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2023 ReportRegistered number 03959429 accesso Technology Group plc 2018 Annual report and financial statements accesso Technology Group plc Contents of the consolidated financial statements for the financial year ended 31 December 2018 Company information Introduction and key financial highlights Chief Executive’s statement 2017 Pro-forma Data The Board of directors Strategic report Directors’ remuneration report Report of the directors Corporate governance 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 20 23 25 28 41 44 48 49 54 55 56 57 58 59 60 61 accesso Technology Group plc Company information for the financial year ended 31 December 2018 Directors: Bill Russell, Non-Executive Chairman Andy Malpass, Non-Executive Director David Gammon, Non-Executive Director John Alder, Executive Karen Slatford, Senior Independent Director Paul Noland, Executive Tom Burnet, Non-Executive Director Secretary: Registered office: 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: Banker: 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 2018 Highlights Continued growth with revenue of $118.7m representing an increase of 15.5% on 2017 revenue (proforma for IFRS 15) of $102.8m. Gross profit has increased 20.2% to $88.2m from $73.4m in 2017. Adjusted Operating Profit up 25.5% to $25.1m and adjusted EBITDA up 36.5%, against proforma comparatives, to $34.8m. Organic revenue growth, which excludes the impact of the 2017 acquisitions, of 7.8% reflects continued strong Ticketing and Distribution performance, which was up 18.3%, offset by an 11% decline in Guest Experience revenue due to weather and changing park visitation patterns. Transactional and Repeatable revenues grew 15.1% to $88.4m or 74.4% of total revenues. Major client activity continued with a significant contract win with Marriott Hotels, renewal of our agreement with Cedar Fair and a strategic partnership with Village Roadshow Theme Parks. Current addressable market opportunity for the group identified estimated to be in the region of $3.4bn. Decision taken to accelerate the investment required to evolve and broaden our range of solutions, unlocking additional cross- sell and up-sell potential within our installed base and allowing for more efficient development, support and service delivery. For 2019 we expect further strong growth in our transactional and repeatable revenues, partly offset by headwinds from non- recurring revenues, resulting in high single digit overall organic revenue growth, similar to 2018. Year ended 31 Dec 18 IFRS15 $m 118.7 6.3 25.1 34.8 74.7% 0.5 12.23 73.58 Year ended 31 Dec 17 (proforma)1 IFRS15 $m 102.8 ∆ reported IFRS15 15.5% 10.1 20.0 (37.6%) 25.5% 25.5 36.5% 83.1% 12.5 (12.0) 41.06 (70.2%) 59.45 23.8% Year ended 31 Dec 17 IAS18 $m 133.4 9.2 19.1 24.6 86.2% 12.5 40.83 56.73 Revenue7 Operating profit7 Adjusted operating profit 2 Adjusted EBITDA3 Underlying cash conversion4 Net cash5,7 Earnings per share – basic (cents) 7 Adjusted Earnings per share – basic (cents)6 1Unaudited information that adjusts the audited 2017 results to be comparable with 2018 as a result of the adoption of IFRS 15. Reconciliation included within the Financial Review 2Operating profit 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 15) 3Adjusted operating profit before depreciation and amortisation 4Adjusted cash generated from operations (cash from operations, adjusted for non-underlying items) as a percentage of Adjusted EBITDA 5Cash less Borrowings (Note 28) 6Adjusted 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 (Note 15) 7Audited number; all other numbers are unaudited. 3 accesso Technology Group plc Introduction and key financial highlights for the financial year ended 31 December 2018 (continued) Commenting on the results, Paul Noland, Chief Executive Officer of accesso, said: “2018 has been another year of global expansion at Accesso. Our progress continues to be driven by the variety of solutions we have to offer and our relentless focus on delivering excellent service and support. We continue to integrate the 2017 acquisitions of TE2 and Ingresso, along with identifying and executing opportunities for integration across the Group’s entire portfolio of solutions. As hoped, we saw increased demand for multiple applications at individual sites and have made positive strides in that direction. Our customers are asking us to bring even more flexibility, integration and scalability to the products and services we offer. As such, and in order to accelerate future growth, we will invest where necessary to maintain our market leadership and to ensure we capitalise on customer demand for our products, as either an integrated or as an individual solution.” 4 accesso Technology Group plc Chief Executive’s Statement These 2018 annual results represent the first fiscal year end since I joined accesso last spring. During my time at accesso, I have developed an increased appreciation that this is a business with an industry-leading technology proposition that serves a truly impressive set of clients. We are succeeding in a competitive landscape due in no small part to the efforts of the amazing staff that I have come to know and appreciate. Our stated strategy has been to make the most of demand for our technology within our installed base, increase penetration within our existing verticals, and diversify our business through expansion across adjacent markets. I firmly believe that 2018 has been a year of positive progress against each of these goals. All businesses experience headwinds and we’ve had our share this past year. We witnessed several events that impacted our clients, and therefore accesso, including attendance fluctuations due to weather and changing park visitation patterns. We were also unable to complete a well-advanced acquisition opportunity which was terminated in October 2018. It is a tribute to our strength as an organisation that we have grown through these challenges. We start the year with renewed determination to continue to expand and evolve. As such, an important part of our go-forward strategy is to ensure we are applying our resources in the most efficient way given the growth in demand for solutions that combine our technology offerings. We have affirmed the positive potential of our strategy and see a clear path toward improving our already successful solutions. We look forward to the year ahead with the enthusiasm that comes from knowing where we need to go and a clear plan on how to get there. 2018 in Review Financial Performance As set out in the Interim results of 19 September 2018, the Group adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018, using the cumulative effect method, with the effect of applying this standard recognized at the date of adoption. Accordingly, information presented for 2017 has not been restated. However, the Group has provided, where relevant, pro-forma data for the comparative period that shows the metric that would have been reported had IFRS15 been adopted for 2017 together with a full reconciliation from the statutory 2017 numbers. The Group’s financial results in 2018 demonstrates continued progress. In terms of headlines, revenue for the year was $118.7m, up from a proforma revenue of $102.8m in 2017, while adjusted operating profit grew to $25.1m from a proforma $20.0m in 2017. This represents growth of 15.5% and 25.5% respectively. Furthermore, adjusted EBITDA was $34.8m representing 36.5% growth on proforma 2017 of $25.5m and while 2018 benefited from having a full year of the two acquisitions undertaken in 2017, it represents a strong top and bottom line. Evolving our Reporting The growth in accesso’s size, our additional acquisitions, and subsequent changes to our organisational structure led the Board to review the reporting of its operating segments. This review concluded we should present more granularity around our individual product lines as they pertain to accesso’s two main activities: ‘Ticketing & Distribution’ and ‘Guest Experience’. A number of acquisitions, each of which has broadened our horizons and helped us better-address our market opportunity, have added new revenue models and new market dynamics, and now make additional disclosure appropriate. Our Ticketing and Distribution segment consists of accesso Passport, accesso SiriuswareSM, accesso ShoWareSM and Ingresso; while our Guest Experience segment consists of accesso LoQueueSM and TE2. These groupings align products with similar financial, technological and go-to-market characteristics with the strategic thrusts of our business: on the one hand selling and distributing tickets, and on the other, providing in-venue technology that helps guests get more out of their visits to attractions. In our view, these changes have three main benefits. First, they will ensure our financial reporting better reflects the way we see ourselves and run our business. Second, they will better enable our followers to discern the moving parts within accesso and fully understand the dynamics driving our performance. Finally, they will help followers differentiate between organic and inorganic revenue, clarifying our underlying performance as we integrate our 2017 acquisitions. All in all, we hope to paint a more detailed and representative picture as we look towards the future. 5 accesso Technology Group plc Chief Executive’s Statement (Continued) A View of our Market Opportunity In 2018, accesso engaged an external firm to support our efforts to estimate our total addressable market. We were interested in understanding not only the total potential but also how it relates to geographies and identified verticals. The result was a detailed analysis of accesso’s opportunities by market segment. We estimate our current total addressable market opportunity is approximately $3.4bn, with Ticketing and Distribution representing an addressable market opportunity of $1.9bn and Guest Experience representing an addressable market opportunity of approximately $1.5bn. Given the Group’s current level of revenue, this represents a significant opportunity with material room for further growth. Beyond the market statistics, accesso has been able to successfully showcase the value of digitizing the guest journey to be universal across the leisure, entertainment and hospitality space, providing significant opportunities. Expansion of this kind remains a key part of our strategy, increasing our potential with every step into a new geography or industry vertical. Operational Highlights Established Verticals accesso views its traditional verticals as theme park, water park and attraction 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. Key among this year’s achievements was the near-completion of our accesso Passport roll-out across Merlin Entertainment’s global estate. We are now present with Merlin in 30 countries, each of which presents a significant opportunity to expand by leveraging the localized footprints and technologies we have established. Our strong relationship with Merlin is also enabling expansion beyond accesso Passport, and we were extremely pleased to announce the first same-site integration of accesso Passport, accesso LoQueue, TE2 and PrismSM at The Bear Grylls Adventure in the UK during Q4. We also signed a contract extension with long-term partner Cedar Fair and announced a further TE2 / accesso Passport integration at their Knotts Berry Farm theme park. With respect to TE2, we have now deployed the first version of a new Food & Beverage capability within the platform which enables personalisation and pre-ordering, enhancing spend-per-customer for those engaging with the platform. TE2 also played its part in the November 2018 announcement of a material expansion to our existing relationship with Village Roadshow Theme Parks, Australia’s largest theme park operator. This marks the first holistic integration of four of accesso’s solutions – accesso Passport, accesso LoQueue, accesso ShoWare and TE2 will be integrated and installed across its Gold Coast Properties - Warner Bros. Movie World, Wet'n'Wild Gold Coast and Sea World (Australia). This agreement is representative of accesso’s rapid growth in the APAC region during the year, with the business now supporting operations for 22 venues in 7 countries there. We have a number of additional roll-outs in this region scheduled for 2019. In our queuing business, we continued to replace legacy QbotSM devices with new and improved technology, including deployment of QsmartSM across our European client base and seeing our state-of-the-art Prism wearable device complete its first full season as the premium queuing device at a tier-1 US park. While a more mature market than some of the others in which we operate, our long-term relationships with large operators in the queuing space continues to provide an excellent foundation for our business and a tangible entry point for the cross and up-sell of additional accesso technologies. This part of the business also continues to make progress addressing the challenge that has arisen in recent years from a significant increase in the proportion of guests who gain admission to the venue as part of a season pass or membership program. The visitation behaviour of this proportion of guests flattens attendance on both a daily basis and across a season and reduces demand for an all- day queuing product. Actions to address this headwind are ongoing and include offering our clients increased options for guests to purchase and access our queuing solution and these efforts continue to gain traction. 6 accesso Technology Group plc Chief Executive’s Statement (Continued) Adjacent Verticals accesso’s adjacent verticals are those that accompanied the acquisitions of accesso Siriusware and accesso ShoWare in 2013 and 2014 respectively. The solutions these acquisitions delivered have provided the opportunity for accesso to break out beyond its traditional markets into ski resorts, cultural attractions, tours and live event ticketing. We have continued to make good progress against our stated aim of expanding our penetration in these new markets, with accesso Passport and accesso Siriusware now working in tandem in twelve locations across four industry verticals, including a maiden combined deployment in the Ski Industry. Our continued progress in the Ski market was also boosted by our agreement with Alterra Mountain Company to deploy TE2’s platform. We continued to make similarly good progress in the Live Entertainment, Cultural Attractions and Live Sports markets. Noteworthy new wins for the accesso ShoWare solution included Vibes International Music Festival in Fort Lauderdale, along with strides made in sports with the Brampton Beast and Nanaimo Clippers Hockey teams, and NOLA Gold and Austin Elite - both teams in Major League Rugby. Lastly, TE2’s partnership with Carnival Corporation also delivered success in 2018. For the last 3.5 years, TE2 has been, and will continue to be, a key guest experience technology partner for Carnival’s Medallion Class enabled cruise ships. Guests are enjoying an extensive portfolio of Ocean Medallion-enabled features, specifically designed to enhance their vacation experience. The successful completion of the initial phase with Carnival contributed to an expected reduction in license and implementation income that reduced TE2 revenues by 30.8% in 2018 when compared to the whole of 2017 and including the pre-acquisition ownership period. We greatly value our ongoing partnership with Carnival. Overall our progress in adjacent markets continues to confirm that the characteristics of the digital guest journey are universal irrespective of industry vertical or geography. We therefore expect our outward expansion to continue during 2019. Greenfield Opportunities The 2017 acquisitions of Ingresso and TE2 brought a range of new capabilities to accesso and, in addition to supporting our product offerings in our existing verticals, the Group has made strides into greenfield areas including ticketing distribution and continues to evaluate the opportunity within the Healthcare vertical. We continue to see strong demand from ticketing inventory aggregators for our Ingresso platform and have delivered significant contract wins or partnerships with the likes of Reserve with Google, Groupon and Yplan, as well undertaking a considerable degree of work during the year to internationalize Ingresso to offer global capability. Ingresso grew revenues by 11.1% on a full year basis, including the pre-acquisition ownership period, despite the loss of their largest client when Amazon UK exited the ticketing space early in the year. We expect the impact of the new contract wins and partnerships together with the work we have done on the supply side of the business will help us take advantage of this material distribution network. We remain at the start of an extremely exciting opportunity in large scale global leisure venue ticketing distribution and have seen pleasing momentum which gives us confidence for the year to come. In July 2018 our accesso ShoWare solution went live in four of Marriott International’s Gaylord Hotels, a new client, which along with the Alterra Mountain Company, represents exciting progress in the hospitality space. Prioritising our Security Infrastructure accesso aspires to be the premier technology solutions provider to the verticals it serves, and as a result, we continue to invest in ensuring our technology offering leads the market. An increasingly critical focus of our clients, and therefore the Group, is around data security and compliance against an evolving global landscape where intrusion threats become more sophisticated and regulations covering the handling of data demand that compliance is at the forefront of our business. accesso has recently appointed a Chief Information Officer who leads a team dedicated to the security of accesso and client data and global compliance with data hosting legislation. accesso is acutely aware of the importance of security to the Group’s clients and their guests and has continued to implement state-of-the-art systems to mitigate risk across the group. With the introduction of GDPR and other global privacy initiatives, compliance has given renewed focus across the business and accesso has maintained pace with all relevant developments. 7 accesso Technology Group plc Chief Executive’s Statement (Continued) Brexit 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 recognized that depending on the specific exit arrangements that are agreed and how these are implemented, there could be an impact to consumer spending within the UK or EU and this could impact attendance at certain venues or investment decisions by leisure operators. Additionally, there could be an impact on exchange rates which could alter international visitation patterns. People During 2018 we continued the consolidation of our US offices, by bringing staff together in three centres of excellence located in Lake Mary, Florida; San Diego, California; and Fresno, California and by expanding our long running ability to accommodate remote working arrangements. Our Lake Mary office is now our largest and continues to expand with the arrival of new colleagues who can now collaborate under one roof. We were also named number four on The Best Places to Work list for large companies by the Orlando Business Journal. In addition, we implemented an accesso culture guide for the first time. During the year accesso’s headcount increased by approximately 10% on the number at 31 December 2017 to just over 550 people, with turnover below the market norm. 2019 and beyond Investing in the Digital Guest Journey accesso has brought together a product set that now stretches across the whole waterfront of the evolving digital guest journey, which the Group helped to define, from queuing and ticketing to distribution and in-venue experience. This unique collection of assets is not matched by other providers within our market. While our portfolio was assembled as individual products, in many cases secured via acquisition, the positive client response to the breadth of our offerings has driven cross and up-selling opportunities of our products to our clients that have in-turn led to increasing technology integration across our portfolio. Clients are benefitting from our ability to offer multi-product solutions, delivering significant economic benefits for their business through combining our technology offerings. Thus far, our approach to integrated business opportunities, such as The Bear Grylls adventure and the Knotts Berry Farm project mentioned above, has been to provide a series of unique installations for specific operators or venues. While this delivery is both effective and prudent in satisfying individual clients and testing market appetite for various combinations of our products and services, it is clear that there are alternative approaches that will be faster and more efficient to scale and will offer the opportunity to unlock a larger market opportunity. It is becoming clear that there is significant opportunity with operators that choose to buy or build parts of the technology they require and do not wish to utilize the whole of our offerings. For these operators or venues, a platform that allows the opportunity to integrate their solutions, our solutions and those from third party providers would, we believe, be a compelling and unique proposition. Therefore, to make the most of these market-led opportunities, we now need to introduce a more unified, efficient and flexible architecture which allows existing and prospective clients to be selective not just around which solutions they implement, but how, and to what extent they deploy them, including the ability to integrate their own or other, third party applications. This shift will ultimately also offer to accesso the opportunity to realize material efficiency gains and reduce the overall cost of supporting, maintaining and improving our current product portfolio. This is the direction of our industry and the future of our business. We started along this path in 2017 focused on evolving accesso Passport, accesso Siriusware and accesso ShoWare to provide a single, functionally rich ticketing offering. We now believe we need to expand and accelerate this project to fully and properly incorporate the functionality offered by TE2, accesso LoQueue and Ingresso as well as offering the opportunity for clients and third parties to use the platform itself as a foundation for their own systems. This is a fundamental but critical shift for accesso. Whereas in the past we have always offered comprehensive end-to-end solutions, we will now be free to offer our solutions individually, in combination, as a platform upon which systems can be built, or with which other systems can be integrated. The case for technological and organisational evolution is clear and compelling, but to deliver it will require investment over the course of the next two to three years. Accurately estimating the required investment at this stage of the project is difficult and likely to change but will lead to an incremental increase in development expenditure in the near term. 8 accesso Technology Group plc Chief Executive’s Statement (Continued) 2019 and beyond (continued) As elements of this development and rationalisation project are deployed, the Group’s evolved technology platform will generate numerous benefits including: Faster time to market Easier to sell and deploy multiple solutions Open platform that will appeal to clients that want control over the interfaces and other elements of their system More efficient development, implementation and support organisation Ability for third parties to integrate with the accesso platform and vice versa Reduced setup and configuration costs for the client Improved ability to scale both up and down market and therefore increase penetration within our available markets Building on the work begun in 2017, the use of micro services technologies, agile development and a largely SaaS (software as a service) deployment model, will allow for a rapid pace of development and distribution. Initial focus will be on delivering features that will be attractive to clients running our existing software, as our choice of architecture will support operation in tandem or integrated with other systems, including our own. This will allow us to sell and evolve our current products, continuing to build our customer base, while we evolve our next generation solution. We anticipate being able to sell and deploy parts of the evolved solution to new and existing clients as early as 2020 with the remaining elements being delivered over the next two to three years. The architecture of the platform will allow for continuous development and improvement for the foreseeable future with the ability to grow the client base and associated revenue from early on in the project. Expanding our ability to market and sell The exercise in quantifying accesso’s total addressable market also revealed an opportunity to find additional growth through further investment in our sales and marketing efforts. As a part of this we will be increasing the Group’s sales and marketing spend to the level required to fully pursue the expansive market opportunity we have identified across traditional, adjacent and greenfield opportunities. We estimate this incremental investment to be in the region of $2.5m in 2019 with an intention to continue to scale expenditure in absolute terms as the business grows. The Board expect these initiatives to be funded from within the Group’s existing financial facilities. Building on strength The fundamentals of accesso’s business model provide a solid foundation from which to move forward. The unique and complementary nature of the technology assets we possess already provides the ability to support the requirements of our client base and our emphasis has been on building strong relationships and a repeatable revenue stream backed by long term agreements. Our willingness to recognise the requirements of our markets, and to proactively pursue change set us apart over recent years and our planned technological path will provide a stronger foundation for our future success. Outlook Although it is still early in the year, trading for 2019 has started in line with our expectations. In terms of revenue guidance for 2019, we expect to see organic growth in line with that achieved in 2018. Growth within Ticketing and Distribution is expected to be in line with the mid-teens percentage growth achieved in 2018. Guest Experience revenues overall are expected to be broadly flat, with queuing revenues expected to reverse the trend experienced in 2018, and the evolution of repeatable platform revenues within TE2 largely offsetting the expected reduction of $2.9m of license revenue related to a single customer that will not repeat. We expect the accelerated investment in development and marketing spend in 2019 to build the platform for accelerating growth in 2020 and beyond. Total development expenditure in 2019 is expected to increase to between $36m to $39m (2018: $29.3m), but with a reduced level of capitalisation within the range 60% and 65%. This expenditure includes incremental investment as referenced above. Looking further ahead, we expect there will progressively be opportunities to absorb further incremental expenditure within our ongoing development effort and we are focused on delivering material reductions in total development expenditure as a proportion of revenues and a reduction in the level of capitalisation. 9 accesso Technology Group plc Chief Executive’s Statement (Continued) 2018 Financial Review accesso’s financial performance continues to be underpinned by its highly repeatable and highly visible revenue stream, supplemented by a high-quality professional services component, delivering organic growth through long-term and transactional agreements with many of the world’s largest attraction operators. The Group is also diversifying its revenue stream as it expands across industry verticals and geographies, reducing customer concentration and lessening its dependence on weather conditions and regional macroeconomic factors. Reflecting the increased scale of accesso and its revised management organisational structure, the Board have updated its operational and financial reporting which will allow a greater level of understanding of the organic growth of the business within a period and the factors which drive growth, the amount and nature of development expenditure and increased granularity generally in relation to its cost base. Alternative Performance Measures The Board utilizes alternative performance measures (“APMs”) in evaluating and presenting the results of the business and views these APMs as more representative of the Group’s performance. The historic strategy of enhancing its technology offerings via acquisitions, as well as an all employee share option arrangement necessitate the making of adjustments to statutory metrics to remove certain items which are not reflective of the underlying business. These adjustments include acquisition expenses, amortisation related to acquired intangibles, deferred and contingent payments related to acquisitions, changes to earn-out considerations, share-based payment and exceptional items. These APMs help ensure the Group is focused on translating sales growth into profit. By consistently making these adjustments, the Group provides a better period to period comparison and is more readily comparable against a business that does not have the same acquisition history and equity award policy. APMs include adjusted EBITDA, adjusted cash EBITDA, adjusted operating profit, adjusted net debt, and adjusted cash from operations. A reconciliation of these measures from IFRS 15 is also provided within this Financial Review. Segments The Board revised its segmental information during 2018 to align with an updated organisational structure, consistent with our investment plans outlined above, and that reflects how the Board now review and make decisions about resources to be allocated to each segment. The Board considers the group to consist of two reportable operating segments: Ticketing and Distribution Guest Experience Ticketing and Distribution We have formed a single ticketing group, headed by the President of Ticketing. This group is made up of our accesso Passport, accesso Siriusware, accesso ShoWare and Ingresso products. All of these technologies were acquired by the Group with the strategic intention of providing operators with best-of-breed point of sale, ticketing and eCommerce technologies, together with the opportunity to participate in a global distribution platform. As the strategy has progressed, the technology and the teams that develop and support it, have become increasingly inter-dependent and the formation of this group is reflective of the objective to formally merge and align the ticketing related activities of the group to allow increased penetration of the markets serviced and to leverage the synergies that exist in their solutions, technological capabilities and pooled expertise. 10 accesso Technology Group plc Chief Executive’s Statement (Continued) Guest Experience This segment consists of the Group’s virtual queuing solution (accesso LoQueue) and experience management platform (TE2) each of which are headed by their respective Presidents. These two distinct but complementary operating segments share similar economic characteristics, customers and markets; the solutions are often heavily tailored, technology and software intensive in their delivery and are directly targeted at improving a guest’s experience of an attraction or entertainment venue, whilst providing cross selling opportunities and increased revenues to the venues. Management therefore conclude that they meet the aggregation criteria for reporting purposes. The Board monitors the results of the operating segments prior to central costs and charges for interest, depreciation, tax, amortisation and exceptional items. The Group’s central costs are not segment specific and therefore not allocated. These costs have therefore been excluded from segment profitability and presented as a separate line below segment profit. The Group’s assets and liabilities are reviewed on a group basis and therefore segmental information is not provided for the statements of financial position of the segments. Prior year segmental information has been restated to provide comparability. Adoption of IFRS 15 As detailed earlier in this statement the Group adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018. The most significant impact from the adoption of IFRS 15 relates to revenue recognition in respect of certain accesso LoQueue agreements. Under the previous revenue recognition standard (IAS 18), management determined the Group was acting as the principal in such agreements, revenue was recognised on a gross basis and amounts due to the operator were recorded as an expense within cost of sales. IFRS 15 introduces revised criteria for determining the principal or agent relationship, focusing on control of the goods or services provided by the Group under the terms of the agreement. Management has determined that, under IFRS 15, the Group acts as the agent in its queuing contracts, and consequently now recognises the net revenue portion of the sale as revenue, rather than the full amount of the guest payment for the service. There is no impact on profit of the Group due to the revised assessment of agent vs principal and therefore the Group will present improved operating margins in the current year and looking forward. The adoption of IFRS 15 has increased 2018 and 2017 operating profit by $3.3m and $0.9m respectively. References to 2017 proforma data presented within this Financial Review have been provided as additional information to the statutory reported requirements to better illustrate the performance of the business. This information is unaudited and does not form part of the audited annual financial statements. Reconciliations between the statutory audited 2017 and 2017 proforma numbers are included as an appendix to this Financial Review. Further details relating to the adoption of IFRS 15 are included in Note 3 of the financial statements. 11 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics Revenue On an IFRS 15 consistent basis total revenue increased by 15.5% to $118.7m (2017 Proforma: $102.8m) and includes $38.7m (2017: $28.6m) from the 2017 acquisitions. Statutory reported revenue reduced by 11% from $144.4m to $118.7m. Segmental information has been revised in 2018 and 2017, with the information from the comparative period being extracted from management accounts and is unaudited. The impact of currency movements during the period was not significant on revenue or earnings. Ticketing and distribution Guest Experience Total revenue Ticketing and distribution – excluding 2017 acquisition Ingresso) Guest Experience – excluding 2017 acquisition (TE2) Total revenue – excluding 2017 acquisitions Ingresso TE2 Total revenue attributable to 2017 acquisitions 2018 (audited) IFRS 15 $000 78,550 40,197 2017 (proforma) IFRS 15 $000 64,418 38,424 2017 IAS 18 $000 63,536 69,893 118,747 102,842 133,429 2018 (audited) IFRS 15 $000 2017 (proforma) IFRS 15 $000 2017 IAS 18 $000 56,435 23,581 80,016 22,115 16,616 38,731 47,700 46,818 26,495 57,964 74,195 104,782 16,718 11,929 16,718 11,929 28,647 28,647 Total revenue 118,747 102,842 133,429 Removing the benefit of the 2017 acquisitions, revenue increased to $80.0m (2017 Proforma: $74.2m) reflecting growth of 7.8%. This growth included a strong performance within ticketing and distribution, which delivered growth of 18.3%, offset by an 11.0% reduction in Guest Experience revenues. This is principally attributable to 2017 benefiting from $2.5m of non-repeatable implementation revenue from a significant queuing solution to a major US operator, and 2018 continuing to address the headwind discussed within the Operational Review relating to the proportion of guests who gain admission to the venue as part of a season pass or membership program Repeatable revenues within guest experience, excluding the 2017 acquisition and significant implementation revenue, were broadly flat. Ticketing and distribution revenue growth was driven by a strong performance from existing venues coupled with the introduction of additional venues from the roll out of the Merlin Entertainments agreement and new customers implemented in the year. An element of this growth was derived from a higher than usual proportion of revenues from up front point of sale licenses, which are unlikely to be repeated to a similar level in 2019. We estimate that this mix benefit to revenue in 2018 was approximately $2m. 12 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics (continued) Revenue: 2017 acquisitions During 2017, the group completed the acquisitions of Ingresso and TE2 in March 2017 and July 2017 respectively. In March 2018, we announced the decision of Amazon UK to immediately exit the UK ticketing distribution space. This was a significant customer of Ingresso but this decision does not impact the strategic opportunity that the group expects to derive from this technology, and was mitigated by new and potentially larger distribution arrangements. It did however negatively impact management revenue expectations in the shorter-term. Notwithstanding the impact of Amazon, full year pro-forma revenues including the pre-acquisition period in 2017, rose by 11.1% to $22.1m (2017: $19.9m). TE2 revenues continue to be largely focused on the ongoing delivery of professional services to Carnival in support of the roll out of its Medallion Class program, the initial part of which was formally launched by that operator at the end of 2017. The focus required to successfully execute on the delivery of these services did impact the planned development of the platform element of this business. Full year revenues on a pro-forma basis, including the pre-acquisition period in 2017, fell by 30.8% to $16.6m (2017: $24.0m). This reduction reflects significant professional services activity in the pre and post-acquisition periods of 2017 together with the full year benefit of license fee recognition revenue relating to a single customer of $4.6m in 2017. While we expect to continue to generate professional services revenues from the ongoing relationship with this customer, the remaining portion of this license was recognized in the current reporting period and represented $2.9m of 2018 TE2 revenues. Revenue Visibility Transactional revenue Other repeatable revenue Non-repeatable revenue Other revenue 2018 (audited) IFRS 15 $000 79,665 8,698 26,487 3,897 118,747 2017 (proforma) IFRS 15 $000 67,719 9,045 18,179 7,899 102,842 2017 (audited) IAS 18 $000 99,188 9,045 17,297 7,899 133,429 Transactional revenue is defined as revenue earned as either a fixed amount per sale of an item, such as a ticket sold by a customer or as a percent of revenue generated by a venue operator. Normally this revenue is repeatable where a multi-year agreement exists and purchasing patterns by venue guests do not significantly change. Other repeatable revenue is defined as revenue, excluding transactional revenue, that is expected to be earned through each year of a customer’s agreement, such as maintenance support revenue without the need for additional sales activity. Non-repeatable revenue is revenue that occurs one-time (e.g. up-front license fees) or is not repeatable based upon the current agreement (e.g. billable professional services hours) and is unlikely to be repeatable without additional successful selling execution by accesso. Other revenue consists of hardware sales and other revenue that may or may not be repeatable with limited sales activity if customer behaviour remains consistent. We estimate that for 2018 74.4% (2017 Proforma: 74.6%) of Group revenue is repeatable in nature (transactional revenue plus other repeatable). There is an expectation that the repeatable % will increase as TE2 repeatable platform revenues evolve at a greater rate than their non-repeatable professional services revenues. Gross Margin The gross profit margin in 2018 was 74.3%, compared to a 2017 reported margin of 55.0% (pre-adoption of IFRS 15), and a 2017 Proforma margin of 72.3% in 2017. There were no significant beneficial or adverse margin changes and the slight increase in margin is principally related to mix, with a higher proportion of ticketing revenues in the year. 13 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics (continued) Administrative Expenses Development expenditure gross expenditure Less capitalized development expenditure Development expenditure included in administrative expenses Sales and marketing Other operating expenditure Underlying administrative expenses (excluding depreciation) Amortisation and depreciation (excluding acquired intangibles) Underlying administrative expenses (including depreciation) Acquisition and aborted acquisition expenses Deferred and contingent payments Amortisation related to acquired intangibles Profit recognized on reduction of earn-out liability Share based payments 2018 $000 29,403 (21,100) 8,303 4,893 40,253 53,449 9,624 63,073 1,703 3,176 11,740 - 2,245 2017 $000 20,025 (12,395) 7,630 3,848 37,363 48,841 5,531 54,372 1,249 2,131 8,591 (3,228) 1,089 Administrative expenses per the income statement 81,937 64,204 Administrative expenses were up 27.6% to $81.9m (2017: $64.2m), as the group absorbed a full year of the enlarged Group and the related full year amortisation of the 2017 acquired intangibles, and employment related consideration together with increased share- based payment charges. Development expenditure, net of capitalisation increased to $8.3m (2017: $7.6m). A $2.7m reduction in expenditure was recorded in respect of year-end director and staff bonuses, which totalled $1.5m (2017: $4.2m), with executive directors and the senior leadership team not accruing any bonus for the year. Finally, an expense of $1.7m was incurred relating to professional fees associated with a significant and well-advanced acquisition opportunity, which was ultimately terminated by the Board of accesso in October 2018. Underlying administrative expenses, which exclude acquisition expenses, amortisation of acquired intangibles, charges relating to any contingent element of acquisition consideration, and share based payments were $53.4m, representing an increase of 9.4% on 2017 ($48.8m) and driven primarily by a full year of the 2017 acquisitions and continued increase in headcount and operational infrastructure to support short and longer-term growth. Adjusted EBITDA and operating profit Adjusted EBITDA of $34.8m was up 41.5% (2017: $24.6m) and 36.5% from a 2017 Proforma of $25.5m. Operating Profit for 2018 was $6.3m, down from a reported $9.2m in 2017, and a Proforma of $10.1m, as the increase in the underlying profitability of the group was unable to absorb the full year of the amortisation on the 2017 acquired intangibles, employment-related consideration, increased share-based payment charges and the additional acquisition related expenses (including aborted acquisition expense). 2017 had also included a one-time non-underlying $3.2m benefit relating to the reduction in the expected earn-out payable to the sellers of Ingresso. Adjusted operating profit, which the Board considers a key underlying metric, was $25.1m in 2018, equating to 25.5% growth when compared to a 2017 Proforma adjusted operating profit of $20.0m. Adjusted operating margin increased to 21.1% for 2018 (2017 Proforma: 19.5%). 14 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics (continued) Adjusted EBITDA and Operating Profit (continued) The tables below set out a reconciliation between operating profit and adjusted EBITDA: Operating profit Add: Acquisition expenses (including aborted acquisition) 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 2018 IFRS 15 $000 6,267 1,703 3,176 11,740 - 2,245 25,131 9,624 34,755 The following is an analysis of the Group’s adjusted EBITDA by reportable segment. Ticketing and distribution % of ticketing and distribution segment revenue Guest Experience % of guest experience segment revenue Central unallocated costs Adjusted EBITDA % of total revenue 2018 IFRS 15 $000 30,805 39.2% 19,256 47.9% (15,306) 34,755 29.3% 2017 (proforma) IFRS 15 $000 10,124 1,249 2,131 8,591 (3,228) 1,089 19,956 5,531 25,487 2017 (proforma) IFRS 15 $000 23,772 36.9% 18,224 47.4% (16,509) 25,487 24.8% 2017 IAS 18 $000 9,241 1,249 2,131 8,591 (3,228) 1,089 19,073 5,531 24,604 2017 IAS 18 $000 22,890 36.0% 18,224 26.1% (16,510) 24,604 18.4% Profit before tax of $5.2m was down from $7.2m in 2017 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 increase in acquisition expenses incurred in the period. Financing costs totalled $1.1m (2017: $2.1m) and included net interest payable of $0.7m (2017: $0.7m) together with amortisation of capitalised finance costs and the interest costs associated with contingent and deferred compensation of $0.4m (2017: $1.4m). 15 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics (continued) Development Expenditure Development expenditure by segment Ticketing and distribution % of ticketing and distribution segment IFRS 15 revenue Guest Experience % of guest experience segment IFRS 15 revenue Total development expenditure % of total IFRS 15 revenue Development expenditure – organic and acquisition related Ticketing and distribution – excluding 2017 acquisitions % of segment IFRS 15 revenue – excluding 2017 acquisitions Guest Experience – excluding 2017 acquisitions % of segment IFRS 15 revenue – excluding 2017 acquisitions Total – excluding 2017 acquisitions % of total IFRS 15 revenue – excluding 2017 acquisitions Ingresso % of Ingresso IFRS 15 revenue TE2 % of TE2 IFRS 15 revenue Total development expenditure % of total IFRS 15 revenue 2018 $000 16,182 20.6% 13,221 32.9% 29,403 24.8% 2018 $000 15,099 26.8% 1,904 8.1% 17,003 21.2% 1,083 4.9% 11,317 68.1% 29,403 24.8% 2017 $000 14,067 21.8% 5,958 15.5% 20,025 19.5% 2017 $000 13,378 28.0% 2,161 8.2% 15,539 20.9% 690 4.1% 3,796 31.8% 20,025 19.5% Total development expenditure, before capitalisation, during 2018 was $29.4m (2017: $20m). The principal driver of this increase was the additional $7.9m related to a full year of the 2017 acquisitions. Both acquisitions represent businesses that were less mature than the group they joined and accordingly the total expenditure represented 24.8% of 2018 revenue (2017: 19.5%). Excluding the acquisitions, development expenditure represented 21.2% of revenues (2017: 20.9%). Development expenditure remains a significant but critically important element of the cost base of the business and the table above demonstrates the significant development resources that are deployed within ticketing and TE2 parts of the business. The group undertakes development primarily in response to revenue enhancing, customer led initiatives and limits exposure to research type work. The expenditure within ticketing includes such customer led enhancements to functionality, the continued globalisation of the product and, new in 2018, initial expenditure in relation to an internal project to re-engineer the product platform to more readily execute on revenue opportunities and to more efficiently develop, maintain and support on a forward-looking basis, as discussed earlier in this review. Expenditure in relation to TE2 represents the ongoing development of its platform, while dovetailing with the broader re-engineering project of the accesso platform referenced above. It also includes a modest investment in relation to our initial work to understand the opportunity within the adjacent healthcare market. The group capitalizes elements of development expenditure, where it is appropriate and in accordance with IAS 38 ‘Intangible assets’. Capitalised development expenditure was $21.1m (2017: $12.4m) representing 71.8% (2017: 61.9%) of total development expenditure. The net benefit of development capitalisation less related amortisation increased to $13.0m from $8.2m in 2017. 16 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics (continued) Taxation On a statutory basis, the Group had a tax charge of $1.9m (2017: tax credit $2.7m). The effective tax rate of the group of 36.4% is inflated by certain items of expenditure, which are not deductible for tax purposes such as aborted acquisition costs, charges related to the accounting for acquisition consideration that is linked to continued employment and therefore deemed to be compensation from an IFRS perspective, together with share based payments. On an adjusted basis, the Group’s effective tax rate on its adjusted earnings, was 18.8%. This rate includes the benefit of credits relating to prior periods of approximately $1.0m. The group maintains its forward-looking guidance in respect of the effective tax rate on adjusted earnings as being between 21% and 23%. Tax is covered in more detail within Note 13. Profit after tax was $3.3m (2017: $9.9m). In addition to the full year of the amortization on the 2017 acquired intangibles and employment related consideration, increased share-based payment charges and the additional acquisition related expenses (including aborted acquisition expense) the prior period benefited from the $2.7m tax credit. As a result, earnings per share (basic) were 12.23 cents for 2018, a decrease of 70% (2017: 40.83 cents). Adjusted basic and fully diluted earnings per share were 73.58 cents and 70.61 cents respectfully for 2018, with increases of 23.8% and 27.6% on 2017 Proforma basis of 59.45 cents and Proforma fully diluted of 55.36 cents. Net Debt and Cash Generated from Operations Underlying cash from operations (see below) Tax Capitalised development costs Other capital expenditure Underlying free cash flow (Less)/ plus: TE2 option cash movement in period (Less)/ plus: movement in Ingresso short term cash Share issues Acquisition related payments (including costs) Interest Other Movement in net debt in year Opening net cash/ (debt) Closing net cash 2018 $000 25,954 (452) (21,100) (1,959) 2,443 (3,992) (2,403) 1,906 (9,269) (541) (192) (12,048) 12,528 480 2017 $000 21,246 (224) (12,395) (936) 7,691 5,500 7,600 77,112 (79,733) (741) (1,469) 15,960 (3,432) 12,528 Our closing net cash balance was $0.5m (2017: $12.5m). Within the financial review for the year ended 31 December 2017, we disclosed that the net cash position at that date included balances of approximately $16.5m 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 and cash balances held by the Group to make near term settlements to venue operators in respect of the Ingresso platform. We took the conservative view that these balances should be viewed as non-cash and movements in these balances ignored when looking at the underlying cash generation within the business. 17 accesso Technology Group plc Chief Executive’s Statement (Continued) Key Financial Metrics (continued) Net Debt and Cash Generated from Operations The TE2 balance at 31 December 2018, of $1.5m (2017: $5.5m) is expected to outflow from the business over an 18-month period from 31 December 2018. The cash balances in relation to Ingresso of $8.6m at 31 December 2018 (2017: $11.0m) represent cash received from ticket distributors or direct ticket sales that includes both ticket commissions, which are recognized as revenue by Ingresso and the ticket value payable to the venues. This ticket value element does not form part of accesso’s revenue or expenses and, by its nature, is difficult to model at any point in time. Both the TE2 and Ingresso balances are beneficially owned by the Group, and while there are no restrictions on their use, they have been excluded from our current definition of net debt and the movements on these balances. Adjusting for these items results in an adjusted net debt position of $10.0m at 31 December 2018 (2017: $4.0m). Cash Generated from Operations Cash flow from operating activities Add: Acquisition related expenses (including debt arrangement) Add: Payment of deferred consideration to employees (Ingresso) Plus/ (less): TE2 option cash movement in period Plus/ (less): Increase in Ingresso short term cash Adjusted cash from operations 2018 $000 17,825 392 1,342 3,992 2,403 25,954 2017 $000 33,097 1,249 - (5,500) (7,600) 21,246 Cash generated from operations of $17.8m (2017: $33.1m) includes a $6.4m outflow in relation to these TE2 and Ingresso balances (2017: $13.1m inflow). Adjusted cash generated from operations was $26m for the year ended 31 December 2018, per the table above, an increase of 22.6% from 2017 ($21.2m). This represents an underlying cash conversion from adjusted EBITDA of 74.7% (2017: 83.1% on IFRS consistent basis). The reduction from 2017 reflects a higher level of multi-year licenses where, under IFRS 15, revenue is recognized in the period of deployment with cash flows received over the term of the agreement and a lower level of payables at 31 December 2018. Looking forward, we expect the underlying cash conversion percentage from adjusted EBITDA to be close to that in 2017. The increase in capital expenditure in the period has not been matched by a corresponding increase in cash generated from operations and therefore underlying free cash flow reduced to $2.4m in the current year (2017: $7.7m). Financing and Investing Activities During the year, a final payment of $9.3m was made to the sellers of Ingresso Group Limited, which was based on the results of that business for the year ended 31 December 2017 and was recognized as a liability when the fair value of that acquisition was disclosed within the 2017 annual report. There are no further contingent or non-contingent acquisition related payments due. Borrowing Facility The Group maintains a borrowing facility with Lloyds Bank plc. This facility currently provides the Group with the ability to draw down a total of $50m, denominated in either US dollars, GB Pound Sterling or Euros, and expires in 2021. 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 30 March 2019 and a further reduction of $10m on 30 March 2020. Cash balances at 31 December 2018 totalled $20.7m (2017: $28.7m) while borrowings at 31 December 2018 totalled $20.2m ($16.1m), versus the current facility of $50m. 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. 18 accesso Technology Group plc Chief Executive’s Statement (Continued) 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. Paul Noland Chief Executive Officer 27 March 2019 19 accesso Technology Group plc 2017 Pro-forma Data The proforma information presented below has been provided as additional information to the statutory reported requirements to illustrate the performance of the business. The statutory reported results for 2018 and 2017 are not directly comparable due to the fact that IFRS 15 was adopted from 1 January 2018 and was not applied retrospectively. This information is unaudited and does not form part of the audited annual financial statements. Selected income statement information has been extracted from the Group’s management accounts for the two comparative years to present this proforma information. IFRS 15 impact 1: Certain accesso LoQueue revenues now recognized on a net basis (previously gross) Under IAS 18, certain queuing contracts were recognised on a gross basis where management determined the company was acting the principal in the agreement. IFRS 15 contains different criteria for determining who is the principal in an agreement, focusing on control of the goods or services. Management have determined the Group is acting as the agent in all queuing contracts, and therefore only recognises its portion of the sale as revenue, rather than the full amount of the guest payment. IFRS 15 Change 2 – Term and annual licenses a) Point-of-sale (POS) licenses and support revenue: Under IAS 18, the license revenue was recognised equally over the term of the agreement, reflecting the pattern of availability to the customer. IFRS 15 considers these licenses to be recognised at a point in point in time which is determined to be when the customer has been provided the software. These licences provide the customer with the right of use of the POS software as it exists, it is at the customers discretion to accept any updates to the software, it is fully functional from the date it is provided to the customer and considered a distinct performance obligation. Support revenue is carved out of the total consideration using an estimate that best reflects its stand-alone selling price and is continued to be recognised rateably as the customer receives the benefit of the support. Accordingly, the license revenue is recognised sooner under IFRS 15, with support revenue, equal to a percentage of the license fee, continuing to be recognised over the term of the agreement. The impact of these changes on items other than revenue is an increase in net assets in the form of a contract asset. b) Software licenses and the related maintenance and support revenue: Under IAS 18, these software licenses were recognised when accepted by the client, as there was a non-refundable right to payment. IFRS 15 considers right of use licenses to be recognised at a point in point in time which is determined to be when the customer has been provided with a functional software licence. The maintenance and support revenue is determined using an estimate that best reflects its stand-alone selling price and is continued to be recognised rateably as the customer receives the benefit of the maintenance and support. The option to renew each year’s licence at a full discount by paying the annual maintenance and support is deferred and recognised at a future point in time when the customer renews. The amount that is deferred is dependent on the term of the contract. For example: on the inception of a three-year contract, two thirds of the licence fee consideration would be deferred and released equally on the first and second anniversary when the customer renews their maintenance and support. Perpetual licences are recognised in the same manner, with the exception being that the contract term is estimated to be five years. As such, the renewal discounts are deferred and spread over the remaining four years at each point the customer renews their maintenance and support. Accordingly, for these type of licenses the phasing of revenue has changed significantly with a smaller portion of the licence revenue being recognised on inception of a new contract, a renewal right to a discounted licence fee is deferred for between three and five years which is held as a contract liability, being recognised on each anniversary of the contract when a customer renews their maintenance and support. 20 accesso Technology Group plc 2017 Pro-forma Data (continued) Income Statement Revenue Cost of sales Gross profit Gross profit % Administrative expenses Operating profit Total revenue by reportable segment Ticketing and distribution Guest Experience Total revenue Statutory 2017 audited $000 IFRS 15 change 1 IFRS 15 change 2 $000 $000 Proforma 2017 Unaudited $000 133,429 (31,469) 882 102,842 (59,984) 31,469 - (28,515) 73,445 55.0% (64,204) 9,241 - - - - 882 - 74,327 72.3% 1 (64,203) 883 10,124 Statutory 2017 IFRS 15 change 1 IFRS 15 change 2 $000 63,536 69,893 $000 - (31,469) $000 882 - Proforma 2017 Unaudited $000 64,418 38,424 133,429 (31,469) 882 102,842 Revenue by reportable segment demonstrating impact of 2017 acquisitions Ticketing and distribution – excluding 2017 acquisitions Guest Experience – excluding 2017 acquisitions Statutory 2017 IAS 18 $000 46,818 57,964 $000 - - (31,469) Total Revenue – excluding 2017 acquisitions 104,782 (31,469) Ingresso TE2 Total revenue attributable to 2017 acquisitions 16,718 11,929 28,647 - - - IFRS 15 change 1 IFRS 15 change 2 Proforma 2017 $000 882 - - 882 - - - IFRS 15 $000 47,700 26,495 74,195 16,718 11,929 28,647 Total revenue Revenue Visibility Transactional revenue Other repeatable revenue Non-repeatable revenue Other revenue 133,429 (31,469) 882 102,842 Statutory 2017 audited IAS 18 $000 99,188 9,045 17,297 7,899 133,429 IFRS 15 change 1 IFRS 15 change 2 Proforma 2017 $000 $000 (31,469) - - - (31,469) - - 882 - 882 Unaudited IFRS 15 $000 67,719 9,045 18,179 7,899 102,842 21 accesso Technology Group plc 2017 Pro-forma Data (continued) Operating profit 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 Revenue and adjusted EBITDA by reportable segment Ticketing and distribution % of segment revenue Guest Experience % of segment revenue Central unallocated costs Adjusted EBITDA % of total revenue Statutory 2017 IAS 18 $000 9,241 1,249 2,131 8,591 (3,228) 1,089 19,073 5,531 24,604 Statutory 2017 IAS 18 $000 22,890 36.0% 18,224 26.1% (16,510) 24,604 18.4% IFRS 15 change 1 IFRS 15 change 2 Proforma 2017 $000 - - - - - - - - - $000 883 - - - - - 883 - 883 IFRS 15 $000 10,124 1,249 2,131 8,591 (3,228) 1,089 19,956 5,531 25,487 IFRS 15 change 1 IFRS 15 change 2 Proforma 2017 $000 - - - - - $000 882 - - - 1 883 IFRS 15 $000 23,772 36.9% 18,224 47.4% (16,509) 25,487 24.8% 22 accesso Technology Group plc The Board of directors for the financial year ended 31 December 2018 Bill Russell, Non-Executive Chairman Bill Russell was appointed as the Group's new Non-Executive Chairman, effective concurrently with Tom Burnet's move to the Non- Executive Director position on 1 March 2019. Bill Russell has served in a variety of roles in both public and private technology company boards, in a career spanning several decades, including 23 years across a number of senior management roles at Hewlett Packard, including Vice President and General Manager of Hewlett Packard's multi-billion-dollar Enterprise Systems Group and its Software Solutions Group. Bill is currently Non-Executive Chairman at leading technology solutions provider Piksel Group and PROS Holdings, a provider of AI-powered solutions that optimize selling in the digital economy, and previously held roles at SABA Software, Inc., webMethods and Cognos. Bill is based in the United States Andy Malpass, Non-Executive Director Andy Malpass has over 30 years’ experience in the software industry covering both private and public companies, including approximately 20 years as Group Finance Director of Fidessa Group plc. Andy also served as Company Secretary of Fidessa Group plc for many years. He is currently an Independent Non-Executive Director and Chair of the Audit Committee at Kainos Group plc. Andy graduated with a BA (Hons) in Accounting and Finance from Lancaster University and is a Fellow of the Chartered Institute of Management Accountants. Andy joined accesso on 26 June 2018 as Independent Non-Executive Director, Andy is the Chair of the Audit Committee and became a member of the Remuneration Committee in March 2019. 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. In 2017 David was elected as an Honorary Fellow of the Royal Academy of Engineering and in 2018 was elected as a member of the Scale Up Institute. In 2019 he became a member of the industrial advisory board to IQ Capital Partners Limited. Previous experience includes non-executive director and advisor at artificial general intelligence company DeepMind Technologies Limited. Earlier in his career David worked as an investment banker for over 15 years. David joined accesso in November audit committees and performed the role of audit committee Chair from 18 March 2016 to until 26 June 2018. a Non-Executive Director. David is a member of 2010 as the remuneration and 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 modelling. 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. 23 accesso Technology Group plc The Board of directors for the financial year ended 31 December 2018 (continued) Karen Slatford, Senior Independent Director Karen Slatford has significant experience working in the global technology and business arenas, serving currently as Senior Independent Director and Micro Focus International plc, Chair of Draper Esprit and Senior Independent Director of Alfa Financial Software Holdings. Between 1983 and 2001 Karen worked at Hewlett Packard where in 2000 she became Vice President and General Manager Worldwide Sales & Marketing for Business Customers. Karen joined accesso on 24 May 2016 and is a member of accesso’s audit committee and is the Chair of the remuneration committee. Paul Noland, Chief Executive Officer Paul Noland joined accesso as Chief Executive Officer in April 2018, guiding the company’s growth and day-to-day operations as it serves more than 1,000 venues in over 30 countries. Paul has built an impressive resume as a leader in the international attractions and entertainment industries. Prior to joining accesso, Paul served as President and CEO of the International Association of Amusement Parks and Attractions (IAAPA) from 2013 to 2018, helping the organization continue its growth as the largest international trade association for amusement facilities and attractions worldwide. He also served for 16 years in senior executive roles with Walt Disney Parks and Resorts where he championed major growth initiatives across the company’s domestic theme parks and resorts and oversaw the financial planning, revenue management and pricing functions at Walt Disney World Resort. Prior to Disney, he spent more than a dozen years in leadership roles with Marriott International where he focused on optimizing revenue across the company’s then 900 hotels. Paul earned a Master of Business Administration from the College of William and Mary in Williamsburg, Virginia, and a Bachelor of Science in Journalism and Speech Communication from Radford University in Radford, Virginia. Tom Burnet, Non-Executive Director Tom Burnet joined accesso as the Chief Executive Officer in late 2010. Tom fulfilled the role of Executive Chairman through 2018 until 1 March 2019 when he stepped down as Executive Chairman and is now a Non-Executive Director with the provision of strategic and acquisition support. 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. 24 accesso Technology Group plc Strategic report for the financial year ended 31 December 2018 Our strategy accesso’s purpose is a simple one. It is to partner with the operators of leisure attractions around the world and to help them deploy technology solutions to engage with their guests to deliver better guest experiences. We look to establish long-term agreements with our customers – our technology is typically a key part of their enterprise software stack. Importantly, we look to find mutually beneficial participative revenue models where we are paid for our services as a percentage of the profit or revenue that our systems deliver, underpinning our group revenues for many years to come. Our strategy has been to identify technology solutions that can engage with guests as they journey through their visit – from their early online research, their arrival and enjoyment of the attraction and the post visit follow ups. Over the last 7 years we have both developed technology in house and acquired businesses which add value to operators along the journey. In addition to operators, our strategy of promoting long term value for shareholders is supported by the management incentive plans being aligned with the interests of investors. Looking ahead, we find ourselves in an enviable situation. No other vendor in the attractions and leisure market has anything like the scale or breadth of competency that we have. Our opportunity is to maximise the cross and upsell opportunity for our products globally by combining core elements of each of our platforms into one unified system. Our plan is to deliver this over the next 2 years at which time we should be uniquely positioned to capture a significant share of what we believe is a $3.4bn global market. 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 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. 25 accesso Technology Group plc Strategic report for the financial year ended 31 December 2018 Principal risks and uncertainties (continued) 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. Cyber security is a primary concern at accesso. We have a team led by our Chief Information Officer focused on the security of our operations and platforms. accesso takes a multi-layer approach to security employing many solutions to protect our systems at every level including vulnerability management, intrusion detection and endpoint protection to name just a few. We conduct aggressive penetration testing throughout the year and against all of our platforms. All of the above is built upon an ever-expanding set of policies that govern our approach to engagement, security and response. We also recognize that the first, and most likely, point of attack is against our people and go to great lengths to provide training on the types of attacks they may encounter and vulnerabilities to which they are subject. This includes, but is not limited to, regular phishing simulations at varying degrees of sophistication followed up by additional training and clarification. As attacks become more sophisticated and customized, our staff need to understand how to recognize and respond as they are the last line of defense when something slips through our various protections. 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. 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 5 to 19 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. 26 accesso Technology Group plc Strategic report (continued) for the financial year ended 31 December 2018 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 Less: TE2 option cash Less: Ingresso near term settlements treated as non-cash Adjusted net debt 2018 $000 6,267 1,703 3,176 11,740 - 2,245 25,131 9,624 34,755 81,937 (28,488) 53,449 20,704 (20,224) 480 (1,508) (8,598) (9,626) 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) 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 13) 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 85) • • • • On behalf of the Board: John Alder Chief Financial Officer 27 March 2019 27 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 Introduction As Chair of the Remuneration Committee, I am pleased to present our report setting out accesso’s remuneration policy and practice and activities over the previous year. The Remuneration Policy is intended to incentivise and motivate the leadership team to achieve the Company’s strategic goals. Although a full remuneration report is not a requirement of an AIM listed company, the Committee has decided that a more comprehensive report is good practice and aids shareholder information. This report is in three parts. The Annual Statement gives an overview of the year. This is followed by the Remuneration Policy. Finally, the Annual Report on Remuneration, on pages 35 to 40, provides greater detail of the amounts paid in 2018 and how the remuneration policy will be implemented in the 2019 financial year. During the year the company adopted the Quoted Companies Alliance’s Corporate Governance Code (the ‘QCA Code’), and the report has been prepared in accordance with the principles of the QCA Code. The content of this report is unaudited unless otherwise stated. We hope you find the information in this report helpful to you as a shareholder. Membership Chair Karen Slatford Members David Gammon Andy Malpass (appointed 21 March 2019) Committee membership is limited to independent Non-Executive Directors of the Company unless there is an insufficient number of appointed Non-Executive Directors at any point, in which case an Executive Director will be appointed. Martha Bruce, the Company Secretary, or her designate acts as secretary to the Committee. Role of the Committee The Committee’s primary role is to determine and agree with the Board, the remuneration policy for the Executive Directors. Within the terms of the policy it also approves performance-related and discretionary awards to Executive Directors. The Committee’s full Terms of Reference may be viewed on accesso’s website. Senior members of accesso’s management team may attend by invitation but will not be present when their own remuneration is discussed. Appointment of external advisors The Committee has not appointed any external advisors. Principal activities in 2018 The principal activities undertaken by the Committee during 2018 were as follows: • Reviewed and agreed the remuneration and related terms for the new CEO; • Reviewed and approved the bonus awards in respect of the 2017 performance year and salary increases with effect from January 2018; • Reviewed and approved the LTIP grants for 2018; • Approved the grant of Special Option Awards to key staff; • Reviewed the annual bonus targets for the Executive Directors for the financial year 2018 and measured performance against them; • Agreed the annual bonus targets for the Executive Directors for the financial year 2019; • Reviewed and approved the terms of reference of the Committee. 28 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Remuneration policy overview The principal objectives of the Company’s remuneration policy are to attract, retain and motivate the Company’s Executive Directors and Senior Management and provide incentives that align with, and support, the Company’s business strategy. The Remuneration Committee oversees the implementation of this policy and seeks to ensure that the Executive Directors are fairly rewarded for the Company’s performance over the short, medium and long-term. Taking typical practice within the sector into account, the Committee has decided that a significant proportion of potential total remuneration should be performance-related. In order to align salaries and total compensation with the market, the Committee approved salary increases 2.8% for the Executive Chairman and 7% for the Chief Financial Officer with effect from 1 January 2018. The Committee will continue closely monitor the salary and total remuneration for Executive Directors and reserves the right to make an increase in excess of typical market practice if it considers it necessary and appropriate. Focus for 2019 In the coming year the Remuneration Committee will consider a number of matters including: • assessment of Group performance against 2018 budget and determination of bonus awards in conjunction with the company’s strategy and risk appetite; approval of bonus performance measures and targets for 2019; approval of performance conditions and awards under the Company’s Long-Term Incentive Plan for 2019; assessment of the ongoing appropriateness of the remuneration arrangements in light of remuneration trends and market practice; The Committee believes that the total remuneration package for each Executive Director represents an appropriate balance between fixed and variable remuneration. It will reward personal and corporate outperformance whilst ensuring overall awards remain competitive. Resolutions at the AGM Shareholders will not be asked to vote on our Remuneration Policy as such a vote is not required for AIM listed companies. The policy has been prepared only for information and to give shareholders full background on the Company’s approach to remuneration. Directors remuneration policy This section sets out accesso’s Remuneration Policy for Executive and Non-Executive Directors. The policy is not subject to a separate shareholder vote and is included for information only. The Policy explains the purpose and principles underlying the structure of remuneration packages and how the Policy links remuneration to the achievement of sustained high performance and long-term value creation. Overall remuneration is structured and set at levels to enable accesso to recruit and retain high calibre executives necessary for business success whilst ensuring that: our reward structure, performance measures and mix between fixed and variable elements is comparable with similar organisations, rewards are aligned to the support the implementation of strategy and aims of the business, and effective risk management for the medium to long-term the right behaviours, values and culture are encouraged and rewarded; and the approach is simple to communicate to participants and shareholders. 29 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Fixed Elements of remuneration for Executive Directors Element of Remuneration Salary set level of Provides a remuneration sufficient to attract and retain Executives appropriate with experience and expertise. the Link to Company Strategy Operation Maximum Opportunity Benefits Provides benefits sufficient to attract and retain Executives with appropriate experience and expertise. the Retirement Schemes sufficient Provides retirement scheme contributions to attract and retain Executives with appropriate experience and expertise. the There is no set maximum to salary levels or salary increases. Account will be taken of increases applied to colleagues as a whole when determining salary the Executive increases Directors, the Committee retains the discretion to award higher increases where it considers it appropriate. however for to maintain The Committee recognises the need suitable flexibility in the benefits provided to ensure it is able to support the objective of attracting and retaining personnel in order to deliver the Company strategy. The maximum will be set at the cost of providing the benefits described. One-off payments such as legal fees or outplacement costs may also be paid if it is considered appropriate. for the 4% of salary per annum for the CEO and CFO and 8% of salary per Executive annum Chairman, subject to an annual maximum for the type of scheme per local tax and/or retirement regulations. The Committee takes into account a number of factors when setting and reviewing salaries, including: • Scope and responsibility of the role; • Any changes to the scope or size of the role; • The skills and experience of the individual; • Salary levels for similar roles within appropriate comparators; and • Value of the remuneration package as a whole. Executive Directors are eligible for the following benefits; Healthcare Life Insurance Critical Illness cover Directors are eligible to receive employer contributions to the Company’s pension plan(s) (which are defined contribution plan) or a salary supplement in lieu of pension benefits. 30 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) None of the fixed elements of remuneration are subject to performance metrics. Variable Elements of Remuneration for Executive Directors Element of Remuneration Link to Company Strategy Operation Maximum Opportunity Performance Metrics Annual Bonus Up to 150% salary for the Executive Chairman and CEO and up to 120% salary for the CFO. Variable remuneration that rewards the achievement of annual financial, operational and individual objectives integral Company strategy. to are Objectives set annually based on the achievement of strategic goals. At the end of the year, the Committee meets to performance review agreed against the and objectives determines payout levels. Awards are made cash. in Awards are based on financial, operational and individual goals set at the start of the year. Up to 50% of the award will be assessed against the Company’s financial performance in that year. The remainder of the award will be based on achievement against specific strategic objectives. The Committee reserves the right to make an award of a different by achievement against the measures if it believes the outcome is not a fair reflection of Company or personal performance. produced personal amount and Overall maximum of 200% salary in year, any one including any Share Option Plan awards. The split between these performance measures will be determined annually by the Committee and exceptionally during the year if there is a compelling reason to do so. Performance measures are currently related to TSR. The Committee reserves the right to adjust the measures before awards are granted to reflect relevant strategic targets. to adjust The Committee reserves the right to exercise discretion the outcome produced by achievement against the measures if it believes the outcome is not a fair reflection of Company performance. Long-Term Incentive Plan (LTIP) Variable remuneration designed to incentivise and reward the achievement of long-term targets aligned with shareholder interests. LTIP provides flexibility in the retention and recruitment of Executive Directors. The also Awards granted under the LTIP vest subject to achievement of performance conditions measured over a three- year period. LTIPs may be made as conditional share awards or in other (e.g. nil cost forms is if options) considered appropriate. Accrued dividends may be paid in cash or shares, to the extent that awards vest. it The plan also allows for Share Options to be granted, subject to a six- month exercise period. The Committee may and adjust amend awards in accordance with the LTIP rules. 31 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Variable Elements of Remuneration for Executive Directors (continued) Element of Remuneration Link to Company Strategy Operation Maximum Opportunity Performance Metrics Overall maximum of 200% salary in any one year, including any LTIP awards if The CSOP will be used for Executive Directors Remuneration the Committee feel it is advantageous to do so, and on such terms as they regard as appropriate and in shareholder’s interests. Company Share Option Plan (CSOP) Variable remuneration designed to incentivise and reward the achievement of long-term targets aligned with shareholder interests. CSOP provides flexibility in the retention and recruitment of Executive Directors. The also CSOP Awards granted under the become exercisable subject to and timings such performance conditions as may be set by the Committee. Options are granted at market value or the nominal share price if higher. Accrued dividends may be paid in cash or shares, to the extent that awards vest. The Committee may adjust and amend awards in accordance with the CSOP rules. Notes to the Policy Table All LTIP, CSOP and bonus awards made to Executive Directors are subject to Malus and Clawback provisions. The Committee may, in its absolute discretion, determine to reduce the number of shares to which an award or option relates or cancel it altogether. Alternatively, the Committee could impose further conditions on the vesting or exercise of an award or option. At any time within 2 years of an award vesting the Committee may require the Executive Director to transfer to the Company a number of shares or a cash amount in: any circumstances justifying summary dismissal of a participant from his office or employment with any Group Company including, but not limited to, dishonesty, fraud, misrepresentation or breach of trust; any material breach of a participant's terms and conditions of employment; any material violation of Company policy, rules or regulations; any material failure of risk management; and/or any inaccurate reporting of any accounts, financial data or such other similar information resulting in such accounts, financial data or other information or any future accounts, financial data or other information having to include material write-downs, adjustments or other corrective items Remuneration Policy for Other Employees As with the Executive Directors, salary for other employees is set at a level sufficient to attract and retain them, taking into account their experience and expertise. Annual bonus for other employees is normally payable as a percentage of salary and is set annually, based on the achievement of strategic or personal goals. Selected employees may be invited to participate in accesso’s LTIP and/or CSOP to aid retention and motivation. Pension arrangements are consistent across the UK and US workforce including Executive Directors. Executive Directors’ service contracts Each of the Executive Directors has entered into rolling service contracts terminable by either party on six months’ notice. Each Executive Director receives life insurance, the benefit of which amounts to a maximum of four times or two times basic annual salary dependant on whether the Executive Director is UK or US based. Each Executive Director is entitled to reimbursement of reasonable expenses incurred by them in the performance of their duties. The service contracts for Executive Directors make no provision for termination payments, other than for payment in lieu of salary. 32 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Recruitment Policy The Committee will seek to align a new Executive Director’s remuneration package to the Company’s remuneration policy as set out above. In determining remuneration for a new Executive Director, the Committee will consider all relevant factors, including the requirements of the role, the external market and internal relativities, while ensuring it does not pay more than is necessary to appoint the preferred candidate. Benefits will be limited to those outlined in the remuneration policy, with relocation assistance provided where appropriate. Awards under the LTIP rules and/or CSOP rules that may be awarded to a new Executive Director will be limited to 200% of salary and bonus limited to 200% of salary. Within these limits, the Committee may include any element included within the approved policy, or any other element which the Committee considers is appropriate given the particular circumstances. The Committee may buy out remuneration a new hire has had to forfeit on joining the Group if it considers the cost can be justified and is in the best interests of the Company. Any such buyout would be in addition to the limits set out above. Any such buyout awards will be of comparable commercial value and reflect as closely as practicable the form and structure of the forfeited awards, including timing of vesting, performance conditions and the probability of those conditions being met. The fair value of any bought-out awards will be no higher than that of those forfeited. Where appropriate, the Committee retains the discretion to use the provisions provided in the Listing Rules for the purpose of making such an award, or to utilise any other incentive plan operated by the Group. Where an Executive Director is appointed from within the Group, any legacy arrangements would be honoured in line with the original terms and conditions as long as these do not cause a material conflict with the remuneration policy. If an Executive Director is appointed following an acquisition of, or merger with, another Company, legacy terms and conditions that are of higher value than provided in the Policy would normally be honoured. Termination of office policy If the employment of an Executive Director is terminated, any compensation payable will be determined by reference to the terms of the service contract in force at the time. As variable pay awards are not contractual, treatment of these awards is determined by the relevant rules. The Committee may structure any compensation payments beyond the contractual notice provisions in the contract in such a way as it deems appropriate. The Company may at its discretion make termination payments in lieu of notice calculated only on base salary. Service agreements may allow for garden leave during any notice period. There is no entitlement to a bonus in any year. The Committee retains discretion to award bonuses for leavers taking into account the circumstances of departure. Any bonus would normally be subject to performance, deferral and time pro-rating as appropriate. Treatment of share awards is governed by the plan rules. If an Executive Director ceases to be a director or employee of a Group Company before (i) the release date of an award granted as a conditional share award or (ii) the date on which an award granted as an option becomes capable of exercise by reason of death or any other reason other than for cause, the award shall be released or become exercisable to the participant. The release or exercise will be subject to the extent that any relevant performance condition has been satisfied over the relevant period, which may be determined by the Board. Any part of the Award which remains unvested as at the date of cessation, office or employment shall lapse immediately. If a participant ceases to be a director or employee of a Group Company for cause, all awards shall lapse immediately. The Committee has discretion regarding whether to pro-rate the bonus based on the proportion of the year worked. The Committee’s intention is that it will pro-rate the bonus for time, taking performance measures up to that time into account. The Committee anticipates it would only use its discretion to not pro-rate only where there is an exceptional business case, which would be explained in full to shareholders. Change of Control policy The rules of the equity incentive plans provide that the number of shares that vest shall be determined by the Committee, taking into account the extent to which any performance conditions have been satisfied and, unless the Committee determines otherwise, pro- rating to reflect the period from the start of the performance period to the date of the change of control. Where an award is in the form of an option, this will then be exercisable for a period of one month and will then lapse. The rules also provide for awards to be exchanged for equivalent awards which relate to shares in a different company. The rules provide that the number of options that vest shall be determined by the Committee, taking into account the extent to which any performance conditions have been satisfied and, unless the Committee determines otherwise, pro-rating to reflect the period from the start of the performance period to the date of the change of control. The option will then be exercisable for a period of one month and will then lapse. The rules also provide for awards to be exchanged for equivalent awards which relate to shares in a different company. 33 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Other considerations In making remuneration decisions, the Committee takes into account the pay and employment conditions elsewhere in the Group although employees were not formally consulted prior to setting the remuneration policy for Executive Directors. Employees within the Group receive base salary, benefits, pension and an annual bonus subject to appropriate eligibility conditions. The terms and value of these elements vary based on seniority. The Committee appreciates the importance of understanding the views of the Company’s shareholders. The Committee is open to listening to the views of our shareholders and engaging in ongoing dialogue with them on executive remuneration matters. The Committee also takes full account of the guidelines of investor bodies and shareholder views in determining the remuneration arrangements in operation within the Group. Shareholders should also note that a significant proportion of the Company’s workforce are based in the USA and their remuneration reflects that market. External Appointments Executive Directors may hold external directorships if the Board determines that such appointments do not cause any conflict of interest. Where such appointments are approved and held, it is a matter for the Board to agree whether fees paid in respect of the appointment are retained by the individual or paid to the Company. Non-Executive Director Remuneration Element of Remuneration Link to Company Strategy Operation Maximum Opportunity Non-Executive Director Fees Fees are set at a level to reflect the amount of time and level of in involvement required order to carry out their duties as members of the Board and its committees and to attract and retain Non-Executive Directors of the highest calibre with relevant commercial and other experience. The fees paid to the Non- Executive are determined by the Board as a whole. Directors Fee levels are set by reference to Non-Executive Director fees at companies of similar size and complexity and general salaried increases for employees the Company. within Appointment of Non-Executive Directors All the Non-Executive Directors have letters of appointment with the Company. Appointment is terminable on written notice. The appointment letters for the Non-Executive Directors provide that no compensation is payable upon termination of employment. Letters of appointment are available for inspection at the Company’s registered offices. Each of the Non-Executive Directors are subject to annual re-election by the Company. 34 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) The Annual Report sets out how the Directors’ Remuneration Policy of the Company has been applied during 2018 and how the Committee intends to apply the policy going forward. The Committee will review the Policy on an annual basis. No shareholder resolution to approve this report will be proposed at the AGM as this report is for information only. Single total figure of remuneration (audited information) The following tables set out the aggregate emoluments earned by the Directors in the years ended 31 December 2018 and 2017 respectively. 2018 Share- based payments Other Benefits $000 $000 2017 2018 2017 Total $000 Total $000 Retirement Contributions $000 $000 Salary $000 Fees $000 Bonus $000 Non - Executive Directors David Gammon (1) (6) Andy Malpass (2) (6) Karen Slatford (6) John Weston (3) (6) Executive Directors John Alder Steve Brown (4) Tom Burnet (6) Paul Noland (5) - - - - 335 114 410 256 57 29 60 41 - - - - Total 1,115 187 - - - - - - - - - - - - - 144 33 196 65 - - - 21 14 3 13 57 29 60 41 500 161 609 334 52 0 52 77 768 942 1,029 0 - - - - 9 - 13 - 11 - 13 6 438 51 1,791 2,920 30 22 (1) Fee payments were paid to Rockspring (family office of the Gammon family) (2) Appointed 26 June 2018 (3) Resigned 26 June 2018 (4) Resigned 9 April 2018 (5) Appointed 9 April 2018 (6) Salary or fees payable in GBP and converted at the applicable monthly exchange rate (i) (ii) (iii) (iv) (v) Annual salary and fees – corresponds to the amount received during the relevant financial year, either as base salary for executives or fees for non-executives. Annual bonus – corresponds to the amount earned in respect of the relevant financial year. Details of how this was calculated are set out below. Benefits – corresponds to the taxable value of benefits received during the relevant financial year and principally includes life assurance and permanent health insurance. Share-based payment – corresponds to the amount charged against current financial year earnings for equity awards to the Executive Directors in the current or previous financial year. Retirement Contributions – corresponds to the amount contributed to a defined contribution retirement plan. The Executive Directors received a retirement plan contribution of between 4% and 8% of salary as detailed earlier in this report. 35 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) 2018 Annual bonus The 2018 annual bonus performance measures were selected to reflect accesso’s annual and long-term objectives and reflect financial and strategic priorities, as appropriate. Performance targets are set to be stretching but achievable, taking into account a range of reference points including financial performance versus budget and achievement of certain strategic milestones. In respect of the year ended 31 December 2018, the Remuneration Committee reviewed corporate performance and decided that no bonuses should be paid to the Executive Directors. Statement of Directors’ shareholding and scheme interests (audited information) The share option and LTIP awards of the directors are set out below: 31 December 2017 Exercised in the period Granted in the period 31 December 2018 Exercise price Date from which exercisable Expiry Date 100,000 40,000 (100,000) (40,000) - - - - 156p 156p 10 Mar 12 10 Mar 12 9 Mar 21 9 Mar 21 29,818 42,127 59,731 - 32,027 42,463 69,653 45,395 47,805 82,960 - - (29,818) - - - (32,027) (42,463) - (45,395) - - - - - - - 15,308 - - - - - - 20,416 32,028 - 42,127 59,731 15,308 - - 69,653 - 47,805 82,960 20,416 32,028 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 1p 8 July 2018 15 Apr 2018 14 Mar 2019 16 Feb 2021 8 July 2018 15 Apr 2018 14 Mar 2019 8 July 2018 15 Apr 2018 14 Mar 2019 16 Feb 2021 16 Feb 2021 - - - - - - - - - - - - Share Options John Alder (1) David Gammon (2) LTIP (3) John Alder Steve Brown Tom Burnet Paul Noland (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 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’’). 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. On 5 April 2018, Tom Burnet terminated his interest in 226,909 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. 36 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Long-Term Incentive Plan (LTIP) Awards There have been five 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. Performance Conditions Date of Award Vesting Period (months) Period stock to be held following exercise (months) 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 Septem ber 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. 37 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Long-Term Incentive Plan (LTIP) Awards (continued) Performance Conditions Date of Award Vesting Period (months) Period stock to be held following exercise (months) 16 Feb 2018 9 April 2018 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 3335 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 2919 pence. An ASP between 2919 pence and 3335 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 2919 pence. 34 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 3462 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 3029 pence. An ASP between 3029 pence and 3462 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 3029 pence. Employee share ownership Widespread share ownership has always been and remains an integral part of our culture. All of our employees contribute to the achievement of our strategy and we believe that extending share ownership throughout the company enhances loyalty and engagement. In keeping with this ethos, the Committee approved share awards to the vast majority of employees during 2018. Payments for loss of office (audited information) There were no payments for loss of office during the year. Payments to past directors (audited information) Following the resignation of Steve Brown on 9 April 2018, Steve Brown remained with the business as an employee until 31 December 2018 in order to facilitate an orderly handover of duties and as an advisor to Paul Noland and the accesso Board of directors. Steve Brown was paid for his post director services at a salary of $84,000 per annum and retained his health insurance cover. No retirement contributions were made. 38 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) Unaudited Section of the Remuneration Report External appointments Executive Directors may accept appointments outside the Company, with the prior approval of the Board. Any fees may be retained by the Director, although this is at the discretion of the Board. Executive Directors hold external appointments for which they receive a fee as follows: Tom Burnet – Kainos Group plc, PCMS Group and Ballie Gifford Fees for the Non-Executive Directors A summary of current fees is shown below: David Gammon Andy Malpass Karen Slatford Basic fee (1) $ 58,960 58,960 Chair of the Audit Committee 67,000 Senior Independent Director, Chair of the Remuneration Committee (1) Payable in GBP and converted at an average GBP/USD exchange rate of 1.34 Implementation of the Remuneration Policy for the year ended 31 December 2019 2018 Executive Directors’ base salary The table below shows the salaries for the Executive Directors as at 1 January 2019 in comparison to base salary at 1 January 2018; Tom Burnet (1) Paul Noland (2) John Alder 1 January 2018 or date of appointment $ 411,174 360,000 335,178 1 January 2019 % change $ 411,174 360,000 344,395 0% 0% 2.8% (1) Payable in GBP and converted at an average GBP/USD exchange rate of 1.34 (2) Appointed 9 April 2018 Implementation of Policy for 2019 Salaries for Executive Directors are reviewed each year taking into account the Remuneration Policy set out in this report. Increases for John Alder was approved from 1 January 2019 as shown in the table above. Annual bonus and LTIP performance measures are selected annually to reflect accesso’s annual and long-term objectives and reflect financial and strategic priorities, as appropriate. Performance targets are set to be stretching and achievable, taking into account a range of reference points including the strategic plan and broker forecasts, as well as the Group’s strategic priorities and the external context. In respect of the annual bonus, the following measures have been agreed: Profit before tax; Revenue; Meeting the relevant 2019 targets in the Company’s long-term plan; and Staff Retention, turnover calculated over a rolling 12-month period. Each measure has a target. Achieving a maximum percentage of target will usually result in the maximum bonus being awarded under the formula. Falling below the set targets will ordinarily result in no award being made in respect of that measure. The final determination on bonus awards is however made by the Committee talking all available factors into account. The Committee will set appropriate performance conditions for LTIP awards made to Executive Directors in 2019. These will be shown in the 2019 report. 39 accesso Technology Group plc Directors Remuneration Report for the financial year ended 31 December 2018 (continued) 2019 Non-Executive Director remuneration No increase to Non-Executive Director Fees had been determined at the time of this report. If any increases are determined during 2019 they will be disclosed in the 2019 report. Karen Slatford Chair of the Remuneration Committee 26 March 2019 40 accesso Technology Group plc Report of the directors for the financial year ended 31 December 2018 The directors present their report with the financial statements of the company and the Group for the financial year ended 31 December 2018. Dividends No dividends will be proposed for the financial year ended 31 December 2018 (31 December 2017: none). 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 2018 the Group invested $21.1m into research and development (year ended 31 December 2017: $12.4m). Directors The directors during the period under review and to the date of approval of the financial statements were: Tom Burnet, Non-Executive (Executive Chairman until 1 March 2019) Bill Russell, Non-Executive Chairman (Appointed 1 March 2019) John Alder, Executive Steve Brown, Executive (Resigned 9 April 2018) Paul Noland, Executive (Appointed 9 April 2018) David Gammon, Non-Executive Andy Malpass, Non-Executive (Appointed 26 June 2018) Karen Slatford, Senior Independent Director John Weston, Senior Independent Director (Resigned 26 June 2018) 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 2018 in the issued share capital of the company were as follows: Ordinary share capital £0.01 shares Tom Burnet, Non-Executive (1) John Alder, Executive David Gammon, Non-Executive Paul Noland, Executive Andy Malpass, Non-Executive Karen Slatford, Non-Executive As at 31 December 2018 224,158 37,913 48,000 - 4,352 - As at 1 January 2018 426,909 6,612 48,000 - - - (1) Shares held by the employee benefit trust of the Company Details of the directors' share options are disclosed within the Directors’ remuneration report. 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 7 to the financial statements. 41 accesso Technology Group plc Report of the directors for the financial year ended 31 December 2018 (continued) Substantial shareholdings As at 26 March 2019 the company had been notified that the following were interested in 3% or more of the ordinary share capital of the company: Shareholder Canaccord Genuity Group Inc Aberdeen Standard Investments Liontrust Investment Partners LLC Allianz Global Investors BlackRock Investment Management* The Capital Group Companies, Inc *Holding as of 31 January 2019 Annual general meeting Number of ordinary shares % of Issued ordinary share capital 2,706,545 2,686,807 1,365,223 1,340,982 1,301,689 1,279,385 9.90% 9.83% 5.00% 4.91% 4.76% 4.68% The annual general meeting of the company will be held on Tuesday, 21st May 2019. The notice convening the meeting is enclosed with these financial statements. Branch registration The company operates branches in Germany and Italy. 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 2019, 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. 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. 42 accesso Technology Group plc Report of the directors (continued) for the financial year ended 31 December 2018 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. Other Information An indication of likely future developments in the business and particulars of significant events which have occurred since the end of the financial year have been included in the Strategic Report on page 25. On behalf of the Board John Alder Chief Financial Officer 27 March 2019 43 accesso Technology Group plc Corporate Governance report for the financial year ended 31 December 2018 The Board of Directors (the ‘Board’) is committed to achieving high standards of corporate governance within the Company and its subsidiaries, which it seeks to demonstrate by adopting and being fully compliant with the principles of the Quoted Companies Alliance’s Corporate Governance Code (the ‘QCA Code’). The Board has chosen to adopt the QCA Code as it considers it is relevant and appropriate for the Company as the ten principles of the QCA Code focus on ‘pursuit of medium to long-term value for shareholders without stifling the entrepreneurial spirit in which the Company was created.’ accesso adheres to a high standard of ethics, values and corporate social responsibility and these principles underpin our governance procedures and the strategic and management decisions that we make. Accordingly, the Board ensures the Company has a strong governance framework embedded within its culture and applies the principles of the QCA Code. The Board periodically reviews the governance framework and, as the Company evolves, will make such improvements as considered necessary. The Board is primarily responsible for the strategic direction of accesso and comprises the chairman, two executive directors and four non- executive directors. The Board is satisfied that its overall composition has an appropriate level of independence. Bill Russell Non-Executive Chairman 27 March 2019 The Board Board composition The Board of directors comprises two executive directors, the chairman and four non-executive directors, three of whom are independent. Full details of the directors are on pages 23 to 24. During the year the Board appointed Paul Noland as chief executive officer following the resignation of Steve Brown. Andy Malpass was appointed as a non-executive director and chair of the audit committee following John Weston’s retirement from the Board. Bill Russell was appointed Non-Executive Chairman from 1 March 2019. All directors are subject to election by shareholders at their first annual general meeting after their appointment to the Board and seek re-election at each annual general meeting thereafter. Each of the directors brings a mix of skills and experience and knowledge, the balance of which enables the Board to discharge its duties effectively. Upon joining the Board, directors receive an induction on various aspects of the Company. The directors receive updates from the company secretary and other various external advisers on legal requirements and regulations, remuneration matters and corporate governance best practice. Three of the Non-Executive Directors are deemed by the Board to be independent. Tom Burnet, who was previously Chief Executive Officer and Executive Chairman, was appointed to a Non-Executive Director role from 1 March 2019, following the appointment of Bill Russell as Non-Executive Chairman. The Board acknowledges that Tom Burnet whilst not independent, brings a wealth of experience and knowledge that he can continue to contribute to the Group and the overall composition of the Board has an appropriate level of independent members appointed. He does not serve on either the audit or the remuneration committee. The Board will continue to look to build further diversity into leadership and across the business recognising the value of building and developing a diverse workforce at all levels. Succession planning is a continuous strategic process and the Board has continued over the year to focus on both long-term and short succession both for board and senior management succession. 44 accesso Technology Group plc Corporate Governance report (continued) for the financial year ended 31 December 2018 The role of the Board The Board is responsible for the overall leadership of the Company and setting the Company’s vision, purpose, values and standards. It approves the Group’s strategic aims and objectives and the annual operating and capital expenditure budgets and ensures maintenance of a sound system of internal control and risk management. There is a formal schedule of matters reserved for the Board. The executive directors have day to day responsibility for the operational management of the Groups’ activities. The non-executive directors are responsible for bringing independent and objective judgement to Board decisions. The chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision making and ensuring the non-executive directors are properly briefed on matters. The chief executive officer has responsibility for implementing the strategy of the Board, alongside the chairman, and managing the day to day activity of the Group. The company secretary is responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with. All directors have access to the company secretary and are permitted to obtain independent professional advice at the Company’s expense where they consider it necessary for them to effectively discharge their duties. The Board has established an Audit Committee and Remuneration Committee to assist the Board in fulfilling its responsibilities. Both board committees have separate terms of reference, which along with the Board’s schedule of matters reserved are reviewed on a regular basis. 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. The Board has appointed Karen Slatford as the Senior Independent Director who regularly engages with investors on behalf of the Company. Board and Committee meetings 2018 The Company holds board meetings regularly throughout the year. Eleven scheduled board meetings were held during the year, as well as three audit committee meetings and two remuneration committee meetings. Attendance by board members is shown below. Number of meetings held Board Executive board members Tom Burnet (Note 1) John Alder Steve Brown (Note 2) Paul Noland (Note 3) Non-executive board members David Gammon Andy Malpass (Note 4) Karen Slatford John Weston (Note 5) Notes to attendance table: 11 11 10 3 8 10 6 11 4 Audit Committee 3 - - - - 3 2 3 - Remuneration Committee 2 - - - - 2 - 2 - (1) Tom Burnet held the position of Executive Chairman during the year. He was appointed a Non-Executive Director from 1 March 2019. Bill Russell was appointed to the Board from 1 March 2019 and was therefore not eligible to attend meetings during 2018. (2) Steve Brown resigned from the Board with effect from 9 April 2018. (3) Paul Noland was appointed to the Board with effect from 9 April 2018 and was eligible to attend 8 board meetings. (4) Andy Malpass was appointed to the Board with effect from 26 June 2018 and was eligible to attend 6 board meetings and 2 audit committee meetings. (5) John Weston retired from the Board with effect from 26 June 2018. 45 accesso Technology Group plc Corporate Governance report (continued) for the financial year ended 31 December 2018 Board and Committee meetings 2018 (continued) In the event that Board approval is required between Board meetings, Board members are emailed the details, including supporting information in order to make a decision. The decision of each Board member is communicated and recorded at the following Board meeting. Board members are aware of the time commitment required when joining the Board. The Board agenda for each meeting is collated by the chairman in conjunction with the company secretary. The agenda ensures that adequate time is spent on operational and financial issues as well as strategic matters. During the course of the year, the topics subject to Board discussion at formal scheduled board meetings included: Strategic plan and annual forecast and budget Financial performance and budget Business operations and project updates Succession planning Acquisitions and group structure changes Share structure and capital Market and competitor reports Risk and internal controls Approval of annual and half year reports Investor engagement Reports from the audit and remuneration committees Detailed proposal papers, management reports, a risk register, progress on key initiatives and routine matters such as financial reports and a statement on current trading are produced in advance of meetings to enable proper consideration and debate of matters by the Board in its meetings. Major strategic initiatives involving significant cost or perceived risk are only undertaken following their full evaluation by the Board. Matters of an operational nature are delegated to executive management. The Board also receives management information on a regular basis between formal meetings. The Chairman, the CEO and CFO are invited to attend the Audit and Remuneration Committee meetings if appropriate. Minutes of all board and committee meetings are recorded by the Company Secretary. Audit Committee The audit committee is chaired by Andy Malpass and both David Gammon and Karen Slatford are members. Andy Malpass became chair of the audit committee when joining the Board with effect from June 2018. David Gammon stepped down from the chair’s position but remained a member of the committee. 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 responsible for monitoring and reviewing the financial reporting of the Group from information provided by the management and the auditor. As part of this it reviews both the financial information and the narrative reporting within the externally published announcements and company reports. It also considers the objectivity, independence and cost effectiveness of the external auditor. The committee keeps under review the effectiveness of the Group’s system of internal control on behalf of the Board. As part of this role it reviews the Group’s controls and procedures for the evaluation, monitoring and management of risks, advises the Board on the Group’s risk strategy. The executive directors are closely involved with the management and review of business operations. The committee considers the objectivity, independence and cost effectiveness of the external auditor, taking into account the views of management. Non-audit/tax advisory services are benchmarked by management to ensure value for money, auditor objectivity and independence of advice. During the year the committee worked with the group auditors, KPMG on the findings of the 2017 audit as well as reviewing the company’s full year and half year results on behalf of the Board. It considered significant accounting policies, ensured compliance with accounting standards and considered reports from the CFO and external auditor on accounting topics of a judgemental nature requiring attention. Several members of the Committee over the year, had separate discussions with the auditor without management being present on the adequacy of controls and any judgemental areas, as well as feedback on the 2017 audit. The audit committee’s recommendation is that KPMG LLP be appointed as the company’s auditor and an appropriate resolution be put to the shareholders at this year’s annual general meeting. 46 accesso Technology Group plc Corporate Governance report (continued) for the financial year ended 31 December 2018 Remuneration Committee The full Remuneration Committee report is on pages 28 to 40 which includes full details of the composition and terms of reference of the committee. 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 and the company holds capital market days as appropriate. 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 2019 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. Board performance evaluation The Board commenced a formal review of its own performance, the performance of the Boards committees and of the chairman at the start of 2019. The review was conducted internally by the company secretary and consisted of written responses to a standard questionnaire. Views and recommendations were consolidated into a report which is due to be presented to the Board. It is intended that issues raised by the evaluation exercise will be used to improve the effectiveness of the Board and to introduce improvements to Board processes. 47 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 Group and parent Company 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 the AIM rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and they have elected to prepare the parent Company financial statements on the same basis. 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. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and a Directors’ Report that complies with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board John Alder Chief Financial Officer 27 March 2019 48 53 accesso Technology Group plc Consolidated statement of comprehensive income for the financial year ended 31 December 2018 Revenue Cost of sales Gross profit Administrative expenses (including credit of nil during 2018 (2017: $3,228k) related to reversal of Ingresso earn-out liability – see Note 21) Operating profit Finance expense Finance income Profit before tax Income tax (expense)/ benefit Profit for the period Other comprehensive income Notes 2018 $000 2017 $000 9 118,747 133,429 (30,543) (59,984) 88,204 73,445 (81,937) (64,204) 6,267 9,241 (1,127) (2,099) 12 12 37 5,177 13 (1,887) 3,290 24 7,166 2,735 9,901 Items that will be reclassified to income statement Exchange differences on translating foreign operations Total comprehensive income (2,291) 166 999 10,067 All profit and comprehensive income is attributable to the owners of the parent Earnings per share expressed in cents per share: Basic Diluted (2017 restated – see note 15) 15 15 12.23 11.74 40.83 38.02 All activities of the company are classified as continuing The accompanying notes on pages 61 to 102 form part of these consolidated financial statements 54 accesso Technology Group plc Consolidated statement of financial position as at 31 December 2018 Registered Number: 03959429 Assets Non-current assets Intangible assets Property, plant and equipment Contract assets Deferred tax assets Current assets Inventories Contract assets Trade and other receivables Income tax receivable Cash and cash equivalents Liabilities Current liabilities Trade and other payables Finance lease liabilities Contract liabilities Income tax payable Net current assets / (liabilities) Non-current liabilities Deferred tax liabilities Contract liabilities Other non-current liabilities Borrowings Total liabilities Net assets Shareholders' equity Called up share capital Share premium Own shares held in trust Retained earnings Merger relief reserve Translation reserve Total shareholders’ equity 31 December 2018 $000 31 December 2017 $000 Notes 16 17 9 13 19 9 20 21 9 13 9 21 22 23 197,332 3,723 5,141 5,346 211,542 1,083 3,337 18,833 1,961 20,704 45,918 28,856 - 7,093 1,440 37,389 198,298 3,400 - 8,937 210,635 506 - 19,761 - 28,668 48,935 49,874 9 - 613 50,496 8,529 (1,561) 15,435 2,412 543 20,224 38,614 76,003 14,629 - 3,024 16,140 33,793 84,289 181,457 175,281 421 107,103 (665) 60,486 19,641 (5,529) 411 105,207 (1,163) 54,273 19,641 (3,088) 181,457 175,281 The financial statements were approved by the Board of directors on 27 March 2019 and were signed on its behalf by: Paul Noland Chief Executive Officer The accompanying notes on pages 61 to 102 form part of these consolidated financial statements 55 accesso Technology Group plc Company statement of financial position as at 31 December 2018 Registered Number: 03959429 Assets Non-current assets Intangible assets Investments in subsidiaries Property, plant and equipment Contract assets Deferred tax asset Current Assets Inventories Contract assets Trade and other receivables Income tax receivable Cash and cash equivalents Liabilities Current liabilities Trade and other payables Contract liabilities Income tax payable Net current assets Non-current liabilities Deferred tax Contract liabilities Borrowings Total liabilities Net assets Shareholders' equity Called up share capital Share premium Retained earnings Merger relief reserve Translation reserve Total shareholders' equity 31 December 2018 $000 Notes 31 December 2017 $000 16 18 17 9 13 19 9 20 21 9 13 9 22 23 6,396 69,112 1,128 3,723 - 80,359 339 1,186 99,401 8 3,311 104,245 4,055 282 1,346 5,683 98,562 327 616 20,224 21,167 26,850 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 29,166 157,754 147,046 421 107,103 45,903 19,641 (15,314) 157,754 411 105,207 31,944 19,641 (10,157) 147,046 The profit for the financial year for the Company was $6.743m (2017: profit of $4.44m). The financial statements were approved by the Board of directors on 27 March 2019 and were signed on its behalf by: Paul Noland Chief Executive Officer The accompanying notes on pages 61 to 102 form part of these consolidated financial statements 56 accesso Technology Group plc Consolidated statement of cash flow for the financial year ended 31 December 2018 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 Payment of deferred consideration to employees Foreign exchange gain Income tax expense / (benefit) Increase in inventories Decrease / (increase) in trade and other receivables Increase in contract assets/ contract liabilities (Decrease) / 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 Deferred consideration settlement Capitalised internal development costs Purchase of property, plant and equipment Acquisition of other intangible assets Interest received Net cash used in investing activities Cash flows from financing activities Share issue Interest paid Payments to finance lease creditors Cash paid to refinance Proceeds from borrowings Repayments of borrowings Net cash generated from 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 2018 $000 2017 $000 3,290 9,901 17 16 16 16 10 12 12 17 13 16 21 16 17 22 1,519 11,740 8,067 38 2,245 1,127 (37) - (1,342) (304) 1,887 28,230 (577) 928 666 (11,422) 17,825 (452) 17,373 - (6,962) (21,100) (1,959) (2) 37 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 (29,986) (91,381) 1,906 (1,833) (9) - 15,530 (10,089) 5,505 (7,108) 28,668 (856) 20,704 77,112 (741) (54) (410) 31,376 (26,037) 81,246 22,738 5,866 64 28,668 The accompanying notes on pages 61 to 102 form part of these consolidated financial statements 57 accesso Technology Group plc Company statement of cash flow for the financial year ended 31 December 2018 Cash flows from operations Profit for the period Adjustments for: Amortisation Depreciation Share-based payment Finance expense Finance income Foreign exchange loss Income tax (benefit) / expense (Increase) / decrease in inventories Decrease / (increase) in trade and other receivables Decrease in contract assets/ liabilities Increase / (decrease) in trade and other payables Cash generated / (used in) from operations Tax paid Net cash inflow / (outflow) operating activities Cash flows from investing activities Investment in subsidiary Payment of deferred acquisition consideration 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 Proceeds from borrowings Repayments of borrowings Net cash generated from financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange (loss) / gain on cash and cash equivalents Cash and cash equivalents at end of year Notes 16 17 18,16 16 17 22 2018 $000 6,743 1,865 396 387 1,135 (4,787) (39) (1,180) 4,520 (60) 1,690 (898) 1,278 6,530 (619) 5,911 (50) (8,635) (1,279) (277) 12 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 (10,229) (20,683) 1,906 (1,502) - 15,530 (10,089) 5,845 1,527 1,909 (125) 3,311 77,112 (741) (410) 31,376 (26,037) 81,300 542 1,303 64 1,909 The accompanying notes on pages 61 to 102 form part of these consolidated financial statements. 58 accesso Technology Group plc Consolidated statement of changes in equity for the financial year ended 31 December 2018 Balance at 31 December 2017 as previously reported Adjustment in respect of IFRS 15, net of tax Adjusted balance at 1 January 2018 Share capital $000 Share premium $000 Retained earnings $000 Merger relief reserve $000 Own shares held in trust $000 Translation reserve $000 Total $000 411 105,207 54,273 19,641 (1,163) (3,088) 175,281 - - 398 - - (150) 248 411 105,207 54,671 19,641 (1,163) (3,238) 175,529 Comprehensive income for the year Profit for period Other comprehensive income Exchange differences on translating foreign operations Total comprehensive income for the year - - - Contributions by and distributions to owners Issue of share capital Share-based payments Equity-settled deferred consideration Reduction of shares held in trust Share option tax charge - deferred Share option tax charge - current Total contributions by and distributions by owners 10 - - - - - 10 - - - 1,896 - - - - - 3,290 - 3,290 - 2,245 2,824 (107) (4,621) 2,184 1,896 2,525 - - - - - - - - - - - - - - - - 498 - - 498 - 3,290 (2,291) (2,291) - - - - - - - (2,291) 999 1,906 2,245 2,824 391 (4,621) 2,184 4,929 Balance at 31 December 2018 Balance at 31 December 2016 Comprehensive income for the year Profit for period Other comprehensive income Exchange differences on translating foreign operations Total comprehensive income for the year 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 421 107,103 60,486 19,641 (665) (5,529) 181,457 357 28,150 39,161 14,540 (1,163) (3,254) 77,791 - - - 54 - - - - - - - 77,057 - - - - 9,901 - 9,901 - 1,089 1,314 (2,213) 5,021 - - - 5,101 - - - - 54 77,057 5,211 5,101 - - - - - - - - - - 9,901 166 166 - - - - - - 166 10,067 82,212 1,089 1,314 (2,213) 5,021 87,423 Balance at 31 December 2017 411 105,207 54,273 19,641 (1,163) (3,088) 175,281 The accompanying notes on pages 61 to 102 form part of these consolidated financial statements. 59 accesso Technology Group plc Company statement of changes in equity for the financial year ended 31 December 2018 Share capital $000 Share premium $000 Retained Earnings $000 Merger relief reserve $000 Translation reserve $000 Total $000 411 105,207 31,944 19,641 (10,157) 147,046 - - 3,113 - (143) 2,970 411 105,207 35,057 19,641 (10,300) 150,016 Balance at 31 December 2017 as previously reported Adjustment in respect of IFRS 15, net of tax Adjusted balance at 1 January 2018 Comprehensive income for the year Profit for period Other comprehensive income Exchange differences Total comprehensive income for the year - - - Contributions by and distributions by owners Issue of share capital Share-based payments Equity-settled deferred consideration Share option tax charge - deferred 10 - - - - - - 1,896 - - - 6,743 - 6,743 - 2,245 2,824 (966) 10 1,896 4,103 Total contributions by and distributions by owners Balance at 31 December 2018 Balance at 31 December 2016 - - - - - - - - - 6,743 (5,014) (5,014) (5,014) 1,729 - - - - - 1,906 2,245 2,824 (966) 6,009 421 107,103 45,903 19,641 (15,314) 157,754 357 28,150 24,803 14,540 (14,726) 53,124 Comprehensive income for the year Profit for period Other comprehensive income Exchange differences Total comprehensive income for the year - - - Contributions by and distributions by owners Issue of share capital Share-based payments Equity-settled deferred consideration Share option tax credit 54 - - - - - - 77,057 - - - 4,442 - 4,442 - 1,089 1,314 296 - - - 5,101 - - - 54 77,057 2,699 5,101 Total contributions by and distributions by owners Balance at 31 December 2017 - 4,442 4,569 4,569 - - - - - 4,569 9,011 82,212 1,089 1,314 296 84,911 411 105,207 31,944 19,641 (10,157) 147,046 The accompanying notes on pages 61 to 102 form part of these consolidated financial statements. 60 accesso Technology Group plc Notes to the consolidated financial statements for the financial year ended 31 December 2018 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, licensing and operation of virtual queuing solutions and providing a personalised experience to customers within 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 and personalised experience platforms 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. Basis of accounting These consolidated financial statements have been prepared in accordance with IFRS. They were authorised for issue by the Company’s board of directors on 27 March 2019. The consolidated financial statements have been prepared on the historical cost basis except for contingent consideration and acquired intangible assets arising on business combinations, which are measured at fair value. Details of the Group’s accounting policies are included in Notes 3 and 4. This is the first set of the Group’s annual financial statements in which IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments have been applied. Changes to significant accounting policies are described in Note 3. 3. Changes to significant accounting policies The Group has initially adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments from 1 January 2018, details of the impact are set out below. The adoption of IFRS 9 did not have a material impact on the company. A number of other new standards are also effective from 1 January 2018 but they do not have a material effect on the Group’s financial statements. Revenue from contracts with customers Due to the transition method chosen by the Group in applying IFRS 15, comparative information throughout these financial statements has not been restated to reflect the requirements of the new standard. IFRS 15 provides a single, principles based five step model to be applied to all sales contracts as outlined below. It is based on the transfer of control of goods and services to customers and replaces the separate models for goods and services. Identify the contract(s) with a customer Identify the performance obligations in the contract 1. 2. 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognise revenue when or as the entity satisfies its performance obligations. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably. The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies. 61 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Changes to significant accounting policies (continued) Revenue from contracts with customers (continued) Type of product/service a. Point-of-sale (POS) licenses support and revenue Nature of the performance obligations and significant payment terms Customers obtain control of the POS license once it is installed on their hardware for terms between one and three years. They have access to ongoing support which is typically for a twelve-month period, this support is not necessary for the functionality of the licence, support revenue is therefore a distinct performance obligation from the licence performance obligation. With agreements longer than one year, invoices are generated either quarterly or annually, usually payable within thirty days. Although payments are made over the term of the agreement, the the is binding agreement negotiated total term. transaction price is payable over the term of the agreement via the annual or quarterly instalments. The for b. Software licenses and the related maintenance and support revenue software Certain licenses are installed on a customer’s hardware in a fully functional state together with support and maintenance for a twelve-month term. The software the licence does not to and maintenance operate, providing the customer with control of the licence for a twelve-month and representing separate performance obligation. require support term a the maintenance Whilst and support revenue must be paid annually to be granted a licence for the the next is performance considered distinct the licence. twelve-months, obligation from Contract terms are typically either three years or perpetual whereby on each anniversary of the contract the customer is required to pay the annual support and maintenance to be granted the annual software licence at a 100% discount from the selling price. This option to renew is considered a material right under IFRS 15 and represents a separate performance obligation. Nature of change in accounting policy Under IAS 18 Revenue, the license revenue was recognised equally over the term of the agreement, reflecting the pattern of availability to the customer. IFRS 15 considers these licenses to be recognised at a point in time which is determined to be when the customer has been provided the software. These licences provide the customer with the right of use of the POS software as it exists, it is at the customers discretion to accept any updates to the software, it is fully functional from the date it is provided to the customer and considered a distinct performance obligation. Support revenue is carved out of the total consideration using an estimate that best reflects its stand-alone selling price and is continued to be recognised rateably as the customer receives the benefit of the support. Accordingly, the license revenue is recognised sooner under IFRS 15, with support revenue, equal to a percentage of the license fee, continuing to be recognised over the term of the agreement. The impact of these changes on items other than revenue is an increase in net assets in the form of a contract asset. Under IAS 18, these software licenses were recognised when accepted by the client, as there was a non-refundable right to payment. IFRS 15 considers right of use licenses to be recognised at a point in time which is determined to be when the customer has been provided with a functional software licence. The maintenance and support revenue is determined using an estimate that best reflects its stand-alone selling price and is continued to be recognised rateably as the customer receives the benefit of the maintenance and support. The option to renew each year’s licence at a full discount by paying the annual maintenance and support is deferred and recognised at a future point in time when the customer renews. The amount that is deferred is dependent on the term of the contract. For example: on the inception of a three-year contract, two thirds of the licence fee consideration would be deferred and released equally on the first and second anniversary when the customer renews their maintenance and support. Perpetual licences are recognised in the same manner, with the exception being that the contract term is estimated to be five years. As such, the renewal discounts are deferred and spread over the remaining four years at each point the customer renews their maintenance and support. Accordingly, for these type of licenses the phasing of revenue has changed significantly with a smaller portion of the licence revenue being recognised on inception of a new contract, a renewal right to a discounted licence fee is deferred for between three and five years which is held as a contract liability, being recognised on each anniversary of the contract when a customer renews their maintenance and support. 62 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Changes to significant accounting policies (continued) Revenue from contracts with customers (continued) Type of product/service Nature of the performance obligations and significant payment terms Nature of change in accounting policy c. Virtual queuing system Virtual queuing systems are installed at a client’s location, and revenue is recognised when the park guest uses the service. The Group’s performance obligation is either to provide a license to and maintain a system in the park or operate the system within the park. d. Ticketing and eCommerce revenue Revenue is recognised at the time the ticket is sold or the transaction takes place. Invoices are issued monthly and generally payable within thirty days. e. Professional services f. Hardware sales is services revenue Professional typically providing customised software development and in general is agreed with the customer and billed at each month end. Certain contracts span longer time periods whereby the Group carry out customisation and deliver software releases to customers at predetermined milestones, in these situations the Group has enforceable rights to revenue in the event of cancellation and therefore is able to recognise the revenue over time using the (hours/total budgeted hours) which best depicts the group’s performance of transferring control. On certain contracts customers request that the group procure hardware on their behalf which the to be a distinct group has determined performance obligation. is This recognised at the point the customer obtains control of the hardware which is considered to be the point of delivery when legal title passes. input method revenue Under IAS 18, certain queuing contracts were recognised on a gross basis where management determined the company was acting the principal in the agreement. IFRS 15 has different criteria for determining who is the principal in an agreement, focusing on control of the goods or services. Management have determined the Group is acting as the agent in all queuing contracts, and therefore only recognises its portion of the sale as revenue, rather than the full amount of the guest payment. There is no impact on profit of the Group due to this change, the Group’s revenue continues to be driven by park attendance. IFRS 15 did not have a significant impact on the Group’s accounting policies. IFRS 15 did not have a significant impact on the Group’s revenue recognition. IFRS 15 did not have a significant impact on the Group’s revenue recognition. Contract assets and contract liabilities Upon implementation of IFRS 15 the group now separately recognises contract assets and contract liabilities. Where these assets or liabilities mature in periods beyond 12 months of the balance sheet date they are recognised within non-current assets or non-current liabilities as appropriate. Contract assets represent licence fees which have been recognised at a point in time but where the consideration is contractually payable over time, professional service revenue whereby control has been passed to the customer and deferred contract commissions incurred in obtaining a contract which are recognised in line with the recognition of the revenue. Contract assets for point in time licence fees and unbilled professional service revenue represent financial assets and are considered for impairment on an expected credit loss model, these assets have historically had immaterial levels of bad debt and are with credit worthy customers, and consequently the group has not recognised any impairment provision against them. 63 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Changes to significant accounting policies (continued) Revenue from contracts with customers (continued) Contract assets and contract liabilities (continued) Contract liabilities represent discounted renewal options on licence arrangements whereby a customer has the right to renew their licence at a full discount subject to the payment of annual support and or maintenance fees on each anniversary of the contract. Contract liabilities are recognised as income when a customer exercises their renewal right on each anniversary of the contract and pays their annual maintenance and support. In the situation of a customer terminating their contract all unexercised deferred renewal rights would be recognised as income, representing a lapse of the renewal right options. The licence fees related to these contract liabilities are non-refundable. The following table summarises the impact, net of tax, of transition to IFRS 15 on retained earnings at 1 January 2018. Retained Earnings License fees recognised up front at point in time License fees recognised on customer renewals in future periods at point in time Deferred contract commissions Related tax Impact at 1 January 2018 Impact of adopting IFRS 15 at 1 January 2018 $000 4,522 (4,428) 267 37 398 If reporting under IAS 18 for the period, revenue would have been $29.4m higher, and operating profit $3.3m lower. There was no material impact on the Group’s statement of cash flows for the year ended 31 December 2018. Impact on the consolidated statement of financial position – all figures in $000s As at 31 December 2018 As reported Adjustments Amounts without adoption of IFRS 15 Assets Non-current assets Contract assets – non-current Total non-current assets Trade and other receivables Contract assets Total Current assets Total assets Liabilities Non-current liabilities Contract liabilities – non-current Total non-current liabilities Trade and other payables Contract liabilities Total current liabilities Total liabilities Total net assets Equity Retained earnings Other equity Total equity - (5,141) (5,141) 1,531 (3,337) (1,806) (6,947) - (2,412) (2,412) 4,648 (7,093) (2,445) (4,857) (2,090) (2,703) 613 (2,090) 206,401 - 206,401 44,112 - 44,112 250,513 36,202 - 36,202 34,944 - 34,944 71,146 179,367 57,783 121,584 179,367 206,401 5,141 211,542 42,581 3,337 45,918 257,460 36,202 2,412 38,614 30,296 7,093 37,389 76,003 181,457 60,486 120,971 181,457 64 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Changes to significant accounting policies (continued) Revenue from contracts with customers (continued) Impact on the consolidated statement of comprehensive income – all figures in $’000s For the year ended 31 December 2018 Revenue Cost of sales Gross profit Administrative expenses Operating profit Profit before tax Income tax expense Profit for the period Total comprehensive income for the period As reported 118,747 (30,543) 88,204 (81,937) 6,267 5,177 (1,887) 3,290 999 Adjustments 29,445 (32,725) (3,280) (67) (3,347) (3,347) 828 (2,519) (2,519) Amounts without adoption of IFRS 15 148,192 (63,268) 84,924 (82,004) 2,920 1,830 (1,059) 771 (1,520) 4. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated (see Note 3). 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 2018 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 18. 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. 65 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Significant accounting policies (continued) 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 other comprehensive income 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 from contracts with customers Information about the Group’s accounting policies relating to contracts with customers and the effect of initially applying IFRS 15 is described in Note 3. 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 recognised 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 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% 25 - 33.3%, or life of contract 20% Shorter of useful life of the asset or time remaining within the lease contract 66 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Significant accounting policies (continued) 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. 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 13 for further discussion on provisions related to tax positions. Goodwill Any 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 is recognised in the Consolidated Statement of Financial Position as goodwill and is not amortised. After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired. Where the recoverable amount of the cash-generating unit is less than its carrying amount including goodwill, an impairment loss is recognised in the Consolidated Statement of Profit or Loss. 67 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Significant accounting policies (continued) 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 16). 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 related 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 from the date the intangible asset goes into use. 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 the criteria noted above. The Group has contractual commitments for development costs of $nil (2017: $nil). 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 7 years. Fair value of contingent consideration Contingent consideration payable in cash in connection with acquisitions is measured at its fair value as of the reporting date and classified as a financial liability with subsequent re-measurement through profit and loss. Equity settled contingent consideration that results in either a fixed number of equity instruments or no issue of equity where the employment condition is not met is treated as equity settled. Equity settled contingent consideration is fair valued at the acquisition date, it is not re-measured at each reporting date and its subsequent settlement is accounted for within equity. Where cash or equity consideration is contingent on the continued employment of the sellers the fair value of the expense is recognised as a remuneration expense in the statement of comprehensive income over the deferral period, where the employment condition does not apply and the consideration is in respect of a business combination it is included within cost of investment. 68 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Significant accounting policies (continued) 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. Contract assets and 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 policies: • 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. The group had a contingent consideration liability relating to the acquisition of Ingresso Group Limited as at 31 December 2017. This was included in cost at its acquisition date fair value and is classified as a financial liability, re- measured at fair value subsequently through profit or loss. 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. New standards and interpretations not yet adopted A number of new standards, amendments to standards, and interpretations are either not effective for 2018 or not relevant to the group, and therefore have not been applied in preparing these accounts. The effective dates shown are for periods commencing on the date quoted. IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (eg personal computers) and short-term leases (ie leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (ie the lease liability) and an asset representing the right to use the underlying asset during the lease term (ie the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. 69 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Significant accounting policies (continued) Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (eg a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs. The Group has entered into a number of long-term leases in respect of land and buildings. The Group has assessed the leases under IFRS 16 and expects an impact as the right of use assets and lease liabilities will come onto the consolidated statement of financial position for the first time in respect of its current operating leases. The Group expects that IFRS 16 will have a material impact on the financial statements of the Group, however the Group are currently assessing the impact. To see the volume of operating leases please see Note 29 to the Group’s consolidated financial statements for the year ended 31 March 2018 for more information. The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. IFRIC 23 IFRIC 23, “Uncertainty over Income Tax Treatments” clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. In such a circumstance, an entity shall recognise and measure its current or deferred tax asset or liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined applying this interpretation. This interpretation is effective for annual periods beginning on or after 1 January 2019, subject to EU endorsement. Annual improvements 2017 Annual Improvements 2017 includes amendments to IFRS 3, “Business combinations”, IFRS 11, “Joint arrangements” and IAS 12, “Income taxes” applies for periods beginning on or after 1 January 2019, subject to EU endorsement. Amendments to References to the Conceptual Framework in IFRS Standards – Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32 to update those pronouncements with regard to the revised Conceptual Framework, effective 1 January 2020, subject to EU endorsement. The impact of IFRS 16 is discussed above. The impact of the other standards, amendments and interpretations listed above are not expected to have a material impact on the consolidated financial statements. 5. 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. The Group’s choice of presentation currency reflects its significant dealings in that currency. 6. 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. 70 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Critical judgments 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 4 for details on the Group’s capitalisation and amortisation policies, and Intangible Assets, note 16, for the carrying value of capitalised development costs. Agent versus principal Management have determined that under IFRS 15 the Group is acting as the agent in all queuing contracts, and therefore only recognises its portion of the sale as revenue, rather than the full amount of the guest payment. When analysing whether the Group is acting as a principal or agent in a given arrangement, this requires management to consider several judgemental factors. The main factor is whether the Group has control over the goods and services to be provided within the contract, with indicators of control including whether the entity is primarily responsible for fulfilling the promise to the customer, the entity has inventory risk, and the entity has discretion over pricing. These factors are different than those under IAS 18 Revenue, which focused more on the risks and rewards of the generating the revenue. Selection of reporting segments and aggregation of accesso LoQueue and The Experience Engine (‘TE2’) reporting segments During 2018 management have organised their business into three operating segments and now monitor goodwill at this level, comprising Ticketing and Distribution, accesso LoQueue and The Experience Engine (‘TE2’). This represents a change from 2017 whereby goodwill was monitored at a group level. Judgement is applied in the assessment of whether the operating segments of accesso LoQueue and TE2 meet the aggregation criteria as set out in IFRS 8 ‘Operating Segments’ and therefore can be presented as a single reportable segment within Guest Experience. This assessment has been made following consideration of economic characterises, nature of the products and services, the type of customers and nature of businesses. Principally the products of each segment are directly targeted at improving a guest’s experience of an attraction or entertainment venue, whilst also providing cross-selling opportunities and increased revenues to the venues, both of which are heavily underpinned by a focus on product development investment activities. 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: Goodwill testing and goodwill allocated to cash generating units The goodwill arising on the respective ticketing entities enhances the value of only the Ticketing and Distribution group of CGUs and has therefore been monitored at a Ticketing and Distribution segment level for impairment testing. accesso LoQueue has no underlying goodwill for consideration of reallocation. $52.4m of goodwill arising on the acquisition of TE2 was identified at the acquisition date as being expected to drive synergies in Ticketing and Distribution and accesso LoQueue, this goodwill has been allocated to Ticketing and Distribution and accesso LoQueue respectively ($28.5m and $6.5m) in line with the apportionment set out at acquisition leaving $17.4m within TE2’s CGU. This allocation has been based on a relative proportion of the EBITDA synergies of the respective CGUs which is considered the most accurate reflection of where the value of the synergies of the goodwill will be driven. 71 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 7. 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 20 and 21, 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 2018 Group Financial liabilities Bank loan Total Company Financial liabilities Bank loan Total 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 21 22 21 22 23,229 - 23,229 2,258 - 2,258 Less than 6 months $000 Note 21 22 21 22 18,123 9 - 18,132 583 - 583 543 - 543 - - - Between 6 months and 1 year $000 1,240 - 1,240 - - - 72 - 20,466 20,466 - 20,466 20,466 - - - - - - Between 1 and 5 years $000 Over 5 Years $000 3,024 - 16,462 19,486 - 16,462 16,462 - - - - - - - Total $000 23,772 20,466 44,238 2,258 20,466 22,724 Total $000 22,387 9 16,462 38,858 583 16,462 17,045 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Financial risk management (continued) 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: Fixed rate $000 Floating rate $000 Non-interest bearing $000 Total assets $000 Total liabilities $000 Note 31 December 2018 Group Financial assets – trade and other receivables Financial assets – contract assets Cash Total Bank loan Total Company Financial assets – trade and other receivables Financial assets – contract assets Cash Total Bank loan Total 31 December 2017 Group Financial assets Cash Total Bank loan Finance lease Total Company Financial assets Cash Total Bank loan Total 20 9 22 20 9 22 Note 20 22 20 22 - - - - - 83,710 - 83,710 - - Fixed rate $000 - - - (9) (9) 79,819 - 79,819 - 4,271 4,271 20,466 20,466 - - - 20,466 20,466 Floating rate $000 - - - (16,462) - (16,462) - - - - - (16,462) (16,462) 73 16,559 8,143 16,433 41,135 - - 15,206 4,909 3,311 23,426 - - 16,559 8,143 20,704 45,406 - - 98,9161 4,909 3,311 107,136 - - Non-interest bearing $000 Total assets $000 17,141 28,668 45,809 - - - 90,773 1,909 92,682 17,141 28,668 45,809 - - - 10,954 1,909 12,863 - - - - - 20,466 20,466 - - - 20,466 20,466 Total liabilities $000 - - - (16,462) (9) (16,471) - - - - - (16,462) (16,462) accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Financial risk management (continued) Credit risk exposure Credit risk predominantly arises from trade receivables, contract assets, 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 – trade and other receivables Financial assets – contract assets Cash Estimated irrecoverable amounts Note 20 9 28 20 Group 2018 $000 16,559 8,143 20,704 (236) 45,170 2017 $000 17,141 - 28,668 (222) 45,587 Company 2018 $000 98,916 4,909 3,311 - 107,136 2017 $000 90,773 - 1,909 - 92,682 The maximum exposure is the carrying amount as disclosed in trade and other receivables. The average credit period taken by customers is 48 days (2017: 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 2018 and 31 December 2017, 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. Up to 3 months 3 to 6 months Capital risk management Group Company 2018 $000 3,659 559 4,218 2017 $000 10,173 612 10,785 2018 $000 661 438 1,099 2017 $000 644 59 703 The Group considers its capital to comprise its ordinary share capital, share premium, own shares held in trust, 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 22. 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. 74 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Financial risk management (continued) 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 2018 are (in ’000s): $742 (2017: $714) denominated in US dollars AUD$9 (2017: AUD$9) denominated in Australian dollars €307 (2017: €85) denominated in euros Kr1,654 (2017: Kr856) denominated in Danish krone 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 = 1.3359USD (2017: 1GBP = 1.2906USD). In light of the UK’s scheduled departure from the EU on 29 March 2019 the directors have considered the risk of greater volatility in sterling to USD to assess the potential impact on the Group’s profitability, 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 $252,060 (4.87%). 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 $252,060 (4.87%). Fair Value Measurement The Group does not have any level 2 or 3 financial assets or liabilities that have unobservable inputs that require disclosure. 8. 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 and monitors its operational performance against this strategy. The Board have revised its segmental disclosure during 2018 to align with its new organisational structure and how the CODM now review and make decisions about resources to be allocated to the segments. During 2018 the ticketing group was reorganised and is now headed by a President of Ticketing who is identified as the segment manager. The segment manager maintains regular contact with the CODM to discuss operating activities, financial results, forecasts, or plans for the ticketing segment as a whole. This change is reflective of the continued objective to merge and align the ticketing entities of the group to leverage the synergies that exist in their solutions, technological capabilities and pooled expertise. The Group’s Ticketing operating segment comprises the following solutions: o o o o accesso Passport ticketing suite using our hosted proprietary technology offering to maximise up selling, cross selling and selling greater volumes. accesso Siriusware software solutions providing modules in ticketing & admissions, memberships, reservations, resource scheduling, retail, food service, gift cards, kiosks and eCommerce. The accesso ShoWare ticketing solution for box office, online, kiosk, mobile, call centre and social media sales. Ingresso operate a consolidated distribution platform which connects venues and distributors, opening up a larger global channel for clients to sell their event, theatre and attraction tickets. The Group’s virtual queuing solution (accesso LoQueue) and experience management platform (The Experience Engine ‘TE2’) are headed by their respective Presidents who act as segment managers and discuss the operating activities, financial results, forecasts and plans of their respective segments with the CODM. These two distinct operating segments share similar economic characteristics, customers and markets; the products are heavily bespoke, technology and software intensive in their delivery and are directly targeted at improving a guest’s experience of an attraction or entertainment venue, whilst providing cross-selling opportunities and increased revenues to the venues. Management therefore conclude that they meet the aggregation criteria. 75 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Business and geographical segments (continued) The Group’s Guest Experience operating segment comprises the following aggregated segments: o o accesso LoQueue providing leading edge virtual queuing solutions to take customers out of line, improve guest experience and increase revenue for theme parks The Experience Engine (“TE2”) experience management platform which delivers personalised real time immersive customer experiences at the right time elevating the guest’s experience and loyalty to the brand The Group’s assets and liabilities are reviewed on a group basis and therefore segmental information is not provided for the statements of financial position of the segments. The prior year segmental information has been restated to provide comparability. The CODM monitors the results of the operating segments prior to charges for interest, depreciation, tax, amortisation and exceptional items. The Group has a significant amount of central unallocated costs which are not segment specific. These costs have therefore been excluded from segment profitability and presented as a separate line below segment profit. The following is an analysis of the Group’s revenue and results from the continuing operations by reportable segment which represents revenue generated from external customers. Ticketing Guest Experience Total revenue Year ended 31 December 2018 2018 $000 78,550 40,197 2017 $000 63,393 70,036 118,747 133,429 Ticketing Guest Experience $000 $000 Central unallocated costs $000 Group $000 Adjusted EBITDA (1) 30,805 19,256 (15,306) 34,755 Depreciation and amortisation (excluding acquired intangibles) Acquisition expenses Deferred and contingent payments Amortisation related to acquired intangibles Share-based payments Finance income Finance expense Profit before tax Year ended 31 December 2017 Ticketing Guest Experience $000 $000 Central unallocated costs $000 (9,624) (1,703) (3,176) (11,740) (2,245) 37 (1,127) 5,177 Group $000 Adjusted EBITDA (1) 22,890 18,224 (16,510) 24,604 Depreciation and amortisation (excluding acquired intangibles) Acquisition expenses Deferred and contingent payments Amortisation related to acquired intangibles Profit recognised on reduction of earn-out liability Share-based payments Finance income Finance expense Profit before tax 76 (5,531) (1,249) (2,131) (8,591) 3,228 (1,089) 24 (2,099) 7,166 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Business and geographical segments (continued) (1) 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 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 and contract assets) by geographical location are detailed below: UK Other Europe Australia/South Pacific USA and Canada Central and South America Revenue Non-current assets 2018 $000 29,962 2,901 4,569 77,595 3,720 118,747 2017 $000 22,701 2,138 1,565 103,294 3,731 133,429 2018 $000 37,616 3 169 163,046 221 201,055 2017 $000 38,788 67 637 162,048 158 201,698 Revenue in 2017 presented above on a comparable basis with 2018 under IFRS 15 would be $102.8m (unaudited). 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 customers of one of the park operators within the Guest Experience segment with which the Group has a contractual relationship accounts for $13.3m of Group revenue for 2018 (2017: $43.9m on IAS18 basis/ 2017: $13.8m on IFRS15 basis). A further customer within the Guest Experience segment accounted for $12.0m of group revenue in 2018 (2017: $8.3m). 9. Revenue The revenue recognition accounting policies and the effect of initially applying IFRS 15 on the Group’s revenue from contracts with customers is described in Note 3. Due to the transition method chosen in applying IFRS 15, comparative information has not been restated to reflect the new requirements. Revenue primarily arises from the operation and licensing of virtual queuing solutions, the development and application of eCommerce ticketing, professional services, and license sales in relation to point-of-sale and guest management software and related hardware. All revenue of the group is from contracts with customers. Disaggregated revenue The Group has disaggregated 2018 revenue into various categories in the following table which is intended to depict the nature, amount, timing and uncertainty of revenue recognition and to enable users to understand the relationship with revenue segment information provided in note 8. Comparative information has not been provided as permitted when adopting IFRS 15 using the cumulative catch up method of adoption. 77 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Revenue (continued) Year ended 31 December 2018 Primary geographic markets UK Other Europe Australia/South Pacific/Asia USA and Canada Central and South America Product type Licence fees Support and maintenance Virtual queuing Ticketing and eCommerce Professional services Hardware Other Timing of transfer of goods and services Point in time licence fees Point in time virtual queuing/ticketing/hardware/other Over time maintenance, support and professional services Ticketing $000 Guest Experience $000 27,463 938 4,277 42,331 3,541 78,550 6,623 8,393 - 57,100 4,014 1,533 887 78,550 6,623 57,100 14,827 78,550 2,500 1,962 291 35,264 180 40,197 2,963 - 21,637 980 12,672 - 1,945 40,197 2,963 22,617 14,617 40,197 Group $000 29,963 2,900 4,568 77,595 3,721 118,747 9,586 8,393 21,637 58,080 16,686 1,533 2,832 118,747 9,586 79,717 29,444 118,747 Revenue included within point in time licence fees above related to the exercise or lapse of renewal rights 1,953 - 1,953 Contract balances The following table provides information about receivables, contract assets and contract liabilities from contracts with customers. At 1 January 2018 At 31 December 2018 Breakdown of Contract assets at 31 December 2018 Unbilled income Contract commissions Group Contract assets $000 Contract liabilities $000 Company Contract assets $000 Contract liabilities $000 4,790 8,478 8,143 335 8,478 4,428 4,593 9,505 4,909 - - - 4,909 - 4,909 790 898 - - - Transfers of contract liabilities to revenue during the period were $10m (Company $266k). 78 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Revenue (continued) The contract assets primarily relate to the Group’s rights to consideration for license fees or professional services recognised but not billed. The contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice to the customer. The Group also capitalises commissions paid in connection with obtaining a contract and recognises the expense over the term of the agreement, testing for impairment annually. The contract liabilities primarily relate to material rights customers of the Group’s guest management software receive at the time contract is signed, which allows them to renew at a discount in subsequent years. The revenue is recognised when the customer renews over the term of the contract or 5 years for contracts that do not have a term. The balance also consists of support services to be provided for POS licenses and guest management software, and the revenue for the support is recognised over the terms of the agreements. No revenue was recognised in the period ended 31 December 2018 from performance obligations satisfied (or partially satisfied) in previous periods. Remaining performance obligations No information is provided about remaining performance obligations at 31 December 2018 that have an original expected duration of one year or less, as allowed by IFRS 15. The amount of revenue that will be recognised in future periods on contracts with material rights over future discounted licence fees is analysed as follows: Material rights over discounted licence fee renewal 10. Employees and directors Wages and salaries Deferred compensation related to acquisitions Social security costs Defined contribution pension costs Share-based payment transactions Less than 1 year $000 2,097 2018 $000 47,555 3,176 4,075 1,348 2,245 58,399 Between 1 and 5 years $000 1,651 2017 $000 39,028 2,131 2,600 904 1,089 45,752 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: Operations Research & development Sales & marketing Finance & administration Seasonal staff 2018 2017 170 227 62 59 406 924 169 200 34 60 418 881 79 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Employees and directors (continued) Key management compensation The key management of the company in 2018 are considered to be the Executive directors and the three respective presidents of Ticketing and Distribution, accesso LoQueue and The Experience Engine (TE2). Their remuneration is as follows. In 2017 key management were considered to be the Executive Directors. Salary Short term-non-monetary benefits Contribution to retirement scheme Employer’s social security costs Share-based payments Deferred compensation treated as remuneration expense Directors emoluments are disclosed on page 35 in the directors’ remuneration report. 11. Expenses by nature Park operating costs Other operating leases Depreciation - owned assets Depreciation - finance leased assets Amortisation of intangible assets Foreign exchange differences Research and development gross spend Research and development capitalized to balance sheet (note 16) Research and development recognized in operating profit 2018 $000 1,879 97 62 561 513 2,247 5,359 2018 $000 6,557 1,917 1,519 - 19,845 304 29,403 (21,100) 8,303 2017 $000 2,283 37 22 229 324 - 2,895 2017 $000 38,806 1,675 1,277 44 12,801 206 20,025 (12,395) 7,630 Park operating costs for the period ended 31 December 2017 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. The factors in determining whether the Group is acting as an agent or principal in an agreement have changed under IFRS 15 resulting in net presentation in 2018 and a decrease in park operating costs. See notes 6 and 9 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 2018 $000 132 136 2 6 4 104 - 530 5 9 917 2017 $000 148 138 32 291 5 203 29 846 80 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 12. 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 13. Tax 2018 $000 23 14 37 (687) (110) (330) - (1,127) (1,090) 2017 $000 5 19 24 (741) (224) (1,131) (3) (2,099) (2,075) The table below provides an analysis of the tax charge for the periods ended 31 December 2018 and 31 December 2017: 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 rate changes Original and reversal of temporary difference - for the prior period Total taxation charge/(benefit) 2018 $000 2,498 (457) 2,041 607 (537) 70 2,111 (670) (483) 929 (224) 1,887 2017 $000 1,012 154 1,166 1,289 (707) 582 1,748 382 (5,094) 229 (4,483) (2,735) 81 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 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: 2018 $000 5,177 1,242 1,269 (25) - (137) (64) - (483) (61) 35 111 1,887 Asset $000 6,008 (5,056) 2,793 5,192 8,937 1,030 (4,621) 2017 $000 7,166 2,866 1,380 (175) (130) (1,050) (324) 1 (5,094) - - (209) (2,735) Liability $000 (9,990) 9,539 (181) (13,997) (14,629) (806) - 5,346 (15,435) 1,014 (1,069) (62) 585 (1,184) 353 - 1 (966) 612 - (115) - 1,184 - 812 (527) - (612) (327) Profit on ordinary activities before tax Tax at United States tax rate of 24% (2017: 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 recognised Impact of rate changes Withholding tax credit Share options Other Total tax charge/(benefit) Deferred taxation Group At 31 December 2016 Charged to income Credited directly to equity Acquired from business combinations At 31 December 2017 Charged to income Debited directly to equity At 31 December 2018 Company At 31 December 2016 Charged to income Credited directly to equity Acquired from business combinations At 31 December 2017 IFRS 15 opening adjustment Charged/(credited) to income Debited directly to equity Netted against the asset At 31 December 2018 82 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Tax (continued) 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 Recognised liability Capital allowances in excess of depreciation 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 Capital allowances in excess of depreciation Offset against Company deferred tax asset Deferred tax liability 2018 $000 2,443 658 2,245 5,346 2018 $000 (6,052) (506) (8,877) (15,435) 623 2 (625) - (952) 625 (327) 2017 $000 6,977 974 986 8,937 2017 $000 (3,078) (272) (11,279) (14,629) 1,535 2 (1,184) 353 (1,184) 1,184 - Tax rates in the UK will reduce from 19% to 17% with effect from 1 April 2020. Tax rates in the US were reduced from 35% to 21%, before state taxes, with effect from 1 January 2018. As both rate changes had been substantively enacted during the previous period, deferred tax assets and liabilities were measured at a rate of 17% and 21% plus state taxes in the UK and US, respectively. The same rates were in effect for 2018. The significant reduction in the US corporate rate will also reduce the Group's effective tax rate in future periods. There are no material unrecognised 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. 83 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Tax (continued) 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. 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 $0.5m (2017: $0.5 million) in relation to transfer pricing risks and $0.3 million (2017: $0.5 million) in relation to availability of tax losses and international R&D claims. 14. 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 2018 was (in $’000) $6,743 (2017: $4,442). 15. 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 Deferred share consideration on business combinations Weighted average number of shares used in diluted EPS Diluted earnings per share (cents) 84 2018 3,290 26,905 12.23 26,905 709 421 28,035 11.74 2017 9,901 24,250 40.83 24,250 1,337 454 26,041 38.02 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Earnings per share (continued) 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 consideration linked to employment 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 (2018: 18.8%, 2017: 25.5%): Adjusted profit attributable to ordinary shareholders ($000) 2018 2017 3,290 11,740 331 1,703 3,176 - 2,245 - 22,485 (2,689) 19,796 9,901 8,591 1,131 1,474 2,131 (3,228) 1,089 (4,450) 16,639 (2,880) 13,759 *The 2017 weighted average number of shares for diluted EPS has been restated to include the dilutive effect of the TE2 deferred shares which are contingent on future employment from the date of the agreement. 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) 2018 19,796 26,905 73.58 2017 13,759 24,250 56.73 28,035 70.61 26,041 52.84 137,432 LTIP awards were not included in the calculation of diluted EPS because their exercise is contingent on the satisfaction of certain criteria that had not been met as at 31 December 2018. 85 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 16. 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 2016 Foreign currency translation Additions Acquired with acquisition At 31 December 2017 Foreign currency translation Additions At 31 December 2018 Amortisation At 31 December 2016 Foreign currency translation Charged At 31 December 2017 Foreign currency translation Charged At 31 December 2018 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 (1,193) - (101) - (86) - (655) - (34) 2 (839) 21,100 (2,908) 21,102 116,144 18,314 1,841 52,981 732 58,026 248,038 - - - - - - - 2,558 383 9,334 420 5,570 18,265 8 1,837 3 170 55 6,585 33 43 381 4,166 480 12,801 4,403 556 15,974 496 10,117 31,546 (25) 2,818 (14) 146 (206) 8,776 (27) 38 (413) 8,067 (685) 19,845 7,196 688 24,544 507 17,771 50,706 86 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Intangible assets (continued) Customer relationships & supplier contracts $000 Goodwill $000 Trademarks $000 Internally developed technology $000 Patent & IPR costs $000 Development costs $000 Totals $000 116,144 11,118 1,153 28,437 225 40,255 197,332 117,337 14,012 1,371 37,662 268 27,648 198,298 Net book value At 31 December 2018 At 31 December 2017 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 2016 Foreign currency translation Additions At 31 December 2017 Foreign currency translation Additions At 31 December 2018 Amortisation At 31 December 2016 Foreign currency translation Charged At 31 December 2017 Foreign currency translation Charged At 31 December 2018 Net Book Value At 31 December 2018 At 31 December 2017 542 51 - 593 (35) 2 560 334 33 43 410 (26) 37 421 139 183 Totals $000 10,374 1,046 1,642 9,832 995 1,642 12,469 13,062 (781) 1,277 (816) 1,279 12,965 13,525 3,614 383 1,280 5,277 (397) 1,828 6,708 6,257 7,192 3,948 416 1,323 5,687 (423) 1,865 7,129 6,396 7,375 Capitalised development costs are not treated as a realised loss for the purpose of determining the Company’s distributable profits as the costs meet the conditions requiring them to be treated as an asset in accordance with IAS 38. Prior period 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. 87 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Intangible assets (continued) 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. The final agreed earn-out was paid in cash during 2018 at $9.1m which was accrued at 31 December 2017 this was based on the financial performance of Ingresso for the year ended 31 December 2017 exceeding its financial performance in 2016. Due to the full earn-out not being achieved a credit was recorded to the Consolidated and company statement of comprehensive income of $3.2m during the year ended 31 December 2017. In addition to the contingent earn-out based consideration, up to $1.8m of further consideration was payable to employees of the acquired company which was contingent on their continued employment, this is treated as a compensation expense, rather than deferred consideration. The Group’s income statement contains $0.4m (2017: $1.0m) of compensation expense due to this treatment within administrative expenses, and $0.3m (2017: $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 ended 31 December 2017. Finance costs are amortised over the life of the agreement and presented netted against bank loans within borrowings in the statement of financial position. During 2017, 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 88 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Intangible assets (continued) 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 which will benefit the ticketing operation of the enlarged Group. These 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 to existing customers, which is not available to other market participants. The net cash outflow in respect of the acquisition comprised: Cash paid Net cash acquired Total cash outflow in respect of acquisition $000 18,736 (5,744) 12,992 Prior period 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 in Ticketing and Virtual Queuing, 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 ended 31 December 2017. During 2017, 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. 89 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Intangible assets (continued) Deferred consideration consisting of 454,547 shares is to be issued to certain key employees of TE2, contingent upon their continued employment, over 36 months with the cost being recognised as a compensation expense. Shares will be issued in 3 separate tranches: one-third was scheduled 12 months after the completion date however this did not complete until 2019; 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 credit in relation to this of $2.8m (2017: $1.3m) is booked directly to Retained Earnings. Two of the key employees left during 2018 and accordingly 33,401 shares will not be issued. The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled work force of the acquired entity and the expected synergies that will benefit 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. 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 ended 31 December 2017, 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. During 2018 management have organised their business into three operating segments and now monitor goodwill at this level, comprising Ticketing and Distribution, accesso LoQueue and The Experience Engine (‘TE2’). This represents a change from 2017 whereby goodwill was monitored at a group level. The goodwill arising on the respective ticketing entities enhances the value of only the Ticketing and Distribution group of CGUs and has therefore been monitored at a Ticketing and Distribution segment level for impairment testing. accesso LoQueue has no original goodwill. $52.4m of goodwill arising on the acquisition of TE2 was identified at the acquisition date as being expected to drive synergies in Ticketing and Distribution, this goodwill has been allocated to Ticketing and Distribution and accesso LoQueue respectively ($28.5m and $6.5m) in line with the apportionment set out at acquisition leaving $17.4m within TE2’s CGU. This allocation has been based on a relative proportion of the EBITDA synergies of the respective CGUs which is considered the most accurate reflection of where the value of the synergies of the goodwill will be driven. The carrying amount of goodwill is allocated as follows: Group Ticketing and Distribution * LoQueue ** The Experience Engine TE2 2018 $000 n/a 70,241 28,500 17,403 2017 $000 117,337 n/a n/a n/a 116,144 117,337 * Comprises accesso, LLC, Siriusware, Inc., VisionOne Worldwide Limited & its subsidiaries and Ingresso Group Limited & subsidiaries and accesso Passport/ accesso Showare trading within Accesso Australia PTY Limited ** Comprises the accesso LoQueue trading within accesso Technology Group plc, Lo-Q, Inc., Lo-Q Service Canada Inc and Accesso Australia PTY Limited 90 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Intangible assets (continued) Development cost assets not yet available for use reside in the CGUs as follows and are considered annually for impairment in line with the goodwill attached to those CGUs. These capitalised costs relate to development projects which have not been put into use as at the year-end: accesso, LLC & Siriusware, Inc. (CGU 1) The key assumptions used for value in the calculations in 2018 and 2017 are as follows: Pre-tax discount rate (%) accesso, LLC & Siriusware, Inc. (CGU 1) VisionOne Worldwide Limited and its subsidiaries (CGU 2) Ingresso Group Limited and subsidiaries (CGU 3) The Experience Engine (CGU 4) LoQueue ** (CGU 5) Average EBITDA growth rate during forecast period (average %) accesso, LLC & Siriusware, Inc. (CGU 1) VisionOne Worldwide Limited and its subsidiaries (CGU 2) Ingresso Group (CGU 3) The Experience Engine (CGU 4) LoQueue ** (CGU 5) Terminal growth rate (%) accesso, LLC & Siriusware, Inc. (CGU 1) VisionOne Worldwide Limited and its subsidiaries (CGU 2) Ingresso Group (CGU 3) The Experience Engine (CGU 4) LoQueue ** (CGU 5) Period on which detailed forecasts based (years) accesso, LLC & Siriusware, Inc. (CGU 1) VisionOne Worldwide Limited and its subsidiaries (CGU 2) Ingresso Group (CGU 3) The Experience Engine (CGU 4) LoQueue ** (CGU 5) 2018 $000 1,790 2017 $000 3,286 2018 2017 11.7 11.7 10.2 11.7 11.7 18.5 7.9 68.2 31.2 8.4 3 3 3 3 3 5 5 5 5 5 9.1 9.1 10.1 12.5 n/a 11.5 15.5 19.7 105.8 n/a 3 3 3 3 n/a 5 5 5 5 n/a ** Comprises the accesso LoQueue trading within accesso Technology Group plc, Lo-Q, Inc., Lo-Q Service Canada Inc and Accesso Australia PTY Limited 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 a market participant’s expected capital structure. Growth rates beyond the formally budgeted period are based on economic data pertaining to the region concerned. 91 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Intangible assets (continued) Sensitivity analysis If any of the following changes were made to the following key assumptions the carrying value and recoverable amount would be equal as at 31 December 2018. The Board concluded that the sensitivities set out below were not reasonably possible and that there was no impairment of goodwill. Pre-tax discount rate EBITDA Growth rate during detailed forecast period (average) Ticketing and distribution* accesso LoQueue** The Experience Engine Increase by 14.9% Reduce by 42.5% Increase by 11.2% Increase by 4.5% Reduce by 39.2% Reduce by 28.3% Terminal growth rate Reduce by 18% Reduce by 16.2% Reduce by 4.7% Excess over carrying value ($000) $323,790 $66,336 $37,941 * Comprises accesso, LLC, Siriusware, Inc., VisionOne Worldwide Limited & its subsidiaries and Ingresso Group Limited & subsidiaries and accesso Passport/ accesso Showare trading within Accesso Australia PTY Limited ** Comprises the LoQueue trading within accesso Technology Group plc, Lo-Q, Inc., Lo-Q Service Canada Inc and Accesso Australia PTY Limited In 2017 a reasonable change in the key assumptions of the terminal growth rate and EBITDA growth did not significantly impact the recoverable value of the pooled goodwill allocated to the collective CGUs. 92 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 17. Property, plant and equipment The cost and depreciation of the Group’s tangible fixed assets are detailed in the following table: Installed systems $000 5,009 364 146 - (30) 5,489 (242) 600 (1,160) 4,687 4,246 343 473 - (27) 5,035 (238) 269 (1,154) 3,912 775 454 Plant, machinery and office equipment $000 3,319 104 705 195 (301) 4,022 (83) 782 (807) 3,914 2,214 48 461 95 (298) 2,520 (53) 684 (786) 2,365 1,549 1,502 Cost At 31 December 2016 Foreign currency translation Additions Acquired with acquisition Disposals At 31 December 2017 Foreign currency translation Additions Disposals At 31 December 2018 Depreciation At 31 December 2016 Foreign currency translation Charged Acquired with acquisition Disposals At 31 December 2017 Foreign currency translation Charged Disposals At 31 December 2018 Net book value At 31 December 2018 At 31 December 2017 Furniture & fixtures Leasehold improvements Totals $000 2,012 74 64 100 (35) 2,215 (56) 330 (297) 2,192 850 28 284 20 (29) 1,153 (33) 290 (265) 1,145 1,047 1,062 $000 $000 1,261 11,601 - 21 - - 542 936 295 (366) 1,282 13,008 - 247 (102) (381) 1,959 (2,366) 1,427 12,220 797 - 103 - - 900 - 276 (101) 1,075 352 382 8,107 419 1,321 115 (354) 9,608 (324) 1,519 (2,306) 8,497 3,723 3,400 93 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 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 2016 Foreign currency translation Additions At 31 December 2017 Foreign currency translation Additions Disposals At 31 December 2018 Depreciation At 31 December 2016 Foreign currency translation Charged At 31 December 2017 Foreign currency translation Charged Disposals At 31 December 2018 Net book value At 31 December 2018 At 31 December 2017 3,805 364 6 4,175 (242) 228 (999) 3,162 3,483 343 221 4,047 (237) 94 (999) 2,905 257 128 897 94 292 1,283 (76) 37 (157) 1,087 398 44 161 603 (45) 203 (157) 604 483 680 782 73 9 864 (52) 12 (187) 637 250 27 86 363 (26) 99 (187) 249 388 501 18. Investments Investment in subsidiaries The investment balance on the company’s books at 31 December 2018 is as detailed below: Cost At 31 December 2017 Capital contribution to Chinese subsidiary Foreign currency translation At 31 December 2018 At 31 December 2016 Purchase of subsidiaries Foreign currency translation At 31 December 2017 Net book value At 31 December 2017 At 31 December 2018 94 Totals $000 5,484 531 307 6,322 (370) 277 (1,343) 4,886 4,131 414 468 5,013 (308) 396 (1,343) 3,758 1,128 1,309 $000 73,353 50 (4,291) 69,112 37,806 28,289 7,258 73,353 73,353 69,112 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 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 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 Netherlands NV (14) Accesso China (15) Ingresso US Inc (16) All shares owned are ordinary shares. 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 China United States of America % Ownership interest 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 % Voting Rights 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 As required by the Companies Act, the registered addresses of each business are: (1) Registered address of 1025 Greenwood Blvd, Suite 500, Lake Mary, FL 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 1025 Greenwood Blvd, Suite 500, Lake Mary, FL, 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, San Diego, CA 92122 (12) Closed during 2018 (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 (15) Registered address of No.778, Chuangxin West Road, FTA, Shanghai, China (16) Registered address of 19C Trolley Square, Wilmington, Delaware, DE 19806, USA 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. The trade for both Lo-Q, Inc. and Lo-Q Service Canada Inc is that of the application of virtual queue technologies, Accesso Australia PTY Limited includes in part the virtual queuing customers pertaining to that region. The trade of accesso, LLC, Siriusware, Inc., the VisionOne subsidiaries, Accesso Australia PTY Limited, Ingresso Group Limited and Blazer and Flip Flops Inc is primarily that of ticketing, point-of-sale and experience management technology solutions. 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 36. 19. Inventories Stock Park installation Group Company 2018 $000 888 195 1,083 2017 $000 443 63 506 2018 $000 339 - 339 2017 $000 279 - 279 The amount of inventories recognised as an expense and charged to cost of sales for the year ended 31 December 2018 was (in thousands) $1,032 (2017: $2,468). 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. 95 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 20. Trade and other receivables Trade debtors Accrued income Social security and other taxes Other debtors Amounts owed by Group undertakings Financial assets Prepayments Group Company 2018 $000 15,806 - 1 516 - 16,323 2,510 18,833 2017 $000 15,013 1,428 17 683 - 17,141 2,620 19,761 2018 $000 3,223 - - 67 95,626 98,916 485 99,401 2017 $000 1,533 108 17 137 88,978 90,773 861 91,634 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. 21. Trade and other payables Current Trade creditors Current other creditors Non-current other creditors Financial liabilities Social security and other taxes Accruals Group Company 2018 $000 20,270 2,959 23,229 543 23,772 712 4,915 29,399 2017 $000 14,212 5,151 19,363 3,024 22,387 1,934 28,577 52,898 2018 $000 2,096 162 2,258 - 2,258 464 1,333 4,055 2017 $000 585 (2) 583 - 583 175 10,654 11,412 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 $1.5m at 31 December 2018 (2017: $5.5m) 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. 96 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Trade and other payables (continued) Included within accruals for the Group and company are amounts owed related to contingent and deferred consideration resulting from the acquisition of Ingresso (2018: $nil, 2017: $9.1m). The movement on deferred consideration treated as a liability during the period is set out below: Balance at 1 January 2018 $000 Recognised at acquisition $000 Fair value adjustment $000 Deferred compensation expense accrued in the period $000 Unwinding of discount $000 OCI adjustment $000 Settlement of liability $000 At 31 December 2018 $000 Deferred cash consideration Deferred cash consideration 9,092 - - 351 331 (178) 9,596* - Balance at 1 January 2017 $000 Recognised at acquisition $000 Fair value fair value adjustment $000 Deferred compensation expense accrued in the period $000 Unwinding of discount $000 OCI adjustment $000 Settlement of liability $000 At 31 December 2017 $000 - 9,553 (3,228) 1,037 961 769 - 9,092 *Includes $961k of accrued interest expense. 22. Borrowings Bank loans Arrangement fees, less amortised cost Group Company 2018 $000 20,466 (242) 20,224 2017 $000 16,462 (322) 16,140 2018 $000 20,466 (242) 20,224 2017 $000 16,462 (322) 16,140 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 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. Financial covenants are attached to the facility in respect of interest cover and leverage which are both tested on a quarterly basis. The group was operating within the covenants with significant headroom during 2018. 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. 97 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 23. Called up share capital Ordinary shares of 1p each Number $000 Number $000 2018 2017 Opening balance Issued in relation to exercised share options Issued in relation to Ingresso share subscription Issued in relation to acquisitions 26,375,748 719,277 22,970 - 411 9 1 - 22,277,631 189,962 - 3,908,155 Closing balance 27,117,995 421 26,375,748 357 2 - 52 411 During the period, 719,277 shares, with a nominal value $9,494, were allotted following the exercise of share options. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. On 3 May 2018, under the terms of the subscription agreement as set out in the in connection with the acquisition of Ingresso Group Limited, Bart Van Schriek, Chief Executive Officer of Ingresso Group Limited, committed to applying 40% of his net earn-out proceeds to subscribing to further new ordinary shares of 1 pence in the company. A total of 22,970 new ordinary shares were issued for a total cash payment of $0.5m ($20.51 per share). These Subscription Shares will be subject to restrictions on disposal for a period of two years, whereby Bart Van Schriek, is prohibited from making any disposal of two thirds of the stock for the first 12 months, with half of such shares being released from the restriction at the end of each 12-month period from the date issued. 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 200,000 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. 24. Reserves The following describes the nature and purpose of each reserve within equity: Reserve Share premium: Own shares held in trust: 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 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 25. 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) 2018 $000 1,348 176 2017 $000 904 85 98 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 26. Related party disclosures Ultimate controlling party There is no ultimate controlling party. Subsidiaries All intercompany revenues, expenses, and balances between group companies, which are related parties, have been eliminated on consolidation and have not been included in this note. 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 $45,510 (2017: $51,625), of which $3,600 (2017: $4,254) 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 (2017: $80,400) were payable in 2018 to B Sirius LLC, of which $nil (2017: $nil) was outstanding at year end. An officer of Siriusware Inc is a member of B Sirius LLC, this transaction is undertaken at an arms length. All the above outstanding amounts are included within trade creditors. 27. Share-based payment schemes and transactions Share option schemes At 31 December 2018 the following share options were outstanding in respect of the ordinary shares: Scheme EMI Scheme UK CSOP Scheme UK unapproved Scheme US Scheme Other schemes Long-term incentive plan Number of shares 1,350 18,235 6,714 8,000 4,500 27,500 46,700 9,800 16,800 2,500 9,789 43,500 66,850 92,550 2,008 183,450 2,262 45,000 226,500 5,000 12,800 18,600 89,932 296,124 85,112 29,935 22,385 2,471 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 30 March 2020 to 22 March 2028 22 March 2021 to 22 March 2028 15 April 2018 to 15 April 2025 29 April 2019 to 28 April 2026 24 June 2013 to 23 June 2021 30 November 2014 to 29 November 2022 25 April 2015 to 25 April 2023 23 January 2018 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 12 July 2020 to 21 March 2028 22 March 2021 to 22 March 2028 26 March 2014 to 25 March 2022 22 March 2021 to 22 March 2028 22 March 2021 to 22 March 2028 15 April 2018 13 March 2019 16 February 2021 21 March 2021 16 February 2021 1 May 2021 Price per share 57.5p 179p 323.5p 600p 697.5p 2270p 2270p 557.5p 1105p 179p 323.5p 600p 697.5p 557.5p 851p 1105p 1061p 2270p 2270p 292.5p 2270p 2270p 1p (1) 1p (1) 1p (1) 1p (1) 1p (1) 1p (1) (1) Vesting is conditional on achievement of certain market-based conditions. 99 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 Share-based payment schemes and transactions (continued) 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 2018 2017 Number 1,607,333 553,496 (719,277) (65,185) WAEP (pence) 309.90 1,639.12 142.55 1,868.39 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 1,376,367 870.86 1,607,333 Exercisable at the end of the year Weighted average share price at date of exercise for share options exercised during the year: 360,728 416.15 365,488 2,263.62 309.90 394.30 1,737.04 The exercise price of options outstanding at 31 December 2018 range between £.01 and 2,270p (2017: £.01 and 1,105p) and their weighted average contractual life was 7.55 years (2017: 3.3 years). The weighted average share price at the date of exercise for share options exercised during the period was 2,263.62p (2017: 1,737.04p). Options were granted in the period and the inputs to the model for options issued in the current 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 (%) There were no options issued in the prior period. 2018 22.7 29.9 2 1.0 - 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 37 to 38. Long-term incentive plan During the current and prior period, the Group granted conditional share award (“Awards”) over ordinary shares of 1 penny under the Long-Term Incentive Plan, which was approved by shareholders on 27 May 2014. All Awards vest three years from the date of grant, except those granted in April 2018 which have a thirty-four month vesting period, 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 award dates, number of awards granted assuming the performance conditions are fully met, and inputs to the valuation model were as follows: Awards issued Expected volatility (%) Expected life years Risk free rate (%) Dividend yield (%) 1 May 2018 2,471 30.0 2.9 0.83 - 9 April 2018 22,385 30.0 2.8 0.91 - 21 March 2018 29,935 30.0 2.9 0.98 - 16 February 2018 99,105 30.0 2.9 0.85 - 30 March 2017 18,851 30.0 3.0 0.16 - 100 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 28. 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 Acquired with acquisitions $000 - - Acquired with acquisitions $000 Cash Flow $000 Exchange movement $000 2018 $000 (7,114) (850) 20,704 1,527 (125) 3,311 Cash Flow $000 Exchange movement $000 2017 $000 9,852 12,886 64 28,668 2017 $000 28,668 1,909 2016 $000 5,866 1,303 - 542 64 1,909 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 Note 22 2018 $000 20,224 (20,704) 2017 $000 16,140 (28,668) Net cash (480) (12,528) Below we set out the breakdown of cash and non-cash movements on the Group’s borrowings: At beginning of period Cash flows Drawings on loan Repayments of drawings Capitalised finance costs Non-cash movements Effects of foreign exchange Release of capitalised finance costs At end of period Note 2018 $000 16,140 15,530 (10,089) - (1,467) 110 20,224 2017 $000 9,298 31,376 (26,037) (350) 1,628 225 16,140 101 accesso Technology Group plc Notes to the consolidated financial statements (continued) for the financial year ended 31 December 2018 29. Commitments under operating leases 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 2018 $000 1,343 3,872 941 6,156 23 19 - 42 145 122 - 267 - - - - 2017 $000 1,306 3,147 436 4,889 48 28 - 76 154 308 - 462 37 - - 37 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. 102
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