More annual reports from accesso Technology Group:
2023 ReportRegistered number 03959429 accesso Technology Group plc 2017 Annual report and financial statements accesso Technology Group plc Contents of the consolidated financial statements for the financial year ended 31 December 2017 Company information Introduction and key financial highlights Chairman's statement Chief Executive’s statement The Board of directors Strategic report Report of the directors Directors’ remuneration report Statement of Directors’ responsibilities in respect of the annual report and the financial statements Report of the independent auditor to the members of accesso Technology Group plc Consolidated statement of comprehensive income Consolidated statement of financial position Company statement of financial position Consolidated statement of cash flow Company statement of cash flow Consolidated statement of changes in equity Company statement of changes in equity Notes to the consolidated financial statements Page 2 3 5 6 11 13 15 18 21 22 27 28 29 30 31 32 33 34 1 accesso Technology Group plc Company information for the financial year ended 31 December 2017 Directors: Secretary: Registered office: Tom Burnet, Executive Chairman John Alder, Executive Steve Brown, Executive David Gammon, Non-Executive Karen Slatford, Non-Executive John Weston, Senior Independent Director Martha Bruce 7 Clifton Terrace Cliftonville, Dorking Surrey RH4 2JG Unit 5, The Pavilions Ruscombe Park Twyford Berkshire RG10 9NN Registered number: 03959429 (England and Wales) Auditor: Bankers: KPMG LLP Arlington Business Park Theale Reading Berkshire RG7 4SD Lloyds Bank plc The Atrium Davidson House Forbury Square Reading Berkshire RG1 3EU 2 accesso Technology Group plc Introduction and key financial highlights for the financial year ended 31 December 2017 Financial Highlights Revenue Operating profit Adjusted operating profit * Adjusted EBITDA* Cash generated from operations Adjusted cash generated from operations** Underlying cash conversion*** Net cash/ (debt) **** Earnings per share – basic (cents) Adjusted Earnings per share – basic (cents) ***** Year ended 31 Dec 17 (audited) $m 133.4 Year ended 31 Dec 16 (audited) $m 102.5 9.2 19.1 24.6 33.1 21.2 86.2% 12.5 40.83 56.73 10.5 15.7 19.1 18.6 18.6 97.4% (3.4) 33.95 51.48 Change +30.1% -12.4% +21.7% +28.8% +78.0% +14.0% $15.9m +20.3% +10.2% * Adjusted operating measures are based on reported profit numbers excluding acquisition expenses, amortisation of acquired intangibles, charges relating to any contingent element of acquisition consideration, and share-based payments. Page 14. ** Cash generated from operations, less specific cash balances as detailed on page 10 *** Adjusted cash generated from operations as a percentage of Adjusted EBITDA **** Cash less Borrowings. Page 14 ***** Adjusted for acquisition expenses, amortisation of acquired intangibles, charges relating to any contingent element of acquisition consideration, share-based payments, net of tax effect, and the revaluation of US deferred tax assets and liabilities. Page 48 Operational Highlights – Broadening our horizons o o Strong performance continues with new business wins, renewed partnerships, geographic expansion and new acquisitions driving growth from our evolved offering accesso extends leadership in traditional verticals through product innovation, while applying expertise to greenfield opportunities with similar guest-management challenges o Acquisitions of Ingresso and The Experience Engine (TE2) broaden our reach, enhance our technology offering and help us impact more of the digital guest journey Strength at our core, innovating for the future in our Established Verticals (Theme Parks, Water Parks) o o o Installed accesso Prism as the backbone of the world’s first 100% virtual queuing based water park, winning the IAAPA award for most impactful new product across the industry Total accesso Passport volumes up 37% reflecting, in part, the continued Merlin rollout Key new customer win in geography of growing importance with Village Roadshow Theme Parks, Queensland (accesso Passport) Growing scale and expanding globally in our Adjacent Verticals (ski resorts, cultural attractions, tours and live event ticketing) o o o o 55 new customers for accesso ShoWare during the year including ski resorts, walking destinations, sports clubs and museums Real-time interface between accesso ShoWare and Ingresso completed, allowing accesso ShoWare customers to list and sell their tickets on numerous eCommerce platforms, expanding reach and driving revenue Event tickets sold for concerts given by Bruno Mars, Ed Sheeran, John Mayer, Green Day and Jack Johnson among others accesso Siriusware continues its global expansion with customer wins now including Watercourse Distillery Limited in Ireland and Experiencias Xcaret in Mexico, rolling out 400 accesso Siriusware salespoints across its 6 popular ecotourism venues Expanding our impact on the digital guest journey across a number of Greenfield Opportunities TE2, acquired in July 2017, extending accesso’s offer with digitalisation and personalisation software o o Mobile technology allows operators to reach out to their guests and offer seamless, integrated experiences using data-driven insights to understand and act on preferences Impressive early performance opening up new verticals including healthcare with the announcement of Henry Ford Health Systems partnership post period end Ingresso, acquired in March 2017, helps ticket-sellers find new routes to market via third party channels o o Volume growth of 67% year-on-year reflects customer wins including Ticketmaster UK, opening up access to West End o theatres in London 3 accesso Technology Group plc Commenting on the results, Tom Burnet, Executive Chairman of accesso, said: “This has been another strong year. We continue to execute on our strategy with precision and focus, and we are continuing to see the rewards. Our financial performance was ahead of our expectations, and our resilience as a global business is becoming more evident. Our clients are increasingly seeing the benefit we bring to their customers, and in turn their own profitability. This is evidenced by today’s results with another profitable period for our own growth at Accesso. We have pushed boundaries this year as we continued to focus on investment, building and improving our business, and finding new ways to support the digital customer journey. Two important strategic acquisitions present us with many more opportunities, and we are excited about the new markets they open up for us as well as how they can support our existing customer base. I am excited by where we are as an organisation, and I see enormous growth opportunities in our future.” Commenting on the results, Steve Brown, Chief Executive Officer of accesso, said: “These results speak to the quality of our technology and our ability to create innovative solutions for our customers. Ensuring the quality of our product offering in terms of both functionality and security remains a key part of our ongoing plan and we will invest behind our platform to make certain of our continued leadership in this area. The acquisitions we made in 2017 have both broadened and strengthened our offering, and our approach to M&A reflects our continued ambition to bring the best technology, people and ideas to Accesso. Having decided to step down from my role as CEO, I know I am leaving the Group in fantastic hands. Accesso has an extremely bright future ahead with Paul Noland at the helm.” 4 accesso Technology Group plc Chairman’s Statement Redefining the guest journey 2017 was another year of growth and expansion for accesso as we integrated new acquisitions, rolled-out market-leading technology and won new business across the world. At the heart of our success remains our focus on the digital guest journey: helping our customers improve their guests’ experience and in turn driving increased revenues. From the initial online research and buying decision to arrival and at the attraction itself, to the feedback and follow-up processes operators use to better understand their customers, accesso’s technology continues to help clients upgrade the experiences they can offer. Our ambition to support the largest operators has taken our business to every corner of the globe and it is pleasing to see that our solutions are as applicable in different geographies as they are across a number of vertical markets is being proven as we expand. The year’s financial results reflect the progress being made across the business. During the year we delivered revenue of $133.4m up from $102.5m last year, while operating profit was $9.2m in 2017, from $10.5m in 2016, as the income statement absorbed the acquisition expenses of the two acquisitions made in the period and ongoing non-cash charges related to the acquisition strategy that the Group has followed over recent years. More importantly, adjusted EBITDA was $24.6m up from $19.1m, which is more representative of the Group’s underlying performance. These revenue and adjusted EBITDA numbers translate into 30.1% and 28.8% growth respectively, indicating our ability to deliver meaningful profit from our revenue despite ongoing investment in R&D to ensure our product remains the best in our industry. We are proud to have now delivered a 7-year revenue CAGR of 23.9% and a 7-year adjusted EBITDA CAGR of 32.2%. Broad thinking focused on solutions At accesso we think in terms of solutions rather than individual product lines. Over the past years, we have evolved our offering to include a range of complementary technologies designed to meet a wide range of client needs, and we engage with existing and prospective customers on this basis. We continue to increase the number of combined deployments of accesso technologies, with the addition of Ingresso and TE2 strengthening our hand still further. Looking through a different lens The range and flexibility of our solutions also makes accesso particularly well placed to expand into new and exciting industry verticals. We are increasingly establishing ourselves beyond our traditional theme and water park markets, making particular progress in ski and snow sports, cultural attractions, museums, sports stadia, live music events and many more areas where we see the opportunity to expand. Gradually, we have come to see our business progress more in terms of these established, adjacent and greenfield areas than we have in terms of our individual products in isolation. This review of our 2017 results reflects that evolution in our thinking, and lays out how accesso technology is helping operators in each of these three areas meet the challenges that mean the most to them. One Team accesso’s people are the bedrock of the Company’s success. Our culture of self-improvement and passionate innovation delivers results for our customers year after year, and it is our nearly 500 dedicated employees that translate the spirit of that idea into action. On behalf of the Board, I thank them all wholeheartedly for their efforts. Opening 2018 accesso has started 2018 with a number of new business wins, a significant contract extension with our long-term partner Cedar Fair and an exciting new partnership with the Henry Ford Health System, accesso’s initial step into a material Greenfield opportunity, Healthcare. We have also announced that Steve Brown will be stepping down as accesso’s CEO in April 2018 to be replaced by Paul Noland. Steve has made an outstanding contribution to the Group since 2012 and we wish him all the very best for the future. We are delighted to be welcoming Paul to accesso. He brings a wealth of industry experience from heading up IAAPA, the largest international trade association for amusement facilities and attractions worldwide, a range of senior executive roles with Walt Disney Parks and Resorts during a 16-year tenure and at Marriott. I am confident he is exactly the right leader for the next phase of development for our company and along with the rest of the Board, I’m very much looking forward to working with him. Tom Burnet Executive Chairman 5 accesso Technology Group plc Chief Executive’s Statement Operational Review accesso has once again made significant strides in 2017. We continue to win a range of business across the Group and geographic expansion continues at a good pace. New clients of varying size have deployed accesso technology for this first time this year, while on a geographic view, deployments have also gone live for the first time in India, Singapore, Thailand, Ireland, Portugal and New Zealand. We also continue to progress well with the rollout of technology related to our agreement with Merlin Entertainments Group Ltd (“Merlin”). With the majority of the initial investment required to deliver on that project now behind us, we are well placed to begin benefiting from the longer-term international expansion opportunities that we always envisaged would be available as a result of enhancing our global technology offering, establishing regional support networks and integrating with local payment and regulatory systems. We have also spent part of the year ensuring the smooth integration of Ingresso and TE2 into the accesso family. These acquisitions have improved both the breadth and impact of our offering and are already being set to work with our existing products to improve the range of solutions we can offer our customers. People We are acutely aware that our ability to attract and retain the best available talent across our organisation is vital to our ongoing success, and during the year we have introduced a number of initiatives with this goal in mind. We continue to expand our workforce to meet the growing demands of our scaling business and, our year end non-seasonal employee count, including those who joined as part of the acquisitions, totaled nearly 500 at the end of the year, up from 362 in 2016. To better integrate our functional teams we are currently combining three of our US East Coast offices into our largest office in Lake Mary, Florida, and we have also launched a substantial computer-based training initiative available for all staff. I want to thank the whole team for its commitment and endeavour during 2017, and we look forward to welcoming many more new faces in 2018. Established Verticals accesso sees its traditional verticals as theme and water park operators. We are proud to have many of the largest operators in this area as clients, deploying multiple product offerings across what remains a vital and growing part of our business. During 2017 we saw a number of positive developments in these verticals, with none more important than the continued roll out of accesso Prism, our state-of-the-art in-park wearable device. In May, accesso Prism was successfully installed as the backbone of the world’s first 100% queueless water park, bringing to life a long-held company ambition that has the potential to redefine our industry with long queue lines remaining the single greatest dissatisfaction metric amongst theme park attendees worldwide. The device has been well received across the board and was recognised as the most impactful new product globally by IAAPA at its Attractions Expo event in Florida in November. During the period accesso Prism also proved its ability to act as a replacement for our Qbot device in a number of successful trials, and we expect the device to be rolled out across large parts of our existing accesso LoQueue customer base over the next 12 to 24 months. We are excited about the opportunities that this should present to enhance revenue within our existing estate. Another important dynamic in these markets is the growing desire among some operators to move substantial parts of their guest bases to pre-committed season pass arrangements. Supported by accesso Passport, their ability to utilise monthly payment plans accelerated the trend. While the adjustment has led to certain changes in guest visitation behaviour, the strength and versatility of accesso Prism’s commercial model opens up a range of new in-park revenue opportunities. In addition to the continued deployment of our technology to Merlin, we were delighted to secure an agreement with Village Roadshow Theme Parks in Queensland, Australia, with four of their attractions now live with accesso Passport for ticketing, eCommerce and point-of-sale. This installation also included Ingresso to support the client’s third-party ticket distribution efforts, underscoring the value of our combined solution offering. Wins like these are particularly important as we seek to broaden our reach in the Asia-Pacific region, which is now supported by offices and technology infrastructure in the region and provides a good example of our ability to add incremental new business on the back of global investments undertaken in recent years. The proportion of our queuing revenues coming from Europe also continues to increase and we have secured a commitment to add the Qsmart mobile app to three European properties, ensuring that all of our European queueing clients can now access our services through their mobile device. Adjacent Verticals The acquisitions of accesso Siriusware and accesso ShoWare supported both our technology offering within our established vertical and provided the impetus for accesso to break out beyond its traditional markets into new verticals including ski resorts, cultural attractions, tours and live event ticketing. Our ambition is to increase penetration in these areas and we were able to make excellent progress against this aim during 2017. accesso ShoWare continued to make excellent strides adding 55 new customers during the period, with 38 coming from North America and 17 coming from Latin America. Among these new customers were Welk Resorts, a collection of premiere destination and travel resorts in California; SLS Las Vegas, a luxury boutique hotel and Casino; Charleston Battery, a football club from South Carolina; and Museo Anahuacalli, a museum in Coyocan, Mexico. Also in Mexico, accesso Siriusware secured its largest ever agreement with Experiencias Xcaret, which is rolling out 400 salespoints across its 6 luxury ecotourism venues. accesso Siriusware also won its second European contract during the period with Watercourse Distillery Limited in Ireland, which owns the Jameson whiskey brand. This 6 accesso Technology Group plc Chief Executive’s Statement (continued) represented a joint win with accesso Passport, which also is now used by the NFL Experience in Times Square, New York and The CNN Studio Tour in Atlanta, Georgia. Within accesso ShoWare we continue to make good progress in the live event ticketing space, supporting concerts given by Ed Sheeran, Bruno Mars, John Mayer, Green Day and Jack Johnson among others during the period. We also rolled out our complete solution for Toluca FC and its new 31,000 seat football stadium. Greenfield Opportunities Last year’s acquisitions of Ingresso and TE2 have brought a range of new capability to accesso and, in addition to supporting our product offerings in our existing verticals, have enabled the Group to make its first steps into a new set of entirely greenfield areas including London’s West End Theatre market and the Healthcare space. With Ingresso as part of our offering, we are now able to tap in to the vast third-party distribution market, helping our clients find new routes to buyers for their tickets while increasing the platform’s ability to serve its existing clients by significantly enhancing the range of inventory it can access. We have established connectivity between Ingresso and pre-existing accesso systems and the initial accesso clients’ inventory is now available via Ingresso’s global distribution system. This acquisition has also helped us reach further into London’s fragmented West End Theatre market and will, over time, allow accesso to exploit the significant inefficiencies that exist within the travel and leisure industry. Ingresso delivered calendar year-on-year growth of 67%, achieved with a strong showing across all its major channels and we continue to invest in their distribution technology paying particular attention to its high-volume, high-speed sale capabilities. Whilst our distribution partner, Amazon, announced post-period end that they are discontinuing their ticketing distribution business, we have been delighted to welcome major customer wins from Ticketmaster UK and Superbreak.com, a major UK tour operator. We see broader future opportunity with the focus we have made on integrating with our other accesso offerings and facilitating access to the wide range of third-party distribution channels that are important to our customers. As the distribution landscape continues to evolve and modernise, a key part of our strategy is to underpin our core ticketing technologies with multi-point distribution capabilities and Ingresso provides that critical infrastructure and know-how. The July acquisition of TE2 enables accesso to offer highly personalised user experiences to our customers, leveraging data-led insights to capture, model and anticipate guest behaviour and preferences. As previously reported, TE2 has performed well ahead of its business plan since acquisition, generating greater than expected levels of non-recurring services revenue and operating with lower costs than expected. We have made significant progress with the integration of our HR, payroll and sales & marketing teams and have focused on a range of product integrations initially with accesso Passport. We expect to see tangible signs of progress on this combined offering later in 2018. After the period end we also announced a significant win for TE2 with the Henry Ford Health System (HFHS), a six-hospital system in Detroit, Michigan. HFHS will leverage TE2 to digitalise and personalise the entire patient journey, using its technology to build unique patient profiles which can be easily integrated with existing electronic medical records. This process will enable healthcare providers to offer convenient and frictionless experiences in real-time, with features such as wayfinding support, concierge services, smartphone bill-payments and patient feedback and communication. This groundbreaking partnership will begin with technology pilots in Autumn 2018, in preparation for full launch to coincide with the grand opening of the Brigitte Harris Cancer Pavilion, the new home of the Henry Ford Cancer Institute, expected in 2020. This agreement marks a bold new step for accesso beyond the leisure, entertainment and cultural markets that has been its home, and provides a significant endorsement of the versatility and range of technology within the Group’s portfolio. Investing in technology accesso aspires to be the premier technology solutions provider to the verticals it serves. To maintain this position, we continue to invest heavily to expand the functionality, effectiveness and robustness of our technology across our full range of offerings. In addition to development work carried out during the period on accesso Prism and a range of longer-term initiatives to support our growth into the future, 2017 saw a host of significant enhancements to our platforms. In particular, we continue to invest in readying our products for the international expansion driving our growth. During the year we introduced localised user-interface elements that now allows for distribution of accesso Passport in 20 languages, and added enhanced support for Global Sales Tax configuration including tax tiers, tax percentages and GL code linking. We also expanded our support of alternative payment solutions, added true-multi-language support for accesso Siriusware and opened a new datacentre in Sydney. In accesso Passport we launched Passport Exchange: our new platform enabling fully integrated third-party ticket sales, and introduced a full-featured API for clients desiring more direct integration. Through a new booking portal, we also now offer service management of date and time-based tickets helping to mitigate risk for whose operations may be impacted by cancellations due to weather or other external factors. We also continued to improve our accesso ShoWare product, enhancing our dynamic pricing capability, completing an important PayPal integration including PayPal Credits, improving event messaging technology and seatmap wizards. 7 accesso Technology Group plc Chief Executive’s Statement (continued) Information Security Another increasingly important element of our business relates to information security, which is at the heart of all development decisions. The business continues to focus increasing levels of resource and technology on initiatives to ensure data minimization, more robust monitoring of our applications, enhanced response capabilities and increased staff training across the whole business. The start of 2018 accesso is pleased to report that the Group is showing good momentum at the start of 2018. We look forward to a promising year ahead. Financial Review accesso continues to deliver strong financial performance as a result of our increasingly global revenue base and diversified product portfolio. Our business continues to be driven forward by long term transaction-based agreements with several of the world’s leading operators that deliver high-quality and highly-visible revenue underpinned by long-term relationships. Alternative Performance Measures The Board utilises consistent alternative performance measures (“APMs”) in evaluating and presenting the results of the business. APMs include adjusted EBITDA, adjusted operating profit, adjusted administrative expenses, adjusted net debt, and adjusted cash from operations. A reconciliation of these measures from IFRS is provided below. The Board views these APMs as more representative of the Group’s performance as they remove certain items which are not reflective of the underlying business, including acquisition expenses, amortisation related to acquired intangibles, deferred and contingent payments related to acquisitions, changes to earn-out considerations and share-based payments. The APMs help ensure the Group is focused on translating sales growth into profit. By making these adjustments, the Group is more readily comparable against a business that does not have the same acquisition history and share-based payment policy. Additionally, these are the measures commonly used by the Group’s investor base. Key Financial Metrics Revenue for the year ended 31 December 2017 was $133.4m, an increase of 30.1% on the previous year’s result of $102.5m, benefitting from our increased global footprint, the broader range of markets we now serve and the acquisition of Ingresso at the end of March and TE2 in July. This growth was delivered despite challenging weather events impacting certain clients, an earthquake in Mexico City, unprecedented forest fires in California and to a lesser extent, European terror-related incidents. The impact of foreign exchange movements on revenue, or costs, was not material. accesso tracks a number of specific operational metrics that influence Group revenue as follows: • • Total transactional ticket sales, including Ingresso distribution, increased 20.2%, with like for like increasing 14.8% Total ticket volumes, processed via our hosted solutions, increased 30.9%, exceeding 100m for the first time. On a like for like basis the increase was 28.0% • North America now accounts for 70% of eCommerce ticket volume (2016: 89%), with Europe accelerating to 25% (2016: 9%) • • 42% of eCommerce volume now takes place via a mobile device (2016: 35%) accesso LoQueue like for like attendance data was broadly flat The gross profit margin in 2017 was 55.0%, compared to 54.0% in 2016, reflecting the improvement in our mix of revenue towards higher margin offerings and a higher level of non-recurring services revenues than in the comparative period. We estimate that for the full year 81% (2016: 91%) of Group revenue is repeatable in nature. This represents the proportion of Group revenue that is derived on a transactional basis plus annual support and annual license revenue. The decrease from 2016 is largely driven by the acquisition of TE2, which currently derives the majority of its revenues from professional services, but remains at a level that gives the Board the continued confidence to innovate to extend our product leadership and provides the opportunity to outperform revenue expectations through winning new business. Adjusted EBITDA and operating profit Adjusted EBITDA of $24.6m was up from $19.1m, an increase of 28.8%. Operating Profit for 2017 was $9.2m (2016: $10.5m), while adjusted operating profit, which the Board considers a key underlying metric, was $19.1m in 2017, equating to 21.7% growth when compared to 2016 ($15.7m). Our adjusted operating margin was 14.3% for 2017 (2016: 15.3%) but as previously identified, the Board maintains its view that there is potential for future improvement in this metric as the Group benefits from the step-down in investment across the business to support the global rollout. The tables below set out a reconciliation between Operating profit and adjusted EBITDA: 8 accesso Technology Group plc Chief Executive’s Statement (continued) Operating profit Add: Acquisition expenses Add: Deferred and contingent payments Add: Amortisation related to acquired intangibles Less: Profit recognised on reduction of earn out -liability Add: Share-based payments Adjusted Operating Profit Add: Amortisation and depreciation (excluding acquired intangibles) Adjusted EBITDA 2017 $000 9,241 1,249 2,131 8,591 (3,228) 1,089 19,073 5,531 24,604 2016 $000 10,512 - - 4,227 - 987 15,726 3,387 19,113 Administrative expenses were up 43.3% to $64.2m (2016: $44.8m). Adjusted administrative expenses reflect the adjusting items shown in the table above were $48.9m, representing an increase of 35.1% on 2016 ($36.2m) and driven primarily by a continued increase in headcount and operational infrastructure to support our short and medium term growth, and by the acquisition of Ingresso and TE2 in March and July respectively. The table below sets out a reconciliation between the statutory and adjusted measure: Administrative expenses Net adjustments detailed above Adjusted administrative expenses 2017 $000 64,204 (15,363) 48,841 2016 $000 44,813 (8,601) 36,212 Profit before tax of $7.2m was down from $10.1m in 2016 as the income statement absorbed the increase in non-cash charges related to the acquisition strategy that the Group has followed over recent years, together with the acquisition expenses incurred in the period. Profit after tax of $9.9m (2016: $7.5m) is after a tax credit for the year ended 31 December 2017 of $2.7m. Tax is covered in more detail below and within note 10. As a result, earnings per share (basic) were 40.83 cents for 2017, an increase of 20.3% on 2016 (33.95 cents). Adjusted earnings per share, were 56.73 cents for 2017, an increase of 10.2% on 2016 (51.48 cents). These results reflect a well-optimised and efficient group capable of delivering sustainable profit expansion while continuing to execute on its shorter-term commitments and heavily investing in its future. As time goes on, accesso expects earnings expansion ahead of top line growth as the business benefits from improving operating leverage as a result of investments made in products, including accesso Prism. Total R&D expenditure during 2017 of $20.0m, (2016: $17.9m) represents 15.0% of revenues (2016: 17.5%). The slight step down in this percentage from 2016, reflects the heavy initial investment in accesso Prism in 2016 and leads us on a track towards what we expect will be a normalised rate on an ongoing basis. Capitalised development expenditure was $12.4m (2016: $11.7m) representing 62.0% (2016: 65.4%) of total R&D expenditure. The net benefit of development capitalisation less related amortisation, fell to $8.2m from $9.8m in 2016. Net debt and cash flow Our closing net cash balance of $12.5m (2016 net debt: $3.4m), includes balances of approximately $5.5m in respect of cash paid back to the Group by the sellers of TE2 to make payments to employees in lieu of a pre-acquisition option scheme over a three year period. In addition, cash balances totaling approximately $11.0m are held by the Group to make near term settlements to venue operators in respect of the Ingresso platform. These balances are beneficially owned by the Group but, while there are no restrictions on their use, they have been excluded from our current definition of net debt. Adjusting for these items offers an adjusted net debt position of $4.0m at 31 December 2017. Cash generated from operations of $33.1m (2016: $18.6) includes the benefit of these TE2 and Ingresso balances, and is after acquisition related expenses. Adjusted cash generated from operations was $21.2m for the year ended 31 December 2017, per the table below, and was 14.0% better than in 2016 ($18.6m). This represents an underlying cash conversion from adjusted EBITDA of 86.2% (2016: 97.4%). This cash conversion percentage remains an indication of a business with a sustainable and strong cash conversion cycle. 9 accesso Technology Group plc Chief Executive’s Statement (continued) Cash flow from operating activities Add: Acquisition related expenses (including debt arrangement) Less: TE2 option cash Less: Increase in Ingresso near term settlement cash since acquisition Adjusted cash from operations 2017 $000 33,097 1,249 (5,500) (7,600) 21,246 2016 $000 18,632 - - - 18,632 Financing costs included interest of $0.7m (2016: $0.2m) and an arrangement fee of $0.4m relating to the extension of the Group’s borrowing facility. Financing and investing activities During the year, the Group extended its borrowing facilities, and undertook a share placing in order to fund the acquisitions of Ingresso and TE2. The acquisition of Ingresso Group Limited in March 2017 was funded via an initial cash investment (net of cash acquired) of $18.7m. To allow for sufficient headroom, the Group extended its borrowing facility with Lloyds Bank plc. The extended Facility provides the Group with the ability to draw down a total of $60m, denominated in either US dollars, GB Pound Sterling or Euros, and has a term of four years, with an option to extend by a further twelve months at the end of the first year. The facility is at an agreed rate of 140 basis points above LIBOR at a borrowing to EBITDA ratio of less than 1.5 times, rising to a maximum 190 basis points if the borrowing to EBITDA ratio is greater than 2.25 times. It provides an additional accordion mechanism allowing for a further $10m relating to future acquisitions, and includes a commitment interest on undrawn funds of 35% of the relevant interest rates above. The total available for drawdown is subject to a reduction of US$10m on each of the first, second and third anniversaries of the Extended Facility. The Facility had an arrangement fee of $0.4m. In July 2017, the Group announced the acquisition of Blazer and Flip Flops Inc (TE2). The cash element of the acquisition costs (net of cash acquired) was $69.2m and was funded via an underwritten vendor and cash placing, raising gross proceeds of $75.6m. Cash balances at 31 December 2017 totaled $28.7m (including the $16.5m of ‘excluded cash’ referenced above), while borrowings at 31 December 2017 totaled $16.1m, versus the facility of $60m. The Board believes that the Group remains in a strong financial position at the period end, with good access to debt finance on attractive terms. Taxation On a statutory basis, the Group had a tax credit of $2.7m (2016: tax expense $2.6m). This includes an initial beneficial impact to the Group of changes to the US tax code that were introduced via The Tax Cuts and Jobs Act of 2017 resulting in a revaluation of US deferred tax assets and liabilities to incorporate the reduction in the headline federal tax rates. This resulted in a one-off credit to 2017 earnings of $5.1m. On an adjusted basis, which excludes the US tax code benefit, the Group’s effective tax rate on its underlying earnings, was 24%. The Group has for a number of years focused on tax planning that lowers its effective rate. Taking into account the relative taxable territories in which the Group operates, and its growth in the relative territories, together with the benefit of the reduced US income tax rates introduced by The Tax Cuts and Jobs Act of 2017, the Group expects the tax rate on its adjusted earnings to be between 21% and 23% in the short term. Dividend The Board maintains its consistent view that the payment of a dividend is unlikely in the short to medium term with cash more efficiently invested in product development and complementary M&A. Summary and Outlook This year has been one of significant progress at accesso, and these results reflect a business pleasing its customers, thinking about the future and translating its potential into financial results. While 2018 has only just begun, the Board remains confident in its expectations for the full year and is focused fully on delivering its growth plan. After joining the accesso Board in 2012, I will formally step down in April and hand the baton to Paul Noland who I have known, trusted and worked with for more than 20 years. I can think of no one better suited to lead accesso through its next exciting stage of growth. Steve Brown Chief Executive Officer 10 accesso Technology Group plc The Board of directors for the financial year ended 31 December 2017 Tom Burnet, Executive Chairman Tom Burnet joined accesso as the Chief Executive Officer in late 2010. In his current position as Executive Chairman, he leads accesso’s medium and long-term growth plans. He has particular responsibility for Group strategy, Investor Relations, and M&A activity. Tom was formerly Managing Director of a division of Serco Group plc, a global outsourcing company, overseeing the 5,000 person Defense Services division. During his career he has been involved in creating, growing and running several businesses and started his career as the UK’s youngest Army Officer. He also has an MBA from the University of Edinburgh. He believes accesso can grow to become a billion-dollar business and a cornerstone of the attraction and leisure industry’s supply chain. John Alder, Chief Financial Officer John Alder joined accesso in 2008 and is the Chief Financial Officer for the company. He is a Chartered Accountant who qualified with Coopers and Lybrand (PricewaterhouseCoopers) and brings expertise in finance, mergers and acquisitions, strategic planning and financial modeling. Prior to joining accesso, John spent 4 years as European Controller and Interim Finance Director of private equity backed Palletways Group Limited, supporting the Continental European development of Europe’s largest and fastest growing palletized freight network business. He also held Finance Director and Controller positions in quoted and private pan-European businesses. John was appointed Chief Financial Officer of the company in August 2009. Steve Brown, President, Chief Executive Officer Steve Brown brings a strong operations and finance background to the accesso team with extensive experience in ticketing, pricing strategy, eCommerce and revenue management. As the company’s President and Chief Executive Officer, he guides accesso’s global operations. Steve’s theme park career began during college at Walt Disney World Resort. Over the course of sixteen years, he held a variety of roles with increasing responsibility in financial planning and pricing strategy including Director, Walt Disney World Ticketing and Vice President, Revenue Management for Disneyland Resort, where he drove dramatic growth in park admission and hotel revenues utilizing strategic and promotional pricing. Prior to joining accesso, Steve served as the corporate Vice President of Ticket Strategy and Sales for Six Flags. While at Six Flags, Steve championed an overhaul of the company’s eCommerce process, which doubled the already significant online sales and established Six Flags’ national partnerships with major distributors. Steve received his MBA from the Goizueta Business School at Emory University in Atlanta and graduated with a BS in Marketing from the University of South Florida in Tampa. David Gammon, Non-Executive Director David Gammon has widespread experience in developing and building technology based businesses. Since 2001, David has focused on finding, advising and investing in UK technology companies. David founded Rockspring, an advisory and investment firm, which focuses on early stage technology companies and where David continues as CEO today. Other current positions include non-executive chairman at Frontier Developments plc, non-executive director at Raspberry Pi Trading Limited, and adviser to Marshall of Cambridge (Holdings) Limited. Previous experience includes non-executive director and advisor at artificial general intelligence company DeepMind Technologies Limited, advisor to Hawkwood Capital LLP, non-executive director at real time location technology specialist Ubisense Trading Limited, non-executive director at internet TV specialist Amino Technologies plc, non-executive director at smart metering and software company BGlobal plc and acting CFO at internet specialist Envisional Solutions Limited. Earlier in his career David worked as an investment banker for over 15 years. David joined accesso in November 2010 and is a member of the remuneration committee and the Chair of the audit committee. 11 accesso Technology Group plc The Board of directors (continued) for the financial year ended 31 December 2017 Karen Slatford, Non-Executive Director Karen Slatford has significant experience working in the global technology and business arenas, serving currently as Senior Independent Director at Micro Focus International plc. Karen has also served since 2009 as Chairman of The Foundry, a global software company and since 2013 as a non-executive director of Intelliflo, a SaaS based financial services software company. Between 1983 and 2001, Karen worked at Hewlett Packard where, in 2000, she became Vice President and General Manager Worldwide Sales & Marketing for the Business Customer Organisation. She was responsible for sales of all Hewlett Packard’s products, services and software to business customers globally. Karen is a member of accesso’s audit committee and the Chair of the remuneration committee. John Weston, Senior Independent Director John Weston joined accesso in 2011 and serves as the Senior Independent Director. Prior to joining, he served as the Chief Executive of British Aerospace and BAE Systems 1998 to 2002, at which time it was a £12.5 billion business employing more than 120,000 people. John brings vast experience in the electronics and technology industries and in addition to accesso, he currently is Chairman of Brittpac PLC. Previously, John served on the board of directors for MB Aerospace, AWS Electronics, Torotrak, Acra Control, Ufi Charitable Trust and Ufi Ltd, Fibercore PLC, Windar Photonics PLC and Pro-Drive Composites. John is a member of accesso’s audit and remuneration committees. 12 accesso Technology Group plc Strategic report for the financial year ended 31 December 2017 Review of business The results for the period and financial position of the company and the Group are as shown in the annexed financial statements and explained in the Chairman’s statement and Chief Executive Officer’s statement. Principal risks and key performance indicators The Board has identified the principal risks and uncertainties which it believes may impact the Group and its operations, as well as a number of key performance indicators with which to measure the progress of the Group and are presented in the financial highlights on page 3. Principal risks and uncertainties In line with groups of a similar size, the Group is managed by a limited number of key personnel, including Executive directors and senior management, who have significant experience within the Group and the sectors it operates within, and who could be difficult to replace. Executive remuneration plans, incorporating long-term incentives, have been implemented to mitigate this risk. A key risk relates to the high concentration of revenue derived from particular customers or guests of particular theme parks groups. The Group continues to increase its customer base, extending its geographical presence and broadening its technologies to a wider range of venues. In addition, the Group continues to seek appropriate complementary acquisitions to reduce reliance on specific customers, sectors or geographies. The Group has a significant seasonal business with revenue and cash flows predominantly linked to leisure venue attendance which, with the current profile of business, peak in the summer months of the Northern Hemisphere. Attendance at leisure venues can be impacted by circumstances outside the control of the Group including, but not limited to, inclement weather, consumer spending capability within the regions we operate together with operator venue pricing, discount policies, investment capability, safety record and marketing. A significant proportion of revenues of the business are denominated in US dollars. Although the majority of expenditure is also denominated in this currency, there remains an exposure to movements between the US dollar and either sterling, euros, the Australian dollar, the Brazilian real, the Mexican peso or the Canadian dollar. The Group has reviewed its operations as a result of the UK’s referendum to leave the European Union (“Brexit”). It is not expected that this will have a material impact on the operations or financial results of the Group given its significant operations in the US, and its growing global presence outside of the EU. It is of fundamental importance in maintaining a sustainable long-term business that the Group is aware and takes action to mitigate competitive threats, whether from technological change, or from competition. Effort is directed to ensure that the Group invests in appropriate and focused research and development activity and monitors technological advances and competitor activity. Linked to this, the Group is committed to protecting its technology by the development and/or purchase of patents and will take appropriate action to defend its intellectual property rights or ensure infringers enter into licensing arrangements. The Group capitalises appropriate levels of development expenditure but is exposed to the risk that development of a specific technology could suffer impairment. Key performance indicators and alternative performance measures Key performance indicators are used to measure and control both financial and operational performance. Ticket volumes, revenues, margins, costs, cash and sales pipeline are trended to ensure plans are on track and corrective actions taken where necessary. See the Chief Executive’s Statement on pages 6-10 for a discussion of the metrics. Product development performance is also monitored and tracked through measurement against agreed milestones. In addition, further key performance indicators include the proportion of business that is delivered via mobile technology and the sales mix of services offered. The Board utilizes consistent alternative performance measures (“APMs”) in evaluating and presenting the results of the business, including adjusted EBITDA, adjusting operating profit and repeatable revenue. A reconciliation of these measures from IFRS, along with their definition, is provided below. The Board views these APMs as more representative of the Group’s performance as they remove certain items which are not reflective of the underlying business, including acquisition expenses, amortisation related to acquired intangibles, deferred and contingent payments related to acquisitions, changes to earn-out considerations and share-based payments. The APMs help ensure the Group is focused on translating sales growth into profit. By making these adjustments, the Group is more readily comparable against a business that does not have the same acquisition history and share-based payment policy. Additionally, these are the measures commonly used by the Group’s investor base. 13 accesso Technology Group plc Strategic report (continued) for the financial year ended 31 December 2017 Reconciliation of APMs Adjusted operating profit and adjusted EBITDA Operating profit Add: Acquisition expenses Add: Deferred and contingent payments Add: Amortisation related to acquired intangibles Less: Profit recognised on reduction of earn out -liability Add: Share-based payments Adjusted operating Profit Add: Amortisation and depreciation (excluding acquired intangibles) Adjusted EBITDA Adjusted administrative expenses Administrative expenses Net adjustments detailed above Adjusted administrative expenses Net cash/ (debt) and adjusted net cash/ (debt) Cash and cash equivalents Less: Borrowings Net cash/ (debt) Less: TE2 option cash Less: Ingresso near term settlements treated as non-cash Adjusted net cash/ (debt) 2017 $000 9,241 1,249 2,131 8,591 (3,228) 1,089 19,073 5,531 24,604 64,204 (15,363) 48,841 28,668 (16,140) 12,528 (5,500) (11,000) (3,972) 2016 $000 10,512 - - 4,227 - 987 15,726 3,387 19,113 44,813 (8,601) 36,212 5,866 (9,298) (3,432) - - (3,432) Definitions of APMs • Adjusted operating profit: operating profit before the deduction of amortisation related to acquisitions, acquisition costs, deferred and contingent payments, profit recognised on the reduction of the earn-out liability, and costs related to share-based payments Adjusted EBITDA: operating profit before the deduction of amortisation, depreciation, acquisition costs, deferred and contingent payments, profit recognised on the reduction of the earn-out liability, and costs related to share-based payments Adjusted administrative expenses: Administrative expenses adjusted for the items in adjusted operating profit Repeatable revenue: transactional revenue that the Group would expect to occur every year from a current customer without a new customer being acquired; for example, ecommerce income (see page 8) Adjusted EPS: earnings per share after adjusting operating profit for amortisation on acquired intangibles, deferred and contingent payments, profit recognised on the reduction of the earn-out liability, acquisition costs, finance charges relating to refinance for acquisition purposes and share-based payments, net of tax at the effective rate for the period (see page 48) • • • • Risk management and internal control The Board is satisfied that the Group’s risk management and internal control systems are adequate. At this stage the Board do not consider it to be appropriate to establish an internal audit function. On behalf of the Board: John Alder Chief Financial Officer 26 March 2018 Unit 5, The Pavilions Ruscombe Park, Twyford RG10 9NN 14 accesso Technology Group plc Report of the directors for the financial year ended 31 December 2017 The directors present their report with the financial statements of the company and the Group for the financial year ended 31 December 2017. Dividends No dividends will be proposed for the financial year ended 31 December 2017. Research and development The Group's research and development activities relate to the development of technologies that can be deployed by entertainment operators and venue owners within leisure, entertainment and cultural markets. During the financial year ended 31 December 2017 the Group invested $20.0m into research and development (year ended 31 December 2016: $17.9m). Directors The directors during the period under review were: Tom Burnet, Executive Chairman John Alder, Executive Steve Brown, Executive David Gammon, Non-Executive Karen Slatford, Non-Executive John Weston, Senior Independent Director The company paid for sufficient directors and officer’s indemnity insurance during the period, and to the date of approval of these financial statements, to enable the directors to carry out their duties. The beneficial interests of the directors holding office on 31 December 2017 in the issued share capital of the company were as follows: Ordinary share capital £0.01 shares Tom Burnet, Executive Chairman (1) John Alder, Executive Steve Brown, Executive David Gammon, Non-Executive Karen Slatford, Non-Executive (Appointed 24 March 2016) John Weston, Senior Independent Director (1) Shares held by the employee benefit trust of the Company As at 31 December 2017 426,909 6,612 633,916 48,000 - 165,144 Details of the directors' share options are disclosed within the Directors’ remuneration report. As at 1 January 2017 426,909 6,612 633,916 48,000 - 165,144 Financial instruments Details of the Group's financial risk management objectives and policies, including the use of financial instruments, are included within the accounting policies in note 4 to the financial statements. Substantial shareholdings As at 31 December 2017 the company had been notified that the following were interested in 3% or more of the ordinary share capital of the company: Shareholder Hargreave Hale Limited Standard Life Investments Limited BlackRock Investment Management Allianz Global Investors Old Mutual Global Investors Mr Leonard Sim Number of ordinary shares % of Issued ordinary share capital 2,957,618 2,843,497 2,796,560 1,502,114 810,394 804,635 11.21% 10.78% 10.60% 5.70% 3.07% 3.05% 15 accesso Technology Group plc Report of the directors (continued) for the financial year ended 31 December 2017 Annual general meeting The annual general meeting of the company will be held on Tuesday, 22nd May 2018. The notice convening the meeting is enclosed with these financial statements. Branch registration The company operates a branch in Germany. Corporate governance The Board of directors comprises three Executive directors, one of whom is the Chairman, and three independent Non-Executive directors. The company holds board meetings regularly throughout the year at which financial and other reports are considered. The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and major items of expenditure. The committees of the Board The following committees have been established to assist the Board in fulfilling its responsibilities: Audit committee The members of the Audit Committee are David Gammon, who chairs the committee, John Weston and Karen Slatford. The committee met three times during the year to fulfil its duties. The Chairman, Chief Executive Officer, Chief Financial Officer and external auditor attended meetings by invitation. The committee is comprised of independent Non-Executive directors only and its terms of reference are to promote appropriate standards of integrity, financial reporting, risk management and internal controls. This committee is responsible for overseeing the involvement of the Group’s auditor in the planning and review of the Group’s financial statements, any other formal announcements relating to the Group’s financial performance, for recommending the appointment and fees of its auditor, and for discussing with the auditor the findings of the audit and issues arising from the audit. It reviews the Group’s compliance with accounting, legal and listing requirements. It is also responsible, along with the Board, for reviewing the effectiveness of the systems of internal control. The committee considers the independence and objectivity of the auditors with regard to the way in which they conduct their audit duties. The committee looks to ensure that the auditor’s independence is not compromised by their undertaking of non-audit services. Non-audit/tax advisory services are benchmarked by management to ensure value for money, auditor objectivity and independence of advice. The Audit Committee’s recommendation is that KPMG LLP be appointed as the company’s auditor and an appropriate resolution will be put before the shareholders at this year’s annual general meeting. Remuneration committee The members of the Remuneration Committee are John Weston, David Gammon, and Karen Slatford, who chairs the committee. The full committee met three times during the year to fulfil its duties. The committee considers and approves specific remuneration packages for each Executive director. In accordance with guidelines set by the Board, the committee determines the Group’s policy on remuneration of senior executives and the operation of share option schemes, the grant of options, and the implementation and operation of other long-term incentive arrangements. Remuneration of Non-Executive directors is set by the Executive directors. It is considered that the composition and size of the Board does not warrant the appointment of a nominations committee and appointments are dealt with by the Board as a whole. The need to appoint such a committee is subject to review by the Board. Going concern After making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, with an underlying business that has good revenue visibility and strong cash generation, continues to perform well, a confident Group outlook for 2018, and a strong balance sheet and cash position and significant headroom to its borrowing facility. For this reason, the Board continues to adopt the going concern basis in preparing the accounts. 16 accesso Technology Group plc Report of the directors (continued) for the financial year ended 31 December 2017 Disabled employees The Group's policy is one of equal opportunity in the selection, training, career development and promotion of staff. The Group has a policy not to discriminate against disabled employees for those vacancies that they are able to fill and will provide facilities, equipment and training to assist any disabled persons employed. All necessary assistance with initial training courses will be given. Once employed, a career plan will be developed so as to ensure suitable opportunities for each disabled person. Arrangements will be made, wherever possible, for re-training employees who become disabled to enable them to perform work identified as appropriate to their aptitudes and abilities. Employees The Group's policy is to consult and engage with employees, by way of meetings, surveys and through personal contact by directors and other senior executives, on matters likely to affect employees' interests. Information on matters of concern to employees is given in meetings, handouts, letters and reports, which seek to achieve a common awareness on the part of all employees on the financial and economic factors affecting the Group's performance. Relations with shareholders The company and Board recognise the importance of developing and maintaining good relationships with all the various categories of shareholders and devotes significant effort and resource in this respect. There have been regular dialogues with shareholders during the year including holding briefings with analysts and other investors, including staff shareholders. The company also uses the annual general meeting as an opportunity to communicate with its shareholders. All directors are expected to attend the annual general meeting with the chairman of the audit and remuneration committees being available to answer shareholders’ questions. Notice of the date of the 2018 annual general meeting is included with this report. Separate resolutions on each substantially separate issue, in particular any proposal relating to the annual report and accounts, will be made at the annual general meeting. Website publication The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. Statement as to disclosure of information to auditor So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Group's auditor is unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Group's auditor is aware of that information. Auditor A resolution approving the re-appointment of KPMG LLP will be proposed at the forthcoming annual general meeting. On behalf of the Board John Alder Chief Financial Officer 26 March 2018 17 accesso Technology Group plc Directors’ remuneration report for the financial year ended 31 December 2017 This report is for the year to 31 December 2017 and sets out the remuneration details in respect of the Executive and Non-Executive Directors of the Company. As an AIM-quoted company, the information provided is disclosed to fulfil the requirements of AIM Rule 19. Accesso Technology Group plc is not required to comply with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. Remuneration Remuneration of the Executive Directors is designed to ensure that the Group achieves its potential and increases shareholder value. In respect of all aspects of the Executives remuneration package, the objective is to ensure that the Group attracts and retains high calibre Executives with the skills, experience and motivation necessary to direct and manage the affairs of the Group. Base remuneration consists of salary, retirement benefits and other benefits, such as the provision of medical and life insurance arrangements. In terms of retirement benefits, the Executive Chairman, Chief Executive and the Chief Financial Officer are all entitled to receive a payment in lieu of a pension or a matching contribution to a retirement scheme operated by a Group company. In addition, annual bonuses and Long-Term Incentive Programs (LTIPs) are seen as an important element of each Director’s total remuneration and are designed to drive and reward exceptional performance. The Remuneration Committee The Board has appointed a remuneration committee consisting of independent non-executive directors John Weston, David Gammon and Karen Slatford, who chairs the committee. The committee takes regard of the return to the shareholders in its deliberations. It reviews the performance of the executive directors, sets their remuneration, considers the grant of options under any of the share option scheme and ensures that the Executive Directors are properly rewarded and motivated. In addition, they provide guidance on pay and conditions for other employees in the Group. The Remuneration Committee meets on an “as required” basis. The Remuneration Committee reviews remuneration of the Executives in light of market conditions, performance and developments in good corporate governance, whilst taking account of the Company’s status as a larger AIM company. Remuneration is benchmarked against similar listed companies and takes into account company performance and any increase in scale and complexity, the role, experience and performance of the individual Director, and average workforce salary adjustments within the Company. Executive Directors are entitled to be considered for the grant of awards under a Long-Term Incentive Plan (“LTIP”). The over-riding objective of this plan is to drive and reward exceptional performance, while aligning the interests of Executives and shareholders. The awards currently take the form of nominal cost options over a specified number of Ordinary Shares. Awards are released to participants after a performance period of three years, subject to certain performance and service conditions being met. The LTIP rewards the future performance of the Executive Directors and certain other employees by linking the size of the award to the achievement of Group performance targets. Participation is at the discretion of the Remuneration Committee and will typically be made annually based on a percentage of annual salary. The Remuneration Committee will make LTIP awards at a level they believe is consistent with its underlying objective to attract and retain high calibre Executives. The maximum annual award permissible under the plan is 200% of salary. The performance conditions for the LTIP scheme are normally related to the achievement of stringent compound share price growth rates from the date of the award. The specific performance conditions related to each award that has been made are set out within this report. Performance and decisions on remuneration taken in 2017 Salaries are normally reviewed annually, in March, and any change applied retrospectively to the beginning of the year. In light of the criteria presented above, the Remuneration Committee determined, from 1 January 2017, to increase the salary of the Executive Chairman by 2.75% to £298,488, to increase the salary of the CEO by 2.75% to $359,624 and to increase the salary of the CFO by 5% to $313,250. The Company produced strong financial results for the 2017 financial year with adjusted earnings per share (“EPS”) 10.2% above the prior year and basic EPS 20.3% higher and the Group completed two important strategic acquisitions. For 2017, the bonus awarded to the Executive Chairman and CEO was 120% (maximum: 150%) of base pay and for the CFO was 100% (maximum: 120%) of base pay. During 2017 the first awards of share options under the Shareholder Approved 2014 LTIP Scheme also matured. The target CAGR for full vesting of LTIPs issued in 2014 was 15% per year over 3 years. This target has been substantially exceeded and, therefore, 100% of the options granted have vested. No additional awards were made to the Executive Directors in 2017. 18 accesso Technology Group plc Directors’ remuneration report (continued) for the financial year ended 31 December 2017 Non-Executive Director remuneration The Senior Independent Director and the other Non-Executive Directors remuneration comprises only fees. They are reviewed annually with changes effective from 1 January each year. Their fees are approved by the Board on the recommendation of the Executive Chairman. The Non-Executive Directors are not involved in any decisions about their own remuneration. The Senior Independent Director and the other independent Non-Executive Directors are entitled to be reimbursed for reasonable expenses. Directors Remuneration for the year ended 31 December 2017 Salary $000 Fees $000 Bonus $000 Share- based payments $000 Other Benefits $000 2017 Total $000 2016 Total $000 2017 2016 Retirement Contributions $000 $000 Non - Executive Directors Matt Cooper (1) David Gammon (2) Karen Slatford John Weston - - - - - 52 52 77 - - - - - - - - - - - - 52 52 77 Executive Directors John Alder Steve Brown Tom Burnet Leonard Sim (3) Total (1) Resigned 18 March 2016 (2) Fee payments in respect of the services provided by David Gammon were paid to Rockspring (3) Resigned 16 March 2016 313 360 385 - 1,058 313 432 480 - 1,225 121 136 162 - 419 - - - - 181 21 14 2 - 37 768 942 1,029 - 2,920 11 51 31 78 615 758 812 18 2,374 - - - - 9 - 13 - 22 - - - - 9 - 17 1 27 Summary of share option and LTIP awards The share option and LTIP awards of the directors are set out below: Share Options John Alder (1) David Gammon (2) 31 December 2016 Exercised in the period 31 December 2017 Exercise price Date from which exercisable Expiry Date 100,000 80,000 - (40,000) 100,000 40,000 156p 156p 10 Mar 12 10 Mar 12 9 Mar 21 9 Mar 21 LTIP (3) John Alder Steve Brown - - - - - - - - - (1) Options may only be exercised when the share price is above £1.82 (2) Held by Rockspring (3) LTIP awards represent the maximum award if the performance conditions are fully met 29,818 42,127 59,731 32,027 42,463 69,653 45,395 47,805 82,960 29,818 42,127 59,571 32,027 42,463 69,653 45,395 47,805 82,960 Tom Burnet 1p 1p 1p 1p 1p 1p 1p 1p 1p 8 July 2017 15 Apr 2018 14 Mar 2019 8 July 2017 15 Apr 2018 14 Mar 2019 8 July 2017 15 Apr 2018 14 Mar 2019 - - - - - - - - - Employee benefit trust share subscription and Tom Burnet equity incentive plan On 10 March 2011, the Remuneration Committee of the Board recommended, and the Board approved, an incentive arrangement pursuant to which the company lent its employee benefit trust (‘’EBT’’) £1,331,956, and the EBT subscribed for 853,818 new ordinary shares of 1 penny each in the company (‘’New Ordinary Shares’’). 19 accesso Technology Group plc Directors’ remuneration report (continued) for the financial year ended 31 December 2017 The EBT plan subsequently granted Tom Burnet an interest in the growth in value above a share price of £2 per share in the New Ordinary Shares. Cash reserves of the Group will not be impacted when this is realised. In addition, the EBT granted Tom Burnet an option to acquire, in relation to half of the New Ordinary Shares (426,909), the EBT’s interest in the value between £1.30 and £2, provided that at the date of exercise the share price is above £1.82. On 5 April 2016, Tom Burnet terminated his interest in 426,909 of the New Ordinary Shares and the EBT subsequently disposed of these in order to settle its obligations relating to the value above £2. The remaining shares are registered in the name of Lo-Q (Trustees) Limited, a wholly owned subsidiary of the company. John Alder and David Gammon are the directors of Lo-Q (Trustees) Limited. Long-Term Incentive Plan (LTIP) Awards There have been three awards to the executive Directors since the introduction of the LTIP scheme in 2014. The performance conditions are identical for each executive director subject to the award. No awards were made during the year ended 31 December 2017. Date of Award Vesting Period (months) Period stock to be held following exercise (months) Performance Conditions 8 July 2014 36 6 Compound Annual Growth Rate (CAGR) of share price, from date of award to vesting date, for maximum vesting of award: 15% CAGR of share price for partial vesting: 10% 100% of the maximum number of Ordinary Shares pursuant to the Award shall vest and become exercisable if the average share price during the thirty days prior to the Release Date (“ASP”) is 803.40 pence or more. The Award shall vest in respect of 30% of the maximum number of Ordinary Shares comprised in it if the ASP is 748.37 pence. An ASP between 748.37 pence and 803.40 pence, shall result in the partial vesting on a straight-line basis between 30% and 100%. The Awards shall not vest at all if the ASP is less than 748.37 pence. 15 April 2015 36 6 CAGR of share price for maximum vesting of award: 15% CAGR of share price for partial vesting: 10% 100% of the maximum number of Ordinary Shares pursuant to the Award shall vest and become exercisable if the average share price during the thirty days prior to the Release Date (“ASP”) is 864.37 pence or more. The Award shall vest in respect of 30% of the maximum number of Ordinary Shares comprised in it if the ASP is 805.16 pence. An ASP between 805.16 pence and 864.37 pence, shall result in the partial vesting on a straight-line basis between 30% and 100%. The Awards shall not vest at all if the ASP is less than 805.16 pence. 14 September 2016 30 6 CAGR of share price for maximum vesting of award: 20% CAGR of share price for partial vesting: 10% 100% of the maximum number of Ordinary Shares pursuant to the Award shall vest and become exercisable if the average share price during the thirty days prior to the Release Date (“ASP”) is 1583 pence or more. An ASP between 1219 pence and 1583 pence, shall result in the partial vesting on a straight-line basis between 57% and 100% The Awards shall not vest at all if the ASP is less than 1219 pence. John Alder Chief Financial Officer 26 March 2018 20 accesso Technology Group plc Statement of Directors’ responsibilities in respect of the annual report and the financial statements 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 group and parent company financial statements for each financial year. Under that law they have elected to prepare both the group and the parent company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law. 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 parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant and reliable; • • state whether they have been prepared in accordance with IFRSs as adopted by the EU; assess the group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and use the going concern basis of accounting unless they either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. • The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. On behalf of the Board John Alder Chief Financial Officer 26 March 2018 21 Independent auditor’s report to the members of accesso Technology Group plc Overview Materiality: Group financial statements as a whole Coverage $360,000 (2016: $465,000) 4.3% (2016: 5%) of Group profit before tax and exceptional items 90% (2016: 81%) of revenue Risks of material misstatement vs 2016 New risks Valuation of acquisition intangibles (Ingresso and TE2) ▲ Recurring risks Goodwill impairment R&D capitalisation Recoverability of parent company’s investment in subsidiaries ◄► ◄► ◄► 1. Our opinion is unmodified We have audited the financial statements of accesso Technology Group plc (“the Company”) for the year ended 31 December 2017 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Company Statement of Financial Position, Consolidated Statement of Cash Flow, Company Statement of Cash Flow, Statement of Changes in Group Equity, Statement of Changes in Company Equity and the related notes, including the accounting policies in note 2. 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 31 December 2017 and of the Group’s profit for the year then ended; — the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU); — the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and — the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. 22 2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, 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. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows: Valuation of acquisition intangibles (Ingresso and TE2) ($41.9m, 2016: $nil) Refer to page 39 (accounting policy) and pages 52 to 57 (financial disclosures). The risk Our response Subjective valuation Our procedures included: The group acquired Ingresso in March 2017 for $28.3m and TE2 in July 2017 for $74.3m. The assets and liabilities acquired have been measured at their acquisition-date fair values and previously unrecognised intangible assets recognised on the balance sheet. The identification and measurement of these intangible assets requires judgment and the application of complex valuation techniques. Acquisition intangibles are also valued using cash flow models and therefore the recoverable amount is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows. — Methodology choice: Involving our own valuation specialists to assess whether the valuation methodology applied to each asset was appropriate; — Benchmarking assumptions: Comparing the key assumptions used in the cash flow and replacement cost models to externally available industry data or post-acquisition results. For replacement cost models the key assumptions are those relating to cost inputs and the relevant mark ups applied and for cash flow models, attrition and gross margin; — Assessing transparency: We assessed whether the group’s disclosures of the critical judgments reflected the risks inherent in the valuation of these intangible assets. 23 Recoverability of group goodwill and of parent’s investment in subsidiaries (Group: $117.3m; 2016: $43.9m; Parent: $73.4m; 2016: $37.8m) Refer to page 39 (accounting policy) and pages 52 to 57 (financial disclosures). The risk Our response Forecast-based valuation Our procedures included: Goodwill in the group and the carrying amount of the parent company’s investments in subsidiaries are significant and recoverability is dependent on achieving sufficient levels of future cash flows. These assets relate to businesses located in highly competitive markets resulting in pricing pressures which may impact future cash flows. The estimated recoverable amount is therefore highly subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows. — Benchmarking assumptions: Comparing the assumptions used in cash flow forecasts to externally derived data in relation to key inputs such as long term growth and inputs to discount rates. Inputs to discount rate include risk free rates, size premium and market risk premium; — Historical comparisons: Comparing previous forecast revenue growth and EBITDA margins to actual performance to assess the historical accuracy of the group’s forecasting; — Sensitivity analysis: Performing breakeven analysis on the key assumptions noted above, including discount rate and projected cash flows; — Assessing transparency: We considered whether the group’s disclosures about the sensitivity of the outcome of the impairment assessment to changes in key assumptions reflected the risks inherent in the valuation of goodwill. We also assessed the adequacy of the parent company’s disclosures in respect of the investment in subsidiaries. 24 Capitalised development costs Subjective estimate Our procedures included: The risk Our response (Costs capitalised in the year $12.4m, 2016: $11.6m) Refer to page 39 (accounting policy) and pages 52 to 57 (financial disclosures). Eligible employment costs in respect of software developers working to develop new software products are capitalised if they meet the relevant criteria, which materially impacts the groups’ profitability. There is judgement involved in determining whether costs incurred meet the criteria for capitalisation as the future financial and technical feasibility of new products is often uncertain. There is also judgment required to identify those costs that are directly attributable to development projects from those that relate to speculative R&D and bug fixes. — Tests of detail: For a sample of projects we assessed the allocation of time to development projects with reference to the developers’ timesheets; — Test of detail: For a sample of development projects where costs were capitalised we corroborated the directors’ analysis that the projects met the criteria for capitalisation by comparing to sales forecasts and obtaining evidence of the project being technically feasible; — Assessing transparency: We assessed the adequacy of the Group’s disclosures in respect of the judgements made in relation to capitalised development costs. 3. Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at $360,000 (2016: $465,000), determined with reference to a benchmark of group profit before tax normalised to exclude acquisition related costs, deferred and contingent payments and profit recognised on reduction of earn out liability incurred in the year, of $8,280,000 (2016: $10,102,000, of which it represents 4.3% (2016: 5%). Materiality for the parent company financial statements as a whole was set at $149,000 (2016: $131,000), determined with reference to a benchmark of parent company revenue, of which it represents 1% (2016: 5% of profit before tax). We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $18,000 (2016: $23,000), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the group’s 18 (2016: 12) reporting components, we subjected 6 (2016: 3) to full scope audits for group purposes and 0 (2016: 1) to an audit of account balances. The components for which we performed an audit of account balances in 2016 were not individually financially significant enough to require an audit for group reporting purposes in the prior year, but did present specific individual risks that needed to be addressed. The components within the scope of our work accounted for the percentages illustrated opposite. For the residual components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no significant risks of material misstatement within these. The work on all 6 of the components (2016: all 4 of the components), including the audit of the parent company, was performed by the group team. Component materiality ranged from $100,000 to $200,000 (2016: $150,000 to $250,000), subject to the mix of size and risk profile of the Group across the components. The group team performed procedures on the items excluded from normalised group profit before tax. 25 4. We have nothing to report on going concern We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects. 5. We have nothing to report on the other information in the Annual Report The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and Directors’ report Based solely on our work on the other information: — we have not identified material misstatements in the strategic report and the Directors’ report; — in our opinion the information given in those reports for the financial year is consistent with the financial statements; and — in our opinion those reports have been prepared in accordance with the Companies Act 2006. 6. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: a. adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or b. the parent Company financial statements are not in agreement with the accounting records and returns; or c. certain disclosures of Directors’ remuneration specified by law are not made; or d. we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. 7. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 21, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and 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 they 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 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 our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. 8. The purpose of our audit work and to whom we owe our responsibilities 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 2006. 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. Simon Haydn-Jones (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Arlington Business Park Reading RG7 4SD 27 March 2018 26 accesso Technology Group plc Consolidated statement of comprehensive income for the financial year ended 31 December 2017 Revenue Cost of sales Gross profit Administrative expenses (including credit of $3,228 ($’000) (2016: $nil) related to reversal of Ingresso earn out liability – see note 13) Operating profit Finance expense Finance income Profit before tax Income tax benefit / (expense) Profit for the period Other comprehensive income Items that will be reclassified to income statement Exchange differences on translating foreign operations Total comprehensive income Notes 2017 $000 2016 $000 6 133,429 102,511 (59,984) (47,186) 73,445 55,325 (64,204) (44,813) 9 9 10 9,241 (2,099) 24 7,166 2,735 9,901 166 10,067 10,512 (414) 4 10,102 (2,576) 7,526 (1,579) 5,947 All profit and comprehensive income is attributable to the owners of the parent Earnings per share expressed in cents per share: Basic Diluted 12 12 40.83 38.70 33.95 32.02 All activities of the company are classified as continuing The accompanying notes on pages 34 to 65 form part of these consolidated financial statements 27 accesso Technology Group plc Consolidated statement of financial position as at 31 December 2017 Registered Number: 03959429 Registered address: Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN 31 December 2017 31 December 2016 Notes $000 $000 Assets Non-current assets Intangible assets Property, plant and equipment Deferred tax assets Current assets Inventories Trade and other receivables Income tax receivable Cash and cash equivalents Liabilities Current liabilities Trade and other payables Finance lease liabilities Income tax payable Net current (liabilities) / assets Non-current liabilities Deferred tax liabilities Finance lease liabilities Other non-current liabilities Borrowings Total liabilities Net assets Shareholders' equity Called up share capital Share premium Own shares held in trust Other reserves Retained earnings Merger relief reserve Translation reserve Total shareholders’ equity 13 14 10 16 17 18 10 18 19 20 198,298 3,400 8,937 210,635 506 19,761 - 28,668 48,935 49,874 9 613 50,496 (1,561) 14,629 - 3,024 16,140 33,793 84,289 175,281 411 105,207 (1,163) 14,453 39,820 19,641 (3,088) 175,281 81,612 3,494 6,008 91,114 491 10,232 681 5,866 17,270 11,242 54 - 11,296 5,974 9,990 9 - 9,298 19,297 30,593 77,791 357 28,150 (1,163) 9,242 29,919 14,540 (3,254) 77,791 The financial statements were approved by the Board of directors on 26 March 2018 and were signed on its behalf by: Tom Burnet Executive Chairman The accompanying notes on pages 34 to 65 form part of these consolidated financial statements 28 accesso Technology Group plc Company statement of financial position as at 31 December 2017 Registered Number: 03959429 Registered address: Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN 31 December 2017 31 December 2016 Notes $000 $000 Assets Non-current assets Intangible assets Investments in subsidiaries Property, plant and equipment Deferred tax asset Current Assets Inventories Trade and other receivables Income tax receivable Cash and cash equivalents Liabilities Current liabilities Trade and other payables Income tax payable Net current assets Non-current liabilities Deferred tax Borrowings Total liabilities Net assets Shareholders' equity Called up share capital Share premium Other reserves Retained earnings Merger relief reserve Translation reserve Total shareholders' equity 13 15 14 10 16 17 18 10 19 20 7,375 73,353 1,309 353 82,390 279 91,634 - 1,909 93,822 11,412 1,614 13,026 80,796 - 16,140 16,140 29,166 147,046 411 105,207 7,138 24,806 19,641 (10,157) 147,046 6,426 37,806 1,353 1,014 46,599 303 16,306 238 1,303 18,150 1,258 - 1,258 16,892 1,069 9,298 10,367 10,625 53,124 357 28,150 4,439 20,364 14,540 (14,726) 53,124 The financial statements were approved by the Board of directors on 26 March 2018 and were signed on its behalf by: Tom Burnet Executive Chairman The accompanying notes on pages 34 to 65 form part of these consolidated financial statements 29 accesso Technology Group plc Consolidated statement of cash flow for the financial year ended 31 December 2017 Cash flows from operations Profit for the period Adjustments for: Depreciation Amortisation on acquired intangibles Amortisation on development costs Amortisation on other intangibles Share-based payment Finance expense Finance income Loss on disposal of fixed assets Foreign exchange gain Income tax (benefit) / expense (Increase) / decrease in inventories Increase in trade and other receivables Increase in trade and other payables Cash generated from operations Tax paid Net cash inflow from operating activities Cash flows from investing activities Purchase of subsidiary, net of cash acquired Purchase of intangible fixed assets Capitalised internal development costs Purchase of property, plant and equipment Interest received Net cash used in investing activities Cash flows from financing activities Share issue Sale of shares held in trust Interest paid Payments to finance lease creditors Cash paid to refinance Proceeds from borrowings Repayments of borrowings Net cash generated from / (used) in financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange gain / (loss) on cash and cash equivalents Cash and cash equivalents at end of year Notes 2017 $000 2016 $000 9,901 7,526 14 13 13 13 7 9 9 14 10 13 13 14 19 1,321 8,591 4,166 44 1,089 2,099 (24) 12 (241) (2,735) 24,223 (15) (2,792) 11,681 33,097 (224) 32,873 (78,074) - (12,395) (936) 24 1,393 4,227 1,927 67 987 414 (4) 5 (1,465) 2,576 17,653 70 (1,152) 2,061 18,632 (810) 17,822 - (84) (11,591) (1,948) 4 (91,381) (13,619) 77,112 - (741) (54) (410) 31,376 (26,037) 81,246 22,738 5,866 64 28,668 1,313 1,240 (414) (51) (184) 5,550 (10,825) (3,371) 832 5,307 (273) 5,866 The accompanying notes on pages 34 to 65 form part of these consolidated financial statements 30 accesso Technology Group plc Company statement of cash flow for the financial year ended 31 December 2017 Cash flows from operations Profit for the period Adjustments for: Amortisation on development costs Depreciation and amortisation on other fixed assets Share-based payment Finance expense Finance income Foreign exchange loss / (gain) Income tax expense Decrease in inventories (Decrease) / increase in trade and other receivables (Decrease) / increase in trade and other payables Cash (used in) / generated from operations Tax paid Net cash (outflow) / inflow from operating activities Cash flows from investing activities Purchase of subsidiary Purchase of intangible fixed assets Capitalised internal development costs Purchase of property, plant and equipment Interest received Net cash used in investing activities Cash flows from financing activities Share Issue Interest paid Cash paid to refinance Repayments of borrowings Proceeds from borrowings Notes 13 14 13 13 14 19 2017 $000 4,442 1,323 468 289 1,890 (3,944) 79 2,028 6,575 24 (64,971) (1,624) (59,996) (79) (60,075) (18,736) - (1,642) (307) 2 (20,683) 77,112 (741) (410) 31,376 (26,037) 2016 $000 6,096 544 567 276 414 (1) (651) 990 8,235 57 2,356 11 10,659 (393) 10,266 - (84) (4,883) (947) 1 (5,913) 1,313 (414) (184) 5,550 (10,825) Net cash generate from / (used in) from financing activities 81,300 (4,560) Increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange gain / (loss) on cash and cash equivalents Cash and cash equivalents at end of year 542 1,303 64 1,909 (207) 1,734 (224) 1,303 The accompanying notes on pages 34 to 65 form part of these consolidated financial statements 31 accesso Technology Group plc Consolidated statement of changes in equity for the financial year ended 31 December 2017 Share capital $000 Share premium Retained earnings Merger relief reserve Other reserves Own shares held in trust Translation reserve $000 $000 $000 $000 $000 $000 Balance at 31 December 2016 357 28,150 29,919 14,540 9,242 (1,163) (3,254) Attributable to equity holders $000 77,791 Comprehensive income for the year Profit for period Other comprehensive income Total comprehensive income for the year - - - - - - 9,901 - 9,901 77,057 - - 54 Contributions by and distributions to owners Issue of share capital Share-based payments Equity-settled deferred consideration Change in tax rates Share option tax credit Total contributions by and distributions by owners 54 - - - - - - 77,057 - - - - - - - - - 5,101 - - - - - - - - 1,089 1,314 (2,213) 5,021 5,101 5,211 - - - - - - - - - - 166 9,901 166 166 10,067 - - - - - - 82,212 1,089 1,314 (2,213) 5,021 87,423 411 105,207 39,820 19,641 14,453 (1,163) (3,088) 175,281 Balance at 31 December 2017 Balance at 31 December 2015 Comprehensive income for the year Profit for period Other comprehensive income Total comprehensive income for the year - - - - - - Contributions by and distributions to owners Issue of share capital Share-based payments Reduction of shares held in trust 4 - - 1,309 - - - - - - - - Removal of NCI Change in tax rates Share option tax credit Total contributions by and distributions by owners Balance at 31 December 2016 7,526 - 7,526 - - 222 2 - - - - - - - - - - - - - - - - 987 - - (11) 4,796 - - - - - 973 - - - 5,772 973 - 7,526 (1,579) (1,579) (1,579) 5,947 - - - - - - - 1,313 987 1,195 2 (11) 4,796 8,282 4 1,309 224 357 28,150 29,919 14,540 9,242 (1,163) (3,254) 77,791 32 Non- controlling interest $000 - - - - - - - - - - - Total $000 77,791 9,901 166 10,067 82,212 1,089 1,314 (2,213) 5,021 87,423 175,281 - - - - - (2) - - (2) - 7,526 (1,579) 5,947 1,313 987 1,195 - (11) 4,796 8,280 77,791 353 26,841 22,169 14,540 3,470 (2,136) (1,675) 63,562 2 63,564 accesso Technology Group plc Company statement of changes in equity for the financial year ended 31 December 2017 Share capital $000 357 Share premium $000 Retained Earnings $000 28,150 20,364 Balance at 31 December 2016 Comprehensive income for the year Profit for period - Other comprehensive income - Total comprehensive income for the year - Contributions by and distributions by owners Issue of share capital Share-based payments Equity-settled deferred consideration Change in tax rates Share option tax credit 54 - - - - - - - 77,057 - - - - Merger relief reserve $000 14,540 - - - 5,101 - - - - Other reserves $000 Translation reserve $000 Total $000 4,439 (14,726) 53,124 - - - - 1,089 1,314 - 296 - 4,569 4,442 4,569 4,569 9,011 - - - - - - 82,212 1,089 1,314 - 296 84,911 4,442 - 4,442 - - - - - - 54 77,057 5,101 2,699 411 105,207 24,806 19,641 7,138 (10,157) 147,046 353 26,841 14,268 14,540 2,643 (4,691) 53,954 Total contributions by and distributions by owners Balance at 31 December 2017 Balance at 31 December 2015 Comprehensive income for the year Profit for period Other comprehensive income Total comprehensive income for the year - - - Contributions by and distributions by owners Issue of share capital Share-based payments 4 - - 4 Share option tax credit Total contributions by and distributions by owners Balance at 31 December 2016 - - - 1,309 - - 1,309 6,096 - 6,096 - - - - - - - - - - - - - - - 987 (11) 820 1,796 - 6,096 (10,035) (10,035) (10,035) (3,939) - - - - 1,313 987 (11) 820 3,109 357 28,150 20,364 14,540 4,439 (14,726) 53,124 33 accesso Technology Group plc Notes to the consolidated financial statements for the financial year ended 31 December 2017 1. Reporting entity accesso Technology Group plc is a public limited company incorporated in the United Kingdom, whose shares are publicly traded on the AIM market. The company is domiciled in the United Kingdom and its registered address is Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN. These consolidated financial statements comprise the company and its subsidiaries (together referred to as the “Group”). The Group's principal activities are the development and application of ticketing, mobile and eCommerce technologies, and licensing and operation of virtual queuing solutions for the attractions and leisure industry. The eCommerce technologies are generally licensed to operators of venues, enabling the online sale of tickets, guest management, and point-of-sale (“POS”) transactions. The virtual queuing solutions are installed by the Group at a venue, and managed and operated by the Group directly or licensed to the operator for their operation. 2. Significant accounting policies Basis of accounting The Group's financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union (“adopted IFRSs”). The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated. New standards that have been adopted during the period • • • • • Annual improvements to IFRSs IAS 16 and 38: Amendments to Clarification of Acceptable Methods of Depreciation and Amortisation IAS 27: Amendments related to Equity Method in Separate Financial Statements IAS 11: Amendments relating to Acquisitions of Interest in Joint Operations IAS 7: Amendments related to Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The adoption of the above has not had a material impact on the financial statements during the period ended 31 December 2017. New standards and interpretations not yet adopted A number of new standards, amendments to standards, and interpretations are not effective for 2017, and therefore have not been applied in preparing these accounts. The effective dates shown are for periods commencing on the date quoted. • • • • IFRS 15 Revenue from Contracts with Customers (effective for year ending 31 December 2018) IFRS 9 Financial Instruments (effective for year ending 31 December 2018) IFRS 16 Leases (effective for year ending 31 December 2019) Annual improvements to IFRSs Management have been considering the impact IFRS 15 and IFRS 9 will have on the Group’s financial statements in the period of initial application, and its review is still in process. Management is currently starting its assessment of the impact of IFRS 16 on the Group’s financial statements, but has not yet completed its assessment of the impact on the financial statements. The assessment is ongoing. IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, and IAS 11 Construction Contracts. The following areas are those management anticipate may have the greatest impact or are the most judgemental under the new standard: Queuing revenue The Group has developed virtual queuing technology which enables guests to virtually queue using proprietary software and hardware. The technology is installed in theme parks under agreement with the theme park operator. Revenue is earned as guests use the product while visiting the park and is recognised on either a gross or net basis, when the Group is acting as the principal or agent, respectively. 34 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Significant accounting policies (continued) Currently where revenue is recognised on a gross basis, the group recognise the entire fee payable by the park guest and recognises costs payable to the theme park operator. Where revenue is recognised on a net basis the group recognises only a portion of the fee payable by the park guest representing the services provided by the group to the theme park operator The factors in determining whether the Group is acting as principal or agent in the transaction are different under IFRS 15 than current guidance, and reflect who has control over the good or service prior to delivery to the end customer. In some agreements, management considers that the technology, hardware, and virtual queue provided to the end customer are controlled by the Group prior to transfer to the end customer. Effectively, the Group has purchased the right to operate and control the virtual queue, and accepts responsibility for staffing the sales office and operation, maintaining the concession from which the product is sold, and ensuring guest satisfaction. In other agreements, management considers that the Group has passed control of the technology, hardware, and virtual queue to the park operator, and has minimal responsibility for the operation. The Group will be responsible for maintenance and support of the technology, but not take part in daily operating decisions. These agreements generally take the form of a licensing contract. Management is still assessing the impact on the Group. Regardless of the outcome of its review, it will not result in an impact to net profit, as only the classification of revenue and cost of sales are impacted. Software licenses and maintenance and technical support The Group sells software licenses for its guest management and POS software, which requires a large initial investment and yearly maintenance and technical support. Additionally, it licenses its on-site ticketing system, requiring an annual payment. In regard to the guest management and POS software, the customer is required to purchase the yearly maintenance and technical support to maintain an active license. The fees are typically higher in the first year, with an upfront license fee payable, than in subsequent years, when only the annual support fee is payable. Under IFRS 15, these types of agreements are treated as containing an option for a renewal at a discounted price – the cost of the yearly support – after the initial up-front purchase of the license. Accordingly, the Group will defer revenue on the initial license sale and recognize a portion of the up-front license payment at the time of the subsequent annual renewal. Where no term is agreed, the contract renews perpetually until the customer declines the yearly support, or the Group terminates the contract. In these circumstances, the initial fee will be spread over 5 years, which is in line with the expected useful life of software. For on-site ticketing licenses, the customer generally agrees to a fixed term over which it is required to pay annual instalments if the agreement is longer than one year. As the customer has control of the license upon delivery by the Group, the total amount of revenue related to the license, for the term of the agreement, will be recognized at the point of delivery. This will create a receivable which future annual instalment payments will be applied against. Revenue related to maintenance and support of the license, such as updates and technical support, will be spread over the contract term. Contract costs The Group pays commission on certain contracts and currently expenses the cost when incurred, unless there is a clawback provision. IFRS 15 requires incremental costs associated with obtaining a contract, such as commissions, be capitalised and amortised over the life of the contract. Accordingly, commissions will become an asset on the consolidated statement of financial position and tested annually for impairment. Transition The Group plans to adopt IFRS 15 using the retrospective method, using the practical expedient in paragraph C5(c) of the standard, allowing non-disclosure of the amount of the transaction price allocated to the remaining performance obligations or an explanation of when the Group expects to recognize that amount as revenue for all reporting periods presented before the date of initial application – i.e. 1 January 2018. IFRS 9 Financial Instruments IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities, and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. Management’s assessment of the impact on the financial statements is still ongoing. 35 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Significant accounting policies (continued) Functional and presentation currency The presentation currency of the Group is US dollars (USD). Items included in the financial statements of each of the Group’s entities are measured in the functional currency of each entity. The Group used the local currency as the functional currency including the parent company, where the functional currency is sterling. Basis of consolidation The consolidated financial statements incorporate the results of accesso Technology Group plc and all of its subsidiary undertakings as at 31 December 2017 using the acquisition method. Subsidiaries are all entities over which the Group has the ability to affect the returns of the entity and has the rights to variable returns from its involvement with the entity. The results of subsidiary undertakings are included from the date of acquisition. The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are written off to the Group income statement in the period incurred. The acquiree’s identifiable assets, liabilities, and contingent liabilities that meet the conditions under IFRS 3 are recognised at their fair value at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities, and contingent liabilities recognised. Disclosure and details of the subsidiaries are provided in note 15. Investments, including the shares in subsidiary companies held as fixed assets, are stated at cost less any provision for impairment in value. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. Lo-Q (Trustees) Limited, a subsidiary company that holds an employee benefit trust on behalf of accesso Technology Group plc, is under control of the Board of directors and hence has been consolidated into the Group results. All intra-Group transactions, balances, income and expenses are eliminated on consolidation. Foreign currency Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the rates ruling when the transactions occur. Monetary assets and liabilities denominated in foreign currency are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign operations The assets and liabilities of foreign operations, including goodwill, are translated into USD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into USD at the rates ruling when the transactions occur, or appropriate averages. Foreign currency differences on translating the opening net assets at an opening rate and the results of operations at actual rates are recognised in OCI, and accumulated in the translation reserve. Retranslation differences recognised in other comprehensive income will be reclassified to profit or loss in the event of a disposal of the business, or the Group no longer has control or significant influence. Revenue recognition Revenue primarily arises from the operation and licensing of virtual queuing solutions, the development and application eCommerce ticketing, professional services, and license sales in relation to point of sale and guest management software and related hardware. 36 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Significant accounting policies (continued) Revenue is recognized when the significant risks and rewards of ownership have been transferred to the customer, the amount of revenue can be reliably estimated, and recovery of consideration is probable. Revenue is measured net of discounts and service credits. In relation to virtual queuing, the Group contracts with theme park operators to offer the technology and service to park guests and share the profit or revenue generated by purchases by park guests. The Group’s contracts are either a profit- share, where the Group and the park split the profit of the operation, or a revenue-share, where the Group receives a percentage of revenue of sales at the park. Under both types of contracts, revenue is recognised when the guest utilises the technology. Where the contract is a profit-share, revenue represents the total payment by the park guest, net of sales taxes, to utilise the technology. The park’s share is deducted in cost of sales within the statement of comprehensive income. Typically in these agreements, the Group accepts responsibility for the operation within the park, including sales, operation, maintenance of the equipment and facility, and guest relations. In a revenue-share contract, only the Group’s share of the revenue generated by the technology, as per the customer agreement, is recognised as revenue. Any costs incurred by the Group are deducted within cost of sales within the statement of comprehensive income. The Group generally does not influence operation of the product, sales, maintenance, guest relations, or employees. Ticketing revenue is generated from owners or operators of venues utilising the Group’s technology, and is earned either by a per-ticket fee or as a percent of the total transaction of ticket purchases by guests or visitors of the venue. It is recognised at the time of the sale to the guest or visitor, and the fee collected for the sale of the ticket is not refundable to the customer. The Group provides implementation, support, and customisation services (collectively, “professional services”) in relation to its products. Professional services revenue is either earned on a time and materials basis as the services are provided to the customer, or on a percentage of completion method when it’s a fixed price contract. Revenue in relation to point of sale and guest management software licences is earned via installing software onto a customer’s owned-hardware and giving the customer the ability to use the software. While installations often occur over a period of time, no revenue is recognized until installation is complete and accepted by the customer. The revenue related to the license fee for the software purchased by the customer is recognized at the time installation is complete, as at the time of the installation the Group has fulfilled its obligation to provide the customer the software, and there is no recourse for revenue to be refunded. Any revenue relating to an on-going support obligation is deferred and recognised over the period of such obligation. Customers of point-of-sale and guest management software are also charged an annual maintenance and support fee, calculated as a percentage of the original cost of the software, each year they remain a customer. This revenue is recognized rateably over the support term, which is generally 12 months. If the customer cancels during the term, the Group is entitled to retain the full amount of the consideration. Interest expense recognition Expense is recognised as interest accrues, using the effective interest method, to the net carrying amount of the financial liability. Employee benefits Share-based payment arrangements The Group issues equity-settled share-based payments to full time employees. Equity-settled share-based payments are measured at the fair value at the date of grant, with the expense recognized over the vesting period, with a corresponding increase in equity. The amount recognised as an expense is adjusted to reflect the Group's estimate of shares that will eventually vest, such that the amount recognised is based on the number of awards that meet the service and non-market performance conditions at the vesting date. The fair value of Enterprise Management Incentive (EMI) and unapproved share options is measured by use of a Black- Scholes model, and share options issued under the Long-Term Incentive Plan (LTIP) are measured using the Monte Carlo method, due to the market-based conditions upon which vesting is dependent. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The LTIP awards contain market-based vesting conditions. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market 37 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Significant accounting policies (continued) vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. Pension costs Contributions to the Group's defined contribution pension schemes are charged to the Consolidated statement of comprehensive income in the period in which they become due. Property, plant and equipment Items of property, plant and equipment are stated at cost of acquisition or production cost less accumulated depreciation and impairment losses. Depreciation is charged so as to write off the cost of assets, less residual value, over their estimated useful lives, using the straight-line method, on the following bases: Plant, machinery, and office equipment Installed systems Furniture and fixtures Leasehold Improvements 20 - 33.3% of the original costs each year 25 - 33.3%, or life of contract, of the original costs each year 20% of the original costs each year Shorter of useful life of the asset or time remaining within the lease contract of the original costs each year Inventories The Group’s inventories consist of parts used in the manufacture and maintenance of its virtual queuing product, along with peripheral items that enable the product to function within a park. Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow- moving items. Inventories are calculated on a first in, first out basis. Park installations are valued on the basis of the cost of inventory items and labour plus attributable overheads. Net realisable value is based on estimated selling price less additional costs to completion and disposal. Deferred tax Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Consolidated and Company statements of financial position differs from its tax base, except for differences arising on: • • • the initial recognition of goodwill; the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities / (assets) are settled / (recovered). Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: • • the same taxable Group company; or different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. 38 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Significant accounting policies (continued) Current income tax The tax expense or benefit for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. See note 10 for further discussion on provisions related to tax positions. Goodwill and intangible assets Goodwill is carried at cost less any provision for impairment. Intangible assets are valued at cost less amortisation and any provision for impairment. Goodwill arising on business combinations (representing the excess of fair value of the consideration given over the fair value of the separable net assets acquired) is capitalised, and its subsequent measurement is based on annual impairment reviews, with any impairment losses recognised immediately in the income statement. Direct costs of acquisition are recognised immediately in the income statement as an expense. Externally acquired intangible assets Intangible assets are capitalised at cost and amortised to nil by equal instalments over their estimated useful economic life. Intangible assets are recognised on business combinations if they are separable from the acquired entity. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see note 13). The significant intangibles recognised by the Group and their useful economic lives are as follows: • • • • Trademarks over 3 years Patents over 20 years Customer relationships and supplier contracts over 1 to 15 years Intellectual property over 5 to 7 years Internally generated intangible assets and research and development Expenditure on internally developed products is capitalised if it can be demonstrated that: • • • • • • It is technically feasible to develop the product for it to be sold; Adequate resources are available to complete the development; There is an intention to complete and sell the product; The Group is able to sell the product; Sale of the product will generate future economic benefits; and Expenditure on the project can be measured reliably. In accordance with IAS 38 'Intangible Assets', expenditure incurred on research and development is distinguished as either to a research phase or to a development phase. Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects is recognised in the Consolidated income statement as incurred. Development expenditure is capitalised and amortised within administrative expenses on a straight-line basis over its useful economic life, which is considered to be up to a maximum of 5 years. The amortisation expense is included within administrative expenses in the Consolidated income statement. All advanced research phase expenditure is charged to the income statement. For development expenditure, this is capitalised as an internally generated intangible asset, only if it meets criteria noted above. The Group has contractual commitments for development costs of $nil (2016: $nil). 39 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Significant accounting policies (continued) Intellectual property rights and patents Intellectual property rights comprise assets acquired, being external costs, relating to know how, patents, and licences. These assets have been capitalised at the fair value of the assets acquired and are amortised within administrative expenses on a straight-line basis over their estimated useful economic life of 5 to 9 years. Financial assets The Group classifies all its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows: • • Trade and loan receivables: Trade receivables are initially recognised by the Group and carried at original invoice amount less an allowance for any uncollectible or impaired amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Debts are written off when they are identified as being uncollectible. Other receivables are recognised at fair value. Loan receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. Impairment of a financial asset is recognised if there is objective evidence that the balance will not be recovered. Cash and cash equivalents in the statement of financial position comprise cash at bank, cash in hand and short-term deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the consolidated statement of cash flow. Financial liabilities The Group treats its financial liabilities in accordance with the following accounting policy: • • Trade payables and other short-term monetary liabilities are recognised at fair value and subsequently at amortised cost. Bank borrowings and finance leases are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. "Interest expense" in this context includes initial transaction costs and premiums payable on redemption, as well as any interest payable while the liability is outstanding. Employee benefit trust (EBT) As the company is deemed to have control of its EBT, it is treated as a subsidiary and consolidated for the purposes of the consolidated financial statements. The EBT's assets (other than investments in the company's shares), liabilities, income, and expenses are included on a line-by-line basis in the consolidated financial statements. The EBT's investment in the company's shares is deducted from equity in the consolidated statement of financial position as if they were treasury shares. 3. Critical judgments and key sources of estimation uncertainty In preparing these consolidated financial statements, the Group makes judgements, estimates and assumptions concerning the future that impact the application of policies and reported amounts of assets, liabilities, income and expenses. The resulting accounting estimates calculated using these judgements and assumptions are based on historical experience and expectations of future events, and may not equal the actual results. Estimates and underlying assumptions are reviewed on an ongoing basis, and revisions to estimates are recognised prospectively. The judgements and key sources of assumptions and estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are discussed below. 40 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Critical judgements and key sources of estimation uncertainty (continued) Judgements Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in these consolidated financial statements are below: Capitalised development costs The Group capitalises development costs in line with IAS 38, Intangible Assets. Management applies judgement in determining if the costs meet the criteria, and are therefore eligible for capitalisation. Significant judgements include the technical feasibility of the development, recoverability of the costs incurred, and economic viability of the product and potential market available considering its current and future customers. See Internally generated intangible assets and research and development within note 2 for details on the Group’s capitalisation and amortisation policies, and Intangible Assets, note 13, for the carrying value of capitalised development costs. Agent versus principal As identified in note 2, revenue in respect of the Group’s queuing contracts is recognised on either a gross or net basis. When analysing whether the Group is acting as a principal or agent in a given arrangement, this requires management to consider several judgemental factors. These factors include whether the Group has the ability to influence operating hours, employees, and prices, whether it bears significant credit and inventory risk, and whether it has primary responsibility for providing the goods or services to the ultimate customer (the park guest or venue). When revenue is recognised on a gross basis, management has determined that the Group is operating the product with enough autonomy and control over the outcome that is bears significant risk and responsibility such that it is acting as the principal. The Group is generally responsible for the operation within the attraction, including sales, operation, employee management (including hiring), maintenance of the equipment and facility, and guest relations. When revenue is recognised on a net basis, management does not view the Group’s participation in the operation as significant enough to influence the factors noted above, including operation of the product, sales, maintenance, guest relations, or employee management. Revenue is generally recognised on a net basis in a revenue-share contract, as the Group’s responsibility would not extend significantly beyond initial installation of the system and annual upkeep. Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments in the following year are: Determination of fair values of intangible assets acquired in business combinations Intangible assets acquired in business combinations are important to the revenue generating capacity of the Group. The recognition of intangible assets requires management to apply judgement, and may require management to contract with specialists to assist when it deems necessary. The recognition of goodwill in a business combination results from assets which do not qualify for separate recognition, such as an assembled workforce, and buyer-specific synergies. The fair values are based on a market participant’s ability to utilise the assets, determined using a method appropriate to the specific intangible asset, and reflect assumptions and estimates that have a material effect on the carrying value of the asset. Key assumptions and estimates made in valuing the acquired intangible assets include: • • • Cash flow forecasts prepared at the time of acquisition, which involve estimating future business volumes; The discount rate applied to the forecasted future cash flows; and The costs to recreate the asset. The nature and inherent uncertainty relating to these assumptions and estimates means that the actual cash flow may be materially different from the forecast, and would therefore have led to a different asset value. See note 2 for the useful lives and amortisation policies regarding intangible assets acquired in business combinations. Impairment of non-financial assets (excluding inventories and deferred tax assets) Impairment tests on goodwill are subject to annual review. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (‘CGUs’). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill. As the Group’s CGUs have become more interrelated, and acquisitions are made with the intention of platform integration, the allocation of goodwill is monitored across the CGUs. 41 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Critical judgements and key sources of estimation uncertainty (continued) Management must make estimates of the pre-tax discount rate, operating margin, and terminal growth rate when testing for impairment. These inputs are based upon historical data and estimates of future events which can be difficult to predict, and actual results could vary from the estimate. See note 13 for management’s assumptions used in testing for impairment. 4. Financial risk management Overview: The Group’s use of financial instruments exposes it to a number of risks, including: • Liquidity risk; • Interest rate risk; • Credit risk; and, • Market risk. This note presents information about the Group’s exposure to each of the above risks and the Group’s policies and processes for measuring and managing these risks. The risks are managed centrally following Board-approved policies, and by regularly monitoring the business and providing ongoing forecasts of the impact on the business. The Group operates a centralised treasury function in accordance with Board-approved policies and guidelines covering funding and management of foreign exchange exposure and interest rate risk. Transactions entered into by the treasury function are required to be in support of, or as a consequence of, underlying commercial transactions. Other than short-term trade receivables and trade payables that arise directly from operations, as detailed in notes 17 and 18, the Group’s financial instruments comprise cash, borrowings, and finance leases. The fair values of these instruments are not materially different to their book values. The objective of holding financial instruments is to finance the Group’s operations and manage related risks. Liquidity risk The Group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments to ensure it has sufficient funds to meet its obligations as they fall due. The Group finance function produces regular forecasts that estimate the cash inflows and outflows for the next 12 months, so that management can ensure that sufficient financing is in place as it is required. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of banking arrangements in place. Maturity analysis The following table analyses the Group’s liabilities on a contractual gross basis based on amount outstanding at the balance sheet date up to date of maturity: 31 December 2017 Group Financial liabilities Finance lease Bank loan Total Company Financial liabilities Bank loan Total Less than 6 months $000 Note Between 6 months and 1 year $000 Between 1 and 5 years $000 Over 5 Years $000 18 19 18 19 18,123 9 - 18,132 583 - 583 1,240 - 1,240 - - - 3,024 - 16,462 19,486 - 16,462 16,462 - - - - - - - Total $000 22,387 9 16,462 38,858 583 16,462 17,045 42 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Financial risk management (continued) 31 December 2016 Group Financial liabilities Finance lease Bank loan Total Company Financial liabilities Bank loan Total Less than 6 months $000 Note Between 6 months and 1 year $000 Between 1 and 5 years $000 Over 5 Years $000 18 19 17 19 1,701 27 - 1,728 149 - 149 99 27 - 126 - - - - 9 9,434 9,443 - 9,434 9,434 - - - - - - - Total $000 1,800 63 9,434 11,297 149 9,434 9,583 The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management. Interest rate risk The Group’s interest rate risk arises mainly from interest on its bank loan facility, which is subject to a floating interest rate, and as such, exposes the entity to cash flow risk if prevailing interest rates were to increase. The Group regularly reviews its funding arrangements to ensure they are competitive with the marketplace. The table below shows the Group’s and company’s financial assets and liabilities that could be affected by the fluctuation in interest rates split by those bearing fixed and floating rates and those that are non-interest bearing: 31 December 2017 Group Financial assets Cash Total Bank loan Finance lease Total Company Financial assets Cash Total Bank loan Total Fixed rate $000 Floating rate $000 Non-interest bearing $000 Total assets $000 Total liabilities $000 Note 17 19 17 19 - - - (9) (9) 79,819 - 79,819 - - - (16,462) - (16,462) - - - - - (16,462) (16,462) 17,141 28,668 45,809 - - - 10,954 1,909 12,863 - - 17,141 28,668 45,809 - - - 90,773 1,909 92,682 - - - (16,462) (9) (16,471) - - - - - (16,462) (16,462) 43 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Financial risk management (continued) Fixed rate $000 - - - - (63) (63) 13,973 - 13,973 31 December 2016 Group Financial assets Cash Total Bank loan Finance lease Total Company Financial assets Cash Total Bank loan Total Credit risk exposure Note 17 19 17 19 Floating rate $000 Non-interest bearing $000 Total assets $000 - - - (9,434) - (9,434) - - - 8,905 5,866 14,771 - - - 1,985 1,303 3,288 - - Total liabilities $000 - - - (9,434) (63) (9,497) - - - 8,905 5,866 14,771 - - - 15,958 1,303 17,261 - - (9,434) (9,434) - - (9,434) (9,434) Credit risk predominantly arises from trade receivables, cash and cash equivalents, and deposits with banks. Credit risk is managed on a Group basis. External credit checks are obtained for larger customers. In addition, the credit quality of each customer is assessed internally before accepting any terms of trade. Internal procedures take into account a customer’s financial position, their reputation in the industry, and past trading experience. As a result, the Group’s exposure to bad debts is generally not significant due to the nature of its trade and relationships with customers. Indeed, the Group, having considered the potential impact of its exposure to credit risk, and having due regard to both the nature of its business and customers, do not consider this to have a materially significant impact to the results. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions that have acceptable credit ratings. Financial assets Cash Estimated irrecoverable amounts Note 19 18 Group Company 2017 $000 17,141 28,668 (222) 45,587 2016 $000 8,905 5,866 (75) 14,696 2017 $000 90,773 1,909 - 92,682 2016 $000 15,958 1,303 - 17,261 The maximum exposure is the carrying amount as disclosed in trade and other receivables. The average credit period taken by customers is 31 days (2016: 31 days). The allowance for estimated irrecoverable amounts has been made based upon the knowledge of the financial circumstances of individual trade receivables at the balance sheet date. The Group holds no collateral against these receivables at the balance sheet date. The following table provides an analysis of trade and other receivables that were past due at 31 December 2017 and 31 December 2016, but against which no provision has been made. The Group believes that the balances are ultimately recoverable based on a review of past payment history and the current financial status of the customers. Group Company Up to 3 months 3 to 6 months 2016 $000 3,542 515 4,057 2017 $000 644 59 703 2016 $000 505 2 507 2017 $000 10,173 612 10,785 44 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Financial risk management (continued) Capital risk management The Group considers its capital to comprise its ordinary share capital, share premium, own shares held in trust, other reserves, accumulated retained earnings and borrowings as disclosed in the Consolidated statement of financial position. Further details of the Group’s borrowing facilities are included in note 19. The Group manages its capital structure in the light of changes in economic conditions and financial markets generally and regularly evaluates its compliance with covenants applicable to their borrowing facilities. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for current and future shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to minimise the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or increase or reduce debt. The Group does not seek to maintain any specific debt to capital ratio, but considers investment opportunities on their merits and funds them in what it considers to be the most effective manner. Foreign currency exposure The Group primarily has operations or customers in the UK, USA, Canada, Italy, Germany, Australia, Brazil, and Mexico, and, as such, is exposed to the risk of foreign currency fluctuations. The main operating currencies of its operations are in sterling, US dollars, and euros. The Group's currency exposure comprises the monetary assets and liabilities of the Group that are not denominated in the operating or 'functional' currency of the operating unit involved. At the period end, Group companies held monetary assets in currencies other than their local currency. Balances at 31 December 2017 are (in $’000s): $714 (2016: $280) denominated in US dollars AUD$9 (2016: AUD$80) denominated in Australian dollars €85 (2016: €133) denominated in euros Kr856 (2016: Kr419) denominated in Danish krone CAD$nil (2016: CAD$16) denominated in Canadian dollars The Group manages risk by its subsidiaries matching revenue and expenditure in their local currency wherever possible. The Group tries to keep foreign intercompany balances as low as possible to avoid translation adjustments. Given the nature of the Group’s operations and their management of foreign currency exposure, they limit the potential down side risk as far as practicably possible. The Group considers the volatility of currency markets over the year to be representative of the potential foreign currency risk it is exposed to. The main currency the Group’s results were exposed to was sterling and over the year the average rate for 1GBP = 1.2906USD (2016: 1GBP = 1.345USD). If sterling had been an average of 5% stronger than the dollar through the year, then it would have increased Group profit before tax by $199,805 (1.77%). If sterling had been an average of 5% weaker than the dollar through the year then it would have decreased Group profit before tax by $199,805 (1.77%). Fair Value Measurement The Group does not have any level 2 or 3 financial assets or liabilities that have unobservable inputs that require disclosure. 5. Business and geographical segments Segmental analysis The Group’s operating segments under IFRS have been determined with reference to the financial information presented to the Board of directors. The Board of the Group is considered the Chief Operating Decision Maker (“CODM”) as defined within IFRS 8, as it sets the strategic goals for the Group as a whole and monitors its operational performance against this strategy. The Board consider the Group in its current form to consist of one Operating Segment and appraises the entity’s performance as a whole. The Group’s revenues, costs, assets, liabilities, currency exposure, and cash flows are therefore totally attributable to the single Operating Segment. The ticketing and queuing operations of the Group are evolving and continually merging, and the Group is now serviced through a single sales team, transferable staff, and is appraised on a Group basis in terms of incentive arrangements. Additionally, similar economic characteristics, including customers, markets, and operating margins, are shared by the revenue generating activities of the Group. As the business gains more scale, large shared customers are becoming increasingly common. Allocation of resources is driven by customer needs across the Group as a whole. 45 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Business and geographical segments (continued) The segments will be assessed as the Group develops and continues to make acquisitions. An analysis of the Group’s external revenues and non-current assets (excluding deferred tax) by geographical location are detailed below: UK Other Europe Australia/South Pacific USA and Canada Central and South America Revenue Non-current assets 2017 $000 22,701 2,138 1,565 103,294 3,731 133,429 2016 $000 4,384 2,053 765 92,993 2,316 102,511 2017 $000 38,788 67 637 162,048 158 201,698 2016 $000 7,459 86 93 77,353 115 85,106 Revenue generated in each of the geographical locations is generally in the local currency of the venue or operator based in that location. Major customers The Group has entered into agreements with theme parks, theme park groups, and attractions to operate its technology in single or multiple theme parks or attractions within the theme park group. The majority of the ultimate revenue of the business is derived from guest rentals of the Group’s virtual queuing technology or tickets purchased by guests via the Group’s ecommerce technology, but no single guest forms a significant proportion of the revenue of the Group. However, the ability to generate guest rentals or ticket related revenue is fully dependant on the Group maintaining and developing agreements with theme parks or attraction owners to operate its technology. The customers of one of the park operators with which the Group has a contractual relationship accounts for $44.8m of Group revenue for 2017 (2016: $51.3m). 6. Revenue Management categorises revenue based upon the likelihood it will be repeatable. Transactional revenue is repeatable revenue earned as either a fixed amount per sale of an item by the customer or as a percent of the total sale (e.g. eCommerce income, ticket sales). Other repeatable revenue is repeatable revenue, excluding transactional revenue, that is expected to be earned each year of a customer’s contract (e.g. annual license fees, maintenance support). Non-repeatable revenue is revenue that occurs one-time (e.g. up-front license fees) or is not repeatable based upon the current contract (e.g. billable hours), and is unlikely to be repeatable without additional sales activity. Other revenue consists of hardware sales and other revenue that may be repeatable with no sales activity if customer behaviour is consistent. Transactional revenue Other repeatable revenue Non-repeatable revenue Other revenue 2017 $000 99,188 9,045 17,297 7,899 133,429 2016 $000 84,912 7,942 5,415 4,242 102,511 See note 2 for a description of revenue recognition policies, and note 5 for a geographical breakdown of revenue. 7. Employees and directors Wages and salaries Social security costs Defined contribution pension costs Share-based payment transactions 46 2017 $000 34,315 2,600 904 1,089 38,908 2016 $000 28,725 2,464 750 987 32,926 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Employees and directors (continued) In respect of directors’ remuneration, the disclosures required by Schedule 5 to Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 are included in the detailed disclosures in the Directors’ Remuneration report. The average monthly number of employees during the year was made up as follows: 2017 2016 Operations Research & development Sales & marketing Finance & administration Seasonal staff 8. Expenses by nature Park operating costs (i) and costs associated with ticket sales Staff costs, less costs associated with research and development Deferred and contingent compensation related to acquisitions Legal and professional costs Travel Marketing Inventories and consumables Other costs Other operating leases Depreciation - owned assets Depreciation - finance leased assets Amortisation Research and development Research and development capitalized to balance sheet Foreign exchange differences 169 200 34 60 418 881 2017 $000 59,071 24,549 2,131 5,784 2,249 1,679 315 4,777 1,675 1,277 44 12,801 20,025 (12,395) 206 124,188 131 140 33 47 398 749 2016 $000 44,274 21,050 - 3,067 1,621 1,733 678 5,035 1,229 1,345 48 6,221 17,869 (11,591) (582) 91,997 (i) Park operating costs include an amount payable to the park when the Group is acting as the principal in the contract, along with the Group’s other park operating costs, regardless of whether it is principal or agent. See notes 2 and 3 for details on how the Group recognises revenue and determines whether principal or agent treatment is appropriate. Auditor’s remuneration During the period the following services were obtained from the Group's auditor at a cost detailed below: Audit services Fees payable to the company's auditors of the parent company and consolidated accounts Fees payable to the company's auditors for the audit of subsidiaries Non-audit services Tax compliance Tax advisory Tax other Corporate finance Audit-related assurance services 2017 $000 148 138 2 32 4 291 5 203 5 29 846 2016 $000 91 84 8 20 - 96 - 299 47 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 9. Finance income and expense The table below details the finance income and expense for the current and prior periods: Finance income: Bank interest received Interest received from customers Total finance income Finance costs: Bank interest Amortisation of capitalised refinance costs Interest expense associated with contingent and deferred compensation Finance lease Total finance costs Net finance expense 10. Tax 2017 $000 5 19 24 (741) (224) (1,131) (3) (2,099) (2,075) 2016 $000 4 - 4 (360) (48) - (6) (414) (410) The table below provides an analysis of the tax charge for the periods ended 31 December 2017 and 31 December 2016: UK corporation tax Current tax on income for the period Adjustment in respect of prior periods Overseas tax Current tax on income for the period Adjustment in respect of prior periods Total current taxation Deferred taxation Original and reversal of temporary difference - for the current period Impact on deferred tax of US rate change Original and reversal of temporary difference - for the prior period Total taxation (benefit) / charge 2017 $000 1,012 154 1,166 1,289 (707) 582 1,748 382 (5,094) 229 (4,483) (2,735) 2016 $000 179 (113) 66 1,432 129 1,561 1,627 831 - 118 949 2,576 48 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Tax (continued) The differences between the actual tax charge for the period and the theoretical amount that would arise using the applicable weighted average tax rate are as follows: Profit on ordinary activities before tax Tax at United States tax rate of 40% (2016: 40.0%) Effects of: Expenses not deductible for tax purposes Additional deduction for patent box Additional deduction for R&D expenditure – current period Profit subject to foreign taxes at a lower marginal rate Adjustment in respect of prior period – income statement Deferred tax not recognized Impact of US tax rate change Other including impact of rate differential Total tax (benefit) / charge Deferred taxation Group At 31 December 2015 Charged to income Credited directly to equity At 31 December 2016 Charged to income Credited directly to equity Acquired from business combinations At 31 December 2017 Company At 31 December 2015 Charged to income Credited directly to equity At 31 December 2016 Charged to income Credited directly to equity Netted against the asset At 31 December 2017 The following table summarises the recognised deferred tax asset and liability: Group Recognised asset Tax relief on unexercised employee share options Short term timing differences Net operating losses & tax credits Deferred tax asset 49 2017 $000 7,166 2,866 1,380 (175) (130) (1,050) (324) 1 (5,094) (209) (2,735) Asset $000 1,377 (105) 4,736 6,008 (5,056) 2,793 5,192 2016 $000 10,102 4,041 60 (104) (200) (1,197) 134 70 - (228) 2,576 Liability $000 (9,196) (843) 49 (9,990) 9,539 (181) (13,997) 8,937 (14,629) 283 (29) 760 1,014 (62) 585 (1,184) 353 2017 $000 6,977 974 986 8,937 (228) (890) 49 (1,069) (115) - 1,184 - 2016 $000 5,796 180 32 6,008 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Tax (continued) Recognised liability Depreciation in excess of capital allowances Short term timing differences Business combinations Deferred tax liability Company Recognised asset Tax relief on unexercised employee share options Short term timing differences Offset against Company deferred tax asset Deferred tax asset Recognised liability Depreciation in excess of capital allowances Offset against Company deferred tax asset Deferred tax liability 2017 $000 (3,078) (272) (11,279) (14,629) 1,535 2 (1,184) 353 (1,184) 1,184 - 2016 $000 (4,116) (257) (5,617) (9,990) 1,012 2 - 1,014 (1,069) - (1,069) Tax rates in the UK will reduce from 19% to 17% with effect from 1 April 2020. Tax rates in the US will reduce from 35% to 21%, before state taxes, with effect from 1 January 2018. As both rate changes have been substantively enacted at the balance sheet date, deferred tax assets and liabilities have been measured at a rate of 17% and 21% plus state taxes in the UK and US, respectively (2016: 17% and 40%, respectively). The significant reduction in the US corporate rate will also reduce the Group's effective tax rate in future periods. There are no material unrecognized deferred tax assets. Taxation and transfer pricing The Group is an international technology business and, as such, transfer pricing arrangements are in place to cover funding arrangements, management costs and the exploitation of IP between Group companies. Transfer prices and the policies applied directly affect the allocation of Group-wide taxable income across a number of tax jurisdictions. While transfer pricing entries between legal entities are on an arm’s length basis, there is increasing scrutiny from tax authorities on transfer pricing arrangements. This could result in the creation of uncertain tax positions. The Group provides for anticipated risks, based on reasonable estimates, for tax risks in the respective countries in which it operates. The amount of such provisions can be based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible authority. Uncertainties exist with respect to the evolution of the Group following international acquisitions holding significant IP assets, interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. Uncertainties in relation to tax liabilities are provided for within income tax payable to the extent that it is considered probable that the Group may be required to settle a tax liability in the future. Settlement of tax provisions could potentially result in future cash tax payments; however, these are not expected to result in an increased tax charge as they have been fully provided for in accordance with management’s best estimates of the most likely outcomes. Ongoing tax assessments and related tax risks The Group has undertaken a review of potential tax risks and current tax assessments, and whilst it is not possible to predict the outcome of any current or future tax enquiries, adequate provisions are considered to have been included in the Group accounts to cover any expected estimated future settlements. In common with many international groups operating across multiple jurisdictions, certain tax positions taken by the Group are based on industry practice and external tax advice, or are based on assumptions and involve a significant degree of judgement. It is considered possible that tax enquiries on such tax positions could give rise to material changes in the Group’s tax provisions. 50 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 The Group is consequently, from time to time, subject to tax enquiries by local tax authorities and certain tax positions related to intercompany transactions may be subject to challenge by the relevant tax authority. The Group has recognised provisions where it is not probable that tax positions taken will be accepted, totalling $0.6 million in relation to transfer pricing risks and $0.4 million in relation to availability of tax losses and international R&D claims. 11. Profit of parent company As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company's profit for the financial year ended 31 December 2017 was (in $’000) $4,442 (2016: $6,096). 12. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the net profit attributable to ordinary shareholders, after adjustments for instruments that dilute basic earnings per share, by the weighted average of ordinary shares outstanding during the period (adjusted for the effects of dilutive instruments). Earnings for adjusted earnings per share, a non-GAAP measure, are defined as profit before tax before the deduction of amortisation related to acquisitions, acquisition costs, deferred and contingent consideration, credits to the income statement from the reversal of the earn-out liability, and costs related to share-based payments, less tax at the effective rate. The table below reflects the income and share data used in the total basic, diluted, and adjusted earnings per share computations. Profit attributable to ordinary shareholders ($000) Basic EPS Denominator Weighted average number of shares used in basic EPS Basic earnings per share (cents) Diluted EPS Denominator Weighted average number of shares used in basic EPS Effect of dilutive securities Options Weighted average number of shares used in diluted EPS Diluted earnings per share (cents) Adjusted EPS Profit attributable to ordinary shareholders ($000) Adjustments for the period related to: Amortisation relating to acquired intangibles from acquisitions Interest expense related to deferred and contingent liabilities Acquisition expenses (including debt arrangement fees) Deferred and contingent payments Profit recognised on reduction of earn out -liability Share-based compensation and social security costs on unapproved options US tax code – tax credit from revaluation of US deferred balances Net tax related to the above adjustments (2017: 24.0%, 2016: 25.5%): 2017 9,901 2016 7,526 24,250 40.83 22,169 33.95 24,250 22,169 1,337 25,587 38.70 1,332 23,501 32.02 9,901 7,526 8,591 1,131 1,474 2,131 (3,228) 1,089 (4,450) 16,639 (2,880) 4,227 - - - - 987 - 12,740 (1,330) Adjusted profit attributable to ordinary shareholders ($000) 13,759 11,410 51 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Earnings per share (continued) Adjusted profit attributable to ordinary shareholders ($000) Adjusted basic EPS Denominator Weighted average number of shares used in basic EPS Adjusted basic earnings per share (cents) Adjusted diluted EPS Denominator Weighted average number of shares used in diluted EPS Adjusted diluted earnings per share (cents) 2017 13,759 2016 11,410 24,250 56.73 22,169 51.48 25,587 53.77 23,501 48.55 13. Intangible assets The cost and amortisation of the Group’s intangible fixed assets are detailed in the following table: Customer relationships & supplier contracts $000 Goodwill $000 Trademarks $000 Internally developed technology $000 Patent & IPR costs $000 Development costs $000 Totals $000 Cost At 31 December 2015 Foreign currency translation Additions At 31 December 2016 Foreign currency translation Additions Acquired with acquisition At 31 December 2017 Amortisation At 31 December 2015 Foreign currency translation Charged At 31 December 2016 Foreign currency translation Charged At 31 December 2017 43,862 10,240 470 20,280 658 13,775 89,285 - - - - (1) - - - (93) 84 (989) 11,591 (1,083) 11,675 43,862 10,240 469 20,280 649 24,377 99,877 1,533 - 71,942 129 - 109 - 834 - 8,046 1,349 32,522 51 - 64 993 12,395 3,649 12,395 - 113,923 117,337 18,415 1,927 53,636 764 37,765 229,844 - - - - - - - 1,676 241 6,129 416 4,267 12,729 - 882 2,558 8 1,837 - 142 383 3 170 - 3,205 (58) 62 (624) 1,927 (682) 6,218 9,334 420 5,570 18,265 55 6,585 33 43 381 4,166 480 12,801 4,403 556 15,974 496 10,117 31,546 52 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Intangible assets (continued) Customer relationships & supplier contracts $000 Goodwill $000 Trademarks $000 Internally developed technology $000 Patent & IPR costs $000 Development costs $000 Totals $000 117,337 14,012 1,371 37,662 268 27,648 198,298 43,862 7,682 86 10,946 229 18,807 81,612 Net book value At 31 December 2017 At 31 December 2016 The cost and amortisation of the company’s intangible fixed assets are detailed in the following table: Patent costs $000 Development costs $000 Cost At 31 December 2015 Foreign currency translation Additions At 31 December 2016 Foreign currency translation Additions At 31 December 2017 Amortisation At 31 December 2015 Foreign currency translation Charged At 31 December 2016 Foreign currency translation Charged At 31 December 2017 Net Book Value At 31 December 2017 At 31 December 2016 551 (93) 84 542 51 - 593 329 (57) 62 334 33 43 410 183 208 Totals $000 6,488 (1,081) 4,967 10,374 1,046 1,642 5,937 (988) 4,883 9,832 995 1,642 12,469 13,062 3,732 (622) 504 3,614 383 1,280 5,277 7,192 6,218 4,061 (679) 566 3,948 416 1,323 5,687 7,375 6,426 Acquisition of Ingresso Group Limited On 30 March 2017, the Group acquired 100% of the voting equity of Ingresso Group Limited (“Ingresso”), a provider of live access to ticketed events worldwide across multiple platforms, languages and currencies, for initial cash consideration of £14.8m ($18.5m), plus a potential earn out payment, capped at £10.5m ($13.1m). The total aggregate consideration was capped at £28.0m ($35.0m), assuming the earn out was achieved in full. A true-up of working capital brought the total cash investment to $18.7m. The acquisition of Ingresso is expected to further deepen the Group’s ability to help its customers drive efficiency and realise greater value from their ticketing operations. Additionally, it will open up a significantly larger global distribution channel through which existing Group customers can seek to sell their event and attraction tickets, along with providing Ingresso with a significant opportunity to grow its business via access to the Group’s expansive ticket inventory, eCommerce expertise, infrastructure and global relationships. Finally, Ingresso allows the Group to address significant inefficiencies it has identified within the travel and leisure industry, and help clients generate more revenue from third party distribution channels 53 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Intangible assets (continued) The earn out, payable in 2018, is based on the financial performance of Ingresso for the year ended 31 December 2017 exceeding its financial performance in 2016. It is payable in cash and secured by a floating charge on the assets of Ingresso. The full earn out was not achieved, resulting in a credit to the Consolidated and company statement of comprehensive income of $3.2m. The Group's statement of financial position includes a liability in relation to the earn out of $9.1m. Under IFRS 3, consideration payable to employees of the acquired company is compensation expense, rather than deferred consideration. The Group’s income statement contains $1.0m of compensation expense due to this treatment within administrative expenses, and $0.2m of interest expense related to this treatment. To fund the acquisition, the Group entered into an amendment and restatement agreement in relation to its Lloyds Bank facility dated 14 March 2016, extending the facility to allow for the ability to draw down $60m, denominated in US dollars, GB Pound Sterling, or Euros. The agreement has a four-year term, with a $10m reduction in the total available for drawdown on the first, second and third anniversaries of the restatement. There is an option to extend the agreement for a further 12 months at the end of the first year, and an accordion mechanism allowing for a further $10m related to future acquisitions. The drawdown rate is 140 basis points above LIBOR at a borrowing to EBITDA ratio of less than 1.5 times, rising to 190 basis points if the borrowing to EBITDA ratio is greater than 2.25 times. Commitment interest on the undrawn funds is 35% of margin. Acquisition related costs of $0.7m were incurred in relation to this acquisition, excluding capitalised finance costs ($0.4m), and are included within administrative expenses within the Statement of comprehensive income for the period. Finance costs are amortised over the life of the agreement, and presented netted against bank loans within borrowings in the statement of financial position. Ingresso contributed $16.7m to revenue and $0.06m to profit before tax from the date of acquisition. Details of the fair value of identifiable assets and liabilities acquired, purchase consideration, and goodwill are below as of the acquisition date: Book value $000 Adjustment $000 Fair value $000 Identifiable intangible assets Internally developed technology Customer relationships Supplier contracts Trademarks Property, plant and equipment Receivables and other debtors Payables and other liabilities Cash Deferred tax asset Deferred tax liability Total net assets Cash paid at completion Contingent consideration Working capital true-up Total consideration Goodwill on acquisition 514 - - - 49 3,129 (11,630) 5,744 582 (20) (1,632) 18,528 9,553 208 28,289 9,835 674 931 1,349 - - - - - (2,406) 10,383 - - - - 10,349 674 931 1,349 49 3,129 (11,630) 5,744 582 (2,426) 8,751 18,528 9,553 208 28,289 19,538 The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled workforce of the acquired entity and the expected synergies of the enlarged Group, which do not qualify for separate recognition, including the ability to integrate into the Group’s current product mix and enable increased sales through third party channels, unavailable to other market participants without its contracts. The net cash outflow in respect of the acquisition comprised: Cash paid Net cash acquired Total cash outflow in respect of acquisition 54 $000 (18,736) 5,744 (12,992) accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Intangible assets (continued) Acquisition of Blazer and Flip Flops Inc DBA The Experience Engine (“TE2”) On 20 July 2017, the Group acquired 100% of the voting equity of Blazer and Flip Flops, Inc, a privately-owned developer of software solutions which enables leading enterprises to offer a highly-personalised guest experience to their customers, primarily in the leisure, hospitality, entertainment and retail sectors. The acquisition was for an enterprise value of $80 million and was funded by the issue of $14.5 million in new Ordinary shares of the Group to the Vendors, and an underwritten vendor and cash placing of $75.6 million. Management believe that TE2's cloud based solution offers market-leading personalisation capabilities and data orchestration technologies which capture, model and anticipate guest behaviour and preferences not only pre- and post- visit online, but in the physical in-venue environment. The acquisition of TE2 will greatly complement and enhance the Group's existing offerings, which help its enterprise customers both improve and monetise their customers' experiences. Using the Group's greater scale, customer relationships, sales and delivery capability, established reputation and capital resources will help accelerate adoption of TE2's solution among new and existing customers. Acquisition related costs of $0.5m were incurred in relation to this acquisition, and are included within administrative expenses within the Statement of comprehensive income for the period. TE2 contributed $11.9m to revenue and $1.8m to profit before tax from the date of acquisition. Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are below: Identifiable intangible assets Internally developed technology Customer relationships Customer relationships - backlog Property, plant and equipment Receivables and other debtors Payables and other liabilities Cash Deferred tax liability Deferred tax asset Total net assets Cash paid at completion Equity instruments (245,128 ordinary shares) Working capital true-up Total consideration Goodwill on acquisition Book value $000 Adjustment $000 Fair value $000 - - - 195 3,608 (7,676) 4,108 (80) 4,565 4,720 69,753 5,101 (563) 74,291 (1) 22,173 4,981 1,460 - - - - (11,446) - 17,168 - - - - 22,173 4,981 1,460 195 3,608 (7,676) 4,108 (11,526) 4,565 21,888 69,753 5,101 (563) 74,291 52,403 (1) In accordance with IFRS 3 Business Combinations, the consideration paid in shares is based on the share price at the date on which the company obtained control of TE2. The price determined in the Purchase Agreement for calculating the number of shares to be issued to the vendors is based on an average price of $20.81. The amount is booked to the Merger Relief Reserve within the consolidated statement of financial position. Deferred consideration consisting of 454,547 shares will be issued to certain key employees of TE2, contingent upon their continued employment, over 36 months. Shares will be issued in 3 separate tranches: one-third 12 months after the completion date; a further one-third 24 months after the completion date; and the final one-third is released rateably over 12 months from the 25th to 36th month after the completion date. A charge in relation to this of $1.3m is booked to Other Reserves. The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled orkforce of the acquired entity and the expected synergies of the enlarged Group, which do not qualify for separate recognition. Expected synergies include the ability to drive increased sales via additional data collection on users of the Group’s current products, and enhanced relationships with current customers. 55 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Intangible assets (continued) The net cash outflow in respect of the acquisition comprised: Cash paid Net cash acquired Total cash outflow in respect of acquisition $000 69,190 (4,108) 65,082 Had Ingresso and TE2 been part of the Group for the full period, revenue would have been $148.7m, with profit before tax of $10.8m. Impairment testing of goodwill The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The Group considers acquisitions based upon their ability to add accretive earnings to the Group and leverage off customer relationships already in place, or bring the Group’s portfolio into new markets. As such, the goodwill of cash generating units (CGUs) is monitored at a Group level, rather than at the individual CGU level. Accordingly, for the impairment test of goodwill, the CGUs are tested collectively. The recoverable amounts of all the CGUs have been determined from value in use calculations based on cash flow projections using budget and forecast projections and assumes a perpetuity based terminal value. The key assumptions used for value in the calculations in 2017 and 2016 are as follows: Pre-tax discount rate (%) Acquired cash generating unit: accesso, LLC & Siriusware, Inc. (CGU 1) Acquired cash generating unit: VisionOne Worldwide Limited and its subsidiaries (CGU 2) Acquired cash generating unit: Ingresso Group (CGU 3) Acquired cash generating unit: TE2 (CGU 4) Average operating margin (%) Acquired cash generating unit: accesso, LLC & Siriusware, Inc. (CGU 1) Acquired cash generating unit: VisionOne Worldwide Limited and its subsidiaries (CGU 2) Acquired cash generating unit: Ingresso Group (CGU 3) Acquired cash generating unit: TE2 (CGU 4) Average EBITDA growth rate (%) Acquired cash generating unit: accesso, LLC & Siriusware, Inc. (CGU 1) Acquired cash generating unit: VisionOne Worldwide Limited and its subsidiaries (CGU 2) Acquired cash generating unit: Ingresso Group (CGU 3) Acquired cash generating unit: TE2 (CGU 4) Terminal growth rate (%) Acquired cash generating unit: accesso, LLC & Siriusware, Inc. (CGU 1) Acquired cash generating unit: VisionOne Worldwide Limited and its subsidiaries (CGU 2) Acquired cash generating unit: Ingresso Group (CGU 3) Acquired cash generating unit: TE2 (CGU 4) Forecast period (years) Acquired cash generating unit: accesso, LLC & Siriusware, Inc. (CGU 1) Acquired cash generating unit: VisionOne Worldwide Limited and its subsidiaries (CGU 2) Acquired cash generating unit: Ingresso Group (CGU 3) Acquired cash generating unit: TE2 (CGU 4) 56 2017 $000 9.1 9.1 10.1 12.5 25.8 17.9 4.7 16.3 7.0-21.0 11.0-27.0 10.0-48.0 (56.0)-65.0 3 3 3 3 5 5 5 5 2016 $000 15.5 15.5 - - 19.1 35.8 - - 8.0-20.0 11.0-15.5 - - 3 3 - - 5 5 - - accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Intangible assets (continued) Operating margins have been based on experience, where possible, and future expectations in the light of anticipated economic and market conditions. Discount rates are based on the Group’s WACC adjusted to reflect market participant’s expected capital structure. Growth rates beyond the formally budgeted period are based on economic data pertaining to the region concerned. In respect of the pooled goodwill, a reasonable change in the key assumptions of the terminal growth rate and operating margin did not significantly impact the recoverable value. If the pre-tax discount rate used for the test was 34.4%, the carrying amount and recoverable amount would be equal. The value-in-use of the CGUs exceeds their carrying value by $247m. 14. Property, plant and equipment The cost and depreciation of the Group’s tangible fixed assets are detailed in the following table: Cost At 31 December 2015 Foreign currency translation Additions Disposals At 31 December 2016 Foreign currency translation Additions Acquired with acquisition Disposals At 31 December 2017 Depreciation At 31 December 2015 Foreign currency translation Charged Disposals At 31 December 2016 Foreign currency translation Charged Acquired with acquisitions Disposals At 31 December 2017 Net book value At 31 December 2017 At 31 December 2016 Installed systems $000 5,435 (683) 361 (104) 5,009 364 146 - (30) 5,489 4,179 (500) 671 (104) 4,246 343 473 - (27) 5,035 454 763 Plant, machinery and office equipment $000 3,635 (88) 859 (1,087) 3,319 104 705 195 (301) 4,022 3,173 (209) 337 (1,087) 2,214 48 461 95 (298) 2,520 1,502 1,105 57 Furniture & fixtures Leasehold improvements Totals $000 11,821 (876) 1,948 (1,292) $000 1,114 - 155 (8) 1,261 11,601 - 21 - - 542 936 295 (366) $000 1,637 (105) 573 (93) 2,012 74 64 100 (35) 2,215 1,282 13,008 734 (34) 242 (92) 850 28 284 20 (29) 1,153 1,062 1,162 658 - 143 (4) 797 - 103 - - 900 382 464 8,744 (743) 1,393 (1,287) 8,107 419 1,321 115 (354) 9,608 3,400 3,494 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Property, plant and equipment (continued) The cost and depreciation of the company’s tangible fixed assets are detailed in the following table: Installed systems $000 Plant, machinery and office equipment $000 Furniture & fixtures $000 Cost At 31 December 2015 Foreign currency translation Additions At 31 December 2016 Foreign currency translation Additions At 31 December 2017 Depreciation At 31 December 2015 Foreign currency translation Charged At 31 December 2016 Foreign currency translation Charged At 31 December 2017 Net book value At 31 December 2017 At 31 December 2016 4,264 (683) 224 3,805 364 6 4,175 3,652 (587) 418 3,483 343 221 4,047 128 322 509 (85) 473 897 94 292 1,283 410 (68) 56 398 44 161 603 680 499 637 (105) 250 782 73 9 864 216 (36) 70 250 27 86 363 501 532 15. Investments Investment in subsidiaries The investment balance on the company’s books at 31 December 2017 is as detailed below: Totals $000 5,410 (873) 947 5,484 531 307 6,322 4,278 (691) 544 4,131 414 468 5,013 1,309 1,353 Cost At 31 December 2016 Purchase of subsidiaries Foreign currency translation At 31 December 2017 At 31 December 2015 Foreign currency translation At 31 December 2016 Net book value At 31 December 2016 At 31 December 2017 58 $000 37,806 28,289 7,258 73,353 45,614 (7,808) 37,806 37,806 73,353 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Investments (continued) Name Lo-Q, Inc. (1) Lo-Q Service Canada Inc (1) Lo-Q (Trustees) Limited (2) accesso, LLC. (3) Siriusware, Inc. (4) Lo-Q Limited (5) VisionOne Worldwide Limited (6) VisionOne, Inc. (7) VisionOne S.A. de C.V. (8) ShoWare do Brazil Ltda (9) VisionOne do Brazil Ltda (9) Accesso Australia PTY Limited (10) Blazer and Flip Flops Inc (11) TE2 Ireland (12) Ingresso Group Limited (13) accesso Nederland NV (14) Country of incorporation United States of America Canada United Kingdom United States of America United States of America United Kingdom British Virgin Islands United States of America Mexico Brazil Brazil Australia United States of America Ireland United Kingdom Netherlands % Ownership interest 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 % Voting Rights 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 As required by the Companies Act, the registered addresses of each business are: (1) Registered address of 420 Thornton Rd, Suite 109, Lithia Springs, GA, USA (2) Registered address of Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN, UK (3) Registered address of 1025 Greenwood Blvd, Suite 500, Lake Mary, FL, USA (4) Registered address of 302 Camino de la Placita, Taos, NM, USA (5) Registered address of Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN, UK (6) Registered address of Geneva Place, PO Box 3469, Waterfront Drive, Road Town, British Virgin Islands (7) Registered address of 6781 N Palm Ave, #120, Fresno, CA 93704, USA (8) Registered address of Montecito #38, Piso 30 Oficinas 26 y 27, Colonia Napoles, 03810, Mexico City, Mexico, D.F. (9) Registered address of Rua Joaquim Floriano, no. 888, Suite 1003, Itaim Bibi, CEP 04534-003, Sao Paulo, Sao Paulo, Brazil (10) Registered address of 135 King Street, Floor 13, Sydney City, 2000, NSW, Australia (11) Registered address of 4660 La Jolla Village Dr, Suite 620, Sand Diego, CA 92122 (12) Registered address of Block 3, Harcourt Centre, Harcourt Rd, Dublin 2 Ireland (13) Registered address of Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN, UK (14) Registered address of Butterwick 1, London, W6 8DL, UK accesso, LLC, Siriusware, Inc. and VisionOne, Inc. and Blazer and Flip Flops Inc are 100% owned by Lo-Q, Inc. VisionOne do Brazil Ltda and VisionOne do Mexico Ltda are 100% owned by VisionOne Worldwide Ltd. Showare Do Brazil Ltda is 100% owned by VisionOne do Brazil Ltda. TE2 Ireland is 100% owned by Blazer and Flip Flops Inc. The trade for both Lo-Q, Inc. and Lo-Q Service Canada Inc is that of the application of virtual queue technologies. The trade of accesso, LLC, Siriusware, Inc., the VisionOne subsidiaries, Accesso Australia PTY Limited, Ingresso Group Limited and Blazer and Flip Flops Inc is that of ticketing, point-of-sale and experience management technology solutions. The economic characteristics of the entities are similar, including customer bases, and operating margins, and therefore they are classified as one segment. Lo-Q (Trustees) Limited operates an employee benefit trust on behalf of accesso Technology Group plc to provide benefits in accordance with the terms of a joint share ownership plan. Further details of this can be found on page 19. 16. Inventories Stock Park installation Group Company 2017 $000 443 63 506 2016 $000 478 13 491 2017 $000 279 - 279 2016 $000 303 - 303 The amount of inventories recognised as an expense and charged to cost of sales for the year ended 31 December 2017 was $2,468,289 (2016: $1,878,066). Park installation balances includes equipment installed at a theme or water park on a trial basis or during the phase prior to a new or updated operation commencing. 59 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 17. Trade and other receivables Trade debtors Accrued income Social security and other taxes Other debtors Amounts owed by Group undertakings Financial assets VAT Prepayments Group Company 2017 $000 15,013 1,428 17 683 - 17,141 - 2,620 19,761 2016 $000 5,903 2,812 - 190 - 8,905 (1) 1,328 10,232 2017 $000 1,533 108 17 137 88,978 90,773 - 861 91,634 2016 $000 970 129 - 38 14,821 15,958 4 344 16,306 The Group’s financial assets are short term in nature. In the opinion of the directors, the book values equate to their fair value. Included within Trade debtors are amounts owed to the Group from ticket sales, equating to the total value of the ticket and the commission earned by the Group. The value of the ticket, less the commission, is payable to the supplier of the ticket, and is not revenue to the Group. 18. Trade and other payables Current Trade creditors Current other creditors Non-current other creditors Financial liabilities Deferred revenue Social security and other taxes Accruals Group Company 2017 $000 14,212 5,151 19,363 3,024 22,387 12,004 1,934 16,573 52,898 2016 $000 1,281 519 1,800 - 1,800 4,050 42 5,350 11,242 2017 $000 585 (2) 583 - 583 356 175 10,298 11,412 2016 $000 150 (1) 149 - 149 - (19) 1,128 1,258 The Group’s financial liabilities are generally short-term in nature. In the opinion of the directors the book values equate to their fair value. Included within trade creditors are amounts payable to ticket suppliers. In certain agreements, the Group receives the total cash from the sale of the ticket. Included within current other creditors and non-current other creditors is a balance related to the TE2 acquisition owed to employees in lieu of a pre-acquisition option scheme. The Group holds cash of $5.5m at 31 December 2017 in respect of this liability, which was cash paid to the Group by the sellers of Blazer and Flip Flops Inc to make the payments over a three year period. Included within accruals for the Group and company are amounts owed related to contingent and deferred consideration resulting from acquisitions ($9.1m, 2016: $nil). 60 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 19. Borrowings Bank loans Arrangement fees, less amortised cost Group Company 2017 $000 16,462 (322) 16,140 2016 $000 9,434 (136) 9,298 2017 $000 16,462 (322) 16,140 2016 $000 9,434 (136) 9,298 On 7 November 2014 the Group entered into an amendment and restatement agreement with Lloyds Bank plc in relation to a Revolving Loan Facility dated 4 December 2013. On 14 March 2016, the Group amended the facility. The amended facility extends it to allow a drawdown facility of $25m, with no step downs, at an improved drawdown rate of 1.35% above LIBOR, and an improved commitment rate. The renewed facility terminates on 14 March 2019 with the possibility for this to extend for a further 24 months in two separate 12 month extensions. As discussed in note 13, on 30 March 2017, in conjunction with the purchase of Ingresso Group Ltd, the Group entered into an amendment and restatement agreement in relation to the facility dated 14 March 2016, extending the facility to allow for the ability to draw down $60m, denominated in US dollars, GB Pound Sterling, or Euros. The agreement has a four-year term, with a $10m reduction in the total available for drawdown on the first, second and third anniversaries of the restatement. There is an option to extend the agreement for a further 12 months at the end of the first year, and an accordion mechanism allowing for a further $10m related to future acquisitions. The drawdown rate is 140 basis points above LIBOR at a borrowing to EBITDA ratio of less than 1.5 times, rising to 190 basis points if the borrowing to EBITDA ration is greater than 2.25 times. Commitment interest on the undrawn funds is 35% of margin. The Facility had an arrangement fee of $0.4m. 20. Called up share capital Ordinary shares of 1p each Number $000 Number $000 2017 2016 Opening balance Issued in relation to exercised share options Issued in relation to acquisitions Closing balance 22,277,631 189,962 3,908,155 26,375,748 357 2 52 411 21,984,321 293,310 - 22,277,631 353 4 - 357 During the period, 189,962 shares, with a nominal value $2,381, were allotted following the exercise of share options. On 30 March 2017, the Group entered into a subscription agreement, subsequent to the acquisition of Ingresso Group Limited, with Bart Van Schriek, Chief Executive Officer of Ingresso Group plc. Mr Van Schriek agreed to subscribe for 31,685 new ordinary shares of 1p each for a total cash payment of $0.6m ($19.71 per share). Shares are subject to certain lock-up restrictions, under which no disposals are allowed during the first 12 months from the subscription date, with one third being released from the restriction at each 12 month period from the subscription date. On 19 July 2017, the Group issued 3,631,342 ordinary shares, with a nominal value of $0.05m, in connection with the purchase of Blazer and Flip Flops Inc as part of an accelerated book build. The shares issued in relation to the vendor placing were 3,304,507, with 326,835 issued in relation to a cash placing. The shares had a placing price of $20.81, resulting in gross proceeds of $75.6m. Shares On 20 July 2017, the Group issued 245,128 ordinary shares as consideration for the acquisition of Blazer and Flip Flops Inc. The shares had a nominal value of $0.004m. Additional shares will be issued over the next 36 months as contingent consideration. Following the adoption of new Articles of Association on 12 April 2011 the company no longer has an authorised share capital limit. All issued share capital is fully paid, except for 426,909 treasury shares registered in the name of Lo-Q (Trustees) Limited, a wholly owned subsidiary of the company on behalf of the Lo-Q Employee Benefit Trust. 61 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 21. Reserves The following describes the nature and purpose of each reserve within equity: Reserve Share premium: Own shares held in trust: Other reserve: Merger relief reserve: Retained earnings: Translation reserve: Description and purpose Amount subscribed for share capital in excess of nominal value Weighted average cost of own shares held by the EBT Reserve to account for share option equity-based transactions and equity-settled deferred consideration The merger relief reserve represents the difference between the fair value and nominal value of shares issued on the acquisition of subsidiary companies, where the company has taken advantage of merger relief All other net gains and losses and transactions not recognised elsewhere Gains/losses arising on retranslating the net assets of overseas operations into US dollars 22. Pension commitments The Group operates defined contribution pension schemes in the UK and US. The assets of each scheme are held separately from those of the Group in an independently administered fund. The pension charge represents contributions payable by the Group to the fund. The amounts related to the charge in the period and payable at period end are: Pension charge in the period Payable to the fund (included within other creditors) 23. Related party disclosures Ultimate controlling party There is no ultimate controlling party. Subsidiaries 2017 $000 904 85 2016 $000 750 57 All intercompany revenues, expenses, and balances are eliminated upon consolidation. Other related parties Rockspring, a company in which David Gammon, an accesso Technology Group plc director, is a director invoiced the company in respect of director’s fees $51,625 (2016: $43,357), of which $4,254 (2016: $7,032) was outstanding at year end. Maven Creative, LLC., a company in which Steve Brown, an accesso Technology Group plc director, is a member and has a 33% interest, invoiced the Group $55,434 (2016: $197,627) in respect of marketing services, of which $1,778 (2016: $164) was outstanding at year end. Siriusware Inc, a subsidiary of the Group, is party to a property lease, in respect of a corporate office of the Group, with B Sirius LLC and lease payments totaling $80,400 (2016: $80,400) were payable in 2017 to B Sirius LLC, of which $nil (2016: $nil) was outstanding at year end. An officer of Siriusware Inc is a member of B Sirius LLC. All the above outstanding amounts are included within trade creditors. Key management compensation The key management of the company staff are considered to be the Executive directors, and their remuneration is as follows: Executive director’s remuneration Executive director's contribution to retirement scheme Employer’s social security costs Share-based payments 62 2017 $000 2,283 22 229 324 2,858 2016 $000 1,987 27 166 198 2,378 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 24. Share-based payment schemes and transactions Share option schemes At 31 December 2017 the following share options were outstanding in respect of the ordinary shares: Scheme EMI Scheme US Scheme UK unapproved Scheme Long term incentive plan Number of shares 1,850 18,235 6,714 8,000 4,750 18,000 17,300 100,000 2,500 9,789 5,000 61,250 92,400 175,110 2,008 201,450 2,262 95,000 182,205 40,400 277,534 216,125 18,851 Period of Option 25 June 2010 to 24 June 2019 24 June 2013 to 23 June 2021 30 November 2014 to 29 November 2022 25 April 2015 to 25 April 2023 23 January 2017 to 22 January 2024 15 April 2018 to 15 April 2025 29 April 2019 to 28 April 2026 10 March 2012 to 9 March 2021 (1) 24 June 2013 to 23 June 2021 30 November 2014 to 29 November 2022 26 March 2014 to 25 March 2022 25 April 2015 to 25 April 2023 23 January 2017 to 22 January 2024 15 April 2018 to 15 April 2025 14 January 2018 to 14 January 2026 29 April 2019 to 28 April 2026 23 May 2019 to 22 May 2026 10 March 2012 to 9 March 2021 8 July 2017 27 October 2017 15 April 2018 13 March 2019 30 March 2017 Price per share 57.5p 179p 323.5p 600p 697.5p 557.5p 1105p 156p 179p 323.5p 292.5p 600p 697.5p 557.5p 851p 1105p 1061p 156p -p (2) -p (2) -p (2) -p (2) -p (2) (1) Options may only be exercised when the share price is above £1.82. (2) Vesting is conditional on achievement of certain market based conditions. Equity-settled share option schemes Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the period are as follows: Outstanding at beginning of year Granted during the year Exercised during the year Leavers, lapsed & other 2017 Number 1,823,684 18,851 (189,962) (45,240) WAEP (pence) 340.04 .01 449.64 834.14 Outstanding at end of the year Exercisable at the end of the year Weighted average share price at date of exercise for share options exercised during the year: 1,607,333 365,488 309.90 394.30 1,737.04 2016 Number 1,591,300 558,345 (293,310) (32,651) 1,823,684 387,250 WAEP (pence) 289.10 496.39 321.29 683.64 340.04 289.02 1,092.3 The exercise price of options outstanding at 31 December 2017 range between £.01 and 1,105p (2016: £.01 and 1,105p) and their weighted average contractual life was 3.3 years (2016: 4.5 years). The weighted average share price at the date of exercise for share options exercised during the period was 1,737.04p (2016: 1,092.3p). The only awards granted during the year were under the LTIP, and more information is provided below. The inputs to the model for options issued in the prior period were as follows: Weighted average exercise price of options issued during the period (pence) Expected volatility (%) Expected life beyond vesting date (years) Risk free rate (%) Dividend yield (%) 63 2016 1,102.58 31.47 2.00 1.00 - accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Share-based payment schemes and transactions (continued) The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous period. Expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous twelve- month period. Expected life is based on the Group’s assessment of the average life of the option following the vesting period. The market vesting condition was factored into the valuation of shares issued under the LTIP as explained on page 20. Long-term incentive plan On 30 March 2017, the Group granted conditional share award (“Awards”) over a total of 18,851 ordinary shares of 1 penny under the Long-Term Incentive Plan, which was approved by shareholders on 27 May 2014. On 14 March and 14 September 2016 the Group granted Awards over a total of 306,974 ordinary shares of 1 penny under the LTIP, and during 2014 and 2015, the company granted Awards over 222,206 and 277,534 ordinary shares of 1 penny under the LTIP, respectively. All Awards vest three years from the date of grant, are required to be held for a further six months, and are subject to certain performance conditions. The fair values of the Awards at the dates of grant were calculated using the Monte Carlo statistical modelling approach to reflect the market conditions within the Award conditions. The inputs to this model were as follows: Expected volatility (%) Expected life years Risk free rate (%) Dividend yield (%) 30 March 2017 30.0 3.0 0.16 - 14 March 2016 28.0 3.0 0.73 - 14 September 2016 28.0 2.5 0.16 - 25. Reconciliation of net cash flow to movements in net funds and analysis of net funds The amounts disclosed on the cash flow statement in respect of cash and cash equivalents are in respect of these balance sheet amounts. Group Cash in hand & at bank Company Cash in hand & at bank Group Cash in hand & at bank Company Cash in hand & at bank 2016 $000 5,866 5,866 1,303 1,303 Acquired with acquisitions $000 9,852 9,852 - - 2015 $000 5,307 5,307 1,734 1,734 64 Cash Flow $000 12,886 12,884 542 542 Cash Flow $000 832 832 (207) (207) Exchange movement $000 64 64 64 64 Exchange movement $000 (273) (273) (224) (224) 2017 $000 28,668 28,668 1,909 1,909 2016 $000 5,866 5,866 1,303 1,303 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2017 Reconciliation of net cash flow to movements in net funds and analysis of net funds (continued) Group net debt reconciliation Borrowings (including capitalised finance costs) Less: Cash in hand & at bank Net (cash) / debt 26. Commitments under operating leases Note 19 2017 $000 16,140 (28,668) (12,528) Total of future minimum operating lease payments under non-cancellable operating leases: Group Land & buildings Less than one year Within one to five years Greater than five years Other Less than one year Within one to five years Greater than five years Company Land & buildings Less than one year Within one to five years Greater than five years Other Less than one year Within one to five years Greater than five years 2017 $000 1,306 3,147 436 4,889 48 28 - 76 154 308 - 462 37 - - 37 2016 $000 9,298 (5,866) 3,432 2016 $000 935 3,123 1,003 5,061 39 34 - 73 100 365 - 465 39 34 - 73 Operating leases within ‘Land & buildings’ include the leases of company and Group offices. Leasing arrangements from the respective lessors can be viewed as standard. Leases within ‘Other’ include office equipment and a vehicle. Terms can be viewed as standard. 65
Continue reading text version or see original annual report in PDF format above