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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Eu Supply Plc | LSE:EUSP | London | Ordinary Share | GB00BFG35570 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 18.05 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMEUSP
RNS Number : 3908L
EU Supply PLC
19 April 2018
19 April 2018
EU Supply plc
("EU Supply", the "Company" or the "Group")
Final Results for the year ended 31 December 2017
EU Supply plc (LSE AIM: EUSP), the e-procurement software provider, is pleased to announce its audited final results for the year ended 31 December 2017.
Financial highlights:
-- Revenue grew by 36% to GBP4.7m (2016: GBP3.4m)
-- 66% of 2017 revenues were estimated to be of recurring or repeated nature at year-end (2016: 71%)
-- Profit before interest and tax of GBP0.1m (2018: loss of GBP0.8m) -- Cash balance of GBP0.7m at 31 December 2017 (2016: GBP1.0m) -- Pre-interest cash flow from operating activities improved to (GBP0.1m) (2016: (GBP0.3m))
Operational highlights:
-- Several new contracts signed during 2017, generating a stronger order book going into 2018
-- Larger enhancement projects of EUR3.6m signed mid-year and larger project (EUR675k) called off at end of year for delivery in 2017/2018
-- Staff numbers increased over the year as profitability was achieved in H1 2017 to deliver larger enhancement projects
-- Extensions of important contracts, including in Ireland and The Netherlands
-- Contracts of up to EUR0.8m signed for enhancements, licenses, maintenance & support for the Ministry for Public Expenditure and Reform of Ireland
Highlights post-year end:
-- Continued strong renewal of customers
-- Large number of smaller customers have adopted the Company's solution in early 2018, particularly in Norway and Denmark
-- In discussions with more than 20 new customers on integration projects due to commence within the next 12 months, which is substantially higher than at any time in 2017
-- Additional paid-for enhancement contracts expected to be signed in 2018 -- Increased telesales activities, employing 3 new agencies addressing Norway and Germany
David Cutler, Chairman of EU Supply, commented:
"The successful establishment of a profitable platform for growth into 2018 and beyond is supported by a strong order book and pipeline of business. With the support of the Group's dedicated and skilled staff, the Board is confident of further revenue growth in 2018 from both existing contracts and also new customers and markets."
FURTHER ENQUIRIES
EU Supply PLC Tel: 020 7127 4545 Thomas Beergrehn, CEO Fredrik Wallmark, CFO Stockdale Securities Tel: 020 7601 6100 Tom Griffiths, Ed Thomas
A copy of this announcement is available at www.eu-supply.com.
Notes to Editors
EU Supply is the UK holding company of the EU Supply Group, a Sweden-based e-commerce business, which has an established, market-leading, multilingual e-procurement platform for esourcing, e-tendering and contract management, tailored for the highly regulated European public sector market.
Since 2006, the Group has invested heavily in employing specialist programmers to add functionality, legal compliance as required and security features to its Complete Tender Management(TM) ("CTM(TM)") platform to ensure that the Group is ideally placed to secure new contracts with EU Member States and their Contracting Authorities. The platform is available in 16 different languages.
The Directors believe that the Group's CTM(TM) platform is one of the easiest to use and most functionally advanced solutions available in the market. The CTM(TM) platform is used by over 8,000 European public sector bodies in 9 EU/EEC Member States and has National Procurement System status in four Member States (the UK, Ireland, Norway and Lithuania).
The Company's shares were admitted to trading on AIM in November 2013. In August and September 2015, the Company raised a total of GBP2.061m (before expenses) through a placing of new shares and the issue of first and second tranches of Convertible Loan Notes to institutional and other investors.
Chairman's Statement
Overview
EU Supply Plc (the "Company") (LSE AIM: EUSP), which is the UK holding company of the EU Supply Group ("Group"), presents its audited final results for the year ended 31 December 2017.
I am pleased to report that the Group has achieved its target of full year operating profitability. This has been achieved by a 36% growth in revenue whilst holding the cost increase to 10%.
Revenues in 2017 increased by 36% to GBP4.7m (2016: GBP3.4m), whilst operational costs grew by 10% to GBP4.6m (2016: GBP4.2m excluding restructuring expenses). A maiden profit before interest and tax was achieved of GBP0.1m (2016 loss: GBP.0.8m).
As at December 2017, approximately 66% of the 2017 revenues were of recurring or repeatable nature (2016: 71%) providing a strong revenue base for 2018.
In 2017, Lithuania, Ireland and Scandinavia continued to be the strongest growth markets for the Group, while revenues were also generated in the UK, Norway, Denmark, The Netherlands, Sweden, Germany, France, Spain and Iceland. Additional revenues from paid for enhancements provided further growth which is anticipated to continue in the future.
Cash at 31 December 2017 was GBP0.7m (31 December 2016: GBP1.0m), with significant payments in H1 2018 in respect of several ongoing projects due to be received which will provide sufficient liquidity for the continued growth of the Group.
Outlook
The successful establishment of a profitable platform for growth into 2018 and beyond is supported by a strong order book and pipeline of business.
With the support of the Group's dedicated and skilled staff, the Board is confident of further revenue growth in 2018 from both existing contracts and also new customers and markets.
David Cutler
Chairman
Date: 18 April 2018
Strategic Report
Introduction
I am pleased to report our first year with operating profitability and continued high revenue growth.
During the year, the Group continued to win new business primarily in its main CTM(TM) software services, and has augmented this and its competitive position with customer-paid enhancements. The new SaaS contracts are expected to generate additional recurring revenues on top of the Group's existing revenue base, creating continued top-line growth.
Business review
The SaaS business is growing with additional layers of recurring revenues added, with revenues of recurring or repeatable nature at 31 December 2017 of 66% of 2017 revenues (2016: 71%).
The Group continued to consolidate its strong position in 2017 in Scandinavia, with SaaS contracts entered into with several new customers, mainly in the public sector. Business with existing and new customers in other European Union countries has also grown, with most of the growth coming from Lithuania and Ireland.
The Group has also won several mid-sized and larger orders for customer-paid enhancements projects, mostly in the UK, Lithuania and Ireland, complementing the increasing SaaS revenues generated by our CTM(TM) solution. New modules for procurement planning and publication of such plans, and management of national notices and protocols have been developed within CTM(TM) to provide a wide scope and more integrated service to the Public Procurement Office in Lithuania. Grants have also been received (directly and indirectly) from the Innovations and Networks Executive Agency ("INEA") for the development of a module to support the management of European Single Procurement Document ("ESPD"), a mandatory standard set of requirements to be used in the European qualification processes.
The first end customer contract in Germany was signed in 2017 as a result of the distribution agreement signed in December 2016. Also an alternative approach has been initiated post-year end to seek an acceleration of growth in the German public sector market. Some new business has also been generated with clients in Spain and France.
With a leaner team and lower cost the Group's Business Alert services delivered profitability and revenues in 2017 of GBP0.45m (2016: GBP0.49m) with most of the revenues coming from Norway. Additional more experienced telesales staff have recently been contracted, hired and trained to grow this business further while maintaining its profitability.
The Group and one of its partners are still in discussions with several blue chip oil and gas companies for various services (including licenses) that subject to the geopolitical development may develop during 2018 with the potential of generating revenues in 2018 and beyond.
The Group expects to deliver continued revenue growth in 2018 from its existing recurring revenue base, a strong order book, including from contracts already announced and a promising pipeline of small and mid-sized SaaS opportunities.
Development of the e-Procurement market
The Group is seeing an accelerated demand for its services, in part driven by the new EU Directives that were ratified in the EU Parliament in January 2014, implemented across EU Member States in their respective legislations with effective dates for certain mandatory e-tendering provisions at milestones before November 2018. The 2014 EU Directives include new requirements for mandatory electronic availability of tender documents and electronic submission of tender responses.
The Directors expect continued revenue growth particularly in those markets where it is already well positioned.
With the short time remaining until the 2018 deadlines, the Directors note that public sector organisations are commonly looking for acquiring either a light touch solution with a focus on compliance and "ease of use", similar to the Group's "Tender Lite" basic service configuration, or already developed more advanced e-Procurement systems. The Group is one of a few suppliers to have built a more advanced platform which has the flexibility to operate in all European markets (and in others) and in multiple sub-sectors without the need to develop and maintain multiple versions of the software. There are already examples of the Group's customers who initially started using the Tender Lite solution and have later acquired additional features of the system giving the Group incremental annual revenues.
Although there has been some consolidation, the European market remains, in the Board's opinion, very fragmented with a handful of competitors in each of the EU and EEC countries. As a result, the Group is still experiencing strong pricing pressure in open tenders and therefore continues to focus on those sectors and sub-sectors of markets where it considers that reasonable or better pricing can be achieved for its CTM(TM) platform and related services.
Additional mandatory requirements are also expected to be implemented by the EU/EEC Member States. Such new requirements are expected to generate further revenues for the Group through paid-for enhancements and/or new module licenses. These requirements are also expected to increase the hurdles for smaller competitors. Examples of such new requirements following the implementation of the 2014 EU Directives include a large number of new contract notice publication schema and an electronic qualification through the use of ESPD. Support for ESPD was developed by the Group during 2017 partly financed by grants.
Additional certifications of management systems are also common to ensure security and quality of services. These additional requirements may over time accelerate the consolidation of the e-Procurement market and also improve pricing.
The Directors still believe that the UK leaving the EU should have limited implications on the e-Procurement market as UK public sector authorities will continue to seek cost reductions and transparency with resulting continuing demand for e-Procurement solutions.
Financial Performance
In the year ended 31 December 2017, revenues grew by 36% to GBP4.7m (2016: GBP3.4m). The operational costs increased slightly to GBP4.6m (2016: GBP4.2m excluding restructuring expenses) and EBIT was improved to a maiden profit of GBP0.1m (2016: GBP0.8m loss).
The Group also generated cash in the first half of 2017, but not in the second half, because of larger projects in progress not being invoiced at the end of the year, with cash as at 31 December 2017 of GBP0.7m (31 December 2016: GBP1.0m). Several larger projects initiated in 2017 are payable in H1 2018.
People, certifications and appointments
Since the first half of 2016, the Group has aligned its staffing to achieve operational profit. In response to its strengthening order book, the Group has since made certain selective hires in key operational positions. During 2017 the Group used consultants to ensure delivery of some larger projects on short notice at the end of the year. The Group has since commenced selective hiring to support continued growth at lower cost.
The Group has maintained its ISO certifications of its integrated management system covering all business processes:
-- ISO 27 001:2013 (information security) -- ISO 9 001:2015 (quality management) -- ISO 20 000-1: 2011 (service management) -- ISO 14 001:2015 (environmental management)
Post-year end, the Group is also making the changes required for compliance with GDPR (General Data Protection Regulation), and certification is currently planned against ISO 27 018:2014 (protection of personal identifiable information).
Principal risks and uncertainties
The key business risks affecting the Group are set out below:
Financial
See financial risk management and policies section above.
Technology
The Group's performance is dependent on its technology keeping pace with developments in e-Procurement market. The Group manages this risk by a commitment to research and development combined with ongoing dialogue with trading partners and sector specialists to ensure that market developments are understood.
Retention of staff
The Group's performance depends largely on its ability to recruit and retain key individuals with the right experience and skills. To ensure that the Group retains the highest calibre staff, the Group seeks to provide competitive incentives, flexible work hours, and a dynamic and inclusive work environment.
Dividend
The Board is not recommending the payment of a dividend.
Outlook
During 2018, the Group will continue to focus on further building its base of SaaS revenues which will substantially continue to be of recurring or repeatable nature. The Group also has a strong order book and pipeline from paid-for enhancements, which will complement the SaaS revenues during 2018 and further strengthen the competitiveness of the Group's CTM(TM) platform.
In 2018, the Group anticipates further increased activity by public sector organisations which do not currently have an e-Procurement solution meeting the new requirements. With our CTM(TM) platform, we are well positioned to gain market share in the countries where we are active.
We expect to achieve considerable revenue growth ahead of the implementation of regulatory requirements for public sector bodies in the country, particularly where the Group already has a strong position, as in Norway and Denmark. There is already an accelerated interest in the Group's CTM(TM) platform and several tenders for a tender management solution service are being considered at any one point in time.
In the UK and Ireland, we are seeing new prospects for both CTM(TM) services and paid-for enhancements and a pipeline of further business is being developed in several other EU/EEC countries.
Growth in Business Alert services is expected to pick up in 2018, particularly in Norway with added sales resources in this area.
In Germany, we have received an initial client from our distributor T-Systems. We are now also testing an additional reseller approach in order to seek an acceleration of business in Germany.
Additional mandatory requirements in the EU public sector are expected to lead to additional software functionality being demanded by our customers. This is expected to provide an additional source of revenues in 2018 and beyond. A targeted increase of development capacity is required to ensure sufficient resources are available to deliver these contracts which forms a key part of the Group's development plan.
Revenues have continued to grow in the first quarter of 2018 compared to the same period last year and the Board anticipates that the Group will continue to move towards profitability after interest in 2018. Revenue growth is expected to continue in 2018 with operational costs remaining tightly controlled.
Thomas Beergrehn
Chief Executive Officer
Date: 18 April 2018
Consolidated Statement of Comprehensive Income
Hot Features
Premium
Year ended Year
31 December ended
31 December
2017 2016
Note GBP GBP
Revenue 4 4,679,427 3,444,015
Administrative expenses excluding
restructuring expenses (4,587,033) (4,163,425)
Restructuring expenses - (113,816)
----------------------------------- ------------------------ ----------------
Total administrative expenses (4,587,033) (4,277,241)
Operating profit/(loss) 5 92,394 (833,226)
Finance Costs - net 8 (264,390) (247,413)
Loss before taxation (171,996) (1,080,639)
Taxation 9 65,343 125,517
------------------------ ----------------
Loss for the year attributable
to equity holders of the
parent
Other Comprehensive income:
Exchange differences arising
on the translation of foreign (106,653) (955,122)
subsidiaries (901) 22,769
Total comprehensive loss
for the year attributable
to equity holders of the
parent (107,554) (932,353)
------------------------ ----------------
Basic and diluted loss per
share attributable to the
owners of the parent 10 (0.002) (0.014)
======================== ================
The results reflected above relate to continuing activities.
Company Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2017 2016
Note GBP GBP
Revenue 4 227,315 199,536
Administrative expenses (222,368) (202,170)
Operating profit/(loss) 4,947 (2,634)
Finance Costs - net 8 (263,843) (246,109)
Loss before taxation (258,896) (248,743)
Taxation 9 - -
------------- -------------
Loss for the year attributable
to the owners of the parent (258,896) (248,743)
Other comprehensive income - -
for the year
------------- -------------
Total comprehensive loss
for the year attributable
to owners of the parent (258,896) (248,743)
------------- -------------
The results reflected above relate to continuing activities.
Consolidated Statement of Financial Position
31 December 31 December
2017 2016
GBP GBP
Non-current assets Note
Property, plant and equipment 11 39,326 50,125
Intangible assets 12 - -
Other long term receivables 14,894 8,685
54,220 58,810
------------- --------------
Current assets
Trade and other receivables 14 1,154,004 575,898
Current tax assets 100,979 151,149
Cash and cash equivalents 15 650,237 965,270
------------- --------------
1,905,220 1,692,317
------------- --------------
Total assets 1,959,440 1,751,127
============= ==============
Equity
Called up share capital 19 67,716 67,716
Share premium 6,497,128 6,497,128
Merger reserve 2,676,055 2,676,055
Other reserve 521,157 510,897
Foreign exchange reserve (25,080) (24,179)
Retained earnings (10,636,385) (10,529,732)
------------- --------------
Total equity (899,409) (802,115)
------------- --------------
Non-current liabilities
Deferred tax liability 30,105 27,211
17,
Borrowings 18 1,271,023 1,172,080
------------- --------------
1,301,128 1,199,291
------------- --------------
Current liabilities
Trade and other payables 16 1,557,722 1,353,951
1,557,722 1,353,951
------------- --------------
Total equity and liabilities 1,959,441 1,751,127
============= ==============
Company Statement of Financial Position
31 December 31 December
2017 2016
GBP GBP
Non-current assets Note
Investment in subsidiary
company 13 - -
------------
- -
------------ ------------
Current assets
Trade and other receivables 14 3,502,253 3,109,068
Cash and cash equivalents 15 70,907 604,227
------------ ------------
3,573,160 3,713,295
------------ ------------
Total assets 3,573,160 3,713,295
------------ ------------
Equity
Called up share capital 19 67,716 67,716
Share premium 6,497,128 6,497,128
Merger reserve (35,541) (35,541)
Other reserve 414,420 414,420
Retained earnings (4,777,535) (4,518,639)
------------ ------------
Total equity 2,166,188 2,425,084
------------ ------------
Non-current liabilities
17,
Borrowings 18 1,271,023 1,172,080
------------ ------------
1,271,023 1,172,080
------------ ------------
Current liabilities
Trade and other payables 16 135,949 116,131
------------
135,949 116,131
------------ ------------
Total equity and liabilities 3,573,160 3,713,295
============ ============
Consolidated & Company Statements of Changes in Equity
Share Foreign
Share premium Retained exchange Other Merger
Group capital account earnings reserve reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP
As at 1 January
2016 67,716 6,497,128 (9,714,342) (46,948) 625,811 2,676,055 105,420
--------- ---------- ------------- ---------- ---------- ---------- ----------
Total comprehensive
loss for the
year - - (955,122) 22,769 - - (932,353)
Untaxed reserves
reclassified
to equity - - - - 21,738 - 21,738
Share based payment - - 139,732 - (136,652) - 3,080
At 31 December
2016 67,716 6,497,128 (10,529,732) (24,179) 510,897 2,676,055 (802,115)
========= ========== ============= ========== ========== ========== ==========
Total comprehensive
loss for the
year - - (106,653) (901) - - (107,554)
Untaxed reserves
reclassified
to equity - - - - 10,260 - 10,260
At 31 December
2017 67,716 6,497,128 (10,636,385) (25,080) 521,157 2,676,055 (899,409)
========= ========== ============= ========== ========== ========== ==========
Share Foreign
Share premium Retained exchange Other Merger
Company capital account earnings reserve reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP
As at 1 January
2016 67,716 6,497,128 (4,409,628) - 551,072 (35,541) 2,670,747
--------- ---------- ------------- ---------- ---------- ---------- ----------
Total comprehensive
loss for the
year - - (248,743) - - - (248,743)
Share based payment - - 139,732 - (136,652) - 3,080
--------- ---------- ------------- ---------- ---------- ---------- ----------
At 31 December
2016 67,716 6,497,128 (4,518,639) - 414,420 (35,541) 2,425,084
========= ========== ============= ========== ========== ========== ==========
Total comprehensive
loss for the
year - - (258,896) - - - (258,896)
At 31 December
2017 67,716 6,497,128 (4,777,535) - 414,420 (35,541) 2,166,188
========= ========== ============= ========== ========== ========== ==========
Consolidated Statement of Cash Flows
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
Cash flows from operating
activities
Loss after taxation (107,554) (932,353)
Adjustments for:
Interest expense (net) 264,390 247,413
Income tax 62,253 (59,519)
Depreciation 24,907 28,949
Share option charge - 3,080
Net foreign Exchange gain (16,556) (31,905)
Operating cash flows before
movements in working capital (227,440) (744,335)
(Increase)/decrease in
trade and other receivables (578,105) 294,228
Increase in trade and other
payables 203,771 120,209
------------- -------------
Cash used in operations (146,894) (329,898)
Net Interest paid (165,447) (176,951)
Net cash used in operating
activities (312,341) (506,849)
------------- -------------
Investing activities
Purchases of property,
plant and equipment (14,108) (8,446)
Increase in long term receivables (6,209) (1,291)
------------- -------------
Net cash used in investing
activities (20,317) (9,737)
------------- -------------
Net decrease in cash and
cash equivalents (332,658) (516,586)
Cash and cash equivalents
at beginning of year 965,270 1,430,963
Effect of foreign exchange
translation on cash equivalents 17,625 50,893
Cash and cash equivalents
at end of year 650,237 965,270
============= =============
Company Statement of Cash Flows
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
Cash flows from operating
activities
Loss after taxation (258,896) (248,743)
Adjustments for:
Interest expense 263,843 246,109
Share based payments - 3,080
Currency exchange adjustment (9,732) (13,435)
------------- -------------
Operating cash flows
before movements in working
capital (4,785) (12,989)
Decrease in trade and
other receivables (393,737) (117,268)
Increase in trade and
other payables 20,369 2,868
------------- -------------
Cash used in operations (378,153) (127,389)
Interest paid (164,900) (165,352)
-------------
Net cash used in operating
activities (543,053) (292,741)
------------- -------------
Net decrease in cash
and cash equivalents (543,053) (292,741)
Cash and cash equivalents
at beginning of year 604,227 883,531
Effect of foreign exchange
translation on cash equivalents 9,733 13,437
Cash and cash equivalents
at end of year 70,907 604,227
============= =============
Notes to the consolidated financial information
General information
EU Supply plc is a public limited company incorporated in the United Kingdom under the Companies Act. The address of its registered office is given on page 1. The principal activities of the Company and its subsidiaries (the Group) are described in note 4.
1. Accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These company and consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 as applicable to companies reporting under IFRS. These accounts have been prepared under the historical cost convention.
The Group financial statements consolidate the financial statements of the Company and its subsidiaries (together referred to as 'the Group'). The parent Company financial statements present information about the Company as a separate entity and not about its Group.
Going concern
With cash generation in the first half of 2017 and EBIT positive for the year and a 36% growth rate, the directors believe that the Group has demonstrated further progress in achieving its objective of positioning itself as market-leading, multilingual e-procurement platform for e-sourcing, e-tendering and contract management, tailored for the highly regulated European public sector market.
The directors have prepared a cash flow forecast covering a period extending beyond 12 months from the date of these financial statements. After taking account of anticipated costs and revenues, the directors are confident that sufficient funds are in place to support the going concern status of the Group.
Therefore, the directors consider that it is appropriate to prepare the Group's financial statements on a going concern basis, which assumes that the Group is to continue in operational existence for the foreseeable future. When assessing the foreseeable future, the directors have looked at a period of at least 12 months from the date of approval of the financial statements.
New and Revised Standards
Standards in effect in 2017 adopted by the Group
The Group has not applied any new standards or amendments for their annual reporting period commencing 1 January 2017:
IFRS in issue but not applied in the current financial statements
The following new and revised IFRSs have been issued but have not been applied by the Group in preparing these financial statements as they are not as yet effective. The Group intends to adopt these Standards and Interpretations when they become effective, rather than adopt them early.
-- IFRS 9, 'Financial instruments', effective date 1 January 2018 -- IFRS 15 'Revenue from Contracts with Customers', effective date 1 January 2018 -- IFRS 16 'Leasing', effective date 1 January 2019
The directors of the Company anticipate that the application of these accounting standards in the future may have a material impact on the amounts reported and disclosures made in the Group's consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until the Group performs a detailed review.
A number of amendments to existing IFRSs are also currently in issue which are not relevant for the Group's activities and which have not therefore been adopted in preparing these financial statements.
Basis of consolidation
Where the Group has power, either directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities, it is classified as a subsidiary.
Merger accounting
The accounting treatment in relation applied to introduction of EU Supply PLC as a new UK holding Company of the Group was considered be outside the scope of the IFRS3 'Business Combinations'. The share scheme arrangement constituted a combination of entities under common control as EU Supply PLC was not a business as defined by IFRS 3 at the time that the Share Scheme became effective. The relative rights of the shareholders remained unaltered post transaction and was facilitated entirely by a share for share exchange.
Paragraph 10 of IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' requires management to use its judgement in developing and applying a policy that is relevant, reliable, represents faithfully the transaction, reflects the economic substance of the transaction, is neutral, is prudent, and is complete in all material respects when selecting the appropriate methodology for consolidation accounting. The directors have therefore treated the insertion of EU Supply PLC as the ultimate parent entity as a Group reconstruction and have applied the merger accounting principles to prepare the consolidated financial statements and treated the reconstructed Group as if it had always been in existence. The difference between the nominal value of shares issued in the share exchange and the book value of the shares obtained is recognised in a merger reserve.
The Group has taken advantage of merger relief available under Companies Act 2006 in respect of the share for share exchange as the issuing company has secured more than 90% equity in the other entity. The carrying value of the investment is carried at the nominal value of the shares issued less provision for impairment.
Segment reporting
In accordance with IFRS 8, segmental information is presented based on the way in which financial information is reported internally to the chief operating decision maker. The group's internal financial reporting is organised along service lines and therefore segmental information has been presented about business segments. A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns which are different from those of other business segments.
The Group currently has two reportable segments, Business Alert services and services relating to the Group's CTM(TM) platform. The Group categorises all revenue from operations to these two segments.
The Group currently does not allocate costs on a segment basis and is therefore unable to report segment profit and loss. Further, the Group does not allocate assets on a segment basis and is therefore unable to report total assets per segment.
Information regarding geographical revenues and non-current assets is disclosed in note 4 to the financial statements.
Revenue Recognition
Revenue represents the gross amounts billed to clients in respect of revenue earned and other client recharges, net of discounts, sales taxes, accrued, and deferred amounts.
Each type of revenue is recognised on the following basis:
a) Licence fees are recognised over the period of the relevant contracts or agreements, in line with the terms of the contract;
b) Ongoing support and maintenance fees are spread over the period of the contract on a straight line basis.
c) The Business Alert service is typically a service where the main work for the Group is performed at the start of each subscription period. The Business Alert subscription fees are therefore recognised in the accounting period when payment is received by the Group.
d) Certain other services fees are recognised in the accounting periods in which work is performed.
Gross revenue is recognised as the Group acts as principal and not agent in its dealings with customers. The Group is also responsible for the quality of the service delivery.
Grants are recognised as revenue in accordance with the performance of the underlying grant conditions and where there is reasonable assurance that the grant will be received. Income from grants is presented as Other Income in the Group's segmental analysis in Note 4 to the financial statements.
Taxation
Income tax expense represents the sum of the current tax and deferred tax charge for the year.
The charge in respect of current taxation is based on the estimated taxable profit for the year. Taxable profit for the year is based on the profit as shown in the income statement, as adjusted for items of income or expenditure which are not deductible or chargeable for tax purposes. The current tax liability for the year is calculated using tax rates which have either been enacted or substantively enacted at the balance sheet date.
Deferred tax is provided in full, using the liability method on temporary differences arising between the tax base of assets and liabilities and their carrying values in the financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates which have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Untaxed reserves in the group's subsidiaries are presented within deferred tax liabilities and equity within other reserves.
Share-based payment
In accordance with IFRS 2 'Share-based payments', the Group reflects the economic cost of awarding shares and share options to employees and directors by recording an expense in the statement of comprehensive income equal to the fair value of the benefit awarded. The expense is recognised in the statement of comprehensive income over the vesting period of the award.
Fair value is measured by the use of a Black-Scholes option pricing model, which takes into account the expected life of the awards, the expected volatility of the return on the underlying share price, the market value of the shares, the strike price of the awards and the risk-free rate of return. The charge to the income statement is adjusted for the effect of service conditions and non-market performance conditions such that it is based on the number of awards expected to vest. Where vesting is dependent on market-based performance conditions, the likelihood of the conditions being achieved is adjusted for in the initial valuation and the charge to the income statement is not therefore adjusted so long as all other conditions are met.
Where an award is granted with no vesting conditions, the full value of the award is recognised immediately in the income statement.
Foreign currency
Items included in the financial statements of each group company are measured using their functional currency, being the currency of the primary economic environment in which each company operates. The functional currency of EU Supply PLC and EUS Holdings Ltd. is Pound Sterling, whereas the functional currency of EU-Supply Holdings AB is Swedish Krona.
The consolidated financial statements are presented in Pound Sterling, which is the company's functional and presentational currency.
Foreign currency transactions are translated using the rate of exchange applicable at the date of or a date in close proximity to the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-translation at the year-end of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
The results and financial position of group companies whose functional currency is not Sterling are translated as follows:
-- Assets and liabilities at each balance sheet date presented are translated using the closing exchange rate at that balance sheet date;
-- Income and expenses for each income statement are translated using average exchange rates for the period which reasonably approximate the effect of the rates prevailing on the transaction dates.
Exchange differences arising on Consolidation are recognised on the group balance sheet in a separate component of equity, the foreign exchange reserve.
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:
Office equipment - 20% -33% per annum straight line
Intangible Assets
Intangible assets consist of development costs relating to the CTM(TM) platform. Development activities involve a planned investment in the building and enhancement of the trading platform. Development expenditure is only capitalised if the development costs can be measured reliably and the platform being built will be completed and will generate future economic benefits in the form of cash flows to the Group. Expenditure being capitalised includes internal staff time and cost spent directly on developing the CTM(TM) platform.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment costs. The amortisation period was 5 years. All previously capitalised costs for the development of the CTM(TM) platform had been amortised by end of December 2016.
The directors consider that there is not sufficient certainty that the development costs incurred in the year meet all of the criteria set out in IAS 38 'Intangible Assets' and therefore such costs have not been capitalised during the period.
Impairment of assets
Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A review for indicators of impairment is performed annually. 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. Any impairment charge is recognised in the income statement in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Investments in subsidiaries
The Company's investments in its subsidiaries are carried at cost less provision for any impairment.
Financial assets
The Group classifies its financial assets into one of the categories disclosed below, depending on the purpose for which the asset was acquired.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents.
Cash and cash equivalents
Cash and cash equivalents deposits held at call with banks, other short-term highly liquid investments with original maturities of 3 months or less, and - for the purpose of the statement of cash flows - bank overdrafts or outstanding credit card balances. Bank overdrafts and credit card advances are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each period end. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Interest-bearing borrowings are recognised initially at fair value, net of any transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method with any difference between the proceeds (net of transaction costs) and the redemption value being recognised over the period of the borrowings.
The component parts of convertible loans issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. At the date of issue, the fair value of the liability portion of convertible loan stock is determined using a market interest rate for a comparable loan stock with no conversion option. This amount is recorded as a liability on an amortised cost basis using the effective interest method until the loan stock is redeemed or converted. The remainder of the carrying amount of the loan stock is allocated to the conversion option and shown within equity, and is not subsequently re-measured. The conversion option recognised as equity will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to share premium. When the conversion option remains unexercised at the maturity date of the convertible note, the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in the income statement upon conversion or expiration of the conversion options.
Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component are amortised over the life of the loan notes using the effective interest method.
Other financial liabilities including trade payables and other short-term monetary liabilities, are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. As the payment period of trade payables is short future cash payments are not discounted as the effect is not material.
Derecognition of financial liabilities
The Group derecognises financial liabilities when and only when the Group's obligations are discharged, cancelled or they expire.
Share Capital
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.
The Group only has one class of ordinary shares, denominated as GBP0.001 (2016: GBP0.001) ordinary shares, as set out in note 19. The Company's ordinary shares are classified as equity instruments.
Leases
On inception of a lease of an item of property, plant and equipment, the terms and conditions of the lease are reviewed to determine the appropriate classification for the lease. Where the Group bears substantially all the risks and rewards of ownership of the item, the lease is classified as a finance lease and the item is capitalised within the appropriate class of property, plant and equipment at the lower of the fair value of the leased item and the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to obtain a constant rate on the finance balance outstanding. The outstanding capital element of the lease payments are included within current and long-term payables as appropriate; the interest element of the lease payments is charged to the income statement over the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Leases where the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on a straight line basis over the term of the lease.
Provisions
Provisions are recognised in the balance sheet where there is a legal or constructive obligation to transfer economic benefits as a result of a past event. Provisions are discounted using a rate which reflects the effect of the time value of money and the risks specific to the obligation, where the effect of discounting is material.
Pensions
The group operates a defined contribution pension scheme under which fixed contributions are payable. Pension costs charged to the income statement represent amounts payable to the scheme during the year.
2. Critical accounting estimates and judgements
The preparation of financial statements in compliance with generally accepted accounting practice, in the case of the Group and Company being International Financial Reporting Standards as adopted by the European Union, requires the Group to make estimates and judgements that affect the reported amount of assets, liabilities, income and expenditure and the disclosures made in the financial statements. Such estimates and judgements must be continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
The significant judgements made by management in applying the Group's accounting policies as set out above, and the key sources of estimation, were:
(a) Revenue recognition
Revenue from the services provided is measured at the fair value of the consideration received or to be received, net of returns, trade discounts and volume rebates.
Revenue is either recognised in the statement of comprehensive income or deferred based on a review of all live contracts at the period end. Based on the judgement of management and with reference to the stage of completion the licence fees and maintenance contracts, a determination of the appropriate revenue to recognise is made. Following this assessment, an appropriate adjustment to deferred income is made. In the current year the value
of the deferred revenue is GBP580,097 (2016: GBP574,118). (b) Convertible loan notes
On issue of the convertible loan in the year ended 31 December 2015, the group was required to estimate the market interest rate for a comparable loan stock with no conversion option, in order to determine the fair value of the liability and equity components. The use of a greater market interest rate would have resulted in a lower liability component and greater finance cost over the life of the convertible loan notes.
(c) Intercompany receivable impairment
The Company has performed an impairment test of the intercompany receivable from EUS Holdings Ltd. The impairment test requires that the Company estimates the future cash flows available to repay the intercompany debt and also estimates a suitable discount rate in order to calculate the present value of the anticipated future cash flows.
Following the review of the carrying value of the receivable from EUS Holdings Ltd, the Board considered it prudent to provide for a part of the receivable in the year ended 31 December 2015 (see note 14).
The key assumptions for the impairment test are those regarding the discount rates, growth rates and expected changes to forecast profitability.
Future cash flows are derived from the most recent financial forecast.
Future cash flows are derived from a financial forecast for an average of 6 and 7 years. The rate used to discount forecast future cash flows is 15%. The result of the impairment review is that the directors consider no change is required to the current provision of GBP3,951,000. This provision is fully eliminated on Consolidation and has no impact on the Group's reported financial performance for the year or financial position at the balance sheet date.
3 (a). Financial instruments - Risk management
General objectives, policies and processes
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below.
The Board receives monthly financial reports from the Financial Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
The Group reports in Pound Sterling. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of directors. The Group does not use derivative financial instruments such as forward currency contracts, interest rate swaps or similar instruments. The Group does not issue or use financial instruments of a speculative nature.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
-- Trade receivables; -- Cash and cash equivalents; -- Trade and other payables; and -- Borrowings and convertible loan notes.
Trade and other receivables are initially measured at face value and subsequently at amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period. Trade and other payables are measured at book value. The book value of financial assets and liabilities equates to their fair value.
A summary of the financial instruments held by category is provided below:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
Cash and cash equivalents 650,237 965,270
------------ ------------
Trade receivables - due
at reporting date 58,898 54,560
Trade receivables - not
due at reporting date 592,961 292,969
Gross trade receivables 651,859 347,529
------------ ------------
Less: Provision for impairment - -
Net trade receivables 651,859 347,529
------------ ------------
Other receivables 502,145 228,369
1,154,004 575,898
------------ ------------
Trade receivables principally comprise amounts outstanding for sales to customers and are payable within 3 months. The average debtor days to settle invoices are 30-60 days (2016: 30-60 days). An impairment review of outstanding trade receivables is carried out at the period end and a specific amount provided for. The Group invoices the total value of licence fees once a binding contract is established between the customer and the Group and defers any revenue according to the revenue recognition policy stated earlier.
Financial Liabilities
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
-------------------- ------------ ----------------
Trade payables 250,685 118,111
Borrowings 1,271,023 1,172,080
1,521,708 1,290,191
------------ --------------
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs and are payable within 3 months. The average credit period taken for trade purchases is 20-30 days (2016: 20-30 days).
Cash and cash equivalents
Cash and cash equivalents comprise balances on bank accounts, cash in transit and cash floats held in the business.
Finance charges are accounted for on an accruals basis and charged to the statement of comprehensive income when payable.
Cash and cash equivalents are held in Pound Sterling, SEK, NOK, DKK and EUR and placed on deposits in UK, Swedish, Norwegian and Danish banks.
The main risks arising from the Group's financial instruments are as follows:
-- Credit risk; -- Liquidity risk, and -- Foreign exchange risk;
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. At 31 December 2017 the Group has net trade receivables of GBP 651,859 (2016: GBP347,529).
The Group is exposed to credit risk in respect of these balances such that, if one or more customers encounter financial difficulties, this could materially and adversely affect the Group's financial results. The Group attempts to mitigate credit risk by assessing the credit rating (or equivalent) of new customers with expected net trade receivables of over GBP2,000 prior to entering into contracts and by entering contracts with customers with agreed credit terms. During the year the Group held bank accounts at NatWest and Nordea Bank in Pound Sterling, Swedish Krona, Danish Krona, Norwegian Krona and Euros.
The analysis below shows the ageing of trade and other receivables and the movement in bad debt provision in the year.
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
------------------------------------- ------------ ------------
Ageing of trade & other receivables
Up to 3 months 639,927 327,886
3 to 6 months 11,744 10,225
Above 6 months 188 9,418
------------ ------------
Gross receivables 651,859 347,529
Less: allowance for receivables - -
Net receivables 651,859 347,529
------------ ------------
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, the Group has the ambition to maintain cash balances to meet expected requirements for a period of at least 45 days.
The table below analyses the Group's financial liabilities by contractual maturities. All amounts disclosed in the table are the contractual undiscounted cash flows.
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
---------------------------------- ------------ ------------
Ageing of trade & other payables
Up to 3 months 250,062 117,510
3 to 6 months - -
Above 6 months 623 601
------------ ------------
250,685 118,111
------------ ------------
Foreign exchange risk
Foreign exchange risk arises when Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow customers to settle liabilities denominated in the customer's functional currency, being primarily Swedish Krona, Euros, Norwegian Krona, Danish Krona or Pound Sterling.
The Group is predominantly exposed to currency risk on sales and purchases made from customers and suppliers based in the Eurozone, Sweden, Denmark and Norway. Sales and purchases from customers and suppliers are made on a central basis and the risk is monitored centrally, but not hedged utilising any forward exchange contracts. Apart from these particular cash flows the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which revenue is generated and expenses are incurred.
As at 31 December 2017, the Group's net exposure to foreign exchange risk was as follows:
Swedish Norwegian Danish
Krona Euro Krone Krone Total
GBP GBP GBP GBP GBP
--------------------- ---------- --------- ---------- --------- ----------
As at 31 December
2016
Trade and other
receivables 19,929 161,597 18,889 52,313 252,728
Cash and cash
equivalents 754,608 1 5,385 150,473 910,467
Trade and other
payables (76,902) (2,031) (20,321) (11,977) (111,231)
---------- --------- ---------- --------- ----------
Net assets 697,635 159,567 3,953 190,809 1,051,964
---------- --------- ---------- --------- ----------
As at 31 December
2017
Trade and other
receivables 0 433,709 39,610 104,921 578,240
Cash and cash
equivalents 476,810 0 1,512 138,062 616,384
Trade and other
payables (215,084) (21,397) (5,834) (6,264) (248,579)
---------- --------- ---------- --------- ----------
Net assets 261,726 412,312 35,288 236,719 946,045
---------- --------- ---------- --------- ----------
The impact of a 10% weakening/strengthening in the foreign exchange rate of GBP will result in an increase/(decrease) in net assets of GBP105,116 and (GBP86,004) respectively for 2017 (GBP116,885 and (GBP95,633) respectively for 2016).
3 (b). Capital risk management
The Group's capital is made up of share capital, share premium, merger reserve, foreign currency reserve, other reserve and retained losses totalling GBP-899,409 at 31 December 2017 (2016: GBP-802,115).
The Group's objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholder's equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources.
4. Segmental analysis
The Group currently has two reportable segments, Business Alert services and services relating to the Group's CTM(TM) platform. The Group categorises all revenue from operations to these two segments. The Group currently does not allocate costs on a segment basis and is therefore unable to report segment profit and loss. Further, the Group does not allocate assets on a segment basis and is therefore unable to report total assets per segment.
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
----------------------------- ------------ ------------
Revenue arises from:
Business Alert services 447,501 489,743
Services relating to
the CTM(TM) platform 4,075,069 2,941,001
Total provision of services 4,522,570 3,430,744
Other Income 156,857 13,271
Administrative expenses (4,587,033) (4,163,425)
Restructuring expenses - (113,816)
------------ ------------
Operating Profit/(loss) 92,394 (833,226)
Finance charges (Net) (264,390) (247,413)
------------ ------------
Loss before tax (171,996) (1,080,639)
============ ============
In 2017 there was one customer generating approximately 22% (GBP1,011,586) of total revenues and the second largest customer generating approximately 11% (GBP540,812), both from Services relating to the CTM(TM) platform segment. This compares to 2016 where no customer was generating more than 10% of total revenue for the Group.
Other income consists of a grant received from EUREKA programme for further development of the Group's Complete Tender Management System and from European Union on the behalf of Difi in Norway.
All revenues in the Company of GBP227,315 (2016: GBP199,536) for the year ended 31 December 2017 arises from services relating to the CTM(TM) platform.
The Group operates in three main geographic areas: UK, European Union and Rest of the World. Revenue and non-current assets by origin of geographical segment for all entities in the group is as follows:
Revenue Non- current assets
-------------------------- --------------------
Year
Year ended ended Year ended Year ended
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
---------------- ------------ ------------ -------------------- ------------
UK 858,085 879,982 - -
European Union 2,614,776 1,381,402 54,220 58,810
Rest of World 1,206,566 1,182,631 - -
Total 4,679,427 3,444,015 54,220 58,810
------------ ------------ -------------------- ------------
All revenues in the Company of GBP215,793 (2016: GBP199,536) for the year ended 31 December 2017 originated from the UK.
5. Operating Profit
Group operating profit for the year is stated after charging the following:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
------------------------------ ------------ ------------
Depreciation of fixed assets 24,907 28,949
Auditor's remuneration:
Audit fees - Subsidiaries 8,200 8,200
Company 13,678 14,050
Non-audit professional fees 9,613 5,980
6. Staff Costs
Staff costs (including directors' emoluments) incurred in the year were as follows:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
--------------------------- ------------ ------------
Wages and salaries 2,123,189 2,034,236
Social Security costs 612,169 537,046
Pensions 214,426 185,894
Share based payments - 3,080
Net staff costs 2,949,784 2,760,256
------------ --------------
The average monthly number of permanent employees during the period was as follows:
Year ended Year ended
31 December 31 December
2017 2016
--------------------------------- ------------------------ -------------
Directors 5 5
Administration, sales and
support 41 43
46 48
------------------------ -------------
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
--------------------------------- ------------------------ -------------
Directors remuneration
Salaries and bonus 320,363 267,051
Pension 36,509 34,950
Share based payments - 495
356,872 302,496
------------------------ -------------
The number of Directors accruing benefits under the defined contribution pension scheme were 3 (2016: 2). During the year there was no key management compensation other than the Directors remuneration shown above with the exception of Consultancy fees as outlined in note 21.
Information regarding the highest paid director is as follows:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
------------------------------ ------------ ------------
Directors remuneration
Salaries & bonus 134,498 136,501
Pension 21,997 20,899
Share based payments - 495
------------ ------------
156,495 157,895
------------ ------------
The average monthly number of employees in the Company where Nil during the period (2016: Nil) with two of the Company's five Directors (2016: 2 of 5 Directors) remunerations being expensed in the Company at a total amount of
GBP47,000 in Salaries & bonus (2016: GBP35,712) as well as the Consultancy fees outlined in note 21.
7. Operating Leases
At 31 December 2017 the group had the following total
commitments under operating leases:
Year Ended Year Ended
31 December 31 December
2017 2016
GBP GBP
Land and Other Land and Other
buildings buildings
------------ ------- ----------- --------
Minimum lease
payments
payable:
Within one
year 78,572 6,536 127,747 27,778
In two to
five years 48,089 1,720 45,493 7,842
126,661 8,256 173,240 35,620
=========== ======= =========== ========
The Land and buildings lease costs amount to GBP148,343
for 2017 (2016: GBP136,419). Other lease costs amount
to GBP29,243 for 2017 (2016: GBP45,759).
The operating leases in the Company were GBPNil in
the period (2016: GBPNil).
8. Finance income and expenses
Group Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
----------------------- ------------ ------------
Finance income
Bank interest 28 250
------------ ------------
Finance expense
Interest payable (575) (1,554)
Convertible loan note
interest (263,843) (246,109)
(264,390) (247,413)
------------ ------------
Company Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
----------------------- ------------ ------------
Finance expense
Convertible loan note
interest (263,843) (246,109)
(263,843) (246,109)
------------ ------------
9. Income tax
Current tax
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
-------------------- ------------ ------------
Group
Current tax credit (65,343) (125,517)
------------ ------------
Factors affecting the tax credit
The reasons for the difference between the actual tax credit for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
------------------------------------------------ ------------
Loss before tax (171,996) (1,080,639)
---------- ------------
Income tax at UK average
rate of 19.25% (2016:
20%) (33,109) (216,128)
Non-deductible expenses 59 33,669
Adjustments to tax in
respect of prior periods 4,137 (27,054)
Tax appropriations by
foreign subsidiaries 12,109 16,473
Effect of different tax
rates of subsidiaries
operating in non-UK jurisdictions 1,702 2,963
Effect of enhanced deductions
for research and development
expenditure and surrender
for tax credits (97,183) (50,424)
Movement in deferred
tax not recognised 47,895 114,984
Other differences leading
to a decrease in income
tax (953) -
Tax credit for the year (65,343) (125,517)
---------- ---------------
Deferred tax
The Group has estimated carried forward losses amounting to GBP9.0million as of 31 December 2017 (2016: GBP8.7million). As the timing and extent of taxable profits are uncertain, the potential deferred tax asset of GBP1.5million arising on these losses has not been recognised in the financial statements.
10. Loss per share
Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The basis for calculating the basic loss per share is as follows:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
------------------------------------- ------------- -------------
Weighted average number of shares
for the purpose of earnings per
share 67,716,406 67,716,406
Loss after tax (107,554) (932,353)
Loss per share (0.002) (0.014)
------------- -------------
The potential ordinary shares associated with share options and convertible loan notes are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purpose of calculating diluted earnings per share.
11. Property, plant and equipment
2016 Office
equipment
& Other
equipment
GBP
Cost
At 1 January 2016 350,569
Additions 8,446
Disposals (29,816)
At 31 December 2016 329,199
Accumulated depreciation
At 1 January 2016 258,724
Charge for the year 28,949
Disposals (8,599)
At 31 December 2016 279,074
As at 31 December 2016 50,125
===========
As at 31 December 2015 91,845
===========
2017 Office
equipment
& Other
equipment
GBP
Cost
At 1 January 2017 329,199
Additions 14,108
-----------
At 31 December 2017 343,307
Accumulated depreciation
At 1 January 2017 279,074
Charge for the year 24,907
At 31 December 2017 303,981
As at 31 December 2017 39,326
===========
As at 31 December 2016 50,125
===========
Included in office equipment & other equipment are assets held under finance leases which had a net book value at 31 December 2017 of GBPnil (2016: GBPnil). Depreciation charged on finance leases for the year was GBPnil (2016: GBP4,590).
12. Intangible assets
2016 CTM Platform
GBP
-------------------------- -------------
Cost
At 1 January 2016 765,485
Additions -
At 31 December 2016 765,485
Accumulated depreciation
At 1 January 2016 765,485
Charge for the year -
At 31 December 2016 765,485
As at 31 December 2016 -
=============
As at 31 December 2015 -
=============
2017 CTM Platform
GBP
-------------------------- -------------
Cost
At 1 January 2017 765,485
Additions -
At 31 December 2017 765,485
Accumulated depreciation
At 1 January 2017 765,485
Charge for the year -
At 31 December 2017 765,485
As at 31 December 2017 -
=============
As at 31 December 2016 -
=============
13. Investments in subsidiaries
The Company owns 100% of the issued share capital of the following subsidiary undertakings, which have been included in the consolidated financial statements:
Subsidiary undertaking Registered office address Principal activity
EUS Holdings Limited 10 Queen Street Place, Development & licensing of software and
London EC4R 1AG, related services
United Kingdom
EU-Supply Holding AB* Gävlegatan 16, Development & licensing of software and
113 30 Stockholm, related services
Sweden
* is owned 100% via EUS Holdings Limited.
14. Trade and other receivables
Group Company
----------------------------- --------------------------------------
Year
Year ended Year ended Year ended ended
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
Gross trade receivables 651,859 347,529 10,167 10,290
Intercompany receivable - - 7,425,814 7,035,060
Provision for
impairment - - (3,951,000) (3,951,000)
-------------- ------------- ------------------ ------------------
Net trade receivables 651,859 347,529 3,484,981 3,094,350
-------------- ------------- ------------------ ------------------
Prepayments and
accrued income 502,145 228,369 17,272 14,718
------------------
Total 1,154,004 575,898 3,502,253 3,109,068
-------------- ------------- ------------------ ------------------
As at 31 December 2017 trade receivables of GBP11,932 (2016: GBP19,643) were past due over 3 months but not impaired.
All amounts shown under receivables are due within 1 year.
The provision for impairment relates to intercompany receivables due for the Company's wholly owned subsidiary EUS Holdings Limited. The provision for impairment has been estimated in accordance with IAS 39 and the key assumptions disclosed in Note 2(c).
15. Cash and cash equivalents
Cash and cash equivalents comprise balances on bank accounts, cash in transit and cash floats held in the business. Finance charges are accounted for on an accruals basis and charged to the statement of comprehensive income when payable.
Cash and cash equivalents are held in Pound Sterling, Euro, Danish Krona, Norwegian Krona and Swedish Krona and placed on deposits in UK, Swedish, Norwegian and Danish banks.
16. Trade and other payables
Group Company
-------------------------- --------------------------
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP GBP GBP GBP
Current
Trade payables 250,685 118,111 195 3,143
Intercompany payables - - 872 872
Other payables 163,467 98,839 - -
Tax Appropriations - - - -
Deferred revenue 580,097 574,118 114,713 96,402
Social security
and other taxes 96,809 91,401 1,566 604
Accruals 466,664 471,482 18,603 15,110
------------ ------------ ------------ ------------
1,557,722 1,353,951 135,949 116,131
------------ ------------ ------------ ------------
17. Borrowings
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
Non-current
Convertible loan stock (see
Note 18) 1,271,023 1,172,080
1,271,023 1,172,080
The Group's borrowing in respect of convertible loan notes of GBP1,649,000 is secured by way of a fixed and floating charge over the assets of parent company and EUS Holdings Limited and a licence of the software conditional upon the charge being enforced.
The fair value of the Group's current borrowings is considered to be equivalent to their carrying amount as the effect of the time value of money is not significant. The fair values of the Group's long term borrowings are as follows:
Year Year ended
ended 31 December
31 December 2016
2017
GBP GBP
Convertible loan stock 1,271,023 1,172,080
1,271,023 1,172,080
The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant.
18. Convertible Loan Notes
On 27 August 2015 the company issued 941,000 of GBP1 convertible loan notes. This was followed by the issue of 708,000 GBP1 convertible loan notes on 23 September 2015. The convertible loan notes carry a coupon of 10% payable quarterly in arrears.
The convertible loan notes are to be redeemed by the company as follows:
(a) on demand, following certain events of default;
(b) automatically, upon the sale of the company and/or its subsidiary or their respective undertakings;
(c) 60 months following issue of the first tranche of convertible loan notes; or
(d) at any time after 30 months from the drawdown of the first tranche of convertible loan notes at the election of the company.
The convertible loan stocks are convertible into ordinary shares of the company at the option of the holder at any time following 30 days after issue of the respective loan notes. The conversion price is dependent on the date of issue of the related loan notes as follows:
1. Prior to 30 September 2015 at a 30 per cent. premium to 9p (being 11.7p); and 2. From 1 October 2015 at a 30 per cent. premium to the higher of the following: a. 9p (being 11.7p); and
b. the average closing middle market price of an Ordinary Share for the 5 trading days prior to the date of issue of the relevant convertible loan notes.
The company has the right to serve a notice on all noteholders to convert all or part of the notes in multiples of GBP20,000 where the volume weighted average mid-market price of the ordinary shares is greater than 70% above the conversion Price for the prevailing 5 dealing days prior to the day before the notice to convert is served at the conversion Price. Once notice to convert has been served, noteholders may not choose to redeem. This call option is a derivative however as the repayment price is equal to the amortised cost of the debt instrument this is, in accordance with IAS 39, considered to be closely related to the loan notes and therefore not separately recognised.
The fair value of the liability component of the loan stocks was calculated using a market interest rate on a similar loan stock with no conversion option which the directors estimated to be 20%. The value of the equity component was GBP414,420 and is included in shareholders' equity in other reserves.
The convertible loan notes are presented in the consolidated and company statements of financial position as follows:
2017 2016
---------------------------- ------------ ------------
GBP GBP
---------------------------- ------------ ------------
Face value of convertible
loan notes issued 1,649,000 1,649,000
---------------------------- ------------ ------------
Less: Liability component
at date of issue (1,192,818) (1,192,818)
---------------------------- ------------ ------------
Less: Finance costs
allocated to equity (41,762) (41,762)
---------------------------- ------------ ------------
Equity component 414,420 414,420
---------------------------- ------------ ------------
Net liability component
at the beginning of
the year 1,172,080 1,083,618
---------------------------- ------------ ------------
Liability component - -
on date of issue ---------------------------- ------------ ------------ Less: Finance costs - - allocated to liability element on the date of issue ---------------------------- ------------ ------------ Interest charge in period 263,843 246,109 ---------------------------- ------------ ------------ Interest paid in period (164,900) (157,647) ---------------------------- ------------ ------------ Liability component at end of period included in borrowings (Note 17) 1,271,023 1,172,080 ---------------------------- ------------ ------------ 19. Share capital
Share capital allotted and fully paid up
Ordinary shares of GBP0.001 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Pounds Sterling.
There were no movements in share capital in the current or the previous year.
Number of shares Share Capital Share Premium
(GBP) (GBP)
-------------------- ------------------------ ---------------- ----------------------
Ordinary share 2017 2016 2017 2016 2017 2016
capital
-------------------- ----------- ----------- ------- ------- ---------- ----------
Balance at the
beginning and the
end of the year 67,716,406 67,716,406 67,716 67,716 6,497,128 6,497,128
-------------------- ----------- ----------- ------- ------- ---------- ----------
20. Share based payments
Employee Share Option Scheme
The Company has had a share option scheme since 2013 for selected employees and Directors of the Group and a total of 1,243,895 options were granted during 2013.
Under the terms of the scheme, employees paid an option premium, valued at arm's length using the Black & Scholes formula for option pricing, in return for an option over a number of shares. The options were exercisable at a multiple of the quoted market price of the Company's shares on the date of grant dependent on the option premium paid. The options vested from the 29 February 2016 and were exercisable for a period of 15 days. In the event that an employee ceased to be employed by any company within the Group they had to offer their options up for sale to the Company.
No employees or Directors chose to exercise their options which have lapsed in the previous year.
The Group used historical data to estimate option exercise and employee retention within the valuation model. Expected volatilities were based upon implied volatilities as determined by a simple average of a sample of listed companies based in similar sectors. The risk free rate for the period within the contractual life of the option was based on the UK gilt yield curve at the time of the grant.
The following reconciles the share options outstanding at the beginning and end of year:
Year ended Year ended
31 December 31 December
2017 2016
Weighted Weighted
Average Average
Number Exercise Number Exercise
of options price of options price
----------------------- -------------- ------------- ------------ ----------
At the beginning
of the year - - 1,243,895 40.5p
Issued/granted during
the year - - - -
Exercised in the
year - - - -
Lapsed/forfeited
during the year - - (1,243,892) -
----------------------- --------------- ------------- ------------ ----------
At the end of the
year - - - -
The fair values were calculated using a Black Scholes pricing model. The inputs into the model in respect of options granted were as follows:
Expected life of options - years 2.5 years Weighted average exercise price - pence 40.5p Weighted average share price at grant date - pence 23p Expected volatility - % 60% Risk free rate - % 1.5% ---------------------------------- ----------
The group has recognised a charge of Nil (2016: GBP3,080) relating to equity-settled share-based charges during the year on the employee share option scheme.
With all options having lapsed and none of these being exercised the total balance relating to equity settled share-based charges of GBP139,732 has at 31 December 2016 been transferred from other reserves to retained earnings.
Adviser warrants
In part settlement of advisers' fees in 2013 the following warrants were granted:
(a) a warrant to subscribe for up to 144,164 shares of GBP0.01 each at a price of 13.56p per share. Such right may be exercised at any time during the period starting on 13 November 2013 and ending on the fifth anniversary of that date.
(b) a warrant to subscribe for up to 432,491 shares of GBP0.01 each at 22.6p per share. Such right may be exercised at any time during the period starting on 13 November 2013 and ending on the fifth anniversary of that date.
The fair value of both tranches of adviser warrants were calculated using a Black Scholes pricing model. The inputs of the model in respect of expected volatility and the risk free rate were consistent with that adopted for the employee and Directors share option scheme.
No Advisor warrants were exercised during 2016 or 2017.
Other warrants
In 2013 Internet Startups Holding BV was granted a warrant to subscribe for up to 2,883,275 ordinary shares of GBP0.01 each at a price of 22.6p at any time during the period starting on 13 November 2013 and ending on the fifth anniversary of that date. None of these warrants were exercised during 2016 or 2017.
These warrants are considered to share based payment arrangements with holders of equity instruments in their capacity as holders of equity instruments.
21. Related party transactions
Compensation or other related payments to key management personnel (including directors):
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
-------------------- ------------- -------------
Consultancy fees * 12,996 10,061
12,996 10,061
------------- -------------
* The consultancy fees 2017 and 2016 were paid to CHB Partners GmbH, an entity in which Andreas Kemi, a director of the company, has an interest.
Remuneration paid directly to all directors has been disclosed in note 6.
Steffen Karlsson (through Trilibo AB*) owns Convertible Loan notes of GBP80,000, Mattias Strom owns Convertible Loan notes of GBP8,000 and Thomas Beergrehn (through Internet Start Ups Holding BV**) owns Convertible Loan Notes of GBP200,000. The Convertible Loan notes are further described in Note 18.
* Trilibo AB is a company in which Steffen Karlsson has an interest.
** Internet Startups Holding BV is an investment company controlled by Thomas Beergrehn.
22. Company related party balances
The balance of EU Supply PLC debt due to EUS Holdings Ltd as of 31 December 2017 was GBP872 (2016: GBP872).
The balance of EU Supply PLC debt due to EU-Supply Holding AB as of 31 December 2017 was GBPNil (2016: GBPNil).
The balance of EU Supply PLC claim on EUS Holdings Ltd as of 31 December 2017 was GBP3,474,814 (2016: GBP3,084,060) after provision for impairment of GBP3,951,000 (2016: GBP3,951,000). The impairment charge recognised in the Company income statement for the year ended 31 December 2017 is GBPNil (2016: GBPNil).
The balance of EU Supply PLC claim on EU-Supply Holding AB as of 31 December 2017 was GBPNil (2016: GBPNil).
23. Control
The board consider that there is no ultimate controlling party.
24. Post balance sheet events
In February 2018, the company entered into a new five-year lease agreement, starting May 2018 for premises with an annual rent of 1.75m Swedish Kronas.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKFDDFBKDDQD
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April 19, 2018 02:00 ET (06:00 GMT)
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