Company Registration No Artilium plc. Annual Reports and Financial Statements. Year ended 30 June 2017

Transcription

1 Company Registration No Artilium plc Annual Reports and Financial Statements

2 Report and financial statements 2017 Contents Company information 1 Chairman s statement 2 Chief Executive s statement 4 Strategic report 6 Directors' report 8 Corporate Governance 11 Directors' responsibilities statement 14 Independent auditor s report 15 Consolidated income statement 20 Consolidated statement of comprehensive income 21 Consolidated statement of financial position 22 Consolidated statement of changes in equity 24 Consolidated cash flow statement 25 Notes to the consolidated financial statements 26 Company statement of financial position 63 Company statement of changes in equity 64 Company cash flow statement 65 Notes to the Company financial statements 66

3 Company information Directors Mr J.P. Menke Mr B. Weijermars Mr. B. de Vries Mr. G. Dorenbos Mr. R. Hutton Secretary Rosenblatt Solicitors Registered Office Rosenblatt Solicitors 9-13 St Andrew Street London EC4A 3AF Principal Bankers HSBC Bank plc 8 Stephenson Place Birmingham B2 4NH Solicitors Rosenblatt Solicitors 9-13 St Andrew Street London EC4A 3AF Nominated Advisor and Broker FinnCap Ltd 60 New Broad Street London EC2M 1JJ Independent Auditor PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD 1

4 Chairman s statement I am very pleased to report that Artilium continued to deliver revenue and adjusted EBITDA growth for the year to 30 June 2017, building on the solid foundations and acquisitions of the last couple of years. Revenues increased by 8.6% to 10.5 million from 9.6 million and the Company achieved an increased adjusted EBITDA margin of 3.6% compared to 3.3% in This was achieved as a result of increasing revenue from wholesale contracts and achieving a reduction in consolidated data centre costs from recent acquisitions. Revenue growth was driven by our core telecom software business Artilium NV together with the acquisition of Comsys. Revenues were slightly up in United Telecom, our fixed, mobile and internet telecom business, which experienced tough market conditions but the recent acquisition of the Digiweb customer base should see significant increases in revenue in 2017/18 in this business unit. We are seeing the benefits of our acquisition of Livecom and Comsys as this adds considerable breadth to our product offering. We are confident that the investments made in both technology and distribution will give us the platform to capitalise on the new opportunities that are available in an increasingly global market where data and telecoms products and services continues to evolve. Emerging markets continue to have an enormous appetite and potential for our innovative, flexible telecom and data solutions in a cloud based environment. We believe that as the infrastructure develops, we will have the access we need to achieve further revenue growth in the coming year. In February 2017, we secured an expanded MVNE platform agreement with our largest customer, Telenet Group BVBA, securing the relationship for the next five years. As part of the extension Artilium secured a cash payment of 5.3 million for revenue which will be recognised until Since the contract extension additional revenue streams have been secured, further strengthening our relationship. Operationally, our strategic alliance with Green IT Globe has developed well during the financial year 2016/17 with both companies working together to develop products such as our e-portal solution to satisfy the rapidly growing demand for data centre solutions. Artilium expects revenue to grow in 2017/18 and this coupled with the Wbase acquisition gives us a solid foundation from which to move forward and develop our solutions further in this segment of the market. Post balance sheet events On 16 October 2017, Artilium entered into a strategic partnership (the Alliance ) with Pareteum Corporation (NYSE: TEUM) ( Pareteum ) to jointly pursue new and developed markets, creating accelerated growth and market penetration for both companies. The global collaboration will include the development of new joint products and services, enhanced sales coverage for both companies, increased speed to market and access to greater knowledge and resources, forming a significant competitive advantage in the fast-growing IT telecoms market. The Alliance will pursue mature markets as well as high growth and underserved developing markets. Artilium and Pareteum s combined cloud-based product sets will continue the Artilium philosophy of connecting any device, anywhere, on any network. The formal arrangement between both companies was signified and strengthened by a strategic minority share exchange, whereby Artilium issued 27,695,177 new ordinary shares at a notional price of 11 pence per ordinary share to Pareteum in exchange for Pareteum issuing 3,200,332 new common shares at a notional price of US$1.26 per common share to Artilium. Following the share exchange, Artilium is beneficially interested in approximately 19.9% of Pareteum s issued share capital and Pareteum is beneficially interested in approximately 8.8% of Artilium s issued share capital. 2

5 Chairman s statement In keeping with our strategy, on 18 October 2017, Artilium opened a new office in Bocholt, North Rhine-Westphalia, to further expand into the significant and growing German market, where sales will be achieved exclusively through IT resellers and systems integrators to business customers. Ron Miedema was appointed Managing Director of Artilium GmbH with responsibility for all business operations in Germany. Outlook We look forward to the 2017/18 financial year with continued optimism as we develop opportunities secured over the last 12 months. Our focus on innovative cloud based telecom software together with an increasing order book positions us well for increasing revenue and profit growth in the year ahead. The Board would like to thank our staff for their hard work and dedication over the last year, as well as our shareholders for their continued support. Jan Paul Menke Executive Chairman 30 October

6 Chief Executive s statement Overview Artilium plc has worked hard during the financial year at enhancing its offerings and expanding its geographical presence into an internationally diverse software group offering telecommunication and cloud-based services for datacentre, messaging and customer interaction. In order to streamline operations and maintain a tight control of costs, we have integrated our recent acquisitions and datacentres to reduce operating costs of the enlarged group. We have increased our international presence and now have operational businesses in Belgium, the Netherlands, Germany, Indonesia and China and are moving into other developing markets. We see significant opportunity in growing internationally and our expanded portfolio of services is enabling us to penetrate new markets and attract new business around the world. Operationally we have been integrating acquisitions and have started to realise the synergies available while developing mutual growth opportunities. We expect further synergies to be realised in the coming financial year. New business development is progressing well and starting to bear fruit having built a solid foundation over the last couple of years. Additional resources have been deployed into developing our commercial strength and capability across the globe. Our product portfolio shows strong operational performance with 24/7 support being delivered directly from our business units. Customer solutions are available on a flexible basis using either the ARTA platform as a whole or by using software modules as required. Our business lines Our market leading mobile enablement platform, ARTA has delivered a consistent performance to our largest customers, such as Telenet. Our cloud-based platform is growing and we are focusing on developing this further, both locally and internationally in developed and developing markets. New functionalities such as payment management have been delivered to our customers and added to our core product offering, in line with the newest developments in the market and we are expanding the range of available products and services such as prepaid identification (Know Your Customer) as well as new user interfaces and business intelligence solutions. We have also increased our efforts in security and controls on the Group s platforms to manage the expanded product suite in a secure way, in compliance with European General Data Protection Regulation (GDPR), the new European legislation on privacy. United Telecom, our MVNE (Mobile Virtual Network Enabler) and retail business in Belgium and the Netherlands is starting to see growth from new MVNOs (Mobile Virtual Network Operator) and B2B contracts that we have signed in retail. The recent acquisition of the Digiweb customer base has successfully been transferred to United Telecom, and we expect further growth from this and other parts of the business for the year ahead. At Comsys, our call centre and customer interaction software solutions continue to grow internationally and are supporting our MVNO and business customers around the globe either directly or through our partners. This software is now integrated with ARTA further enhancing our software platform and making it more attractive to some of the largest players in the mobile telecom market. We are investing in further development of the product suite including new social media interaction channels to offer a one stop shop offering to the growing SME market. 4

7 Chief Executive s statement Financial Results Notes Continuing Operations Revenue 4 10,453 9,622 Cost of sales (2,716) (2,599) Gross profit 7,737 7,023 Administrative expenses excluding depreciation, amortisation and redundancy costs (7,357) (6,710) Adjusted EBITDA Adjusted EBITDA margin 3.6% 3.3% For the reconciliation between operating profit, net result and Adjusted EBITDA, refer to note 9. Revenue Consolidated revenue for the year ended 30 June 2017 amounted to 10.5 million (2016: 9.6 million). Revenue growth principally comprises increased license and subscriber fees. Fees from professional services relating to project management and implementation services have been somewhat less compared to previous years. Revenue from maintenance and support contracts, as well as call charges for fixed line and mobile, have been relatively stable despite further price reductions. Gross profit The Company generated a gross profit of 7.7 million or 74.0% of revenues (2016: 7.0 million or 72.9% of revenues). Adjusted EBITDA and adjusted EBITDA margin The adjusted EBITDA margin of the Group was 3.6% (2016: 3.3%). Strategic Outlook Investment in expanding commercial capabilities are starting to produce additional revenue for Further expansion in the range of services offered to new and existing customers is part of our strategy of delivering a holistic solution to customers needs as well as leading the way in transforming the data and telecom market. IT and telecoms are increasingly intertwined as data becomes the growth area for the future. As a software development business we are able to shape these developments and take advantage of the new opportunities that are arising in not only fixed and mobile telecoms but the rapidly evolving and growing data market. Connected devices (Internet of Things) will become a mainstream requirement driving market growth globally and creating additional opportunities for our mobile enablement platform. Bart Weijermars Chief Executive 30 October

8 Strategic report The Directors present their strategic report on the affairs of Artilium plc and its subsidiaries (the Group ). Principal activities Artilium plc (the Company, Group or Artilium ) operates in the business to business communications sector delivering innovative software solutions which layer seamlessly over disparate fixed, mobile and IP networks to enable the deployment of converged services and applications. The Group has three main trading businesses: Firstly, Artilium NV, which provides advanced mobile telecommunications software to network operators and enablers (managed services providers, systems integrators etc.). Its core product is its ARTA Mobile Applications Platform which enables network operators to open networks to third party developers and launch new services which feature elements from the telecoms and web environments. Customers include Mobile Network Operators ( MNOs ), Mobile Virtual Network Operators ( MVNOs ), Mobile Virtual Network Enablers ( MVNEs ), Fixed and Alternative Operators, Hosting Providers, System Integrators and Managed Service Providers. Artilium NV is headquartered in Bruges, Belgium. The second division, United Telecom NV, is a service provider and reseller of telecommunications services in Belgium and the Netherlands and has been successful in building a loyal customer base. The business of United Telecom is telecom operating services including the development and sale of advanced carrier grade shared services for telecom services providers (including fixed, mobile and VOIP). United Telecom has been using the ARTA technology for many years. United Telecom is headquartered in Rotselaar, Belgium. The third division, Comsys Telecom & Media BV together with Livecom International BV, are specialists in interactive telephony services, call centre solutions and provide telecommunication products, solutions and hosted services in the converging arena of IN, SIP and VOIP networks for mobile and fixed line telephone operators as well as business customers. Comsys and Livecom are headquartered in Soesterberg, the Netherlands. Business review A review of the year s activities, financial performance and future prospects is contained in the Chief Executive s statement on pages 4 and 5, which forms part of this strategic report. The Directors refer to the Chief Executive s statement for an explanation of the financial results of the Group. Principal risks and uncertainties and risk management There are a number of potential principal risks and uncertainties which could have a material impact on the Group s long term performance and cause actual results to differ materially from expected and historical results. The Group s financial risk management policies and procedures are also discussed in note 32 of the financial statements. The Group is strongly focused on software development and is currently engaged in further upgrading its existing ARTA, Comsys and Livecom platforms. There are risks associated with the development of this software, inherent in any software development. The risk is managed through detailed project management and resource planning in order to limit delays as much as possible. Software development is very dependent on the quality of the people and there is a risk that key employees may leave the Group, which could delay development. The risk is managed by ensuring that remuneration levels are competitive, the work is interesting and there are opportunities for personal development. 6

9 Strategic report The Group s revenue is derived from a few key customers. Therefore there is a risk to the business from the loss of a key customer and if there is a delay in payment by customers. Many of the Group s customers are significant, well established companies with good credit ratings but the risk remains that the Group may not be paid or suffers from expensive delays in payment for its services which could lead to liquidity issues. Going concern As described in the directors report, the Group has reported an operating loss for the current and previous year. The directors consider that the outlook and the expanded Group presents significant opportunities to increase our sales. The Group had cash and cash equivalents of million at 30 June After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual reports and financial statements. Financial Management Reports are made to the Directors on a regular basis of the key performance indicators ( KPIs ) which are used to monitor the Group. These indicators include key financial measures of revenue and costs compared to the prior year and the sales pipeline as well as other non-financial KPIs of development progress against plan, resolution of customer enquiries and bugs are also in place. Information about the use of financial instruments by the Group is disclosed in note 32 to the financial statements and in the financial results in our CEO statement on pages 4 and 5. Future developments The transformation of the services and footprint of the Group have accelerated the momentum for the Group. Management believes that further acceleration in the growth of the business can be achieved. Growth will be achieved through our positioning in new growth segments (cloud and datacentre services) and our investments in commercial activities that enable growth. Further mergers and acquisitions in both distribution as well as technology companies will complement and accelerate that. On behalf of the Board, Jan Paul Menke Executive Chairman 30 October

10 Directors report The Directors present their annual report on the affairs of Artilium plc and its subsidiaries (the Group ), together with the financial statements and auditor s report, for the year ended 30 June Certain information required by the Companies Act 2006 relating to the information to be provided in the Directors report is set out in the Strategic report and includes future developments and principal risks and uncertainties. Directors The Directors, who served during the year and up to the date of approval of the financial statements, were as follows: Name Particulars Mr J.P. Menke Executive Chairman Mr B. Weijermars Executive Mr R Hutton Executive (appointed 1 July 2017) Mr B. de Vries Non- Executive Mr G. Dorenbos Non-Executive Replacement of Directors As set out in the Company s Articles of Association, at every Annual General Meeting at least one third of the Directors shall retire from office by rotation. Jan Paul Menke was appointed as Executive Chairman as from 1 July 2014 having previously been a Non-Executive Director for a number of years. Bote de Vries was appointed as Non-Executive Director as from 1 January Gerard Dorenbos was appointed as Non-Executive Director as from 1 October Rupport Hutton was appointed as Executive Director as from 1 July Events since the balance sheet date Rupert Hutton was appointed as Chief Financial Officer ('CFO') with effect from 1 July Details of other post year end events affecting the Group or Company are included in note 29 to the financial statements. Capital Structure The Company s capital consisted of ordinary shares on 30 June The voting rights of these shares are identical with each share carrying the right to one vote. The total number of voting rights in the Company is 307,583,545. No person has any special right of control over the Company s share capital and all issued shares are fully paid. The Company s share structure is set out in Note 23 to the financial statements. 8

11 Directors report Dividends The Directors do not recommend a dividend for the year (2016: nil). Going concern The Directors have adopted the going concern basis in preparing the consolidated financial statements, having carried out a going concern review. Given the nature of the Group, the challenging economic environment, and the way in which the business is managed, cash flow forecasts have been prepared for the Group's main cash generating units, Artilium NV, United Telecom NV and Comsys Telecom & Media BV/Livecom International BV, including the in-year acquisitions of Ello Mobile BV and WBase. These forecasts are considered by the directors to satisfy themselves that the going concern assumption is appropriate. United Telecom NV The directors have prepared and reviewed cash flow forecasts from the date of the financial statements approval to the end of December The directors do not consider there to be a material uncertainty in relation to the amount of revenue that the company will generate, or costs that it will incur. This is supported by historic data and experience of forecasting within the United Telecom business. Artilium NV A worst-case scenario cash flow forecast (which represents a significant downgrade compared to internal budgets and targets) has been prepared from the date of the financial statements approval to the end of December In carrying out the review the Directors have had to make significant assumptions about the revenue expected to be generated to the end of December The company has currently secured 73% ( 3.3m) of its expected revenue per the worst case scenario forecast. The remaining revenue for the forecast period is a combination of expected recurring revenue included within concluded contracts and proposals to existing and new customers. Based on the directors' assessment of the likelihood of winning these on a project by project basis, revenue has only been included in the forecasts where the directors are at least 80% certain that the revenue will be secured. Therefore the directors would like to highlight that 27 % ( 1.2m) of forecast revenue per the worst case scenario is not yet committed or contracted. Comsys The directors have prepared and reviewed cash flow forecasts from the date of the financial statements approval to end of December The directors do not consider there to be a material uncertainty in relation to the amount of revenue that the company will generate, or costs that it will incur. This is supported by historic data and experience of forecasting within the Comsys business. The directors consider that the assumptions made are appropriate and are satisfied that the Group and Company are going concerns. The directors monitor the cash position of the business on an ongoing basis and consider the various sources of finance available to the Group and Company. The directors would seek to access these sources of finance as necessary. Directors indemnities The Company has made qualifying third party indemnity provisions for the benefit of its Directors which was available during the year and remain in force at the date of this report. 9

12 Directors report Special business The notice convening the AGM to be held at the offices of Rosenblatt Solicitors, 9-13 St Andrew Street, London EC4A 3AF on 19 January 2018 at noon has been despatched to shareholders under separate cover. Provision of information to the auditor The directors confirm that: so far as each director is aware, there is no relevant audit information of which the Company s auditors are unaware; and the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. Auditor A resolution to re-appoint PKF Littlejohn LLP will be proposed at the forthcoming Annual General Meeting. PKF Littlejohn LLP has indicated its willingness to continue in office. On behalf of the Board Jan Paul Menke Executive Chairman 30 October 2017 Company No

13 Corporate Governance The Directors are responsible for and committed to achieving a good standard of corporate governance of the Company. Under the AIM rules the Company is not required to comply with the UK Corporate Governance Code. However, the Company, in so far as it can be applied practically, given the size and the nature of its operations, has taken appropriate steps to comply with the Corporate Governance guidelines published by the Quoted Companies Alliance ( QCA ) and the UK Corporate Governance Code. This section sets out the main corporate governance practices of the Group, although it does not purport to be a full code compliance statement as set out within the guidelines. For the financial year the Board comprised two Executive Directors and two Non-Executive Directors. The Board is satisfied that throughout the period it was appropriately constituted. The Board of Directors The Board has regular meetings to primarily discuss the Group strategy, current progress in achieving the Group s goals and future performance of the Group. In addition the Board has a schedule of matters reserved for its decision which includes, but is not restricted to: approval of interim and annual reports; establishment of long term goals; review and adoption of annual budgets for the financial performance of the Group; ensure implementation of adequate internal controls; Executive remuneration and appointments; and Approval of acquisitions. Board members are provided with a formal agenda and a set of Board papers in advance of the meeting for each agenda item to be discussed at the meeting and additional information is provided as required. As at 30 June 2017 the Board consisted of two Executive Directors and two non-executive Directors. Details of the Directors are set out in the Directors Report. The Company has a policy of appointing a separate Chairman and CEO. Risk management and internal controls The Directors acknowledge their responsibility for the Company s and the Group s systems of internal control, which are designed to safeguard the assets of the Group and ensure the reliability of financial information for both internal use and external publication. Overall control is ensured by a detailed reporting and review system covering both technical progress of projects and the state of the Group s financial affairs. The Board has put in place procedures for identifying, evaluating and managing any significant risks that face the Group. Any system of internal control can provide only reasonable, and not absolute, assurance that material financial irregularities will be detected or that the risk of failure to achieve business objectives is eliminated. The Directors, having reviewed the effectiveness of the system of internal financial, operational and compliance controls and risk management, consider that the system of internal control operated effectively throughout the financial year and up to the date the financial statements were signed. 11

14 Corporate Governance Committees Each of the following committees has its own terms of reference. Audit Committee The Audit Committee comprises Jan Paul Menke (Chairman), Rupert Hutton and Bart Weijermars. Its terms of reference require at least two regular meetings per year and its formal meetings, to review the interim financial information and audit for the year ended 30 June 2017, took place on 27 March 2017 and 27 October 2017, which was attended by all members of the committee. The Committee received a copy of the auditor s report to management prior to the meeting and had an opportunity to comment. The meeting was attended by representatives of the external auditors. The head of finance and representatives of the external auditors are normally invited to attend meetings. Staff may be invited to attend, as considered beneficial by the Committee. The Audit Committee s primary responsibilities are to review the effectiveness of the Group s systems of internal control, to review with the external auditors the nature and scope of their audit and the results of the audit, and to evaluate and select external auditors. Remuneration Committee The Remuneration Committee comprises Jan Paul Menke (Chairman) and Bote De Vries. The Group s policy is to remunerate senior management fairly in such a manner as to facilitate the recruitment, retention and motivation of staff. The Remuneration Committee agrees with the Board a framework for the remuneration of the chairman and the senior management of the Group. The principal objective of the Committee is to ensure that members of the senior management of the Group are provided incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group. Non-Executive fees are considered and agreed by the Board as a whole. Nomination Committee The Nomination Committee is comprised of Jan-Paul Menke and Bart Weijermars. Its function is to consider the appointment and reappointment of Directors when appropriate. Relations with shareholders The Group encourages dialogue with its shareholders and responds to all enquiries verbally or in writing. The Chairman and Bart Weijermars (Group Chief Executive Officer) are the principal spokesmen for the Group. The Annual General Meeting is used as an opportunity to communicate with investors and all shareholders have at least 28 days notice of the Annual General Meeting. 12

15 Corporate Governance Remuneration of Directors Basic salary/fee Eur 000 Total remuneration Eur 000 Directors Jan Paul Menke Bart Weijermars Bote De Vries Gerard Dorenbos Total Year ended 30 June 2016 Basic salary/fee Eur 000 Total remuneration Eur 000 Directors Jan Paul Menke Bart Weijermars Bote De Vries Gerard Dorenbos Total

16 Directors responsibilities statement The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under Company Law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board, Jan Paul Menke Executive Chairman 30 October

17 Independent auditors report to the members of Artilium plc Opinion We have audited the financial statements of Artilium plc (the parent company ) and its subsidiaries (the group ) for the year ended 30 June 2017 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company Statements of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. In our opinion, the financial statements: give a true and fair view of the state of the group s and of the parent company s affairs as at 30 June 2017 and of the group s loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: the directors use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group s or the parent company s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. 15

18 Independent auditors report to the members of Artilium plc Our application of materiality The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. Group materiality was 120,000 based upon revenues and the result before tax. The parent company has no trading activity and materiality was 120,000 based upon the net assets and the result before tax. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. An overview of the scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the Directors and considered future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Of the 10 reporting components of the group, we selected 8 components covering entities within Belgium, Netherlands and the UK and which represent the principal business units within the group. Of the 8 components selected, a full scope audit was performed on the complete financial information of 7 components and, for the other component, we performed audit procedures on significant accounts based on size or risk profile to the Group. For the remaining 2 reporting components, audit procedures were undertaken in response to potential risks of material misstatement to the group financial statements. Of the 10 reporting components of the group, 8 are located in Belgium and the Netherlands and audited by a PKF network firm operating under our instruction. The Senior Statutory Auditor interacted regularly with the component audit team during all stages of the audit and was responsible for the scope and direction of the audit process. This, in conjunction with additional procedures performed, gave us appropriate evidence for our opinion on the group and parent company financial statements. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter Carrying value of goodwill and intangible assets The Group carries a material amount of goodwill and separately identifiable intangible assets arising from business combinations and asset acquisitions in its Statement of Financial Position. The Group has goodwill of million and other intangible assets of million as at 30 June 2017 principally contained within 3 cash generating units. Goodwill must be tested for impairment on at least an annual basis whilst other intangible assets are assessed for indicators of impairment. How our audit addressed the key audit matter We reperformed management s value in use calculations and assessed the categorisation of cash generating units, which we found to be satisfactory. We discussed the basis of the key assumptions with management, in particular regarding revenue growth and EBITDA, and critically assessed the cash flow forecasts. We performed sensitivity analysis on the headroom to changes in key assumptions. We assessed the accuracy of management budgets and forecasts used in the prior year value in use calculations to actual results achieved in the current period. 16

19 Independent auditors report to the members of Artilium plc Key audit matter The determination of recoverable amount, being the higher of value in use and fair value less disposal costs, requires judgement by management in identifying and then valuing the cash generating units. Recoverable amounts are based on management s view of key variables such as revenue and EBITDA growth rates and the most appropriate discount rate. The headroom in the 2016 and 2017 value in use calculations are sensitive to possible changes in key assumptions. Revenue recognition The Group has numerous revenue streams comprising platform services, sale of software, professional services, sale of hardware and maintenance. Each stream has different revenue recognition criteria considerations. How our audit addressed the key audit matter We updated our understanding of the internal control environment in operation for the significant revenue streams and undertook a walk-through to ensure the key controls within these systems operated during the period. We reviewed the key contractual terms and terms of business with customers to identify the material performance obligations. We undertook substantive testing on revenue recognised in the financial statements, including deferred and accrued income recognised at the year end, to ensure revenue had been recognised in accordance with the disclosed accounting policy for revenue recognition. We undertook a review of invoices, credit notes and cash receipts post year end to ensure the completeness of income recognised in the accounting period. Other information The other information comprises the information included in the Annual Report, other than the financial statements and our auditor s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 17

20 Independent auditors report to the members of Artilium plc Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: the information given in the strategic report and the directors report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors responsibilities statement the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group s and the parent company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 18

21 Independent auditors report to the members of Artilium plc A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council s website at: This description forms part of our auditor s report. David Thompson (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD 30 October

22 Consolidated income statement Notes Continuing Operations Revenue 4 10,452 9,622 Cost of sales (2,716) (2,599) Gross profit 7,737 7,023 Depreciation and amortisation 13,15 (1,768) (1,411) Administrative expenses before redundancy costs, depreciation and amortisation (7,413) (6,835) Redundancy costs 8 (227) (294) Administrative expenses (7,640) (7,129) Operating loss (1,671) (1,517) Finance costs 7 (324) (200) Loss before tax (1,995) (1,717) Tax credit Loss for the year from continuing operations 5 (1,760) (1,526) Basic & diluted earnings per share in euro-cents from continuing operations 11 (0.58) (0.54) 20

23 Consolidated statement of comprehensive income Loss for the year (1,760) (1,526) Other comprehensive income for the year: Items that may be reclassified subsequently to profit or loss Exchange differences on translation 187 (10) Total comprehensive income for the year attributable to owners of the parent (1,573) (1,536) 21

24 Registered number: Consolidated statement of financial position As at 30 June 2017 Notes Non-current assets Goodwill 12 17,127 17,127 Other intangible assets 13 3,812 4,286 Property, plant and equipment Other receivables 18 1,000-22,472 21,884 Current assets Inventories Trade and other receivables 18 2,434 3,922 Cash and cash equivalents 2, ,381 4,475 Total assets 27,853 26,359 Non-current liabilities Deferred tax liabilities Bank loans Other loans ,539 Other liabilities 100-1,255 2,064 Current liabilities Trade and other payables 20 7,801 5,795 Bank loans Other loans 22 1, ,194 6,210 Total liabilities 10,449 8,274 22

25 Consolidated statement of financial position (continued) As at 30 June 2017 Notes Equity attributable to owners of the parent Share capital 23 20,267 19,601 Share premium 47,480 47,379 Shares to be issued Merger relief reserve 1,488 1,488 Capital redemption reserve 6,503 6,503 Translation reserve (2,156) (2,343) Own shares 24 (2,336) (2,336) Retained deficit (53,967) (52,207) Total equity 17,404 18,085 Total liabilities and equity 27,853 26,359 The financial statements were approved by the Board of Directors and authorised for issue on 30 October They were signed on its behalf by: Jan Paul Menke Director 23

26 Consolidated statement of changes in equity Share capital Share premium Shares to be issued Merger relief reserve Capital redemption reserve Translation reserve Own shares Retained deficit Total Balance at 1 July ,415 46,748-1,488 6,503 (2,333) (2,336) (50,681) 14,804 Nominal value of shares issued 4, ,186 Premium arising on issue of shares Total transactions with owners, recognised directly in equity 4, ,817 Loss for the year (1,526) (1,526) Other comprehensive income - currency translation differences (10) - - (10) Total comprehensive income for the year (10) - (1,526) (1,536) Balance at 30 June ,601 47,379-1,488 6,503 (2,343) (2,336) (52,207) 18,085 Nominal value of shares issued Premium arising on issue of shares Shares to be issued Total transactions with owners, recognised directly in equity Loss for the year (1,760) (1,760) Other comprehensive income - currency translation differences Total comprehensive income for the year (1,760) (1,573) Balance at 30 June ,267 47, ,488 6,503 (2,156) (2,336) (53,967) 17,404 24

27 Consolidated cash flow statement Notes Net cash generated from/(used in) operating activities 25 3,858 (1,261) Investing activities Acquisition of subsidiaries, net of cash acquired (143) Purchase of intangible assets (155) (348) Purchase of property, plant and equipment 15 (206) (40) Loans advanced 18 (1,000) - Net cash used in investing activities (1,274) (531) Financing activities New borrowings/loans received 1,751 2,000 Interest paid (312) (200) Repayment of borrowings (1,582) (321) Net cash (used in)/generated from financing activities (143) 1,479 Net increase/(decrease) in cash and cash equivalents 2,441 (313) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2, Non-cash transactions The principal non-cash transaction is the issue of shares as consideration for the acquisitions discussed in notes 14 and

28 Notes to the consolidated financial statements 1. General information Artilium plc is a Company incorporated in the United Kingdom. The address of the registered office is given on page 1. The nature of the Group s operations and its principal activities are set out in the Strategic report and Directors report on pages 5 to 9. The Group s principal place of business is Belgium and the Netherlands. The ultimate parent Company of the Group is Artilium plc. The consolidated financial statements were authorised for issue by the Board of Directors on 30 October Standards adopted early by the Group The Group has not adopted any standards or interpretations early in either the current or the preceding financial year. New and amended standards and interpretations Standards and interpretations effective in the current period but with no significant impact No new standards and amendments to standards and interpretations effective for annual periods beginning on or after 1 July 2016 have had a material impact on the Group. New and amended standards issued but not yet effective for the financial year beginning 1 July 2016 and not early adopted Standard Effective Date IFRS 9 Financial Instruments 1 January 2018 IFRS 15 Revenue from Contracts with Customers 1 January 2018 IFRS 16 Leases *1 January 2019 IAS 7 (amendments) Disclosure Initiative *1 January 2017 IAS 12 (amendments) Recognition of Deferred Tax Assets for Unrealised Losses *1 January 2017 Annual Improvements Cycle *1 January 2018 *Subject to EU endorsement IFRS 9 and IFRS 15 are expected to be effective for the year ended 30 June 2019, with IFRS 16 expected to be effective for the year ended 30 June The impact of IFRS 9 is being assessed by management, with the main impact likely to arise from the expected credit loss model although the financial effect, if any, has not yet been quantified. The impact of IFRS 15 has begun to be assessed by management given the number of different revenue streams, and in connection with current new contracts which have a duration exceeding the date of IFRS 15 adoption. Although the assessment is ongoing, the work undertaken to date has not highlighted any potentially material adjustments. The impact of IFRS 16 has not yet been assessed. Functional and presentation currency The individual financial statements of each company within the Group is presented in the currency of the primary economic environment in which it operates (its functional currency). The consolidated financial statements are presented in EUR in order to reflect the economic substance the Group operates in (see also accounting policies - Note 2). These financial statements are presented in round thousand Euros. 26