products and functionality spreads
across varying aspects of their business.
Our acquisitions in prior years have been fully integrated and have continued
to allow us to address a wider market opportunity and provide existing
customers with more product and functionality. Whilst we remain focused on the
strong organic growth opportunity, we will as in previous periods consider
carefully those opportunities that may well be served by market
consolidations.
Results overview
Strong financial results in year delivered revenues of £44.5m (2022: £26.6m)
a growth of 67%.
Organisation
We have continued to establish the teams across the globe to make sure we are
able to develop customers relationships with cultural, regional understanding
and local/ infield support. In 2023 we saw the expansion of our Asian region
with the opening of an office in Kuala Lumpur. Head count has been carefully
increased in the year to 217 (2022: 180). This expansion continues to enhance
our management team and those skills needed to understand the challenges our
customers and industries face.
Outlook
We entered 2023 with a strong conviction for the opportunity we had in front
of us, and those opportunities and convictions remain as we exited the year.
Against a backdrop of fast growing markets opportunities, a talented
organisation, and a set of strong financial attributes, we remain confident
that we can continue to meet growing market demand.
Finally, I would like to thank our customers who entrust their material
operational needs with our products and people, our shareholders for their
continued support, and our team at IQGeo. The IQGeo team is focused and
excited by the role they play in our customer's journey to build better
networks for our collective future.
Paul Taylor
Chair
19 March 2024
Chief Executive Officer's statement
Our customers are changing the face of communication with new fibre networks
and completely redesigning electric grids for a decarbonised future, and in
2023 IQGeo again demonstrated the strategic role our software plays in these
global megatrends. At the heart of our success is a clear focus on delivering
software solutions that help our telecom and utility customers manage the
entire lifecycle of their networks.
The challenges facing these industries are enormous, impacting virtually every
aspect of their business. Our Integrated Network and Adaptive Grid solutions
are giving broadband and electric operators the long-term software technology
foundation they need to build and maintain the networks of the future.
While we continue our ambitious plans for the enhancement and extension of our
software product line, we are increasingly confident in our technology
leadership position and in the long-term market potential for our telecom and
utility sectors. The combination of our innovative technology, strong market
demand, and the quality of our growing global team has delivered an excellent
set of results for 2023 with an optimistic outlook for future performance.
Fibre that delivers digital equity
The market opportunity for our geospatial network management software remains
strong as we continue to see significant public and private investment.
Governments around the world are investing in fibre deployments to provide
digital equity for their citizens. This is typified by an additional $40
billion fund for high-speed internet across our primary North American market
with President Joe Biden calling broadband access an "absolute necessity" and
that the US government "Were not going to leave anyone behind".
The IQGeo software suite which includes our Comsof Fiber automated planning
and design software (2022 Comsof acquisition) is well positioned to respond to
this demand and in 2023 we were pleased to sell our solutions to many new
large and small fibre network operators in North America and markets as
diverse as Egypt, Greece, and Malaysia. The combination of public and private
investment together with compelling commercial opportunities for broadband
operators has accelerated fibre deployment projects, and we've been able to
capitalise on this market momentum as we expand our customer base globally.
In contrast to fibre network deployments that are commercially driven,
electric grid operators are tightly regulated and driven by operational and
service metrics. While the speed of the grid transformation may be slower than
fibre deployments, because the addressable market is many times larger than
fibre, the opportunity for our Adaptive Grid software solution is significant.
In response to this opportunity we are actively investing in our utility
software offering and have seen success in 2023 with a solid list of new
electric utility customers that view the IQGeo software as strategic to their
grid transformation objectives.
Measuring our success
To focus our operational priorities across all departments within IQGeo and
monitor our progress we established three key business goals when we
relaunched IQGeo at the beginning of 2019. Over the last five years we have
consistently monitored and measured our performance against these targets.
1. Global growth
Revenue growth for 2023 has met our ambitious targets across all metrics.
These results have been achieved through sales in our traditional North
American, EMEA and Japanese markets. At the end of 2023 we opened a new office
in Kuala Lumpur, Malaysia staffed by IQGeo employees. We will be using this
team to develop new partners in the Asia Pacific (APAC) region to expand our
revenue opportunities in 2024 and beyond.
· 67% growth in revenue
· Revenue of £44.5m in 2023 compared to £26.6m in 2022
· 40% growth in order intake
· Order intake of £57.2m in 2023 compared to £41.0m in 2022
2. Recurring revenue
With exit ARR growth of 41% in 2023 (50% on a constant currency basis), the
team continued to make significant progress on our goal to increase
predictable recurring revenue. Our SaaS based software deployments were
instrumental to the success of our "land and expand" business model that was
fuelled by strong market demand for our industry leading software.
· 41% growth in exit ARR (50% on a constant currency basis)
· Exit ARR of £21.3m in 2023 compared to £15.1m in 2022
3. Product innovation
2023 was another milestone year for product innovation at IQGeo as we launched
our Integrated Network solution for telecom operators, the Adaptive Grid
solution for electrical operators, and the Insight, Professional, and
Enterprise editions of our Network Manager products. These new solutions and
product innovations are leading our competition and opening market and revenue
opportunities with new and existing customers. One key indicator of product
management success and customer satisfaction is our net retention rate, which
measures organic growth. This statistic showed healthy growth for the 2023
financial year.
· Net retention of 133% in 2023 compared to 108% in 2022
Investing in the IQGeo customer lifecycle
In the same way that our software solutions support fibre and electric network
lifecycles, the IQGeo management team is focused on supporting the entire
lifecycle of our customers. We resist the temptation to apply isolated point
solutions for different departmental needs, and instead approach our business
from a holistic perspective that joins up the different operational areas.
This strategy delivers tremendous benefits for our customers because it allows
them to embark on a multi-year 'digitization journey' with IQGeo which yields
continuous improvements in operational efficiency and safety. Our customer
lifecycle journey begins when they first engage with the IQGeo story and
continues through their software purchase, onboarding, training, services, and
long-term support. Our customer success teams then become permanent customer
partners for identifying the next opportunity within the organisation. To
support this transition from 'land' to 'expand' based revenue we will continue
making investment in talent, tools, and processes to maximise customer
satisfaction and continued net retention success.
In 2023 we were pleased to announce that Dr David Cottingham joined IQGeo as
our new Chief Technology Officer and under David's vision we are enhancing and
expanding our SaaS offering that makes it simple for smaller network operators
to subscribe to our software with little or no service requirements,
accelerating ACV. For those Enterprise customers that require a more complex
solution, our Delivery team now has in place an impressive professional
services portfolio that includes product training, integration and data
services so they can deploy quickly and our sales team can focus on expanding
these customer accounts with additional user licences and new applications.
Joining up each stage of the customer lifecycle is accelerating time to ACV
with new customers, enabling faster expansion revenue with existing customers,
and delivering a much better customer experience that supports our goal of
long-term customer retention.
Celebrating 5 years as IQGeo
We launched the IQGeo brand 5 years ago on the 1(st) of January 2019 after the
disposal of the Ubisense RTLS business. Looking back at the launch of IQGeo,
I'm very pleased with the progress that we have made in terms of the
partnership with our customers and the growth of the IQGeo team.
We have made bold and innovative moves with our software, integrated two
strategic acquisitions, and established our company as world-class in the
markets we serve. From a financial perspective we have been successful in
executing our plans to meet revenue, ACV, and profitability targets, and this
is fuelling the growth of our team with industry professionals that are keen
to be part of our success.
When speaking to staff I often compare IQGeo's journey to NASA's hugely
successful Voyager missions which took advantage of a once in a lifetime
alignment of the outer planets. Transposed to our markets what favours us is
strategic strength both for factors we control (product, technology and
organisation) and, crucially, those we do not (market demand, market size and
competition). I tell staff that having all those elements align at the same
time is a unique opportunity and one that will continue supporting the IQGeo
mission for many years to come.
Richard Petti
Chief Executive Officer
19 March 2024
Chief Financial Officer's statement
Principal events and overview
2023 has seen continued improvement for the Group as we demonstrated
significant growth across key financial metrics. In 2022, we achieved the
major milestone of profitability at the adjusted EBITDA level and in 2023 the
level of profitability has increased substantially, demonstrating good
operating leverage, and for the first time we became cash flow positive. As we
continue to be successful in the growing markets in which we operate, we will
continue to grow revenue and achieve sustained profitability and cash inflows.
Key performance indicators
On a monthly basis, the Directors review revenue, operating costs, cash and
KPIs to ensure the continued growth and development of the Group. Primary
KPIs for 2023 and 2022 were as follows:
KPIs 2023 2022
£'000 £000
Total revenue 44,485 26,592
Recurring revenue 15,749 10,610
Recurring revenue % 35% 40%
New ARR added in year 9,007 7,017
Exit recurring revenue run rate 21,295 15,081
Gross margin % 60% 59%
Adjusted EBITDA 6,576 1,898
Profit / (Loss) for the year 4 (913)
Recurring revenue net retention 133% 108%
Recurring revenue order intake 25,719 21,957
Cash, net of debt 10,954 8,055
Revenue
Revenue composition by revenue stream is summarised in the table below:
Revenue by stream 2023 % of total revenue 2022 % of total revenue
£'000 £'000
Subscription 12,728 29% 8,107 31%
Maintenance and support 3,021 7% 2,503 9%
Recurring product revenue 15,749 35% 10,610 40%
Perpetual Software 4,355 10% 1,138 4%
Demand Points 4,879 11% 3,357 13%
Services 18,776 42% 10,527 39%
Non-recurring product revenue 28,010 63% 15,022 56%
Total product revenue 43,759 98% 25,632 96%
Geospatial services from third party products 726 2% 960 4%
Total revenue 44,485 100% 26,592 100%
Total revenue grew by 67% over the prior year to £44.5 million. Included in
this was £8.8 million from Comsof (2022: £4.8 million) which meant that
underlying organic revenue growth from the existing IQGeo business was 64%,
increasing to £35.7 million.
Annual recurring revenues
Annual recurring revenue or ARR arises from both subscription-based SaaS sales
and also maintenance and support arrangements from licence sales. During 2023,
the Group has added a record new ARR of £9.0 million, which compares to the
£5.3 million new ARR added in 2022, excluding the £1.7 million which was
added via the acquisition of Comsof, delivering a 70% increase on a
like-for-like basis. In 2022, the growth was 55% over the £3.4 million
added during 2021, so demonstrable continued growth as the Group scales and
continues to add new products.
The exit ARR of the Group as of 31 December 2023 has increased by 41%
to £21.3 million (2022: £15.1 million) or by 50% from £14.1 million on a
constant currency basis. Although recurring revenues have increased by 48%
to £15.7 million in 2023, recurring revenue percentage has decreased to 35%
of all revenue, compared to 40% in 2022. The main reasons behind this are
the growth in our services revenue, largely due to implementations for
enterprise customers won in 2022 and 2023, and the full year impact of the
Comsof business which had approximately 15% recurring revenue when we acquired
it.
The Group achieved a recurring revenue net retention figure of 133% (2022:
108%) which we are very pleased with and indicates the success of the land and
expand strategy and reflects the Group's continued ability to grow existing
customer accounts through new products and increasing the user count, along
with excellent logo retention.
As indicated at the time of the Comsof acquisition, our plan was to change the
business model for the Comsof business over time to increase the recurring
revenue, selling the automated fibre planning module as a subscription
product. We have been successful with this strategy, signing £2.2 million
of the Comsof product as Annual Recurring Revenue. As a result of this, and
the predicted stabilisation of services revenues going forwards, we do expect
the recurring revenue percentage to grow over the coming years, bringing
increased visibility of revenues and cash flows as well as increased margins
given the 85% gross margin that our recurring IQGeo product revenues bring.
Non-recurring revenues
Comsof revenue includes £4.9 million of demand points - revenue from the
number of end points that the fibre planning software is used to plan for
customers. This demand point revenue is similar to our perpetual licence
revenue and is included in our non-recurring IQGeo product revenue. Sales of
perpetual software licences have increased over the prior year, mainly as a
result of increased sales to utility customers in the North American market
who prefer a perpetual software offering. It is anticipated that this one-off
revenue will continue to fluctuate year on year.
As the number of customers and new contract wins has increased, our associated
service revenues from initial deployments and expansion orders have also grown
by 78% over the prior year and the Group is heading into 2024 with a strong
backlog of services orders. Labour backlog as at 31 December 2023 was £8.9
million (2022 £5.0m).
Services revenues have scaled significantly, increasing from £11.5m in 2022
to £19.5m in 2023 (both figures including the services performed on third
party products), a growth of 70%, as we have been implementing enterprise
solutions for the new customers that we have won both in 2022 and 2023.
Services revenue should also stabilise in 2024 due to the launch of our fully
hosted out-of-the-box products such as the Insight and Professional editions
of the software, but we know that the services "engine" allows us to win and
implement the levels of new Annual Recurring Revenue, as well as the one-off
licence revenues that we have won over the last 2 years.
Additionally to revenue derived from consultancy services on own IP product,
revenue is also derived from consultancy services connected to third party
products. Revenues from third party product services have declined in the
current period and are still expected to decline in future periods as the
Group continues to focus on growing our own product revenues.
Orders
Bookings of orders increased by 40% to £57.2 million during 2023 (2022:
£41.0 million) and the closing order book relating to revenue to be taken in
future years increased by 50%, from £27.5 million at 31 December 2022 to
£41.2 million at 31 December 2023.
Gross profit
Gross profit 2023 Gross margin % 2022 Gross margin % Gross margin movement
£'000
£'000
Gross profit / gross margin 26,702 60% 15,665 59% +1%
Gross margin percentage for the year was 60%. Despite the growth in lower
margin services from 39% of total revenues in 2022 to 42% in 2023, services
margins have increased slightly from 20% in 2022 to 23% in 2023. Recurring
revenue and licences and demand points continue to have gross margins between
85% and 96% respectively. As services revenues stabilise going forwards and
we build our recurring revenues, we would expect gross margins to continue to
grow in future years.
Operating expenses and adjusted EBITDA
Operating expenses were £26.2 million (2022: £17.2 million) and are
summarised as follows:
2023 2022
£'000 £'000
Other operating expenses 20,126 13,767
Depreciation 613 447
Amortisation 3,292 2,241
Share option expense 774 303
Unrealised foreign exchange (gain) / loss on intercompany trading balances 290 (574)
Non-recurring items 1,085 1,007
Total operating expense 26,180 17,191
Other operating expenses of the Group include sales, product development,
marketing and administration costs, net of costs capitalised.
Other operating costs during the period have increased with a full year of
costs from the Comsof business that was only included from 22(nd) August in
2022. In addition, and as the Group continues to scale, we have continued to
grow headcount, recruiting a net new 37 heads during the year across all
geographies and all areas within the business. As at 31 December 2023, there
were 217 employees on the payroll. Operating costs are anticipated to increase
in the future to drive further revenue growth albeit the Group has experienced
significant operational gearing with Adjusted EBITDA increasing 247% off
revenue growth of 67%.
Non-recurring items in 2023 mostly relate to a non-cash provision for the
previously disclosed potential tax warranty claim related to the sale of the
RTLS business in 2018. As set out in the 2022 annual report, the Group has
been working with external advisers and the German tax authorities with
regards to their enquiries into that business' historic tax arrangements. The
Group has now been able to estimate that a payment is more likely than not to
be required in around four years' time, and have made a provision as at 31
December 2023 of £965k in this regard. 2022 non-recurring costs relate to the
Comsof acquisition costs and the costs of integrating the business with the
IQGeo business. The Group are not aware of any other potential claims under
the warranty provisions of this or any other corporate transaction undertaken
by the Group in recent years.
Adjusted EBITDA excludes amortisation, depreciation, share option expense,
foreign exchange gains/losses on intercompany trading balances and
non-recurring items and is reported as it reflects the performance of the
Group. Adjusted EBITDA profit in 2023 was £6.6 million (2022: £1.9 million).
The operating profit for the period was £0.5 million (2022: operating loss of
£1.5 million), £1.6 million profit before non-recurring items (2022: £0.5
million loss)
EPS and dividends
Adjusted diluted earnings per share was 4.4 pence (2022: 0.6 pence).
Reported basic and diluted earnings per share was 0.0 pence (2022: basic and
diluted 1.6 pence loss). The Board believes that the Group's financial
resources provide flexibility and the resources to make investments to
accelerate or promote growth, and does not feel it appropriate at this time to
commence paying dividends.
Assets
Total assets were £50.1 million (2022: £41.6 million). Total current assets
increased to £27.3 million (2022: £19.8 million).
Total non-current assets were £22.8 million (2022: £21.8 million). Goodwill
decreased to £11.3 million (2022: £11.5 million) due to the foreign exchange
movements. Capitalised development costs at 31 December 2023 were £5.5
million (2022: £3.7 million) with the increase reflecting the investment in
the IQGeo product suite, offset by the amortisation charge. No change has been
made to the current three-year amortisation period, due to the fast-moving
nature of the technology.
Liabilities
Total current liabilities increased to £24.4 million (2022: £16.6 million)
which includes an increase in deferred revenue of £4.9 million as would be
expected in a business that is increasing annual recurring revenue through
subscription-based customer contracts. Current liabilities also include £1.3
million of contingent consideration in respect of the Comsof acquisition. We
expect to pay this deferred consideration in March 2024, reflecting the
excellent performance of the Comsof business.
Total non-current liabilities decreased to £2.9 million (2022: £3.3 million)
largely due to the payment of £1.3 million of contingent consideration for
the Comsof acquisition in April 2023, offset by the £1.0 million warranty
provision recognised in 2023.
Net assets
Net assets increased to £22.8 million (2022: £21.7 million).
Cash and cash flow
Operating cash before working capital movement was £6.5 million inflow (2022:
£0.9 million). Cash inflow from operating activities after adjusting for
working capital and tax was £9.9 million (2022: £2.5 million). Given the
annual in advance payment profile of our subscription revenues, and in a
company growing at rates the Group is, we would expect working capital to be a
cash inflow.
The Group had investment outflows of £6.0 million (2022: £8.7 million)
including £0.2 million for tangible assets (2022: £0.2 million) and £4.4
million on development investments in own products (2022: £2.9 million). In
2023, approximately 73% of R&D expenditure was capitalised (2022: 74%).
The 2023 investment outflow figures also include £1.3 million paid in respect
of the first earnout and contingent consideration for the Comsof business. The
2022 figures include £5.0 million paid for the acquisition of Comsof, net of
£2.5 million cash acquired and £1.0 million on non-recurring costs related
to the acquisition and integration of the Comsof business, together with £0.6
million of deferred payments in relation to OSPI acquisition.
Cash outflows from financing activities were £0.4 million (2022: £3.1
million inflow). The 2023 outflow was due to office leases, offset by
proceeds from share issues on exercise of share options. The 2022 inflow was
primarily due to the fundraise associated with the placing of shares to assist
fund the Comsof acquisition, both completed in August 2022.
Going concern
As at 31 December 2023, the Group had £11.0 million of cash (2022: £8.1
million) and no debt. The Directors have prepared detailed cash flow
projections including sensitivity analysis on key assumptions. The
projections prepared until 30 June 2025 show that the Group will be able to
operate comfortably within the current levels of cash available and, based on
this, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis in preparing
its consolidated financial statements.
Haywood Chapman
Chief Financial Officer
19 March 2024
Consolidated income statement
for the year ended 31 December 2023
Notes 2023 2022
£'000 £'000
Revenue 5 44,485 26,592
Cost of revenue (17,783) (10,927)
Gross profit 26,702 15,665
Operating expenses (26,180) (17,191)
Operating profit / (loss) 522 (1,526)
Analysed as:
Gross profit 26,702 15,665
Other operating expenses (20,126) (13,767)
Adjusted EBITDA 6,576 1,898
Depreciation 13, 14 (613) (447)
Amortisation 12 (3,292) (2,241)
Share option expense (774) (303)
Unrealised foreign exchange gains / (losses) on intercompany trading balances (290) 574
Non-recurring items 9 (1,085) (1,007)
Operating profit / (loss) 522 (1,526)
Finance income 8 15 -
Finance costs 8 (480) (288)
Profit / (loss) before tax 57 (1,814)
Income tax 10 (53) 901
Profit / (loss) for the year 4 (913)
Basic and diluted earnings / (loss) per share (pence) 11 0.0 (1.6)
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023 2022
£'000 £'000
Profit / (loss) for the year 4 (913)
Other comprehensive income:
Exchange difference on retranslation of net assets and results of overseas 128 417
subsidiaries
Total comprehensive profit / (loss) for the year 132 (496)
Consolidated statement of changes in equity
for the year ended 31 December 2023
Ordinary share capital Share premium Share based payment reserve Capital redemption reserve Merger relief reserve Translation reserve Other reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 1,150 22,507 454 476 959 (1,854) 238 (6,779) 17,151
Loss for the year - - - - - - - (913) (913)
Exchange difference on retranslation of net assets and results of overseas - - - - - 417 - - 417
subsidiaries
Total comprehensive loss for the year - - - - - 417 - (913) (496)
Exercise of share options 4 109 (30) - - - - 30 113
Issue of shares - acquisition (Comsof) 16 - - - 957 - - - 973
Deferred consideration - (OSPI) 3 - - - 237 - - - 240
Issue of shares - associated costs - (95) - - - - - - (95)
Issue of shares - fundraise 56 3,444 - - - - - - 3,500
Lapse of share options - - (93) - - - - 93 -
Equity-settled share-based payment - - 303 - - - - - 303
Transactions with owners 79 3,458 180 - 1,194 - - 123 5,034
Balance as at 31 December 2022 1,229 25,965 634 476 2,153 (1,437) 238 (7,569) 21,689
Profit for the year - - - - - - - 4 4
Exchange difference on retranslation of net assets and results of overseas - - - - - 128 - - 128
subsidiaries
Total comprehensive profit for the year - - - - - 128 - 4 132
Exercise of share options 5 168 (49) - - - - 49 173
Lapse of share options - - (23) - - - - 23 -
Equity-settled share-based payment - - 774 - - - - - 774
Transactions with owners 5 168 702 - - - - 72 947
Balance as at 31 December 2023 1,234 26,133 1,336 476 2,153 (1,309) 238 (7,493) 22,768
Consolidated statement of financial position
for the year ended 31 December 2023
Notes 2023 2022
£'000 £'000
Assets
Non-current assets
Intangible assets 12 20,830 20,029
Property, plant and equipment 13 382 310
Right-of-use assets 14 1,624 1,480
Total non-current assets 22,836 21,819
Current assets
Trade and other receivables 15 16,330 11,064
Corporation tax receivable - 662
Cash and cash equivalents 16 10,954 8,055
Total current assets 27,284 19,781
Total assets 50,120 41,600
Liabilities
Current liabilities
Trade and other payables 17 (23,806) (16,217)
Lease liability obligations 20 (629) (417)
Total current liabilities (24,435) (16,634)
Non-current liabilities
Deferred income tax liabilities 10 (596) (802)
Trade and other payables 17 - (996)
Provisions 18 (965) -
Lease liability obligations 20 (1,356) (1,479)
Total non-current liabilities (2,917) (3,277)
Total liabilities (27,352) (19,911)
Net assets 22,768 21,689
Equity attributable to owners of the Company
Ordinary share capital 21 1,234 1,229
Share premium 21 26,133 25,965
Share-based payment reserve 1,336 634
Capital redemption reserve 476 476
Merger relief reserve 2,153 2,153
Translation reserve (1,309) (1,437)
Other reserves 238 238
Retained earnings (7,493) (7,569)
Equity attributable to shareholders of the Company 22,768 21,689
The financial statements were approved and authorised for issue by the Board
of Directors on 19 March 2024 and signed on its behalf by:
Richard
Petti
Haywood Chapman
Chief Executive Officer Chief
Financial Officer
IQGeo Group plc
Registered Number: 05589712
Consolidated statement of cash flows
for the year ended 31 December 2023
2023 2022
Notes £'000 £'000
Profit / (loss) before tax from operating activities 57 (1,814)
Depreciation 13,14 613 447
Amortisation 12 3,292 2,241
Unrealised foreign exchange (gain) / loss on intercompany trading balances 290 (574)
Share-based payment charge 774 303
Finance income 8 (15) -
Finance costs 8 480 288
Movement in provision 18 965 -
Operating cash flows before working capital investment 6,456 891
Change in receivables (4,604) (6,039)
Change in payables 7,589 7,051
Cash used in operations before tax 9,441 1,903
Net income taxes received 507 607
Net cash flows from operating activities 9,948 2,510
Cash flows from investing activities
Purchases of property, plant and equipment 13 (245) (170)
Expenditure on intangible assets 12 (4,434) (2,900)
Acquisition of subsidiaries, net of cash acquired 6 (1,319) (5,613)
Interest received 15 -
Net cashflows used in investing activities (5,983) (8,683)
Cash flows from financing activities
Payment of lease liability 20 (602) (444)
Proceeds from the issue of ordinary share capital on exercise of options 173 103
Proceeds from the issue of ordinary share capital from - 3,405
fundraising, net of associated costs
Net cash flows (used in) / generated from financing activities (429) 3,064
Net increase / (decrease) in cash and cash equivalents 3,536 (3,109)
Cash and cash equivalents at start of period 8,055 11,499
Exchange difference on cash and cash equivalents (637) (335)
Cash and cash equivalents at year end 16 10,954 8,055
Notes to the consolidated financial statements
1 General information
IQGeo Group plc (the "Company") and its subsidiaries (together, the "Group")
delivers geospatial software solutions that integrate data from any source -
geographic, real-time asset, GPS, location, corporate and external cloud-based
sources - into a live geospatial common operating picture, empowering all
users in the customer's organisation to access, input and analyse operational
intelligence to proactively manage their networks, respond quickly to
emergency events and effectively manage day-to-day operations.
The Company is a public limited company which is listed on the Alternative
Investment Market (AIM) of the London Stock Exchange (IQG) and is incorporated
and domiciled in the United Kingdom. The value of IQGeo Group plc shares, as
quoted on the London Stock Exchange at 31 December 2023, was 309.0 pence per
share (31 December 2022: 188.5 pence per share).
The address of its registered office is Nine Hills Road, Cambridge, CB2 1GE,
United Kingdom.
The Group has its operations in the UK, USA, Canada, Belgium, Germany, Japan
and Malaysia and sells its products and services in over 40 countries
globally. The Group legally consists of eight subsidiary companies headed by
IQGeo Group plc at 31 December 2023 (seven at 1 January 2023).
The consolidated financial statements have been approved for issue by the
Board of Directors on 19 March 2024.
2 New accounting standards
The consolidated financial statements are prepared in accordance with
UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006.
The accounting policies used are the same as set out in detail in the Annual
Report and Accounts 2022 and have been applied consistently to all periods
presented in the financial statements.
There were no new standards or amendments or interpretations to existing
standards that became effective during the year that were material to the
Group.
No new standards, amendments or interpretations to existing standards having
an impact on the financial statements that have been published and that are
mandatory for the Group's accounting periods beginning on or before 1 January
2023, or later periods, have been adopted early.
Standards and interpretations not yet applied by the Group
The following new standards and interpretations, which are yet to become
mandatory and have not been applied in the Group's financial statements, are
not expected to have a material impact on the Group's financial statements.
• Supplier Finance Arrangements (Amendment to IAS 7 and IFRS 7)
• Lease Liability in a Sale and Leaseback (Amendment to IFRS 16)
• Classification of Liabilities as Current or Non-Current (Amendment to IAS
1)
• Amendment - Noncurrent Liabilities with Covenants (Amendment to IAS 1)
• Lack of Exchangeability (Amendment to IAS 21)
These amendments are not expected to have a significant impact on the
financial statements in the period of initial application and therefore the
disclosures have not been made.
3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of the
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of IQGeo Group plc are prepared in
accordance with UK-adopted international accounting standards in conformity
with the requirements of the Companies Act 2006 ('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 critical accounting 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
In determining the basis for preparing the consolidated financial statements,
the Directors are required to consider whether the Company can continue in
operational existence for the foreseeable future, being a period of not less
than twelve months from the date of the approval of the consolidated financial
statements.
Management prepares detailed cash flow forecasts which are reviewed by the
Board on a regular basis. The forecasts include assumptions regarding the
opportunity funnel from both existing and new clients, growth plans, risks and
mitigating actions. In particular, operating cash flow and profitability are
highly sensitive to revenue mix and the positive contribution of continuing
growth in software sales whether on a perpetual licence or subscription basis.
In reaching their going concern conclusion, the Directors have considered that
the Group had cash of £11.0 million as at 31 December 2023 and sufficient
working capital to continue operations. Management have also prepared analysis
including downside scenarios considering the impact of limited revenue growth
and reduced margins. This demonstrates that even in the event of a significant
downturn in performance, cash reserves are sufficient to continue trading. A
reverse stress test scenario has also been considered, demonstrating that a
depletion of all cash reserves would require an implausible fall in revenue
and margins.
The Group's forecasts and projections to 30 June 2025, 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 to continue in operational existence for the foreseeable
future, a period of not less than twelve months from the date of this report.
The Group, therefore, continues to adopt the going concern basis in preparing
the consolidated financial statements.
Consolidation
The Group financial statements include the results, financial position and
cash flows of the Company and all of its subsidiary undertakings. Subsidiary
undertakings are those entities controlled directly or indirectly by the
Company. Control arises when the Company has the power to govern the financial
and operating policies of an entity, uses this power to affect the returns
from that entity and has exposure to variable returns from its investment in
the entity.
Financial statements of the subsidiaries are prepared for the same reporting
year as the Company, using consistent accounting policies. Businesses acquired
or disposed of during the year are accounted for using acquisition method
principles from, or up to, the date control passed. Intra-group transactions
and balances are eliminated on consolidation. All subsidiaries use uniform
accounting policies for like transactions and other events and similar
circumstances.
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 consolidated income statement within
"operating expenses". Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates
as at the dates of the initial transactions.
c. Consolidation
For the purpose of presenting consolidated financial statements, the results
and financial position of all the Group entities (none of which have the
currency of a hyperinflationary economy) that have a functional currency other
than GBP are translated into GBP as follows:
· assets and liabilities for each statement of financial position are
translated at the exchange rate at the period end date;
· income and expenses for each income statement are translated at the
exchange rate ruling at the time of each period the transaction occurred; and
· all resulting exchange differences are recognised in other
comprehensive income.
Business reporting
IFRS 8 requires a "management approach" under which information in the
financial statements is presented on the same basis as that used for internal
management reporting purposes.
The Group is organised on a global basis. The Directors believe that the Chief
Operating Decision Maker (CODM) is the Chief Executive Officer of the Group.
The CODM and the rest of the Board are provided with information as a single
business unit to assess its financial performance.
The internal management accounting information is prepared on an IFRS basis
but has non-GAAP "adjusted EBITDA" as the primary measure of profit and this
is reported on the face of the consolidated income statement.
Revenue recognition
Revenue represents the consideration that the entity expects to receive for
the sales of goods and services net of discounts and sales taxes. Revenue is
recognised based on the distinct performance obligations under the relevant
customer contract as set out below. Where goods and/or services are sold in a
bundled transaction or on a subscription basis, the Group allocates the total
consideration under the contract to the different individual elements based on
actual amounts charged by the Group on a standalone basis.
Revenue is recognised at different points in time, upfront, over time and at
points in time, as described below. Such recognition takes into
consideration the term of the licence granted or services to be provided as
much as the term of any longer agreement that the licencing and services are
provided within. Where there are recognisable points which require actions
from the customer and/or the Company, which includes the renewal of annual
licences within a term contract, the Company recognises revenue only to the
next renewal point to reflect inherent uncertainties of future revenues and
separate performance obligations. Revenue is recognised either on a
subscription / monthly basis or upfront annually dependant on the basis of the
agreement and services to be provided or upfront for the term of the licence
where there are no separate performance obligations or renewal points within
the customer agreement.
Recurring IQGeo Product revenue - subscription
Subscription services, which may include hosting services, are considered to
be a single distinct performance obligation due to the promises stated within
the contract. Revenue is recognised evenly over the subscription period as the
customer receives the benefits of the subscription services.
Recurring IQGeo Product revenue - maintenance and support
Maintenance and support is recognised on a straight-line basis over the term
of the contract, which is typically one year, reflecting the time over which
the customer receives the benefits of the services. Revenue not recognised in
the consolidated income statement is classified as deferred revenue on the
consolidated statement of financial position.
Perpetual software
Software is also sold under perpetual licence agreements. Under these
arrangements revenue is recognised at a point in time, when the software is
made available to the customer for use, provided that all obligations
associated with the sale of the licence have been made fulfilled.
If contracts include performance obligations which result in software being
customised or altered, the software cannot be considered distinct from the
labour service. Revenue recognition is dependent on the contract terms and
assessment of whether the performance obligation is satisfied over time. If
the conditions of IFRS 15 to recognise revenue over time are not satisfied,
revenue is deferred until the software is available for customer use, because
once software has been installed by the customer, the Group has no further
obligations to satisfy.
Demand Points revenue (Comsof products)
Annual licence revenue
For Comsof software products which are sold within an agreement based on
Demand Points and which contain an annual licence renewal, revenue is
recognised annually upfront, when the software is made available to the
customer for use, provided that all obligations associated with the sale of
the licence have been made fulfilled. Hosting or associated services within
the same agreement are recognised over time, reflecting the time over which
the customer receives the benefits of the services. This reflects that whilst
the contractual term may extend across multiple annual renewals, there is a
trigger at the annual renewal which if not met could cause the contract to be
terminated.
Term licence revenue
For Comsof software products which are sold within an agreement based on
Demand Points, which is for a fixed period, but which does not contain an
annual licence renewal, revenue is recognised in full upfront, when the
software is made available to the customer for use, provided that all
obligations associated with the sale of the licence have been made
fulfilled. Hosting or associated services within the same agreement are
recognised over time. This reflects that the customer has the benefit of the
software for the duration of the term contract.
Services
Services revenue includes consultancy and training. Services revenue from time
and materials contracts is recognised in the period that the services are
provided on the basis of time worked at agreed contractual rates and as direct
expenses are incurred.
Revenue from fixed price, long-term customer specific contracts is recognised
over time following assessment of the stage of completion of each assignment
at the period end date compared to the total estimated service to be provided
over the entire contract where the outcome can be estimated reliably. If a
contract outcome cannot be estimated reliably, revenues are recognised equal
to costs incurred, to the extent that costs are expected to be recovered. An
expected loss on a contract is recognised immediately in the consolidated
income statement.
Timing of payment
Maintenance and support income and subscription income is invoiced annually in
advance at the commencement of the contract period. Software and demand points
are invoiced on delivery. Services are invoiced either on a time and
deliverables basis monthly in arrears, or on completion of milestones. Other
revenue is invoiced based on the contract terms in accordance with performance
obligations. Our standard payment terms are 30 days from date of invoice,
however management discretion can be applied for significant contracts.
Contract assets and contract liabilities
Amounts recoverable on contracts (contract assets) relate to the Group's right
to consideration for completed performance obligations under the contract
prior to invoicing. Deferred income (contract liabilities) relates to amounts
invoiced in advance of services performed under the contract.
Employee benefits
a. Retirement benefits
The Group operates various defined contribution pension arrangements for its
employees.
For defined contribution pension arrangements, the amount charged to the
consolidated income statement represents the contributions payable in the
period. Differences between contributions payable in the period and
contributions actually paid are shown as either accruals or prepayments in the
consolidated statement of financial position.
b. Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Vesting conditions are continuing employment. 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 the
share-based payment reserve. Non-market vesting conditions include assumptions
about the number of options expected to vest.
Non-recurring items
Non-recurring items are disclosed separately in the financial statements where
it is necessary to do so to provide further understanding of the financial
performance of the Group. They are material one-off items of income or expense
that have been shown separately due to the significance of their nature or
amount and do not reflect the ongoing cost base or revenue-generating ability
of the Group.
Adjusted EBITDA
Due to the one-off nature of acquisition and other costs and the non-cash
element of certain charges, the Directors believe that adjusted EBITDA
provides shareholders with a more appropriate representation of the underlying
earnings derived from the Group's business and a more comparable view of the
year-on-year underlying financial performance of the Group. Adjusted EBITDA
excludes amortisation, depreciation, share option expense, foreign exchange
gains/losses on intercompany trading balances and non-recurring items.
Interest income and expense
Interest income and expense is included in the consolidated income statement,
using the effective interest method by reference to the principal outstanding.
Tax
The tax charge or credit comprises current tax payable and deferred tax:
a. Current tax
The current tax charge represents an estimate of the amounts payable or
receivable to or from tax authorities in respect of the Group's taxable
profits and is based on an interpretation of existing tax laws. Taxable profit
differs from profit before tax as reported in the consolidated income
statement because it excludes certain items of income and expense that are
taxable or deductible in other years or are never taxable or deductible.
Taxation received is recognised only when it is probable that the Group is
entitled to the asset.
b. Deferred tax
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets
and liabilities in the consolidated financial statements with their respective
tax bases. In addition, tax losses available to be carried forward as well as
other income tax credits to the Group are assessed for recognition as deferred
tax assets. However, deferred tax is not provided on the initial recognition
of goodwill, nor on the initial recognition of an asset or liability, unless
the related transaction is a business combination or affects tax or accounting
profit.
Deferred tax liabilities are always provided in full. Deferred tax assets are
recognised to the extent that it is probable that the underlying deductible
temporary differences will be able to be offset against future taxable income.
Deferred tax assets and liabilities are calculated, without discounting, at
tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the
reporting date. Deferred tax is recognised as a component of tax expense in
the consolidated income statement, except where it relates to items charged or
credited directly to other comprehensive income or equity when it is
recognised in other comprehensive income or equity.
During the current and prior year IQGeo UK Limited has and intends to submit
claims for UK Research and Development tax credit relief ("R&D tax claim")
under the HMRC SME scheme. In 2023 this forms part of the unrecognised
deferred tax asset in the UK.
Business combinations
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the 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.
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 is
recognised in accordance with IFRS 9 in the consolidated income statement.
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 and the net fair value of the assets and
liabilities acquired. Goodwill is carried at cost less accumulated impairment
losses.
Research and development
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
Costs relating to ongoing obligations of customer contracts are expensed.
Development activities involve a plan or design for the production of new or
substantially improved products and processes. Development expenditure is only
capitalised if all of the following conditions are met:
· completion of the intangible asset is technically feasible so that it
will be available for use or sale;
· the Group intends to complete the intangible asset and use or sell
it;
· the Group has the ability to use or sell the intangible asset;
· the intangible asset will generate probable future economic benefits.
Among other things, this requires that there is 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 the intangible asset; and
· the expenditure attributable to the intangible asset during its
development can be measured reliably.
Internally generated intangible assets, consisting mainly of direct labour
costs, are amortised on a straight-line basis over their useful economic
lives. Amortisation is shown within administrative expenses in the
consolidated income statement. The estimated useful lives of current
development projects are three years. Upon completion the assets are subject
to impairment testing if impairment triggers are identified, based on expected
future sales.
Where no internally generated intangible asset can be recognised, development
expenditure is recognised as an expense in the period in which it is incurred.
Other intangible assets
Intangible assets that are purchased separately, such as software licences
that do not form an integral part of related hardware, are capitalised at cost
and amortised on a straight-line basis over their useful economic life which
is typically three years.
Customer relationships acquired following a business combination are amortised
on a straight-line basis over their useful economic life which is ten years.
Brands acquired following a business combination are amortised on a
straight-line basis over their useful economic life which is two to five
years.
Intellectual Property acquired following a business combination is amortised
on a straight-line basis over its useful economic life which is five years.
Acquired software recognised following a business combination is amortised on
a straight-line basis over their useful economic life which is three to five
years.
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
consolidated 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 and leasehold improvements: three to ten years,
or period of the lease if shorter
· Computer equipment: three years
Residual values and useful economic lives are assessed annually. The gain or
loss on the disposal or retirement of an asset is determined as the difference
between the sales proceeds and the carrying amount of the asset and is
recognised in operating expenses.
Leased assets
The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is,
or contains, a lease. A lease is defined as 'a contract, or part of a
contract, that conveys the right to use an asset (the underlying asset) for a
period of time in excfhange for consideration'. To apply this definition the
Group assesses whether the contract meets three key evaluations which are
whether:
• the contract contains an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified at the
time the asset is made available to the Group
• the Group has the right to obtain substantially all of the economic
benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
• the Group has the right to direct the use of the identified asset
throughout the period of use. The Group assesses whether it has the right to
direct 'how and for what purpose' the asset is used throughout the period of
use
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the consolidated statement of financial position. The
right-of-use asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset at the end
of the lease, and any lease payments made in advance of the lease commencement
date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in-substance fixed), variable payments based on
an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment
or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the right-of-use
asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value
assets using the practical expedients. Instead of recognising a right-of-use
asset and lease liability, the payments in relation to these are recognised as
an expense in profit or loss on a straight-line basis over the lease term.
On the consolidated statement of financial position, right-of-use assets have
been presented as non-current assets and lease liabilities presented within
current and non-current liabilities.
Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill - 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 of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units). Impairment
losses are recognised immediately in profit or loss.
Non-financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date. Where
an impairment loss is reversed, it is reversed to the extent that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS
15, all financial assets are initially measured at fair value adjusted for
transaction costs (where applicable).
Financial assets are classified into the following categories:
• amortised cost;
• fair value through profit or loss (FVTPL); and
• fair value through other comprehensive income (FVOCI).
The classification is determined by both:
• the entity's business model for managing the financial asset; and
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the
financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash flows that
are solely payments of principal and interest on the principal amount
outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than
'hold to collect' or 'hold to collect and sell' are categorised at fair value
through profit and loss. Further, irrespective of business model, financial
assets whose contractual cash flows are not solely payments of principal and
interest are accounted for at FVTPL.
Assets in this category are measured at fair value with gains or losses
recognised in profit or loss. The fair values of financial assets in this
category are determined by reference to active market transactions or using a
valuation technique where no active market exists.
Trade receivables
Trade receivables are amounts due from customers for products sold or services
performed in the ordinary course of business. If collection is expected in one
year or less, they are classified as current assets. If not, they are
presented as non-current assets.
The Group makes use of a simplified approach in accounting for trade and other
receivables as well as contract assets and records the loss allowance as
lifetime expected credit losses. These are the expected shortfalls in
contractual cash flows, considering the potential for default at any point
during the life of the financial instrument. In calculating, the Group uses
its historical experience, external indicators and forward-looking information
to calculate the expected credit losses using a provision matrix.
The Group assesses impairment of trade receivables on a collective basis as
they possess shared credit risk characteristics and they have been grouped
based on the days past due.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and other
payables.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for derivatives and financial liabilities
designated at FVTPL, which are carried subsequently at fair value with gains
or losses recognised in the profit or loss.
Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents
includes cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the consolidated income statement over the period of
the borrowings using the effective interest method.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. The nominal value of shares issued
is classified as share capital and the amounts paid over the nominal value in
respect of share issues, net of related costs, is classified as share premium.
Share-based payment reserve
The share-based payment reserve relates to a cumulative charge made in respect
of share options granted by the Company to the Group's employees under its
employee share option plans.
Capital redemption reserve
The capital redemption reserve relates to the repurchase and subsequent
cancellation of issued ordinary share capital.
Merger relief reserve
The merger relief reserve relates to the issue of shares as consideration for
acquisitions of direct or indirect 100% owned subsidiaries within the Group.
Translation reserve
Exchange differences relating to the translation of the results and net assets
of the Group's foreign operations from their functional currencies to the
Group's presentation currency of GBP, are recognised directly in other
comprehensive income and accumulated in the translation reserve.
Retained earnings
Retained earnings include all current and prior period retained
profits/losses.
4 Critical accounting judgements and key sources of estimation and uncertainty
When preparing the financial statements, management makes a number of
judgements, estimates and assumptions about the recognition and measurement of
assets, liabilities, income and expenses.
Significant management judgements
The following are the judgements made by management in applying the accounting
policies of the Group that have the most significant effect on the financial
statements.
Capitalisation of development costs
The point at which development costs meet the criteria for capitalisation is
critically dependent on management's judgement of the point at which technical
and commercial feasibility is demonstrable. The carrying amount of capitalised
development costs at 31 December 2023 is £5.5 million (2022 £3.8 million).
After capitalisation, management monitors whether the recognition requirements
continue to be met and whether there are any indicators that capitalised costs
may be impaired.
Revenue recognition
Significant management judgement is applied in determining the distinct
performance obligations included within contracts involving multiple
deliverables. In particular, where additional services are sold alongside
perpetual licence sales, management must make an assessment if contracts
include performance obligations which would result in software being
customised or altered, prior to reaching a conclusion as to whether the
software can or cannot be considered distinct from the labour service.
Significant judgement is required around the duration of a licence agreement
where the contractual term extends beyond an annual licence renewal in
determining whether revenue should be recognised over the contractual term or
the licence term. In making this judgement management consider historic
practice of renewal's, contractual termination clauses, interaction with the
licence renewal terms and enforceability of termination clauses contained
within. This includes the certainty over such revenues given the changing
nature of a customer's requirements through the lifecycle of the products
utilisation and the Group's ability to provide a stack of products that can
change through a customer's journey.
For each identified significant performance obligation management are required
to determine which obligations meet the criteria to recognise revenue over
time. As revenue from fixed price services agreements is recognised over time,
the amount of revenue recognised in a reporting period depends on the extent
to which the performance obligation has been satisfied. This requires an
estimate of the time and value to deliver the services to be provided, based
on historical experience with similar contracts. In a similar way, recognising
revenue requires the estimated number of hours required to complete the
promised work. For further detail on the specific nature of revenue streams
recognised by the Group, refer to the revenue recognition section within Note
3.
Deferred tax
A deferred tax asset is recognised where the Group considers it probable that
future taxable profits will be available against which the tax credit will be
utilised in the future. This specifically applies to tax losses and to
outstanding vested share options at the statement of financial position date.
In estimating the amount of the deferred tax asset that should be recognised,
the Directors make judgements based on current budgets and forecasts about the
amount of future taxable profits and the timings of when these will be
realised. As at 31 December 2023 deferred tax assets have not been recognised
in respect of existing tax losses and equity-settled share options temporary
differences, because it is not probable that future taxable profits will be
available against which the Group can utilise the benefits
Estimating uncertainty
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.
Amortisation and impairment of development costs
Capitalised development costs are amortised over a three-year period which is
management's estimate of the useful lives of current development projects. In
reaching this conclusion, management have made assumptions in respect of
future customer requirements and developments within the industry. These
estimates have a high level of uncertainty and are matters outside of
management's control.
The Group reviews capitalised development costs for indicators of impairment
annually in accordance with the accounting policy stated in Note 3. In
assessing if an indication of impairment exists management review sales over
the preceding three years for each product capitalised. For the majority of
products capitalised, these sales support management's assessment that no
indication of impairment exists. Where these sales do not support this
conclusion, such as for new products developed, management are required to
make assumptions of the future cash flows generated from these software
products. This includes consideration of both the current business pipeline,
the expected conversion of that pipeline and the future cash flows to be
generated through recurring revenue contracts, including the application of a
suitable discount rate.
5 Business information
5.1 Operating segments
Management provides information reported to the Chief Operating Decision Maker
(CODM) for the purpose of assessing performance and allocating resources. The
CODM is the Chief Executive Officer.
The business delivers software solutions that integrate data from any source -
geographic, real-time asset, GPS, location, corporate and external cloud-based
sources - into a live geospatial common operating picture, empowering all
users in the customer'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. These
geospatial operations are reported to the CODM as a single operating segment
which includes the operations of Comsof acquired during the year. Whist the
Comsof brand will be retained as part of the Company's product portfolio, the
operations, people, sales, development, administration and systems have all
been fully integrated into the IQGeo group and amalgamated within the existing
single operating segment.
5.2 Revenue by type
The following table presents the different revenue streams of the IQGeo Group:
Revenue by stream 2023 % of total revenue 2022 % of total revenue
£'000
£'000
Subscription 12,728 29% 8,107 31%
Maintenance and support 3,021 7% 2,503 9%
Recurring IQGeo product revenue 15,749 35% 10,610 40%
Perpetual software 4,355 10% 1,138 4%
Demand points software 4,879 11% 3,357 13%
Services 18,776 42% 10,527 39%
Non-recurring IQGeo product revenue 28,010 63% 15,022 56%
Total IQGeo product revenue 43,759 98% 25,632 96%
Geospatial services on third party products 726 2% 960 4%
Total revenue 44,485 100% 26,592 100%
5.3 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 have been identified on the basis of the
customers' geographical location. Non-current assets are allocated based on
their physical location.
The following table represents the Group's operational revenue and non-current
assets by geographical region:
Revenue Non-current assets
2023 2022 2023 2022
£'000 £'000 £'000 £'000
UK 2,626 1,133 12,089 9,755
Europe 5,404 1,983 2,539 2,920
USA 29,318 17,867 7,362 8,308
Canada 3,501 2,893 3 2
Japan 3,049 1,867 843 891
Rest of World 587 849 - -
Total 44,485 26,592 22,836 21,876
5.4 Information about major customers
During 2023, the Group had two customers who generated revenues of greater
than 10% of total revenue for the group (2022: no customers).
6 Acquisitions
There have been no acquisitions in 2023. On 11th August 2022 the Group
acquired 100% of the equity instruments of Comsof NV ("Comsof"), a business
based in Ghent, Belgium, thereby obtaining control. Comsof had a wholly
owned subsidiary based in Toronto, Canada, Comsof Technologies America Ltd.
Effective 1 January 2023, ownership of Comsof Technologies America Ltd was
transferred directly under IQGeo Group plc ownership and amalgamated with
IQGeo's existing Canadian subsidiary IQGeo Solutions Canada Inc.
Comsof and contribution to the Group results
The acquisition of Comsof was concluded on 11(th) August 2022, with 100% of
the share capital acquired with the total consideration of up to £11.1
million (up to €13.0 million).£2.5 million of cash.
The consideration included up to £2.4 million (€3.0 million) as contingent
consideration based on the achievement of contract awards to agreed Demand
point values and subsequent collection of cash in settlement of the first
year's invoice values. The first payment was made in April 2023, and at 31
December 2023, the remaining contingent consideration was expected to be
settled in March 2024. The second half of the consideration at 31 December
2023 is included within current liabilities (£1.3 million).
Contingent consideration was discounted on recognition with £0.3 million
recognised as interest expense during the year 2023 (2022: £0.2 million).
7 Employee information
7.1 Employee numbers
The number of people as at 31 December and the average monthly number of
people employed during the year, including Executive Directors, was:
Actual number of people as at 31 December Average monthly number of people in the year
By activity 2023 2022 2023 2022
Number Number Number Number
Technical consultants 80 68 75 47
Sales & marketing 65 54 61 44
Research & development 50 41 45 29
Administration 22 17 20 15
217 180 200 135
By geography 2023 2022 2023 2022
Number Number Number Number
United Kingdom 53 36 43 31
Europe 45 43 43 19
North America 111 95 107 80
Asia 8 6 7 5
217 180 200 135
7.2 Employee benefits
The aggregate employee benefit expense, including Executive Directors,
comprised:
2023 2022
£'000
£
'
0
0
0
Wages and salaries 20,931 14,434
Social security costs 2,105 1,161
Contributions to defined contribution pension arrangements 645 433
Share-based payments 774 303
Total aggregate employee benefits 24,455 16,331
8 Finance income and costs
2023 2022
£'000 £'000
Interest income from cash and cash equivalents 15 -
Finance income 15 -
Interest expense for lease arrangements (136) (95)
Interest expense for contingent and deferred consideration (344) (193)
Finance costs (480) (288)
Net finance costs (465) (288)
9 Loss before tax: analysis of expenses by nature
9.1 Expenses by nature
The following items have been charged / (credited) to the consolidated income
statement in arriving at a gain before tax:
Notes 2023 2022
£'000 £'000
Amortisation of capitalised development and software costs 12 2,520 1,686
Amortisation and impairment of acquired intangible assets 12 772 555
Depreciation of owned property, plant and equipment 13 163 99
Depreciation of right-of-use assets 14 450 348
Lease rental charges - land and buildings 20 602 444
Research & development costs expensed 1,650 1,022
Net foreign currency expense 539 378
Unrealised foreign exchange losses/(gains) on intercompany trading balances 290 (574)
Non-recurring items expense 9.2 1,085 1,007
9.2 Non-recurring items
2023 2022
£'000 £'000
Acquisition costs 120 1,007
SPA tax warranty 965 -
Total non-recurring items 1,085 1,007
Acquisition costs
On 11(th) August 2022 the Group acquired Comsof NV. Costs of acquisition and
business integration have been expensed during the year as non-recurring
items.
SPA warranty
On 31 December 2018, the Group disposed of its RTLS SmartSpace business. The
sale agreement included a number of warranties which would allow the new
owners of the RTLS SmartSpace business to claw back consideration paid, should
additional liabilities crystallise at a later date. Management have been made
aware of a potential tax warranty claim related to the sale, and following
legal advice, believe that it is more likely than not that payment will be
required under the warranty in around 4 years' time. Management have made a
best estimate of the amount payable including associated costs and expenses
and have discounted this using the Group's weighted average cost of capital,
resulting in a provision as at 31 December 2023 of £965k.
9.3 Auditor's remuneration
During the year, the Group (including its overseas subsidiaries) obtained the
following services from the Company's auditor and its associates:
2023 2022
£'000 £'000
Fees payable to the Group's auditor for the audit of:
Parent company and consolidated financial statements 123 129
Financial statements of subsidiaries, pursuant to legislation 17 17
Total audit fees 140 146
Fees payable to the Group's auditor for other services:
Audit-related assurance services 35 18
Fees payable to the Group's auditor affiliates for other services:
Tax advisory 29 28
Tax compliance services 26 12
Total non-audit fees 90 58
Total auditor's remuneration 230 204
The auditor of IQGeo Group plc is Grant Thornton UK LLP.
10 Income tax
10.1 Income tax recognised in the consolidated income statement
2023 2022
£'000 £'000
Current tax
Corporation tax 95 (862)
Adjustments in respect of prior periods 164 -
Total current tax charge / (credit) 259 (862)
Deferred tax
Origination and reversal of timing differences (97) (39)
Adjustments in respect of prior periods (21) -
Effect of increased / decreased tax rate on opening balance (88) -
Total deferred tax credit (206) (39)
Total income tax charge / (credit) for the year 53 (901)
The tax credit differs from the standard rate of corporation tax in the UK for
the year of 23.52% in 2023 (2022:19%) for the following reasons:
2023 2022
£'000 £'000
Profit / (loss) before tax 57 (1,814)
Profit / (loss) before tax multiplied by the standard rate of corporation tax
in the UK of 23.52% (2022: 19%)
13 (345)
Tax effects of:
Fixed asset differences (88) -
Expenses not deductible for tax purposes 558 696
Non-deductible amortisation of goodwill (46) -
Research & development tax (credits) in additional deduction (674) (431)
Adjustments to tax charge in respect of previous periods - current tax 164 -
Adjustments to tax charge in respect of previous periods - deferred tax (21) -
Additional overseas tax deduction - (92)
Utilisation of previously unrecognised tax losses (838) (19)
Remeasurement of deferred tax for changes in tax rates (121) -
Difference on tax treatment of share options - unrecognised (208) 58
Unrecognised deferred tax movements 1,412 (664)
Difference on overseas tax rates (98) (104)
Total income tax charge / (credit) 53 (901)
During the current and prior year IQGeo UK Limited has and intends to submit
claims for UK Research and Development tax credit relief ("R&D tax claim")
under the HMRC SME scheme. In 2023 this forms part of the unrecognised
deferred tax asset in the UK. In 2022 IQGeo elected to receive a cash refund
for this claim at a discounted rate of 14.5%. The funds were received during
2023 for the 2022 claim which was agreed by HMRC. The consolidated income
statements reflects the tax credit for the 2022 financial year and does not
reflect the unrecognised deferred tax asset for the claim which will be
submitted during 2024 in respect of the 2023 financial year.
10.2 Factors that may affect future tax charges
The Group has tax losses of £23.7 million (2022: £18.0 million) that are
available for offset against future taxable profits of those subsidiary
companies in which the tax losses arose. Deferred tax assets have not been
recognised in respect of those losses as they may not be used to offset
elsewhere in the Group, and they have arisen in subsidiaries whose future
taxable profits are uncertain. No deferred tax has been recognised on the
unremitted earnings of overseas subsidiaries, because the earnings are
continually reinvested by the Group and no tax is expected to be payable on
them in the foreseeable future.
The deferred tax balances have been measured at 25%, based on the UK tax rate
as at April 2023 (2022: 25%).
10.3 Deferred tax
The movement in deferred tax in the consolidated statement of financial
position during the year is as follows:
Deferred income tax assets Deferred income tax liabilities
2023 2022 2023 2022
£'000 £'000 £'000 £'000
At 1 January 937 630 (1,739) (630)
Deferred tax liability recognised on acquisition - - - (841)
Prior year adjustment re blended rate 21 - - -
Deferred tax credit / (charge) to the income statement 185 307 - (268)
At 31 December 1,143 937 (1,739) (1,739)
The components of deferred tax included in the consolidated statement of
financial position are as follows:
2023 2022
£'000 £'000
Fixed asset timing differences (24) -
Short term timing differences 11 -
Deferred tax liability on development costs capitalised (1,400) (937)
Deferred tax liability recognised on acquisition of intangible assets (596) (802)
Deferred tax asset on losses 1,413 937
Total net deferred tax liabilities (596) (802)
Deferred tax assets have not been recognised in respect of the following
amounts because it is not probable that future taxable profits will be
available against which the Group can utilise the benefits:
2023 2022
£'000 £'000
Tax losses carried forward 4,524 3,529
Equity-settled share options temporary differences 698 906
Total unrecognised deferred tax assets 5,222 4,435
11 Earnings / (Loss) per share (EPS)
2023 2022
Earnings attributable to ordinary shareholders
Profit / (loss) from operations (£'000) 4 (913)
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS 61,691 58,816
('000)
Effect of dilutive potential ordinary shares:
- Share options ('000) 4,229 2,957
Weighted average number of ordinary shares for the purposes of diluted EPS 65,920 61,773
('000)
EPS
Basic and diluted EPS (pence) 0.0 (1.6)
Basic earnings per share is calculated by dividing loss for the period
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. For diluted earnings
per share, the weighted average number of shares is adjusted to allow for the
effects of all dilutive share options and warrants outstanding at the end of
the year. Options have no dilutive effect in loss-making years and are
therefore not classified as dilutive for EPS since their conversion to
ordinary shares does not decrease earnings per share or increase loss per
share.
The Group also presents an adjusted diluted earnings per share figure which
excludes amortisation of acquired intangibles, share-based payments charge,
unrealised foreign exchange gains/(losses) on intercompany trading balances
and non-recurring items from the measurement of loss for the period.
Notes 2023 2022
£'000 £'000
Earnings for the purposes of diluted EPS, being net loss attributable to 4 (913)
equity holders of the parent company
Adjustments:
Amortisation and impairment of acquired intangible assets 12 772 555
Reversal of share-based payments charge 22 774 303
Unrealised foreign exchange (gains)/losses on intercompany trading balances 290 (574)
Reversal of non-recurring items 9 1,085 1,007
Net adjustment 2,921 1,291
Adjusted earnings / (loss) (£'000) 2,925 378
Adjusted diluted EPS (pence) 4.4 0.6
The adjusted EPS information is considered to provide an alternative
representation of the Group's trading performance and in particular, it
excludes non-recurring items. Options have no dilutive effect in loss-making
years.
12 Intangible assets
Goodwill has been recognised on acquisition of the Comsof and OSPI businesses
in 2022 and 2020 respectively. Management considers that the Group as a whole
represents a single CGU including the Comsof and OSPI businesses which have
been fully integrated into the existing structure of the Group. All goodwill
has therefore been allocated to this single CGU, and management has undertaken
a detailed review of the future cash flows which are anticipated to be
generated from the Group. With the continued expectation of growth and
profitability, management have concluded that no impairment is required to
goodwill as at 31 December 2023. Management have projected cash flows to 2028
and then applied a terminal growth rate of 1% to future periods. The key
underlying assumption is that the Group will continue to see revenue growth
and an increase in recurring revenue contracts through subscription and demand
point sales at a rate consistent to that achieved in 2023. A discount rate of
11.3% has been applied to future cash flows. No reasonably possible changes to
the assumptions would lead to an impairment. Management believe the
assumptions used after considering the market factors are appropriate.
Capitalised product development costs relate to expenditure that can be
applied to a plan or design for the production of new or substantial
improvements to software products. Management have assessed the underlying
products capitalised to identify if any indicators of impairment exist. Where
an indication of impairment does exist, management have completed impairment
reviews through estimating the future discounted cash flows to be generated
from these assets and concluded that no impairment is required as the
discounted cash inflows exceeded the carrying value of the asset as at the
year end.
The intangible assets include those acquired with the Comsof and OSPI business
include acquired software products, acquired brands and acquired customer
relationships. Values have been recognised from a valuation conducted by
external experts.
Amortisation for capitalised product development costs is 3 years. Software
assets represent assets purchased from third parties.
Goodwill Acquired Customer relationships Acquired Software Products Acquired Brands Capitalised Product Development Costs Software Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
As at January 2022 7,408 2,093 474 57 10,731 128 20,891
Additions - - - - 2,888 12 2,900
Additions as a result of acquisition 6,557 1,954 606 274 - - 9,391
Effect of movements in exchange rates 521 216 - - - - 737
At 31 December 2022 14,486 4,263 1,080 331 13,619 140 33,919
Additions - - - - 4,310 125 4,434
Effect of movements in exchange rates (249) (118) (27) (3) - - (397)
At 31 December 2023 14,237 4,145 1,053 328 17,929 265 37,957
Accumulated amortisation
As at January 2022 (2,970) (209) (158) (29) (8,208) (110) (11,684)
Charge for the year - (293) (213) (49) (1,668) (18) (2,241)
Effect of movement in exchange rates - - 33 2 - - 35
At 31 December 2022 (2,970) (502) (338) (76) (9,876) (128) (13,890)
Charge for the year - (423) (293) (56) (2,504) (16) (3,292)
Effect of movements in exchange rates - 29 22 4 - - 55
At 31 December 2023 (2,970) (896) (609) (128) (12,380) (144) (17,127)
Net book value
At 31 December 2023 11,267 3,249 444 200 5,549 121 20,830
At 31 December 2022 11,516 3,761 742 255 3,743 12 20,029
13 Property, plant and equipment
Fixtures and fittings Computer equipment Leasehold improvements Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 165 240 - 405
Effect of movements in exchange rates 18 19 - 37
Additions - 170 - 170
Additions on acquisition - 61 73 134
At 31 December 2022 183 490 73 746
Effect of movements in exchange rates (8) (17) (1) (26)
Additions 36 150 59 245
Disposals - (5) - (5)
At 31 December 2023 211 618 131 960
Accumulated depreciation
At 1 January 2022 (74) (164) - (238)
Effect of movements in exchange rates (9) (12) - (21)
Charge for the year (30) (66) (3) (99)
Transfer on acquisition - (23) (55) (78)
At 31 December 2022 (113) (265) (58) (436)
Effect of movements in exchange rates 6 10 1 17
Charge for the year (36) (119) (8) (163)
Disposal - 4 - 4
At 31 December 2023 (143) (370) (65) (578)
Net book value
At 31 December 2023 68 248 66 382
At 31 December 2022 70 225 15 310
14 Right of use assets
Details of the Group's right-of-use assets and their carrying amount are as
follows:
2023 2022
£'000 £'000
Cost
At 1 January 2,266 1,793
Effect of movements in exchange rates (101) 227
Additions 652 93
Lease acquired on acquisition - 233
Disposal (105) (80)
Cost at 31 December 2,712 2,266
Amortisation
At 1 January (786) (457)
Effect of movements in exchange rates 44 (61)
Charge for the year (450) (348)
Disposal 104 80
Amortisation at 31 December (1,088) (786)
Net book amount at 31 December 1,624 1,480
Refer to Note 20 for details of the related lease liabilities.
15 Trade and other receivables
Notes 2023 2022
£'000 £'000
Cost
Trade receivables, gross 12,746 9,930
Allowances for expected credit losses 15.1 (370) (244)
Trade receivables, net 15.2 12,376 9,686
Amounts recoverable on contracts 2,469 303
Other receivables 209 132
Prepayments 1,276 943
Total trade and other receivables 16,330 11,064
All amounts disclosed are short term. The carrying value of trade receivables
is considered a reasonable approximation of fair value. Expected credit losses
are not material. The significant increase in amounts recoverable on contracts
is due to the significant increase in revenue during the year, including
increased revenue from services performed in the last quarter of 2023, and
licences delivered at the end of 2023, which were subsequently invoiced in
early 2024.
The following disclosures are in respect of trade receivables that are either
impaired or past due. The individually impaired receivables mainly relate to
customers who are in unexpectedly difficult economic situations and are
assessed on a customer-by-customer basis following detailed review of the
particular circumstances. To the extent they have not been specifically
provided against, the trade receivables are considered to be of sound credit
rating.
15.1 Movement in allowance for expected credit losses
2023 2022
£'000 £'000
At 1 January (244) (250)
Allowance released / (provided) (126) 6
As 31 December (370) (244)
15.2 Ageing past due but not impaired receivables
2023 2022
£'000 £'000
Neither past due nor impaired 9,387 1,736
0 to 90 days 2,347 7,042
More than 90 days 642 908
Total 12,376 9,686
16 Cash and cash equivalents
2023 2022
£'000 £'000
Cash at bank and in hand 10,954 8,055
Cash and cash equivalents 10,954 8,055
Short-term cash deposits earn interest at fixed rates for the term of the
deposit. Included within cash and cash equivalents at 31 December 2023 is
£2.6 million of cash on deposit with a time to maturity of 30 days or less.
The composition of cash and cash equivalents by currency is as follows:
2023 2022
By currency
£'000 £'000
British Pound (GBP) 343 1,630
Euro (EUR) 2,643 2,910
US Dollar (USD) 5,305 1,814
Japanese Yen (JPY) 2,537 912
Canadian Dollar (CAD) 126 789
Cash and cash equivalents 10,954 8,055
17 Trade and other payables
Notes 2023 2022
£'000 £'000
Trade and other payables due within 1 year:
Deferred income 12,341 7,450
Trade payables 1,243 1,247
Accruals 7,318 5,371
Other taxation and social security 1,506 866
Other payables 51 72
Contingent acquisition consideration 6 1,347 1,211
Total trade and other payables due within 1 year 23,806 16,217
Trade and other payables due after 1 year:
Contingent acquisition consideration 6 - 996
Trade and other payables due after 1 year - 996
Total trade and other payables 23,806 17,213
18 Provisions
2023 2022
£'000 £'000
SPA tax warranty 965 -
Total provisions 965 -
A provision has been recognised in 2023 in relation to a SPA tax warranty
related to a previous business disposal. Refer to Note 9 for further
information as to the nature of the provision.
19 Bank facilities
During 2022 an overdraft facility of £3.0 million was agreed with HSBC, the
Group's bank, as a contingent arrangement around the acquisition of Comsof
NV. The facility was not drawn down and has now lapsed. Security in the
form of a group debenture was put in place to facilitate this. The security
remains in place at 31 December 2023 to facilitate additional funding options
for the Group.
Within the current period, the group has entered a Bank Guarantee for
€344,000 as required in one of our customer's contracts.
20 Lease liabilities
The Group has measured lease liabilities at the present value of the remaining
lease payments, discounted using the Group's incremental borrowing rate at the
date of initial application.
Details of the Group's liability in respect of right-of-use assets and their
carrying amount are as follows:
2023 2022
£'000 £'000
At 1 January 1,896 1,680
Effect of movements in exchange rates (77) 211
New leases entered into during the year 652 93
Lease related to acquisition - 261
Finance costs incurred 116 95
Payments made during the year (602) (444)
At 31 December 1,985 1,896
Presented as:
Lease liability payable within 1 year 629 417
Lease liability payable in more than 1 year 1,356 1,479
At 31 December 1,985 1,896
Refer to Note 14 for details of the related right-of-use assets.
At 31 December 2023, the lease liability consists of £2.1 million of lease
payment commitments including:
Following the acquisition of Comsof NV, a nine year lease was acquired on the
existing office premises in Ghent, with the remaining term running to 2024. A
number of motor vehicles were acquired on lease commitments, typically between
three and five years' duration.
The Group has a seven-year lease running to February 2028 on office premises
in Denver, an 18 month lease running to April 2025 on office premises in
Cambridge, and a 2 year lease running to September 2025 on office premises in
Tokyo.
The OSPI business ceased operating from premises in Utah in 2022, the lease
commitments ceased on 31 December 2022.
Leases as lessee
During the year the Group held short-term office rental agreements within the
Germany and Canada. The leases entered into are 12 months or less and the
Group has elected to apply the practical expedient permitted under IFRS 16 to
not recognise a right-of-use asset and lease liability in respect of these
leases due to their short-term nature. The 2023 operating expense presented
within the consolidated income statement includes £0.3 million of rent
expense in respect of these leases. The future obligations for the new
short-term leases are reported within the table below.
The Group enters into these arrangements as these are a cost-efficient way of
obtaining the short-term benefits of these assets.
The Group's future aggregate minimum lease payments under non-cancellable
short-term leases are as follows:
Land and buildings Land and buildings
2023 2022
£'000 £'000
No later than one year 25 177
Total 25 177
The above table reflects the committed cash payments under short-term leases,
rather than the expected charge to the consolidated income statement in the
relevant periods.
21 Share capital and premium
The Company has one class of ordinary shares. Holders of these shares are
entitled to participate in dividends, and to share in the proceeds on a return
of capital on liquidation or capital reduction or otherwise, in proportion to
the number of shares held. Holders are also entitled to one vote per share at
general meetings of the Company
Where shares have been issued as part of the consideration for the acquisition
of OSPI by IQGeo America Inc and Comsof NV, excess proceeds over nominal value
are recognised in a merger relief reserve.
Ordinary shares of £0.02 each Share capital Share premium Merger relief reserve Total
Number.of £'000 £'000 £'000 £'000
Balance at 1 January 2022 57,515,696 1,150 22,507 959 24,616
Issued under share-based payment plans 184,998 4 109 - 113
Issue of shares - acquisition (Comsof) - - - 957 957
Issued on placing to institutional investors - legal fees - - (95) - (95)
Issued on placing to institutional investors 2,800,000 56 3,444 - 3,500
Issued as part consideration for acquisition 937,923 16 - - 16
Deferred consideration - OSPI - 3 - 237 240
Balance at 31 December 2022 61,438,617 1,229 25,965 2,153 29,347
Issued under share-based payment plans 252,873 5 168 - 173
Balance at 31 December 2023 61,691,490 1,234 26,133 2,153 29,520
22 Final Results Announcement
This final results announcement, which has been agreed with the auditors, was
approved by the Board of Directors on 19 March 2024. It is not the Group's
statutory accounts for the year ended 31 December 2023 within the meaning of
section 435 of the Companies Act 2006 but is extracted from those financial
statements. Copies of the Group's audited statutory accounts for the year
ended 31 December 2023 will be available at the Company's website,
www.iqgeo.com, promptly after the release of this preliminary announcement and
a printed version will be dispatched to shareholders shortly. Copies will
also be delivered to the registrar of Companies following the Annual General
Meeting.
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