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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Frontier Smart Technologies Group Limited | LSE:FST | London | Ordinary Share | KYG3730C1078 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 25.50 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Nov 2019 to Nov 2024
TIDMFST
RNS Number : 6319K
Frontier Smart Technologies Grp Ltd
30 August 2019
For immediate release 30 August 2019
Frontier Smart Technologies Group Limited
('Frontier', the 'Group' or the 'Company')
Half-Year Results
Frontier Smart Technologies Group Limited (AIM: FST), a pioneer in technologies for Digital Radio and Smart IoT devices, announces its half-year results for the six months ended 30 June 2019 ('H1-2019' or the 'period').
Summary
-- Results for H1-2019 are in line with the Group's trading update issued in May 2019. In H1-2019:
o Revenues were US$14.2 million (H1-2018: US$17.0 million)
o Adjusted EBITDA(1) loss was US$1.3 million (H1-2018: loss US$2.1 million)
o Trading EBITDA(2) loss was US$1.8 million (H1-2018: loss US$2.1 million)
o Period-end cash was US$3.6 million (31 December June 2018: US$3.8 million)
o Net debt was US$2.7 million (31 December 2018: net debt US$2.5 million)
Notes:
(1) Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, and before share-based payments and restructuring charges.
(2) Trading EBITDA means Adjusted EBITDA less R&D costs capitalised in compliance with IAS 38 'Intangible Assets'.
For Further Enquiries:
Hot Features
Premium
Frontier Smart Technologies Group Limited +44 (0) 20 7391 0630
Anthony Sethill, Chief Executive Officer
---------------------
Jonathan Apps, Chief Financial Officer
---------------------
Patrick Hannon, Vice President, Corporate
Development
---------------------
N+1 Singer (Nominated Adviser and Broker) +44 (0) 20 7496 3000
---------------------
Sandy Fraser / Lauren Kettle / Ben Farrow
---------------------
About Frontier Smart Technologies Group Limited
Frontier Smart Technologies is a pioneer in technologies for Digital Radio and Smart IoT devices. The Group's customers include many leading consumer audio brands: Bose, Denon, harman/kardon, JBL, Onkyo, Panasonic, Sony, Yamaha, Altec Lansing, Blaupunkt, Grundig, Hama, Klipsch, Marshall, Pioneer, Pure, Roberts, TechniSat, Teufel and many more. Established in 2001, the Group is headquartered in London, with engineering, sales and operations teams in Cambridge, Timisoara (Romania), Hong Kong and Shenzhen. For more information, see frontiersmart.com.
Forward-looking statements
The information in this release is based on management information. This announcement includes statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the AIM Rules and applicable law, the Group undertakes no obligation to update, revise or change any forward-looking statements to reflect events or developments occurring after the date of this announcement.
MAR
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via a regulatory information service, this inside information is now considered to be in the public domain.
Overview of H1-2019 performance
Group H1-2019 revenues were US$14.2 million (H1-2018: US$17.0 million) and Trading EBITDA loss, after the capitalisation of R&D costs, was US$1.8 million (H1-2018: Trading EBITDA loss of US$2.1 million). Adjusted EBITDA loss was US$1.3 million (H1-2018: Adjusted EBITDA loss of US$2.1 million).
Digital Radio (DAB and Smart Radio) revenues were US$13.1 million (H1-2018: US$14.9 million) reflecting increased competition for low cost DAB solutions, partly offset by a stronger performance in Smart Radio.
Digital Radio Adjusted EBITDA was US$1.6 million (H1-2018: US$3.0 million).
R&D expenditure for Digital Radio in the period was US$1.0 million. The major development programme over the last 12 months has been the Group's new Smart Radio solution, Venice X, which entered mass production at the end of Q2-2019.
Smart IoT revenues in H1-2019 were US$1.1 million (H1-2018: US$2.2 million). This business line is switching its focus from smart audio hardware modules to licensing.
A significant reduction in Research & Development costs resulted in the Adjusted EBITDA loss for Smart IoT reducing to a loss of $2.7 million (H1-2018: loss of US$4.7 million).
The Group achieved gross margin of US$5.3 million (H1-2018: US$7.1 million). In percentage terms, gross margin fell from 42% to 38% of revenues, with both business lines seeing a narrowing of margins partly due to price pressure and partly due to product mix.
R&D expenditure was reduced by 39% to US$2.8 million (H1-2018: US$4.6 million) due largely to a US$1.8 million reduction in Smart IoT R&D expenditure. Group sales and administrative expenses fell 15% to US$4.0 million (H1-2018: US$4.7 million).
Central group Adjusted EBITDA loss was US$0.2 million (H1-2018: US$0.5 million) an improvement of US$0.3 million due to a reduction in professional fees.
From 1 January 2019, the Group has adopted IFRS 16 "Leases". This has primarily affected the accounting for leasehold properties occupied by the Group and has resulted in overheads reducing by US$0.42 million and depreciation and interest costs increasing by US$0.4 million and US$0.02 million, respectively.
EBITDA can be calculated as:
H1-2019 H1-2018
US$'000 US$'000
--------- ---------
Revenue 14,168 17,042
Cost of sales (8,831) (9,906)
--------- ---------
Gross margin 5,337 7,136
Other income 150 -
Research and development (2,769) (4,563)
Sales and administrative expenses (3,977) (4,683)
--------- ---------
Adjusted EBITDA (1,259) (2,110)
--------- ---------
Capitalised research and development (560) -
--------- ---------
Trading EBITDA (1,819) (2,110)
Below Adjusted EBITDA, the Group reports non-recurring costs, interest, tax, depreciation and amortisation.
At 30 June 2019, the Group's gross cash balance was US$3.6 million (31 December 2018: US$3.8 million; 30 June 2018: US$3.4 million). This equates to a net cash position of US$(2.7) million (31 December 2018: net cash US$(2.5) million; 30 June 2018: US$(3.2) million).
Group pre-tax loss was US$3.5 million (H1-2018: loss US$4.5 million) with a loss per share of 8.23 cents (H1-2018: loss 10.86 cents).
The Board
Following the emergence of Science Group plc ('Science Group') as the Group's largest shareholder, the following changes were made to the composition of Frontier's Board. In July 2019 Martin Harriman, Non-Executive Director, stepped down from the Board and in August, Sir Hossein Yassaie, Chairman, and the Group's other Non-Executive Director, Paul Taylor, stepped down from the Board. In September, Science Group's Martyn Ratcliffe and Sarah Cole are expected to take positions on the Board following the publication of the Company's Interim Results - with Martyn becoming Chairman of the Board and Sarah becoming a Non-Executive Director.
Anthony Sethill
Chief Executive Officer
30 August 2019
Consolidated Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
Note 30 June 2019 30 June 2018 2018
$'000 $'000 $'000
Revenue 4 14,168 17,042 41,754
Cost of sales (8,831) (9,906) (24,613)
------------------------------------- ---- ------------- ------------- ------------
Gross profit 5,337 7,136 17,141
------------------------------------- ---- ------------- ------------- ------------
Other income 150 - 300
Research & development(1) (2,769) (4,563) (7,457)
Sales & administrative expenses (3,977) (4,683) (8,604)
Adjusted EBITDA(2) (1,259) (2,110) 1,380
---- ------------- -------------
Amortisation (1,192) (1,261) (2,461)
Depreciation (548) (214) (381)
Non-recurring costs - (234) (729)
Share based payment (138) (279) (507)
Total administrative expenses (8,474) (11,234) (19,839)
Operating loss (3,137) (4,098) (2,698)
Finance income 1 1 1
Finance charges (266) (394) (588)
------------------------------------- ---- ------------- ------------- ------------ Loss before taxation (3,402) (4,491) (3,285) Taxation (85) (154) 330 ------------------------------------- ---- ------------- ------------- ------------ Loss for the Period (3,487) (4,645) (2,955) ------------------------------------- ---- ------------- ------------- ------------ Other comprehensive income/ (expense) Items that will be reclassified subsequently to profit or loss Exchange differences on translating foreign operations (24) (384) (828) Other comprehensive income/(expense) for the period (24) (384) (828) ------------------------------------- ---- ------------- ------------- ------------ Total comprehensive loss for the period (3,511) (5,029) (3,783) ------------------------------------- ---- ------------- ------------- ------------
(1) Research & development expensed is net of the capitalised Venice X development costs of $560k (HY2018: Nil) (FY2018: $619k).
(2) Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share option charge and non-recurring costs but includes the capitalised development cost credit
Loss per share
------- --------
Basic & diluted earnings
per share
- From continuing operations 5(8.23)c (10.86)c (6.90)c
Consolidated Condensed Statement of Financial Position at 30 June 2019
Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2019 2018 2018
Assets $'000 $'000 $'000
Non-current assets
Goodwill 6 10,840 11,273 10,892
Other intangible assets 7 5,708 6,999 6,275
Property, plant and
equipment 8 2,314 579 419
18,862 18,851 17,586
----------------------------- ------ --------- --------- ------------
Current assets
Inventories 3,845 6,253 2,839
Tax receivable 340 170 340
Trade and other receivables 9 9,133 7,458 9,294
Cash and cash equivalents 3,559 3,385 3,817
----------------------------- ------ --------- --------- ------------
Total current assets 16,877 17,266 16,290
----------------------------- ------ --------- --------- ------------
Total assets 35,739 36,117 33,876
----------------------------- ------ --------- --------- ------------
Liabilities
Current liabilities
----------------------------- ------ --------- --------- ------------
Trade and other payables 10 18,957 18,646 14,928
----------------------------- ------ --------- --------- ------------
Total current liabilities 18,957 18,646 14,928
----------------------------- ------ --------- --------- ------------
Other liabilities >
1 year 1,206 - -
Total liabilities 20,163 18,646 14,928
----------------------------- ------ --------- --------- ------------
Equity
Share capital 12 6,848 6,844 6,847
Share premium 187,971 187,971 187,971
Share based payment
reserve 9,666 9,300 9,528
Foreign exchange reserve (9,877) (9,409) (9,853)
Retained earnings (179,032) (177,235) (175,545)
Total equity 15,576 17,471 18,948
----------------------------- ------ --------- --------- ------------
Total equity and liabilities 35,739 36,117 33,876
----------------------------- ------ --------- --------- ------------
Consolidated Condensed Statement of Changes in Equity
for the period ended 30 June 2019
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2019
(audited) 6,847 187,971 9,528 (175,545) (9,853) 18,948
Share-based payments - - 138 - - 138
Issue of share capital 1 - - - - 1
Transactions with
owners 1 - 138 - - 139
--------- -------- --------- --------- ---------- -------
Loss for the period - - - (3,487) - (3,487)
Other comprehensive
losses
Exchange differences
on translating foreign
operations - - - - (24) (24)
Total comprehensive
loss - - - (3,487) (24) (3,511)
--------- -------- --------- --------- ---------- -------
At 30 June 2019
(unaudited) 6,848 187,971 9,666 (179,032) (9,877) 15,576
========= ======== ========= ========= ========== =======
Consolidated Condensed Statement of Changes in Equity
for the period ended 30 June 2018
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2018
(audited) 6,836 187,971 9,021 (172,590) (9,025) 22,213
Share-based payments - - 279 - - 279
Issue of share capital 8 - - - - 8
Transactions with
owners 8 - 279 - - 287
----- -------- --------- --------- ---------- -------
Loss for the period - - - (4,645) - (4,645)
Other comprehensive
losses
Exchange differences
on translating foreign
operations - - - - (384) (384)
Total comprehensive
loss - - - (4,645) (384) (5,029)
----- -------- --------- --------- ---------- -------
At 30 June 2018
(unaudited) 6,844 187,971 9,300 (177,235) (9,409) 17,471
===== ======== ========= ========= ========== =======
Consolidated Condensed Statement of Changes in Equity
for the period ended 31 December 2018
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2018
(audited) 6,836 187,971 9,021 (172,590) (9,025) 22,213
Share-based payments - - 507 - - 507
Issue of share capital 11 - - - - 11
Transactions with
owners 11 - 507 - - 518
--------- -------- --------- --------- ---------- -------
Loss for the period - - - (2,955) - (2,955)
Other comprehensive
losses
Exchange differences
on translating foreign
operations - - - - (828) (828)
Total comprehensive
loss - - - (2,955) (828) (3,783)
--------- -------- --------- --------- ---------- -------
At 31 December 2018
(audited) 6,847 187,971 9,528 (175,545) (9,853) 18,948
========= ======== ========= ========= ========== =======
Consolidated Condensed Cash Flow Statement
for the period ended 30 June 2019
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
$'000 $'000 $'000
Cash flows from operating activities
Loss before taxation (3,402) (4,491) (3,285)
Amortisation 1,192 1,261 2,461
Depreciation 548 214 381
Share based payments 138 279 507
Net interest paid 265 393 587
(Increase)/ decrease in inventories (1,006) (1,469) 1,945
Decrease/ (increase) in trade
and other receivables 161 (3,050) (4,886)
Increase/ (decrease) in trade
and other payables 3,196 520 (3,572)
Foreign exchange movements 32 55 355
Tax refund - - 373
Net cash provided by/(used
in) operating activities 1,124 (6,288) (5,134)
------------------------------------------ ------------- ------------- ------------
Cash flow from investing activities
------------------------------------- --- ------------- ------------- ------------
Purchase of property, plant
and equipment (100) (397) (403)
Purchase on intangible assets (629) (37) (729)
Net cash (used in) investing
activities (729) (434) (1,132)
------------------------------------------ ------------- ------------- ------------
Cash flow from financing activities
Loan repayments - (420) (3,989)
Loan proceeds - 2,992 6,876
Proceeds from issue of share
capital 1 8 11
Loan interest payable (245) (394) (588)
Lease payments (410) - -
Interest receivable 1 1 1
Net cash (used in) / provided
by financing activities (653) 2,187 2,311
------------------------------------------ ------------- ------------- ------------
Net change in cash and cash
equivalents (258) (4,535) (3,955)
------------------------------------------ ------------- ------------- ------------
Cash and cash equivalents at
beginning of period 3,817 7,920 7,920
Exchange differences on cash
and cash equivalents - - (148)
Cash and cash equivalents at
end of period 3,559 3,385 3,817
------------------------------------------ ------------- ------------- ------------
Condensed Notes to the Interim Report
for the period ended 30 June 2019
1. Nature of operations and general information
Frontier Smart Technologies Group Limited and subsidiaries' (the 'Group') principal activity is that of commercial exploitation of wireless infrastructure technologies with commercial propositions for the consumer electronic sector.
Frontier Smart Technologies Group Limited is the Group's ultimate parent company. It is incorporated in the Cayman Islands. The address of Frontier Smart Technologies Group Limited's registered office is Elgin House, 119 Elgin Avenue, George Town, Grand Cayman, Cayman Islands. Frontier Smart Technologies Group Limited's shares are listed on the Alternative Investment Market of the London Stock Exchange. Frontier Smart Technologies Group Limited's consolidated condensed interim financial statements are presented in US Dollars ($).
The financial information set out in this interim report does not constitute statutory accounts. The interim financial statements have not been audited or reviewed by the Group's auditor. The Group's statutory financial statements for the year ended 31 December 2018 are available from the Group's website. The auditor's report on those financial statements was unqualified.
2. Accounting Policies
Basis of Preparation
These interim condensed consolidated financial statements are for the six months ended 30 June 2019. They have been prepared following the recognition and measurement principles of IFRS as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2018.
These financial statements have been prepared on the going concern basis and under the historical cost convention.
These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2018.
3. IFRS 16 'Leases'
IFRS 16: Leases came into effect on 1 January 2019, this is the first set of accounts which incorporates the adoption of the new standard.
The main impact of the standard is to capitalise the Group's rental leases as "right-of-use assets" within Property, Plant and Equipment on the Statement of Financial Position with corresponding liabilities representing the commitment to fulfil those lease obligations. The assets are then depreciated over the life of the lease and a notional interest charge is made against the liability.
The standard allows for different transition options and the Group has adopted the Modified Retrospective: Asset equals liability approach, resulting in the Group adopting the standard from 1 January 2019 with no adjustment to reserves or comparative numbers. On adoption, the Group's assets increased by US$2.3m with liabilities increasing by the same value. The group has elected not to recognise a lease liability for short term leases (leases of expected term of 12 months or less) or for leases of low value. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred.
For the six months to 30 June 2019 reported EBITDA has increased by US$0.42m as a result of rental costs no longer being charged to overhead expenses. Additional depreciation and interest costs of US$0.4m and US$0.02m respectively have been incurred.
The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.
The following is a reconciliation from IAS17 to IFRS 16 at 1 January 2019:
Carrying amount IFRS 16 carrying
at 31 December amount at
2018 1 January
2019
$000 $000
Reclassification Remeasurement
$000 $000
Property,
plant & equipment 419 - 2,344 2,763
---------------- ------------------ --------------- -----------------
Lease liabilities - - (2,344) (2,344)
---------------- ------------------ --------------- -----------------
The following is a reconciliation of total operating lease commitments as 31 December 2018 to the lease liabilities recognized at 1 January 2019:
$000s
Total operating lease commitments disclosed
at 31 December 2018 2,743
Leases with remaining lease term of less
than 12 months (356)
Operating leases before discounting 2,387
Discounted using incremental borrowing rate (43)
--------------------------------------------- ------
Total lease liability recognised under IFRS
16 at 1 January 2019 2,344
--------------------------------------------- ------
Of which are:
* Current lease liabilities 779
* Non-current lease liabilities 1,565
4. Revenue by sector
Unaudited Audited
Unaudited 30 June 31 December
30 June 2019 2018 2018
$'000 $'000 $'000
Radio 13,074 14,862 35,688
Smart IoT 1,094 2,180 6,066
Revenue 14,168 17,042 41,754
---------- ------------- --------- ------------
In accordance with IFRS 15, the Group's revenue disaggregated by pattern of revenue recognition is as follows:
For the year ended 30 June 2019 (unaudited)
Goods Services Total
$'000 $'000 $'000
Goods transferred at a
point in time 13,965 - 13,965
Services transferred over
time 30 173 203
-------- ---------- --------
Total 13,995 173 14,168
======== ========== ========
For the year ended 30 June 2018 (unaudited)
Goods Services Total
$'000 $'000 $'000
Goods transferred at a
point in time 16,357 - 16,357
Services transferred over
time 17 668 685
-------- ---------- --------
Total 16,374 668 17,042
======== ========== ========
For the year ended 31 December 2018 (audited)
Goods Services Total
$'000 $'000 $'000
Goods transferred at
a point in time 40,525 - 40,525
Services transferred
over time 43 1,186 1,229
-------- ---------- --------
Total 40,568 1,186 41,754
======== ========== ========
Segmental information
Management currently identifies three divisions as operating segments.
For the period ended Radio Smart Group Total
30 June 2019 (unaudited) IoT
$'000 $'000 $'000 $'000
Revenue 13,074 1,094 - 14,168
Cost of sales (8,115) (716) - (8,831)
-------- -------- ------- --------
Gross profit 4,959 378 - 5,337
-------- -------- ------- --------
Other income - 150 - 150
Research & development (958) (1,811) - (2,769)
Sales & administrative
expenses - other (2,353) (1,427) (197) (3,977)
------------------------------ -------- -------- ------- --------
Adjusted EBITDA 1,648 (2,710) (197) (1,259)
------------------------------ -------- -------- ------- --------
Non-recurring costs - - - -
Amortisation of intellectual
property (1,192) - - (1,192)
Depreciation (484) (64) - (548)
Share based payment - - (138) (138)
-------- -------- ------- --------
Total administrative
expenses (4,987) (3,152) (335) (8,474)
-------- -------- ------- --------
Loss from continuing
operations (28) (2,774) (335) (3,137)
Net finance payable (18) (2) (245) (265)
Loss before taxation (46) (2,776) (580) (3,402)
-------- -------- ------- --------
For the period ended Radio Smart Group Total
30 June 2018 (unaudited) IoT
$'000 $'000 $'000 $'000
Revenue 14,862 2,180 - 17,042
Cost of sales (8,647) (1,259) - (9,906)
---------- ---------- -------- ----------
Gross profit 6,215 921 - 7,136
---------- ---------- -------- ----------
Research & development (976) (3,587) - (4,563)
Sales & administrative
expenses - other (2,218) (1,995) (470) (4,683)
-------------------------------- ---------- ---------- -------- ----------
Adjusted EBITDA 3,021 (4,661) (470) (2,110)
-------------------------------- ---------- ---------- -------- ----------
Non-recurring costs - - (234) (234)
Amortisation of intellectual
property (1,261) - - (1,261)
Depreciation (171) (43) - (214)
Share based payment - - (279) (279)
---------- ---------- -------- ----------
Total administrative
expenses (4,626) (5,625) (983) (11,234)
---------- ---------- -------- ----------
Profit/ (loss) from continuing
operations 1,589 (4,704) (983) (4,098)
Net finance payable 1 - (394) (393)
Profit/ (loss) before
taxation 1,590 (4,704) (1,377) (4,491)
---------- ---------- -------- ----------
For the period ended Radio Smart Group Total
31 December 2018 (audited) IoT
$'000 $'000 $'000 $'000
Revenue 35,688 6,066 - 41,754
Cost of sales (20,198) (4,415) - (24,613)
---------- ---------- -------- ----------
Gross profit 15,490 1,651 - 17,141
---------- ---------- -------- ----------
Other income - 300 - 300
Research & development (1,254) (6,203) - (7,457)
Sales & administrative
expenses - other (3,901) (3,878) (825) (8,604)
-------------------------------- ---------- ---------- -------- ----------
Adjusted EBITDA 10,335 (8,130) (825) 1,380
-------------------------------- ---------- ---------- -------- ----------
Amortisation of intellectual
property (2,460) (1) - (2,461)
Depreciation (300) (81) - (381)
Non-recurring costs - - (729) (729)
Share based payment - - (507) (507)
---------- ---------- -------- ----------
Total administrative
expenses (7,915) (9,863) (2,061) (19,839)
---------- ---------- -------- ----------
Profit/ (loss) from continuing
operations 7,575 (8,212) (2,061) (2,698)
Net finance payable 1 - (588) (587)
Profit/ (loss) before
taxation 7,576 (8,212) (2,649) (3,285)
---------- ---------- -------- ----------
5. Loss per share
The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The impact of the share options on the loss per share is anti-dilutive.
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
$'000 $'000 $'000
Loss for the period
attributable to equity
shareholders $3,487 $4,645 $2,955
Weighted average number
of 10p ordinary shares 42,381,800 42,784,343 42,813,487
(Loss) per share -
basic and diluted (8.23)c (10.86)c (6.90)c
6. Goodwill
Frontier
Smart Technologies Frontier
Microsystems Total
$'000 $'000 $'000
Cost
At 1 January 2018 (audited) 11,548 8,051 19,599
Foreign exchange in period (275) - (275)
Additions - - -
------------------- -------------- ------
At 30 June 2018 (unaudited) 11,273 8,051 19,324
Foreign exchange in period (381) (457) (838)
Additions - - -
------------------- -------------- ------
At 31 December 2018 (audited) 10892 7,594 18,486
Foreign exchange in period (52) (37) (89)
Disposals - - -
At 30 June 2019 (unaudited) 10,840 7,557 18,397
=================== ============== ======
Impairment
At 1 January 2018 (audited) - 8,051 8,051
Foreign exchange in period - - -
------------------- -------------- ------
At 30 June 2018 (unaudited) - 8,051 8,051
Foreign exchange in period - (457) (457)
------------------- -------------- ------
At 31 December 2018 (audited) - 7,594 7,594
Foreign exchange in period - (37) (37)
------------------- -------------- ------
At 30 June 2019 (unaudited) - 7,557 7,557
Net book amount at 30
June 2019 (unaudited) 10,840 - 10,840
=================== ============== ======
Net book amount at 30
June 2018 (unaudited) 11,273 - 11,273
=================== ============== ======
Net book amount at 31
December 2018 (audited) 10,892 - 10,892
=================== ============== ======
7. Other intangible assets
Marketing Customer Other Licence &
intellectual intellectual intellectual Development
property property property fees Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2018 (audited) 5,411 2,286 13,804 21,426 42,927
Foreign exchange on opening
balances (129) (54) (330) 167 (346)
Additions - - - 37 37
Disposals - - - (19,393) (19,393)
------------- ------------- ------------- ------------ --------
At 30 June 2018 (unaudited) 5,282 2,232 13,474 2,237 23,225
Foreign exchange on opening
balances (178) (76) (454) (2) (710)
Additions - - - 692 692
Disposals - - - - -
------------- ------------- ------------- ------------ --------
At 31 December 2018 (audited) 5,104 2,156 13,020 2,927 23,207
Foreign exchange on opening
balances (24) (10) (62) (4) (100)
Additions - - - 629 629
Disposals - - - (3) (3)
At 30 June 2019 (unaudited) 5,080 2,146 12,958 3,549 23,733
============= ============= ============= ============ ========
Amortisation
At 1 January 2018 (audited) 2,886 1,017 9,234 21,418 34,555
Foreign exchange on opening
balances (80) (28) (255) 166 (197)
Charge in period 275 96 873 17 1,261
Disposals - - - (19,393) (19,393)
At 30 June 2018 (unaudited) 3,081 1,085 9,852 2,208 16,226
Foreign exchange on opening
balances (108) (38) (347) (1) (494)
Charge period 260 93 822 25 1,200
Disposals - - - - -
------------- ------------- ------------- ------------ --------
At 31 December 2018 (audited) 3,233 1,140 10,327 2,232 16,932
Foreign exchange on opening
balances (21) (10) (65) - (96)
Charge in period 259 91 822 20 1,192
Disposals - - - (3) (3)
At 30 June 2019 (unaudited) 3,471 1,221 11,084 2,249 18,025
============= ============= ============= ============ ========
Net book amount at 30
June 2019 (unaudited) 1,609 925 1,874 1,300 5,708
============= ============= ============= ============ ========
Net Book amount at 30
June 2018 (unaudited) 2,201 1,147 3,622 29 6,999
============= ============= ============= ============ ========
Net book amount at 31
December 2018 (audited) 1,871 1,016 2,693 695 6,275
============= ============= ============= ============ ========
Intellectual property
Intellectual property relates to the valuation of beneficial licence agreements, trade names and customer relationships at the date of their original acquisition.
Licence & development fees
Intellectual property
Intellectual property relates to the valuation of beneficial licence agreements, trade names and customer relationships in Frontier Smart at the date of their original acquisition.
Licence & development expenditure
The Group capitalises certain licence, third-party development fees and internally generated development where, in the view of management, they have intrinsic value to ongoing software and hardware development programmes. Additions in the year relate to technology on new projects essential to the future development of new generation solutions. The capitalised costs are amortised in accordance with the Group accounting policy and are subject to a regular impairment reviews.
During the year all licences that no longer provide any benefit to the Group have been disposed of from the Financial Statements, the carrying value of these licences was nil.
Marketing
Marketing-related intangible assets are defined as those assets that are primarily used in the marketing or promotion of products and services. The Frontier solutions are well known and preferred by a majority of the consumer electronic brands who specifically instruct their manufacturers to use Frontier modules and solutions in their audio systems.
Customer relationships
Customer-related intangible assets may consist of customer lists, order or production backlogs, customer contracts and relationships, and non-contractual customer relationships. Frontier has developed relationships with both consumer electronic brands and manufacturers. The customer relationship valuation captures the economic benefits of having these trading relationships.
Impairment reviews
The Directors have considered impairment indicators for all intangible assets and tested for impairment in conjunction with their testing for goodwill, in accordance with the Group's accounting policy.
8. Property, Plant and Equipment
Plant and Office Fixtures Office Buildings
machinery equipment and fittings Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2018 (audited) 2,493 70 4,160 - 6,723
Foreign exchange on opening
balances - - (4) - (4)
Additions 286 - 111 - 397
Disposals (2,268) (70) (2,608) - (4,946)
----------- ----------- -------------- ------------------ -------
At 30 June 2018 (unaudited) 511 - 1,659 - 2,170
Foreign exchange on opening - - - - -
balances
Additions - - 6 - 6
Disposals - - - - -
----------- ----------- -------------- ------------------ -------
At 31 December 2018 (audited) 511 - 1,665 - 2,176
Foreign exchange on opening
balances - - (3) - (3)
Additions 45 - 55 - 100
Right-of-use assets adjustment
on transition to IFRS
16 - - - 2,344 2,344
Disposals - - (14) - (14)
At 30 June 2019 (unaudited) 556 - 1,703 2,344 4,603
=========== =========== ============== ================== =======
Amortisation
At 1 January 2018 (audited) 2,473 70 3,769 - 6,312
Foreign exchange on opening
balances - - 11 - 11
Charge in period 57 - 157 - 214
Disposals (2,268) (70) (2,608) - (4,946)
At 30 June 2018 (unaudited) 262 - 1,329 - 1,591
Foreign exchange on opening
balances - - (1) (1)
Charge period 58 - 109 - 167
Disposals - - - - -
----------- ----------- -------------- ------------------ -------
At 31 December 2018 (audited) 320 - 1,437 - 1,757
Foreign exchange on opening
balances - - (2) - (2)
Charge in period 56 - 91 401 548
Disposals - - (14) - (14)
At 30 June 2019 (unaudited) 376 - 1,512 401 2,289
=========== =========== ============== ================== =======
Net book amount at 30
June 2019 (unaudited) 180 - 192 1,943 2,314
=========== =========== ============== ================== =======
Net Book amount at 30
June 2018 (unaudited) 249 - 330 - 579
=========== =========== ============== ================== =======
Net book amount at 31
December 2018 (audited) 191 - 228 - 419
=========== =========== ============== ================== =======
9. Trade and other receivables
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Trade receivables 6,969 5,339 7,799
Other debtors 1,003 854 857
Prepayments and accrued income 1,161 1,265 638
Trade and other receivables 9,133 7,458 9,294
------------------------------- --------- --------- ------------
Trade and other receivables are usually due within 30 - 60 days and do not bear any effective interest rate.
The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.
10. Trade and other payables
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Trade payables 8,959 7,353 5,715
Other payables 711 1,391 566
Accruals 2,005 3,364 2,073
Contract liabilities 226 - 247
Loan 6,308 6,538 6,327
Lease 748 - -
Trade and other payables 18,957 18,646 14,928
------------------------- --------- --------- ------------
Loan
Frontier Smart Technologies Group Limited entered into a loan facility agreement in October 2015 for a maximum of GBP5,000,000. The loan accrued interest monthly at 6.25% above three-month LIBOR with interest repayable in 12 quarterly instalments commencing 29 December 2015. Capital repayments were payable quarterly in ten instalments commencing March 2016, made up of nine instalments of GBP300,000 and a final instalment of GBP2,300,000. The loan carried a fixed and floating charge over all the property, assets and undertakings of the Group.
This loan was repaid on 23 May 2018 and replaced by a new revolving credit facility with Clydesdale of GBP5,000,000 over three years. The facility accrues interest monthly at 4.75% above three-month LIBOR with interest repayable quarterly, interest on any amount not drawn down is 1.9%. The loan carries a fixed and floating charge over all the property, assets and undertakings of the Group. At the 30 June 2019 the amount drawn down was GBP5,000,000. The loan carries certain covenants on the business which are monitored at a historic and forecast level on a monthly and quarterly basis by the Board.
11. Leases
The Group has leases for all office buildings. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability.
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease.
The table below describes the nature of the Group's leasing activities by type of right-of-use asset recognised on the balance sheet:
Right-of-use No of Range Average No. of No. of No. of No. of
asset right-of-use of term remaining leases leases leases leases
assets term of with with purchase with variable with
leased lease extension options payments termination
options linked options
to an
index
Office
buildings 4 1-5 years 2.75 years 4 0 0 0
-------------- ---------- ----------- -------------- -------------- -------------- -------------
Lease liabilities
Lease liabilities are presented in the statement of financial position as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Current 748 - -
Non-current 1,206 - -
1,954 - -
------------ --------- --------- ------------
12. Share capital
Unaudited Unaudited Audited
30 June 2019 30 June 2018 31 December 2018
Authorised
100,000,000 ordinary shares
of 10p 10,000,000 10,000,000 10,000,000
Allotted, issued and fully
paid 42,853,494 42,825,554 42,853,025
$ 6,847,549 6,843,975 6,847,490
----------------------------- --------------- --------------- -------------------
The movement in the number of
shares is as follows:
Number of
ordinary shares
At 1 January 2018 42,766,171
Shares issued 59,383
At 30 June 2018 42,825,554
Shares issued 27,471
At 31 December 2018 42,853,025
Shares issued 469
At 30 June 2019 42,853,494
--------------- -----------------
All shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of shareholders with the exception of 2,119,841 shares held jointly by the Employee Benefit Trust and participants for the purpose of the Company's joint share ownership plan in relation to which all voting rights have been waived.
Allotments
13 June 2019, 469 ordinary shares of 10p were issued in relation to the exercise of share options by employees.
13. Financial Instruments
The Group uses financial instruments comprising cash and cash equivalents, other loans and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the business.
Financial assets by category
The categories of financial asset included in the balance sheet and the headings in which they are included are as follows:
30 June 2019
(unaudited)
Loans Non Balance
and financial sheet
receivables assets total
$'000 $'000 $'000
Goodwill - 10,840 10,840
Other intangibles
assets - 5,708 5,708
Property, plant
and equipment - 2,314 2,314
Inventories - 3,845 3,845
Trade receivables
Other receivables 7,972 - 7,972
Prepayments and
accrued income 1,161 - 1,161
Tax receivable 340 - 340
Cash and cash
equivalents 3,559 - 3,559
Total 13,032 22,707 35,739
============ ========== =======
30 June 2018
(unaudited)
Loans Non Balance
and financial sheet
receivables assets total
$'000 $'000 $'000
Goodwill - 11,273 11,273
Other intangibles
assets - 6,999 6,999
Property, plant
and equipment - 579 579
Inventories - 6,253 6,253
Trade receivables 5,339 - 5,339
Other receivables 854 - 854
Prepayments and
accrued income 1,265 - 1,265
Tax receivable 170 - 170
Cash and cash
equivalents 3,385 - 3,385
------------ ---------- -------
Total 11,013 25,104 36,117
============ ========== =======
31 December 2018
(audited)
Loans Non Balance
and financial sheet
receivables assets total
$'000 $'000 $'000
Goodwill - 10,892 10,892
Other intangibles
assets - 6,275 6,275
Property, plant
and equipment - 419 419
Inventories - 2,839 2,839
Trade receivables 7,799 - 7,799
Other receivables 857 - 857
Prepayments and
accrued income - 638 638
Tax receivable - 340 340
Cash and cash equivalents 3,817 - 3,817
Total 12,473 21,403 33,876
============ ========== =======
Financial liabilities by category
The categories of financial liability included in the balance sheet and the headings in which they are included are as follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
30 June 30 June 30 June 30 June 31 December 31 December
2019 2019 2018 2018 2018 2018
Other Other Other
financial financial financial
liabilities liabilities liabilities
at at at
amortised amortised amortised
cost Fair Value cost Fair Value cost Fair Value
$'000 $'000 $'000 $'000 $'000 $'000
Trade payables 8,959 8,959 7,353 7,353 5,715 5,715
Other payables 937 936 1,391 1,391 813 813
Accruals
and deferred
income 2,005 2,005 3,364 3,364 2,073 2,073
Lease 1,954 1,954 - - - -
Loan 6,308 6,308 6,538 6,538 6,327 6,327
Total 20,163 20,163 18,646 18,646 14,928 14,928
============== ============= ============== ============= ============== =============
All financial assets and liabilities are stated at amortised cost.
The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Board is responsible for co-ordinating the Group's risk management and focuses on actively securing the Group's short to medium term cash flows. Long term financial investments are managed to generate lasting returns.
The Group does not actively engage in the trading of financial assets and has no financial derivatives. The most significant risks to which the Group is exposed are described below:
Credit risk
The Group's credit risk is primarily attributable to its trade receivables, recoverable taxation and cash and cash equivalents. The amounts presented in the balance sheet are net of any allowance for doubtful receivables, estimated by the Directors. The Group has a concentration of credit risk due to exposure from a limited number of customers. This is managed at the highest level in the Group. Cash at bank is all held with highly rated banks, the suitability of which is periodically reviewed. The Group monitors debtor levels continuously and all customers have defined credit limits.
Credit risk management
The credit risk is managed on a group basis based on the Group's credit risk management policies and procedures.
The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits and are only with major reputable financial institutions.
The Group continuously monitors the credit quality of new customers. Where available, external credit ratings and/or reports on customers are obtained and used. The group's policy is to deal only with credit worthy counterparties. The standard credit terms range between 30 and 90 days. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits per customer.
Liquidity risk
The Group holds all of its financial assets as cash or cash equivalents which are entirely liquid. Trade receivables are recorded in the normal course of business and have maturities of less than three months. The Directors prepare rolling cash flow forecasts and would seek to raise additional funding whenever a shortfall in facilities is forecast. Details of the funding status of the Group are included in the going concern paragraph in the principal accounting policies.
All the current financial liabilities recorded in the balance sheet are expected to result in cash outflow within six months of the year end, with the exception of the revolving credit facility which is disclosed in note 10.
The Group is exposed to interest rate risk on its loan. The Group does not manage this risk with the use of derivatives. No other liabilities accrue interest.
Currency risks
The Group is exposed to translation foreign exchange risk in connection with its investment in Frontier Smart Technologies Limited whose subsidiaries are Frontier Silicon (Hong Kong) Ltd incorporated in Hong Kong and Frontier Silicon SRL incorporated in Romania. The Group does not hedge any transactions. As a result, the Group is subject to foreign currency risk in respect of accounting for its investment in the subsidiaries.
14. Post Balance Sheet Events
Since the period end, Martin Harriman and Paul Taylor have resigned as non-executive directors (30 July and 14 August, respectively). In addition, Sir Hossein Yassaie has resigned as non-executive chairman with effect from 14 August.
On 27 August 2019, Science Group have taken a majority stake in the Company and in addition have subscribed for 4 million new ordinary shares in the Company at a subscription price of 25p. These new shares were admitted to AIM on 28 August 2019. As disclosed to the market on 21 August it is expected that Martyn Ratcliffe and Sarah Cole (both existing directors of Science Group) will step up to the Board of Frontier with effect from 2 September 2019.
- Ends -
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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