Annual Report
2019
ikeGPS Group Limited
p 2
TABLE OF CONTENTS
Chairman's & CEO's Report
FY19 Results Highlights
Management Team
Board of Directors
Director's Report
Corporate Governance
Disclosures
Financial Statements
Directory
4
8
26
28
30
31
38
44
79
p 3
Chairman's &
CEO's Report
FY19
Year in Review
Performance
FY19 was a positive year for our business with growth
and improvement across key metrics. Our core target
market has continued to develop positively, being tier-1
U.S. communications companies, electric utilities and their
engineering service providers. Success within this market is
the long term value driver for our business.
In terms of financial performance, recognised revenue of
$8.0m was approximately 4% higher against the FY18 prior
comparative period (PCP) of $7.7m. Gross margin in FY19
grew to $5.4m, 34% higher against PCP (FY18 $4.0m),
reflecting the shift to increasing sales of our higher margin
IKE solution including IKE Analyze. Consolidated gross
margin percentage was approximately 67%, an improvement
against PCP of 51%. Operating expenses for FY19 were
$10.6m, a reduction of $0.2m against PCP, reflecting our
tight focus on operating cost control at the same time as
growing revenue and gross margin. Operating cash flow
performance improved as the business continues to trend
towards targeted breakeven. We had approximately $3.5m
cash on hand and $1.4m receivable at the end of the period.
Our net loss after tax for the period was $5.1m, a 24%
improvement against PCP of $6.7m.
p 4
Market tailwinds
As we have consistently communicated the key value driver
for IKE is the development of IKE solution sales, including
IKE Analyze, across target accounts, typically the largest
communications companies and electric utilities operating
in the North American market. From a market timing
perspective, the pace of investment into fiber networks
and 5G continues to increase. The U.S. fiber market is
estimated to be at year-two of a seven-year investment
super-cycle exceeding $300B, and with more than 200
entities competing to deploy networks. An additional large
market tailwind emerging relates to 5G, the next generation
mobile technology. IKE has recently been involved in aerial
make-ready engineering projects specific to 5G network
deployments. Usage of the IKE solution, in particular IKE
Analyze, materially improves productivity for fiber network
development and 5G site assessment workflow processes,
and we are pleased to be in positioned in front in these very
large macro market factors.
IKE Analyze, materially improves productivity for
fiber network development and 5G site assessment
workflow processes
Product development milestones
Transition to the IKE Analyze platform and business model
was completed in FY19. Adding to our historical model of
selling field tools and software subscriptions, IKE Analyze
leverages our cloud-based pole software platform so that
IKE can deliver significantly more value to customers via
asset analysis & make ready engineering. The depth and
specificity of the IKE Analyze offering for distribution asset
projects is important and provides an opportunity to access
materially larger customer contracts.
As a result of this product transition, we expect that
approximately 80% of FY20 revenue will be derived from
either recurring subscription or transaction sources. The
ultimate revenue opportunity per IKE Analyze customer
is significant, representing the potential for hundreds of
thousands, and eventually, millions of dollars of revenue per
annum.
p 5
Brand development
Through FY19 we completed important work
establishing our brand and the IKE story within the
Communications and Utility segment. IKE is a poles
business; focused on people, process and technology
to deliver network projects faster and at a higher
quality data standard. Our brand objective is to create a
deep customer engagement by evangelizing, teaching
and celebrating the often under-recognised people &
entities that we serve.
We are setting the Pole Record Standard via the IKE
Record. In creating ‘the news channel for poles’ by
natural extension we are exhibiting our inside-out
culture and our values of Simplicity, Clarity, Ingenuity,
Be Yourself, and Never (ever) give up. Examples of this
re-branding can be seen at https://ike4.ikegps.com/.
Sales proof points
We were pleased to close record IKE solution sales in
FY19, with $7.3m revenue representing 27% growth
against PCP. Most important however was the in-
market progress with the sales & delivery of IKE
Analyze to target accounts. Today, seven of the largest
15 Communications & Cable companies operating in
the U.S. market are engaged in deployments or pilots
of IKE Analyze. Entities within this category include
Charter Communications Inc. - the largest cable
company in the U.S., Crown Castle Inc. - the largest
provider of shared communications infrastructure
in the U.S., and Cox Communications Inc.- the
6th largest cable company in the U.S. Additional
customer progress included at AT&T Inc., the largest
communications company operating across North
America, who has written the ‘IKE Standard’ into its
Articles for aerial make-ready-engineering. We are
confident that additional tier-1 customers will added
through FY20.
Our mobile product, Spike, is not expected to materially
contribute to overall revenue in FY20 given the very
large opportunity and our subsequent focus on the
North American Communications and Electric Utility
market, however we consider that it has some notable
upside potential. The strategy for Spike continues to
focus on partnerships so to tie directly into leading
enterprise software platforms and established
enterprise workflows, with some success. This has
included with ESRI Inc, the largest global GIS software
business (see https://www.esri.com/en-us/about/
esri-partner-network/our-partners/hardware-partners/
ikegps-esri) and also with HP Inc, via integration with
their HP WorkExpert for Field Services product (see
https://www8.hp.com/us/en/solutions/fieldservices.
html). These types of partnerships provide an
opportunity for Spike to access a larger volume,
enterprise-type, user base. Some positive sales signs
have emerged via ESRI in particular - with Spike also
recently being awarded ESRI’s Global Partner of the
Year for Field Efficiency at their worldwide partner
conference.
Team development milestones
From a team perspective, we were pleased to welcome
Bill Morrow onto IKE’s Board at the beginning of Q4
FY19. Bill brings leadership experience from positions
across our targeted industries and geographical
markets. He has consequently ‘hit the ground running’
with respect to contributions to the business. Bill’s
past roles include as CEO of Pacific Gas & Electric Co,
CEO of Vodafone Europe, President of Vodafone KK
Japan, CEO of Clearwire Corporation Inc., and most
recently CEO of Australia’s national fiber network, nbn
co. His considerable governance experience includes
as non-executive director at Broadcom Inc, one of the
world’s largest semiconductor companies, and as a
non-executive director at Openwave Inc, a pioneer of
the Mobile Internet.
p 6
ikeGPS FY19 Annual ReportChairman & CEO's Report Outlook
Our vision is to put IKE Analyze at the centre of every
pole transaction. Looking to FY20 our focus remains
squarely on the North American Communications &
Electric Utility sector. As detailed above we believe that
market timing is optimal. The pace of investment into
fiber networks and 5G mobile networks is continuing
to increase and usage of the IKE solution shows that
against existing work practices IKE increases efficiency
for field engineering by approximately two times and
increases efficiency for back-office engineering by
approximately five times.
We are in the early phases of serving numerous
national infrastructure groups. Our focus on these
very large businesses will continue to bring some
timing uncertainty and associated risk but we are
optimistic about the potential to deliver a strong FY20
performance, including new tier-1 customer wins. We
feel IKE is as well positioned as it has been, noting that
the first quarter of FY20 has been positive in terms of
revenue and customer development.
Rick Christie
Chairman
IKE GPS Group
30 June 2019
Glenn Milnes
CEO & Managing Director
IKE GPS Group
30 June 2019
p 7
FY19 Results Highlights
+ Revenue growth in the core Communications & Electric Utility segment:
+ Total recognised revenue of $8.0m, 4% higher than PCP of $7.7m.
+ Revenue in IKE’s core Communications and Electric Utilities segment grew 27% against
PCP, to approximately $7.3m.
+ Gross margin growth:
+ Gross margin in the period of $5.4m, 34% higher than PCP of $4.0m.
+ Gross Margin percentage improved to 67%, an increase against PCP of 51%.
+ Lower operating expenses:
+ Operating expenses were $10.6m (PCP of $10.8m), reflecting continued investment
into Sales & Marketing and Research & Engineering, and a lower Corporate expense
profile.
+ Reduced Net Loss
+ Net loss after tax was $5.1m, a 24% improvement against PCP of $6.7m.
+ Record sales into the U.S. Communications and Electric Utility market, with
approximately $7.3m revenue including;
+ $1.8m revenue generated from annual software subscriptions, with subscription
renewal rates of approximately 91%.
+ $1.4m revenue generated from the new ‘IKE Analyze’ solution.
+ Cash and receivables:
+ IKE ended the period with cash of $3.5m and receivables of $1.4m.
+ Transition to the IKE Analyze business model was completed in FY19
+ As a result IKE expects that approximately 80% of FY20 revenue will be derived from
either recurring subscription or transaction sources.
p 8
ikeGPS FY19 Annual ReportChairman & CEO's Report + Ultimate revenue opportunity per IKE Analyze customer is significant, representing the
potential for hundreds of thousands, and eventually, millions of dollars of revenue per
annum.
+ Progress with Target Accounts included:
+ AT&T Inc., the largest communications company operating across North America, has
written the ‘IKE Standard’ into its Articles for aerial make-ready-engineering.
+ Seven of the largest 15 Communications & Cable companies operating in the U.S.
market are engaged in deployments or pilots of IKE Analyze. Entities include:
+ Charter Communications Inc. - the largest cable company in the U.S.
+ Crown Castle Inc. - the largest provider of shared communications infrastructure in
the U.S.
+ Cox Communications Inc.- the 6th largest cable company in the U.S.
+ The platform to deliver a strong FY20 performance.
+ Considered that IKE is as well positioned as it has been with respect to customer
engagement and market offering.
p 9
Positive
Overall Momentum
p 10
ikeGPS FY19 Annual ReportChairman & CEO's Report Positive Trending of Revenue,
Gross Profit, and EBITDA
Particularly within the
Core Communications
and Utility Segment
p 11
A key development in FY19 was the introduction
of IKE Analyze. Several drivers supported this
transition.
There has been exponential growth in usage of the the IKE
platform over the past four years;
>450 organizations have processed >9M aerial asset records on the platform…..
p 12
ikeGPS FY19 Annual Report Several Drivers supported the transition to
IKE Analyze.
Users of the IKE 4 Solution are achieving dramatic
productivity and quality improvements….
9.4 Million
1.7 Million
Photos
of poles to date
Poles
in IKE Office
75%
0
Reduce
personnel requiring field visit
Zero
revisits to the pole
2x Faster
8x
Improve
workflows from end to end
Reduce
permit request rejections
p 13
Customer demand, and market timing factors.
Communication
Infrastructure
Providers (CIPs)
Engineering Service
Providers
Electric
Utilities
Pain point IKE solves;
Pain point IKE solves;
Pain point IKE solves;
+ Need to bring networks and services online
faster while standardizing costs and data
quality across multiple geographic markets.
+ Need to maximize efficiency
+ Need to meet the demands of
and profits. Typically
doing >50% of the network
development work required by
the CIPs and Electric Utilities.
sharply increasing pole attachment
permit requests.
+ Need a faster and standardized way
to assess and ensure poles are not
compromised.
Applications;
Applications;
Applications;
+ Fiber network deployments
+ 5G network deployments
+ Fiber network deployments
+ 5G network deployments
+ Joint-use requests from CIPs
+ Network hardening requirements to
protect against storm and fire risk.
+ In some cases, building their own
fiber network.
Market opportunity for IKE;
Market opportunity for IKE;
Market opportunity for IKE;
+ Bottom up;
+ >$225m revenue opportunity over 5 years
from the largest 15 players in the U.S.
+ >200 CIPs in the North American market.
+ Top down;
+ >$300B forecast investment into fiber
networks in the U.S over next 5+ years.
+ 5G network investment forecast to grow
to >$50B per annum by 2025.
+ >1,000 groups in the U.S.
+ An IKE Analyze force multiplier;
+ The largest potential market for IKE
in the longer term;
using IKE tools for field
engineering, driving asset
data back to the IKE Analyze
platform.
+ >3,200 electric utilities in North
America
+ >$750M per annum Total
Addressable Market
+ IKE expects that this segment will
develop more slowly than the CIP
and Engineering Service Provider
market
IKE Record
Adjustments
Digital Twin
IKE Analyze People | Process | Technology
p 14
ikeGPS FY19 Annual Report IKE Analyze increases the value of IKE’s offering to
customers; and substantially extends IKE’s revenue model.
IKE Record
Adjustments
Digital Twin
Basic Pole
Assessment
Pole Load Analysis
(Digital Twin)
Make Ready
Adjustments
Annual Subscription
IKE Analyze People | Process | Technology
IKE Analyze Deliverables
+ IKE Device
+ IKE Field s/w
+ IKE Integration (Any module)
+ Software updates & maintenance
+ Technical Support
+ Hot Swap*
+ Training*
+ Joint Use Coordinator Support
Per Pole Transaction Pricing
IKE Analyze adds further
Analysis & Reporting layers.
Translating to >10-20x more
revenue per system deployed
than a historical sale of device
& subscription software.
+ Analyze Level
+ Volume
+ Time
+ Timing
+ Turnaround
+ Deliverables
+ IKE Device
+ IKE Report (pdf)
+ Excel File
+ KML
+ PLA Report
+ MRA Improvements
+ Pass/Fail Maps
+ IKE Office Cloud Database
+ IKE Photo Records
+ Permitting
p 15
Analysis Levels Explained
IKE Analyze offers three levels of analysisto support a fiber or 5G
mobile network deployment.
HOA
PLA
MRA
Height of Attachment
Pole Loading Analysis
Make-Ready Assessment
p 16
ikeGPS FY19 Annual Report HOA
+ Height of Attachment
+ Route Surveys
+ Pole locates
+ Joint Use
+ Billing compliance
+ Network confirmation
PLA
+ Pole Loading
+ Pole integrity
+ Clearance Analysis
+ NESC compliance
MRA
+ Make-Ready Adjustments
+ Fiber deployments
+ Design Suggestions
+ Network hardening
p 17
Creating More Value and Building Deeper
Customer Relationships
+ IKE now delivers more value to every customer;
+ speeding multiple aspects of the network assessment & make-ready-engineering
process.
+ an IKE Analyze customer represents the potential for hundreds of thousands, and
eventually, millions of dollars of revenue per annum.
+ IKE Analyze demands deeper, longer term customer (& revenue) relationships;
+ with the IKE platform becoming embedded in customer workflows.
+ IKE Analyze realizes lower upfront revenue but is expected to facilitate 10-20x
greater revenue from every IKE solution in use vs. IKE’s historical business model;
+ IKE’s revenue mix evolves favorably;
+ becoming substantially weighted towards ongoing transaction & subscription revenue.
+ Market timing is optimal;
+ with the potential to play a role in speeding up network deployment processes in
markets experiencing investment super-cycles;
+ Fiber network deployment;
+ >$300B expected investment in the U.S. over the next 5+ years.
+ Utilities network hardening initiatives.
+ >$10B per annum expected investment in coming years.
+ 5G mobile network deployment;
+ Expected to grow to a market investment size >$50B per annum by 2025.
p 18
ikeGPS FY19 Annual ReportChairman & CEO's Report Working with the Biggest
Names in the Business
p 19
The IKE Analyze Method
Evidencing the depth of IKE's market offering.
Photo Verifiable IKE Record
Excel, KML, CAD, GIS, JSON Outputs
JSON REST API
IKE Report
PLA Report (existing & proposed)
MRA Adjustments & Recommendations
Pass/Fail Maps
IKE Office Database
- Incl. Access to IKE Photos
Permitting
Project/Status Tracking
Tuned Scalability
Resource Management
Pole Loading Analysis
Make-Ready Assessments
Design Remedies
Quality Control (3 levels)
Asset Identification
Accurate Height of Attachments
Field Logistics
Site Acquisition
Data Capture
Candidate Selection
Analysis of surrounding node assets
Data Feedback
Field Coaching
Support / Customer Success
Project Management
Intake
Functional specifications
Planning & Routing
Project / Deployment Plan
Onboarding & Alignment
Resource Scalability -
Field data collection forms
Scripting -
Form creation & integration -
Workflow Design
Workflow Optimization -
Process Recommendations -
p 20
ikeGPS FY19 Annual Report People, Processes, and Technology
The people at IKE bring forward unparalleled experience
and depth in the science of utility poles. The processes
through which the team engages from planning through
delivery have been long-term practiced. The technology
bringing IKE Analyze to our markets bears the hallmarks,
and real-world implementation, of a scalable, repeatable,
flexible, and robust solution for Communication
Infrastructure Providers, Engineering Service Providers,
and Electric Utilities.
Our methodology, the whole, guides our team and those we
serve, more than the sum of the parts.
Planning
Field Ops
IKE Analyze
Deliverables
p 21
Success Stories
5G Application; National shared-communications
infrastructure group. IKE Analyze Process // Reduced Time
& Cost + Accuracy & Quality
Before applying the IKE Analyze Methodology
Revisit /
Fire Drill
CM
AE
Time +
Resources
Field
Inspection
CM
AE
PM
RF
RF
PM
lat / long pole id
Site Map
AE
CM
AE
PM
RF
PM
Pole Load Analysis
and Make Ready
Approval
Permitting
p 22
ikeGPS FY19 Annual Report Applying the IKE Analyze Approach // Faster
2xMore Data Fielded
3xFaster End-to-End Delivery 75%Fewer People in the Field
2X Faster
Approvals
Field
Inspection
RF
RF
lat / long
pole id
Site Map
AE
PM
Pole Load Analysis
and Make Ready
Permitting
p 23
ikeGPS FY19 Annual Report
Success Stories
Annual Revenue
Subscribers:
States
$1.1B
1MM
21
Metrics
Before
After (IKE Analyze)
Make Ready Engineering Completion
30 Days
5 Days
Approval times to attach
30 Days
10 Days
p 24
ikeGPS FY19 Annual Report
Success Stories
Annual Revenue
$133B
Subscribers:
143MM (mobility)
States
22
Metrics
Before
After (IKE Analyze)
5G (field visits)
3
1
Fiber deployment completion times
30 Days
10 Days
p 25
Management Team
p 26
Glenn Milnes
Chief Executive Officer & Managing Director
Leon Toorenburg
Chief Technology Officer
Glenn Milnes is the CEO and managing director at ikeGPS,
where he is accountable for the company’s overall strategy,
performance, and growth. Glenn joined ikeGPS after
more than a decade of leadership roles at international
communications group, Cable and Wireless International,
London, and at venture capital firm No 8 Ventures.
Before entering the business world, Glenn played
professional cricket in New Zealand, England, and The
Netherlands, representing New Zealand at various levels.
Glenn holds an MBA with distinction from Imperial College
London, a Bachelor of Science with first-class honors
from Oxford Brookes University and a Bachelor of physical
education from the University of Otago.
Leon Toorenburg is the Chief Technology Officer at ikeGPS,
where he leads the research department to investigate
how to leverage new technologies to simplify and speed up
ikeGPS customers’ workflow.
Leon is the founder of ikeGPS and has been instrumental in
the development of all ikeGPS’ products. He holds numerous
U.S. and international patents on measurement technologies.
Leon holds a Bachelor of Science from Victoria University
and Bachelor of Engineering with honors from Canterbury
University.
Mike McGill
Senior Vice President, Utility & Communication Business Unit
Chris Birkett
Chief Financial Officer
Mike McGill is the Senior Vice President of the Utilities
& Communication business unit at ikeGPS, where he
is responsible for delivering collection, analysis, and
management solutions for customers focused on distribution
assets.
Chris Birkett is the Chief Finance Officer at ikeGPS, where
he is responsible for ensuring the company has the correct
settings for growth and profitability. A key part of his role is
supporting other team members to unleash the value of our
products for our customers.
Prior to joining ikeGPS, Mike served as the senior vice
president of sales at Navagis and spent six years at
DigitalGlobe in director- and vice president-level positions
for the spanned commercial and defense segments.
After leaving DigitalGlobe, Mike leveraged his intelligence,
surveillance and reconnaissance experience by co-founding
a drone company, now known as Silent Falcon UAS. Mike
earned his degree in economics from the University of Utah.
p 27
Prior to joining ikeGPS, Chris held CFO and Managing
Director roles at General Cable New Zealand Limited, General
Cable Asia Pacific, and Rock Shox (US). Chris is a Chartered
Accountant (CAANZ). Chris received his degree from Victoria
University of Wellington.
Board of Directors
p 28
Rick Christie / (MSc (Hons) Chemistry)
Chairman and Independent Director
Glenn Milnes (MBA (Dist.), BSc (Hons), B PhD)
CEO & Managing Director
Rick Christie is the former Chairman of Ebos Group,
where he was Chair through much of its growth to
become a >$3B business today. He has experience on
a number of other major boards, including TVNZ. Rick
was previously CEO of investment company Rangatira
Ltd and had 20 years’ executive management
experience in the international oil & gas industry.
Prior to leading ikeGPS, Glenn Milnes previously held
senior executive, strategy and corporate development
positions with No 8 Ventures and Cable & Wireless
International.
Bill Morrow
Non-Executive Director
Bill was most recently CEO of NBN co., where he led
the build of Australia’s $40B universal broadband
network that has connected more than 6.5 million
homes and businesses. Prior to that, he has held
positions including CEO of Vodafone Europe,
President of Vodafone KK Japan, and CEO of Pacific
Gas and Electric. Bill has considerable governance
experience, serving as a board member for eight years
at Broadcom Inc. and Openwave Inc. among other
directorships.
Dr. Bruce Harker / (PhD Electrical Engineering,
BE (Hons))
Independent Director
Bruce is currently Director of H.R.L. Morrison & Co’s
Energy Group and is also Chairman of ASX listed
Tilt Renewables. Among other directorships, he was
previously Chairman of NZX listed TrustPower and also
Z-Energy.
Alex Knowles
Director
Fred Lax / (MSEE AND BSEE)
Independent Director
Alex has investing and operating experience with
international companies in the information technology
and transportation industries. Based in Los Angeles,
He was formerly Chief Operating Officer of the largest
international freight forwarder and small parcel
consolidator in the U.S.
Fred Lax is an executive leader with extensive global
experience in the telecommunications industry and
related technologies. Based in California, he is a former
director of NASDAQ listed Ikanos Communications Inc.
(acquired by Qualcomm Atheros), and former Chief
Executive Officer and President of NASDAQ listed
Tekelec Inc.
p 29
Director's Report
p 30
Corporate Governance
Corporate
Governance
Corporate Governance Information
On the IKE website under the investors section (ike4.ikegps.
com/governance/), you will find the following corporate
governance documents referred to in this section:
+ Constitution
+ Corporate Governance Code
+ Code of Ethics
+ Diversity Policy
+ Securities Trading Policy
+ Continuous Disclosure Policy
+ Nominations and Remuneration Committee Charter
+ Audit and Risk Management Committee Charter
Corporate Governance Statement
ikeGPS Group Limited is a New Zealand company. Its
shares are quoted on the New Zealand Stock Exchange
(NZX) and Australian Securities Exchanges (ASX). IKE
became a foreign exempt listed issuer on ASX in September
2016. IKE is reporting against the updated Principles and
Recommendations in the NZX Corporate Governance Code 1
January 2019 (the NZX Code).
NZX Code
Principle 1
Code of Ethical Behaviour: Directors should set high
standards of ethical behaviour, model this behaviour
and hold management accountable for delivering
these standards throughout the organisation.
p 31
Director's Report
Code of conduct
IKE has a Code of Ethics, setting out the ethical and
behavioural standards expected of Directors of IKE, and
of IKE staff. Directors and staff are also expected to
uphold the IKE values.
Whistle blowing
IKE Code of Ethics includes specific direction on action
to be taken by a person who suspects a breach of the
Code.
Avoiding conflicts of interest
The Board is updated at each meeting on changes
in Directors’ interests and any potential conflicts.
The register records relevant transactions and our
disclosures of interests. A current listing of Directors’
interests is found on page 39.
Trading in securities
IKE Directors are restricted from trading in IKE
shares under New Zealand law and by IKE’s Security
Trading Policy. This policy applies to both Directors
and designated senior employees. The policy details
“blackout periods” where trading is forbidden, as well
as a process for authorisation at other times.
Management is responsible for implementing the
strategic objectives, operating within the risk appetite
the Board has set, and for all other aspects of the day-
to-day running of the Company.
The Board delegates the day-to-day leadership
and management of the Company to the CEO. The
delegations are set out in the Board Charter and in a
Delegated Authority framework, which also sets out
authority levels for types of commitments that the
Company’s management can make.
The Board consists of five non-executive Directors and
one executive Director.
1. Rick Christie (Independent, Non-executive Chairman,
Remuneration Committee),
2. Bruce Harker (Independent, Non-executive Director, Audit and
Risk Management Committee, Remuneration Committee),
3. Alex Knowles (Non-executive Director),
4. Bill Morrow (Independent, Non-executive Director),
5. Fred Lax (Independent, Non-executive Director, Audit and Risk
Management Committee Chairman),
6. Glenn Milnes (Not Independent, Audit and Risk Management
Committee, Chief Executive Officer and Managing Director)
Bill Morrow was appointed as a Director on 1 January
2019.
Our Directors current shareholdings are set out on page
40.
Profiles of the Directors can be found on page 29.
Principle 2
Board composition and performance: To ensure
an effective Board there should be a balance of
independence, skills, knowledge, experience and
perspectives.
The structure of IKE’s Board and its governance
arrangements are set out in the Company’s
Constitution, and in the Board’s written Charter
setting out the Board’s roles and responsibilities. The
management and control of the business of IKE is
vested in the Board. The Charter sets out the matters
reserved for our decision making including (amongst
other key matters) the establishment of the Company’s
overall strategic direction and strategic plans.
The nominations committee identifies and
recommends to the Board, individuals for nomination
as members of the Board and its Committees taking
into account such factors as it deems appropriate
including experience, qualifications, judgement and the
ability to work with other Directors.
Board meetings
Between 1 April 2018 and 31 March 2019, seven Board
meetings were held including two strategy meetings.
All meetings were attended by all Directors (or
committee members) as appropriate.
p 32
ikeGPS FY19 Annual Report Board composition
The Board formally considers its composition each year
at an annual performance review. The Directors believe
the respective skills and experience of individual
Directors to be complementary, appropriate for the
Company, balanced and reasonably diverse. IKE’s
Directors have expertise and experience in strategy
development, executive leadership, acquisitions and
divestment, technology, data, corporate responsibility,
governance, legal and regulatory matters, public policy,
and finance (including the assessment of financial
controls). One-third of the Directors retire by rotation
annually in accordance with the applicable listing rules.
Diversity Policy
The Company fosters an inclusive working environment
that promotes employment equity and workforce
diversity at all levels, including within the executive
team and Board. The Diversity Guidelines are available
on the investor relations website.
A gender breakdown of Directors and officers of the
Company and its subsidiaries as at 31 March 2018 and
31 March 2019 are detailed below. For the purposes of
accurate disclosure Glenn Milnes and Leon Toorenburg
are shown both as a Director and an officer.
Directors
Male
Female
Officers
Male
Female
2019
2018
7
-
3
-
6
-
5
-
Director independence
The Board Charter requires that at least two Directors
be independent and sets out circumstances in which a
Director will not be regarded as independent.
The Board assesses Director independence against the
criteria in the Charter. The Board consider the following
Directors to be independent at present, Rick Christie,
Bruce Harker, Bill Morrow and Fred Lax.
p 33
Director's Report
Director training
Each Director maintains membership of relevant
bodies and undertakes appropriate education to remain
current in how to best perform their duties as Directors.
In addition, the Directors will receive information
independently and from management in relation to
specific issues relevant to IKE, the markets in which
it operates, or to NZX and ASX listed companies
generally.
Board performance
Annually the Board reviews how it is performing. The
review process comprises a group self-evaluation
relating to Board and committee composition and
performance. The Board has found this effective
and believes it has helped to refine IKE’s strategy
setting processes, and the information provided in
Board papers. The Board is satisfied that the Board
and its committees are operating well and that the
performance process used are both effective and
suited to the company.
Principle 3
Board committees: The Board should use
committees where this will enhance its
effectiveness in key areas while still retaining
Board responsibility.
The Board committees review and consider in detail
the policies and strategies developed by management.
They examine proposals and make recommendations
to the Board. They don’t take action or make decisions
on behalf of the Board unless specifically mandated to
do so.
Audit & Risk Management Committee:
Fred Lax (chair), Bruce Harker, Glenn Milnes.
The majority of the committee members are
independent Directors. In accordance with the NZX
Code the Audit & Risk Management Committee is
chaired by an independent Director, Fred Lax, who is not
the Chair of the Board.
The committee’s Charter is set out on the investor
relations website. The committee met three times
in the year to 31 March 2019. Management attend
meetings only at the invitation of the committee and at
least annually the committee meets with the external
auditors with management excluded.
Remuneration Committee:
Rick Christie (chair), Bruce Harker.
The committee members are independent Directors.
The committee met on four occasions in the year to 31
March 2019. This committee has oversight of matters
of recruitment, retention and remuneration.
Other committee matters
The Board will occasionally appoint a committee of
Directors to consider or approve a specific proposal
or action, if the timing of meetings or availability of
Directors means the matter cannot be considered by
the full Board. Their deliberations and decisions are
reported back to the Board not later than the next
meeting following.
During FY19 IKE’s standing Board committees were the:
Takeover protocol
+ Audit & Risk Management Committee
+ Remuneration Committee
The Board has elected not to establish a takeover
committee or protocols documenting the procedure to
be followed in the event it receives a takeover offer. The
Board has determined that due to the current size and
make-up of the Board, it is sufficiently independent and
can manage the takeover process and any additional
issues, effectively as a whole Board.
p 34
ikeGPS FY19 Annual Report Principle 4
Reporting and disclosure: The Board should
demand integrity in financial reporting and in the
timeliness and balance of corporate disclosures.
Financial reporting
The Board is responsible for ensuring the integrity of
the Company’s reporting to shareholders, including
for financial statements that comply with generally
accepted accounting practice. The Board’s Audit & Risk
Management committee oversees the quality, reliability
and accuracy of the financial statements and related
documents (the Audit & Risk Management committee’s
role is described fully in its Charter). In doing so the
committee makes enquiries of management and
external auditors (including requiring management
representations) so that the committee can be satisfied
as to the validity and accuracy of all aspects of IKE’s
financial reporting.
The CEO and CFO certify to the Board in relation to
IKE’s financial statements, including certifying that
the integrity of the financial statements is founded
on a sound system of risk management and internal
compliance and control.
Non-financial reporting
IKE has not adopted a formal environmental, social
and governance (ESG) reporting framework at this
time. IKE’s assessment of exposure to non-financial
risks, including economic, environmental and
social sustainability risks, is incorporated into the
Comprehensive and Key Risk assessments that we
refer to under Principle 6. IKE is predominantly an office
based software company with minimal impact on
financial risks.
Disclosure to the market
IKE has a written disclosure policy – the Continuous
Disclosure Policy, found on IKE’s investor relations site.
It sets out requirements for full and timely disclosure
to the market of material issues, so all stakeholders
have equal access to information. The Board reviews
and approves material announcements. The Board
specifically consider with management at each Board
meeting whether there are any issues which might
require disclosure to the market under the NZX and
ASX continuous disclosure requirements.
Information for investors
IKE’s investor relations website includes the Company’s
presentations, reports, announcements, and media
releases, as well as the Charters and guidelines referred
to in this section. The Annual Report is available in
electronic and hard copy format. IKE’s annual meeting
will be held on 6 September 2019 in Wellington. The
external auditors, PWC, will be at this meeting and will
be available to answer questions about the audit and
the audit report.
Director's Report
Principle 5
Remuneration: The remuneration of Directors
and executives should be transparent, fair and
reasonable.
Remuneration of Directors
IKE employee remuneration principles
IKE uses market data to determine competitive salary
and total remuneration levels for all staff. IKE makes
allowance for individual performance, scarcity of skills,
internal relativities and specific business needs. IKE
is operating in a growth industry and has a skilled and
mobile workforce.
The total remuneration pool for IKE’s Directors is set at
$320,000 per annum. For the financial year the annual
fees paid to Directors were:
All employees have fixed remuneration. Selected
employees have the potential to earn a Short Term
Incentive (STI) and Long Term Incentive (LTI).
+ Chairman $88,750 (including all committee responsibilities)
CEO remuneration
+ All other Directors $190,250
The last increase in Directors’ fees was made with
effect from 01 May 2019. The Directors’ fees for FY19
are set out on page 40.
Glenn Milnes’ employment agreement for his role as
CEO commenced on July 2010. His agreement reflects
appropriate standard conditions for a chief executive of
a listed company.
Remuneration of employees
IKE aims to have remuneration framework and policies
to attract and retain talented and motivated people.
The Company wants to:
+ Be recognised as a great place to work, attract, retain and
motivate high-performing individuals.
+ Align employee incentives with the achievement of good
business performance and shareholder return.
+ Recognise and reward individual success, while encouraging
teamwork and a high-performance culture.
+ Be competitive in the labour market.
+ Be fair, consistent and easy to understand.
Glenn’s remuneration is a combination of fixed salary
and incentive arrangements. The incentives are an STI
component set at up to 50% of base salary, linked to
specific financial and non-financial targets set annually
by the Board, and an LTI component, in employee stock
options.
Glenn’s fixed salary for the year to 31 March 2019 was
US$306,000. Performance for the purposes of the
STI component has not yet been assessed and will
be paid in August 2019. Glenn had 600,000 employee
stock options at 31 March 2019. Those employee
stock options have vesting dates from 2016 to 2020.
Vesting at each date is dependent on him remaining an
employee at the applicable vesting date.
p 36
ikeGPS FY19 Annual Report Non-audit work
The Audit Independence Policy sets out restrictions on
non-audit work that can be performed by the auditor.
Principle 8
Shareholder rights and relations: The Board
should respect the rights of shareholders
and foster constructive relationships with
shareholders that encourage them to engage
with the issuer.
IKE’s investor relations website is the key place for
IKE’s financial and operational information, and for its
important corporate governance documents. IKE keeps
shareholders informed through periodic reporting to
NZX and ASX, and through its continuous disclosure.
IKE provides briefings and presentations to media and
analysts (which are made immediately available on
the investor relations website) and communicate with
shareholders through annual and half-year reports
and annual shareholder meeting, as well as through
a range of releases to media on matters which the
company believes will interest shareholders and
members. IKE encourages shareholders to refer to
the investor relations website, and to receive annual
and half-year reports electronically but hard copies
of the reports can readily be obtained from the share
registrar, Link Market Services Limited. IKE takes care
to write all shareholder communications in a clear and
straightforward way and to limit use of jargon. IKE’s
results presentations are published immediately on
company’s investor relations site.
The company’s annual meeting of shareholders will
be held in Wellington in September 2019. A notice
of the meeting and proxy form will be circulated to
shareholders closer to the time.
Principle 6
Risk management: Directors should have a
sound understanding of the material risks faced
by the issuer and how to manage them. The
Board should regularly verify that the issuer has
appropriate processes that identify and manage
potential and material risks.
IKE has an enterprise risk management framework in
place to identify, quantify, prioritise, exploit, monitor and
review risks. That framework categorises the enterprise
risks and sets out specific principles to effectively
manage these. Directors have reviewed the enterprise
risk register of IKE which includes particular risk areas
identified by management. IKE doesn’t have an internal
audit function.
Health and Safety Risk
IKE values the health, safety and wellness of our
people and we believe that everyone should be able
to work in an environment where risks are managed
and controlled. We have a health, safety and wellness
plan for FY20 that identifies our risks and the current
procedures to mitigate these from occurring.
IKE’s a relatively low-risk office-based business.
However, we do have employees performing training
and in some instances field work for customers. The
Board is conscious of these risks to employees and
have reviewed the actions currently in place to mitigate
these. The frequency of incidents has been very low so
the Board has not required LTIFR reporting to date.
Principle 7
Auditors: The Board should ensure the quality and
independence of the external audit process.
IKE has an external Auditor Policy that requires the
external auditor to be independent and to be seen
as independent. The Board is satisfied that there is
no relationship between the auditor and IKE or any
related person at this time, that could compromise
the auditor’s independence. The Board also obtained
confirmation of independence formally from the
auditor. To ensure full and frank dialogue amongst the
Audit & Risk Management committee and the auditors,
the auditor’s senior representatives meet separately
with the Audit & Risk Management committee (without
management present) at least once a year.
p 37
Introduction
The directors of ikeGPS Group Limited (the Company) present their
report on the consolidated entity (the Group), consisting of ikeGPS
Group Limited and the entities it controlled during the year ended 31
March 2019.
Audit Fees
The amounts payable to PwC as auditor of the Group are as set out in
Note 6 to the financial statements.
Subsidiary company Directors
The following people held office as Directors of subsidiary companies
of the Company at 31 March 2019:
1.
2.
ikeGPS Inc: Glenn Milnes, Leon Toorenburg and Alex Knowles.
ikeGPS Limited: Leon Toorenburg, Rick Christie and Bruce Harker
Dividends
As part of the Group's growth plans, dividends are not currently paid
and the Board did not declare a dividend in respect of the period
ending 31 March 2019 nor does it expect to declare any dividends
during the period ending 31 March 2020.
Net Tangible Assets
The Net Tangible Assets per security at 31 March 2019 was $0.06 (31
March 2018: $0.05).
NZX Waivers
There were no waivers obtained or relied upon during the period to 31
March 2019.
The Company’s officers as at 31 March 2019, and their respective
roles, were as follows:
Glenn Milnes
Chief Executive Officer
Chris Birkett
Chief Financial Officer
Leon Toorenburg
Chief Technology Officer
Michael McGill
SVP Sales Utilities & Communications
Richard Mander Chief Operating Officer
Disclosures
p 38
Annual Meeting
The Company’s Annual Meeting of shareholders will be held in Wellington on 6 September 2019. A notice of
Meeting and Proxy Form will be circulated to shareholders closer to the time.
Entries recorded in interests register
The following are particulars of entries made in the Company’s interests register pursuant to section 140 of the
Companies Act 1993 for the period 1 April 2018 to 31 March 2019 (including in respect of those Directors who are
Directors of the Company’s subsidiaries).
Director
Interest
Declaration
Rick Christie - Chairman
NZX:SPN Southport NZ Limited
Solnet Group (Private)
Powerhouse Ventures Limited (Resigned in February. 2019)
National e-Science Infrastructure (NeSI)
Service IQ
Victoria University Foundation
Dr Bruce Harker - Non Executive Director
Tilt Renewables Ltd
Alex Knowles - Non Executive Director
Alphian Investments Ltd
A Way To Move Inc
Trinium Technologies LLC / QED LLC
Xenon FS LLC
AWA Shipping / Intelligent SCM LLC
Epe Frame Metal Spa
Framemax Systems Inc
Infrastructure Solutions Group LLC
Climate Coatings Ltd
No conflicting
interests
No conflicting
interests
No conflicting
interests
Director
Director
Director
Chairman
Chairman
Trustee
Chairman
Director
Director
Board Member
Board Member
Board Member
Director
Director
Board Member
Director
p 39
Disclosures
Directors remuneration and other benefits
Directors’ fees are currently set at a maximum of $320,000 for the non-executive Directors. The actual amount of
fees paid in the year to 31 March 2019 was $279,000 (2018: $202,500).
Directors fees and other remuneration and benefits (including share option expense) from the Company
recognised in profit or loss during the accounting period ended 31 March 2019 are as follows:
Director
Richard Christie
Bruce Harker
Bill Morrow
Alex Knowles
Frederick Lax
Glenn Milnes*
Leon Toorenburg*
Total
Interest
Declaration
116,990
Director fees & share option
expense
94,324
Director fees & share option
expense
24,071
Director fees & share option
expense
76,574
Director fees & share option
expense
91,574
Director fees & share option
expense
658,413
Salary and entitlements
333,390
Salary and entitlements
$ 1,395,335
*Glenn Milnes and Leon Toorenburg received salary and entitlements in US$ as employees of ikeGPS Inc. Remuneration shown above, has been converted to
NZ$ at the average rate for the month each transaction took place. Neither received any remuneration in their capacity as a Director of any Group company.
Entitlements include the share option expense.
Each Director is separately entitled to be reimbursed for reasonable travel, accommodation and other expenses
incurred in performing their role as a Director.
No Director of either of the Company’s subsidiaries receives any remuneration in that capacity.
Options granted to Directors are stated on the next page in Directors’ relevant interests.
p 40
ikeGPS FY19 Annual Report Statement of Directors’ relevant interests
Directors (including Directors of subsidiary companies) held the following relevant interests in equity securities of
the Company as at 31 March 2019.
Quoted Shares
With beneficial interest
As trustee or associated
person of registered holder
Total number of ordinary
shares 31 March 2019
Unlisted options to
acquire
ordinary share
Richard Christie
143,696
Bruce Harker
Bill Morrow
Alex Knowles
Glenn Milnes
Frederick Lax
Leon Toorenburg
Total
-
-
-
890,614
236,266
-
1,270,576
Spread of security holders
Security holders as at 12 June 2019
Size of shareholding
1-1,000
1,001-5,000
5,001-10,000
10,001-50,000
50,001-100,000
Greater than 100,000
Total
-
408,895
-
7,190,117
102,900
-
1,179,539
8,881,451
143,696
408,895
-
7,190,117
993,514
236,266
1,179,539
10,152,027
250,000
250,000
250,000
250,000
600,000
250,000
200,000
2,050,000
Number of
holders
% of holders
Total shares
held
% of shares
84
244
147
207
39
74
795
10.57%
30.69%
67,890
764,374
18.49%
1,225,847
26.04%
5,252,378
4.91%
2,805,651
9.31%
80,365,165
100%
90,481,305
0.08%
0.84%
1.35%
5.80%
3.10%
88.82%
100%
p 41
Disclosures
Twenty largest shareholders
Analysis of shareholding on a disaggregated basis as at 12 June 2019:
Shareholder rank and name
Holding
% Total shares on issue
1 Nicola Jane Wilson & David Jonathan Wilson
17,798,211
19.7%
2 Forsyth Barr Custodians Limited
3 Tanza Elizabeth Knowles & Veronica Pauline Lawrie
4 New Zealand Central Securities Depository Limited
5 Forsyth Barr Custodians Limited
6 Kevin Glen Douglas & Michelle Mckenney Douglas
7 FNZ Custodians Limited
8 Hector Rex Nicholls & Kerry Leigh Prendergast
9 Leveraged Equities Finance Limited
10 Nzvif Investments Limited
11 James Douglas Jr & Jean Ann Douglas
11 Kevin Douglas & Michelle Douglas
12 Dongwen Xiong
13 Leon Mathieu Lammers Van Toorenburg & Fanny Emmanuelle Lammers Van
Toorenburg
14 48 Investments Limited
15 Glenn Stefan Milnes
16 Watt Land Company Limited
17 Nikau Nominees Limited
18 Susan Iorns
19 Roger John Williams
20 Ronald James Diack
Total
Substantial product holders
8,568,984
7,190,117
6,597,867
4,424,253
3,000,000
2,745,781
2,657,812
2,164,791
1,685,029
1,500,000
1,500,000
1,362,000
1,179,539
907,343
890,614
694,930
679,000
610,388
610,000
567,110
9.5%
8.0%
7.3%
4.9%
3.3%
3.0%
2.9%
2.4%
1.9%
1.7%
1.7%
1.5%
1.3%
1.0%
1.0%
0.8%
0.8%
0.7%
0.7%
0.6%
67,333,769
74.4%
According to notices given under the Securities Markets Act 1988 and the Financial Markets Conduct Act 2013 as
at 31 March 2019, the following were substantial product holders in respect of the 78,450,255 ordinary shares of
the Company on issue as at 31 March 2019 (being the Company’s only class of quoted voting securities):
Name
Shareholding
%
Nature of relevant interest
David Jonathan Wilson and Nicola Jane Wilson
17,798,211
19.7%
Tanza Elizabeth Knowles & Veronica Pauline Lawrie
7,190,117
7.9%
Registered holder and beneficial owner of
financial products
Registered holder and beneficial owner of
financial products
Douglas Irrevocable Descendants Trust, Douglas
Family Trust, K&M Douglas Trust
5,291,864
6.0%
Registered holder and beneficial owner of
financial products
Scobie Ward
p 42
6,918,491
9.0%
Registered holder and beneficial owner of
financial products
ikeGPS FY19 Annual Report Employee Remuneration
The following table shows the number of current or former employees (excluding employees holding office as
Directors of the parent or a subsidiary) who received remuneration and other benefits in excess of $100,000 from
the subsidiary companies of the Group during the year ended 31 March 2019:
Band
# of Employees
$100,000 to $109,999
$110,000 to $119,999
$120,000 to $129,999
$130,000 to $139,999
$140,000 to $149,999
$150,000 to $159,999
$160,000 to $169,999
$170,000 to $179,999
$180,000 to $189,999
$190,000 to $199,999
$200,000 to $209,999
$210,000 to $219,999
$220,000 to $229,999
$230,000 to $239,999
$240,000 to $249,999
$250,000 to $259,999
$260,000 to $269,999
$270,000 to $279,999
$280,000 to $289,999
$290,000 to $299,999
$300,000 to $309,999
$320,000 to $329,999
$330,000 to $339,999
$340,000 to $349,999
$350,000 to $ 359,999
$360,000 to $ 369,999
$370,000 to $ 379,999
$380,000 to $ 389,999
$390,000 to $ 399,999
Total
Donations
4
2
-
2
1
1
1
-
-
-
1
-
-
-
1
-
-
1
-
-
1
1
-
-
-
-
-
1
-
17
No member of the Group made any significant donations during the financial year. The Group undertakes regular
promotional sponsorship activity through a variety of channels.
p 43
Financial
Statements
p 44
Independent auditor’s report
To the shareholders of ikeGPS Group Limited
We have audited the financial statements which comprise:
the consolidated balance sheet as at 31 March 2019;
the consolidated statement of profit or loss and other comprehensive income for the year then
ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies.
Our opinion
In our opinion, the accompanying financial statements of ikeGPS Group Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 31 March 2019, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of assurance services relating to the
Company’s research and development grant and tax compliance services in respect to annual income
tax returns. The provision of these other services has not impaired our independence as auditor of the
Group.
Material uncertainty related to going concern
We draw attention to note 2 in the financial statements, which indicates that the Group incurred an
operating cash outflow of $4.0 million for the year ended 31 March 2019, and a further investing
outflow of $1.1 million relating to capitalised internal development and the purchase of property, plant
and equipment. The Group also incurred a net loss of $5.1 million for the year. The cash balance at 31
March 2019 was $3.5 million. If the Group fails to achieve its FY20 business plan (particularly forecast
sales growth), manage costs or obtain alternative sources of financing it may not be able to meet its
obligations as they fall due. As stated in note 2, these conditions, along with other matters as set forth
in note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s
ability to continue as a going concern. Our opinion is not modified in respect of this matter.
PricewaterhouseCoopers, PwC Centre, 10 Waterloo Quay, Wellington 6011
T: +64 4 462 7000, F: +64 4 462 7001, pwc.co.nz
p 45
Financial Statements
Our audit approach
Overview
An audit is designed to obtain reasonable assurance
whether the financial statements are free from material
misstatement.
Overall Group materiality: $363,000, which represents
5% of the 3-year average loss before tax.
We chose 3-year average loss before tax as the benchmark
because, in our view, the level of ongoing losses is the
benchmark against which performance of the Group is
most commonly measured by users and utilisation of a 3-
year average addresses the historical volatility of the
benchmark.
Our key audit matter is the valuation of development
assets.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the financial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management
override of internal controls including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
The financial statements are a consolidation of the Company and two subsidiaries, one based in New
Zealand and one in the United States of America. The Company and both subsidiaries share one
centralised group finance function.
We scoped our audit on a Group financial statement line item basis and completed audit work on
Group balances at the materiality level for the Group. All audit procedures were conducted by the
Group audit team.
PwC
p 46
ikeGPS FY19 Annual Report
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current year. In addition to the matter described in the
Material uncertainty related to going concern section, we have determined the matter described
below to be the key audit matter to be communicated in our report. This matter was addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
How our audit addressed the key audit
matter
We obtained an understanding and evaluated the
Group’s processes and controls relating to the
assessment of impairment indicators of
development assets, the preparation and approval
process of forecasts, and the execution of the
impairment assessment. We completed the
following audit procedures to assess the
reasonableness of the impairment assessment:
We performed procedures to evaluate and
challenge the Group’s determination of CGUs.
This included reviewing internal management
reporting to assess the level at which the Group
monitors performance, comparing CGU’s to our
knowledge of the Group’s operations and
reporting systems, and reconciling assets
allocated to CGU’s to those totals within the
general ledger.
We obtained management’s assessment of
impairment indicators and assessed whether
the indicators identified were consistent with
our understanding of the operations and
environment of the business.
We obtained management’s impairment
assessments and tested the mathematical
accuracy of the impairment models, and used
our internal valuation expert to challenge and
assess the appropriateness of the assumptions
underlying the impairment models.
We assessed the reasonableness of the forecast
sales volumes within the Board-approved
budget for the years ending 31 March 2020 to
March 2023. Our assessment included
completing look back procedures to evaluate
the forecasting accuracy of previous forecasts
against actual results to assess the reliability of
historical forecasting. We also considered
factors influencing forecast revenue growth,
such as sales pipelines, previous growth
achievements, and the Group’s strategic
objectives and we performed a sensitivity
analysis based on our independent
determination of forecast sales volumes
assumptions.
Key audit matter
Valuation of development assets
As disclosed in note 15, Intangible assets, the
Group has $3.6 million of development assets
related to the internal development of
hardware and software products.
Development assets are initially carried at
cost. To determine whether the carrying
value of the developed assets are reasonable,
the Directors assessed whether any
impairment indicators existed for each
development asset Cash Generating Unit
(CGUs) by considering, among other factors,
sales achieved to date for the asset’s relevant
product line(s) and the overall operating and
cash performance of the entity. The Directors
concluded the Group’s overall operating
losses and difficulty in meeting budgeted
sales levels for the Spike Business were
indicators of impairment.
Management performed an impairment
assessment of the overall business on a value
in use basis and the Spike development assets
on a value in use and fair value less costs of
disposal basis. These assessments require
significant judgement when identifying
appropriate assumptions upon which to base
the model, particularly forecasting future
sales volumes . The impairment assessments
were a key audit matter due to the significant
judgement involved in assessing whether
forecast future sales volumes would be
achieved to support the conclusion on
whether it is probable that future economic
benefit will be generated and whether the
carrying value was impaired.
Based on management’s assessments, no
impairment was recognised. Refer to notes 2
and 15 in the financial statements for
disclosures on development assets.
PwC
PwC
p 47
Financial Statements
Key audit matter
Valuation of development assets
How our audit addressed the key audit
matter
We assessed management’s valuation basis for
determining the fair value less costs of disposal
of the Spike Business, and used our internal
valuation expert to challenge and assess the
appropriateness of the assumptions underlying
the fair value calculation, including
independently determining a valuation range
for the Spike Business.
Whilst recognising that the impairment assessment
is inherently judgemental and there is a level of
subjectivity involved in valuing CGUs, there is a
range of values which can be considered reasonable
when evaluating the carrying value of a CGU. Based
on the above procedures there were no matters to
report.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not, and will
not, express any form of assurance conclusion on other information. The directors have advised that
no other information will be included in the annual report.
In connection with our audit of the consolidated financial statements, if other information is included
in the annual report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed on the other information that we obtained prior to the date of our auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
PwC
p 48
ikeGPS FY19 Annual Report
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Christopher
Ussher.
For and on behalf of:
Chartered Accountants
30 May 2019
Wellington
PwC
p 49
Financial Statements
Consolidated statement of profit or loss and other
comprehensive income
Continuing operations
Operating revenue
Cost of sales
Gross profit
Other income
Operations cost
Sales and marketing expenses
Research and engineering expenses
Corporate costs
Foreign exchange (losses)/gains
Expenses
Operating loss
Net finance income
Net loss before income tax
Income tax (expense)/credit
Loss attributable to owners of ikeGPS Group
Other comprehensive loss
Items that may subsequently be recognised through profit or loss
Exchange differences on translation of foreign operations
Comprehensive loss
Year ended 31 March Group
Note
2019
2018
6
6
6
6
6
6
$'000's
7,996
(2,646)
5,350
102
(643)
(3,226)
(3,210)
(3,443)
(39)
$'000's
7,732
(3,754)
3,978
125
(477)
(3,231)
(3,019)
(4,011)
(71)
(10,561)
(10,809)
(5,109)
(6,706)
17
(20)
(5,092)
(6,726)
12
4
(6)
(5,088)
(6,732)
168
(31)
(4,920)
(6,763)
Basic and diluted loss per share
21
$(0.06)
$(0.09)
The accompanying notes form part of, and should be read in conjunction with, these financial statements.
p 50
ikeGPS FY19 Annual Report
Consolidated statement of changes in equity
Share capital
Accumulated
loses
Share based
payment reserve
Foreign currency
translation
reserve
Total
Opening balance at 1 April 2017
Loss for the year
Currency translation differences
Total comprehensive income/(loss)
Issue of ordinary shares
Recognition of vesting of share-
based options
Share based payment reserve
movement
Total transactions with owners
Balance at 31 March 2018
$'000's
45,252
-
-
-
4,011
-
-
4,011
49,263
$'000's
(34,763)
(6,732)
-
(6,732)
-
-
407
407
(41,088)
$'000's
399
-
-
-
-
68
(407)
(339)
60
$'000's
(252)
-
(31)
(31)
-
-
-
-
(283)
Share Capital
Accumulated
loses
Share based
payment reserve
Foreign Currency
Translation
reserve
Total
Opening balance at 1 April 2018
49,263
(41,088)
Change in accounting policy
Restated balance at 1 April 2018
Loss for the year
Currency translation differences
Total comprehensive income/(loss)
-
49,263
-
-
-
Issue of ordinary shares
5,869
Recognition of vesting of share-
based options
Share based payment reserve
movement
Total transactions with owners
Balance at 31 March 2019
-
-
5,869
55,132
274
(40,814)
(5,088)
-
(5,088)
-
-
56
56
(45,846)
60
-
60
-
-
-
-
188
(56)
132
192
(283)
-
(283)
-
168
168
-
-
-
-
(115)
The accompanying notes form part of, and should be read in conjunction with, these financial statements.
$'000's
10,636
(6,732)
(31)
(6,763)
4,011
68
-
4,079
7,952
7,952
274
8,226
(5,088)
168
(4,920)
5,869
188
-
6,057
9,363
p 51
Financial Statements
Consolidated balance sheet
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee entitlements
Contract liabilities
Total current liabilities
Non-current liabilities
Non-current contract liabilities
Total non-current liabilities
Total liabilities
Total net assets
EQUITY
Share capital
Share based payment reserve
Accumulated losses
Foreign currency translation reserve
Total equity
Year ended 31 March Group
Note
2019
2018
$'000's
$'000's
7
9
8
14
15
12
10
6
6
13
3,475
1,370
294
1,691
6,830
944
3,604
17
4,565
11,395
505
226
1,246
1,977
55
55
2,032
9,363
2,586
1,358
273
1,220
5,437
842
3,928
13
4,783
10,220
699
364
1,205
2,268
-
-
2,268
7,952
55,132
192
49,263
60
(45,846)
(41,088)
(115)
9,363
(283)
7,952
Director
NZ (New Zealand Time)
Date: 30 May 2019
Director
NZ (New Zealand Time)
Date: 30 May 2019
The accompanying notes form part of, and should be read in conjunction with, these financial statements.
p 52
ikeGPS FY19 Annual Report
Consolidated statement of cash flows
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Interest paid
Net cash used in operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Additions to intangible assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of shares on listing
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 April
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents
Year ended 31 March Group
Note
2019
2018
$'000's
$'000's
8,401
8,458
(12,422)
(11,241)
(14)
(26)
20
(4,035)
(2,809)
(477)
(603)
31
(26)
(1,224)
6
(1,048)
(1,244)
5,869
5,869
785
2,586
104
3,475
4,011
4,011
(42)
2,730
(102)
2,586
The accompanying notes form part of, and should be read in conjunction with, these financial statements.
p 53
Financial Statements
Notes to the
consolidated
financial
statements
1. Reporting Entity
ikeGPS Group Limited (the “Company”) is a limited
liability company domiciled and incorporated in New
Zealand, registered under the Companies Act 1993 and
listed on the New Zealand Stock Exchange (“NZX”) and
Australian Securities Exchange (“ASX”). The Company
is an FMC reporting entity for the purposes of the
Financial Markets Conduct Act 2013. The financial
statements for the year ended 31 March 2019 comprise
the Company and its subsidiaries (together referred
to as the “Group”) which include ikeGPS Limited and
ikeGPS Inc.
The principal activity of the Group is that of design,
marketing and sale of integrated GPS data capture
devices, related software and consulting solutions.
The financial statements were authorised for issue by
the Directors on 30 May 2019.
2. Basis of preparation
The principal accounting policies applied in the
preparation of these consolidated financial statements
are set out below. These policies have been
consistently applied to all the years presented, unless
otherwise stated.
Statement of compliance
The consolidated financial statements have been
prepared in accordance with the requirements of the
Companies Act 1993 and Financial Reporting Act 2013.
The consolidated financial statements of the Group
have been prepared in accordance with New Zealand
Generally Accepted Accounting Practice (“NZ GAAP”).
The Group is a for-profit entity for the purposes of
complying with NZ GAAP. The consolidated financial
statements comply with New Zealand equivalents
to International Financial Reporting Standards (“NZ
IFRS”), other New Zealand accounting standards and
p 54
authoritative notices that are applicable to entities that
apply NZ IFRS. The consolidated financial statements
comply with International Financial Reporting
Standards (IFRS).
Basis of measurement
The financial statements have been prepared on
the historical cost basis with the exception of
certain financial instruments which are measured
in accordance with the specific relevant accounting
policy.
Critical estimates and judgments
The preparation of financial statements requires
management to make judgments, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised and in any future periods affected.
Going concern
These financial statements have been prepared
based on the Group being a going concern, which
assumes the Group has the ability and intention to
continue operations for a period of at least 12 months
from the date of the financial statements. During the
Group’s current growth phase, investment continues
into increasing revenue by developing and expanding
the Group’s product and service offerings. The
Group has continued to incur net cash outflows from
operating and investing activities during this phase.
During fiscal year 2019 (FY19), the Group had cash
outflows of $4,035,000 (2018: $2,809,000) relating to
operations, and $1,048,000 (2018: $1,224,000) relating
to capitalised internal development intangible assets
and purchase of property plant and equipment for the
12 months ended 31 March 2019. The cash balance at
31 March 2019 was $3,475,000 (2018: $2,586,000). If
the current level of cash outflows continued the Group
would not be able to fund its operations without the
need to raise additional capital or alternative funding.
ikeGPS FY19 Annual Report The approved base business plan for fiscal year 2020
(FY20) includes the prudent management of costs
while focusing effort on realising the significant sales
opportunities for the entity’s products and services.
The plan takes into consideration:
+ forecast sales increases of IKE Solution, focused on sales into
the utilities and telecommunications companies within the
United States that are deploying fiber
+ continued subscription revenue associated with the IKE cloud
platform
+ transaction revenue from the new IKE Analyze solution
+ continued prudent operational cost management
+ continued focus on optimising working capital
+ the ability of the Group to manage its growth activities and
associated costs.
If one or more components of the plan are not realised
further cost-cutting measures are available to the
Group. To assess the degree of sensitivity, stress
testing has been performed on the FY20 plan, reducing
forecast receipts from customers by 17%. The impact
being that the Group remains a going concern, albeit
with reduced available cash funds. In FY19 the Group
completed a Private Placement and Share Purchase
Plan raising $5,869,000. The dual listing on the NZX
and ASX provides the Company with the potential
option to pursue capital raise opportunities from a
wider market in order to among other things; expand
existing business, access additional working capital,
and acquire or establish new businesses. The Directors
believe that additional capital could be raised should
circumstances necessitate.
In FY19 sales by the core Utility & Communications
business unit grew. The Directors acknowledge
the difficulty of predicting certainty of sales due to
long sales cycles associated with Enterprise level
customers, however the Directors believe that the
Group now has a closer understanding of the process
requirements of Enterprise level sales cycles and
the timing of forecasted revenue. On this basis, the
Directors believe that the Group has sufficient funding
tocontinue operations for at least the next 12 months
from the date of authorising the financial statements,
and hence consider the use of the going concern basis
appropriate.
The Group’s ability to improve its financial capacity
and cash flow generated from its operations cannot
be assured. Should the Group fail to achieve its FY20
business plan (particularly forecast sales growth),
manage costs or obtain alternative sources of
financing, then this represents a material uncertainty
that may cast significant doubt on the validity of the
going concern assumption. The existence of this
material uncertainty may result in the Group’s inability
to realise its assets and settle its liabilities in the
normal course of operations. These consolidated
financial statements do not reflect adjustments in
the carrying values of the assets and liabilities, the
reported revenues and expenses, and the balance sheet
classifications used, that would be necessary if the
Group were unable to continue as a going concern.
Impairment
The carrying amounts of the Group’s assets were
reviewed to determine whether there is any indication
of impairment. The Directors concluded the Group’s
operating losses as an indicator of impairment for
the overall business, requiring an estimate of the
Cash Generating Unit’s (CGU1) recoverable amount.
Additionally, it determined that due to the low relative
revenue from the Spike Business, an indicator of
impairment existed requiring an estimate of the Cash
Generating Unit’s (CGU2) recoverable amount of the
intangible assets directly associated with the Spike
Business.
CGU1 was determined to be the Group’s total intangible
assets plus total property, plant & equipment. The
useful life of the CGU was determined to be 6 years. A
pre-tax discount rate of 12% was used to establish the
net present value.
Sensitivity analysis was performed on key
assumptions; Spike revenue is assumed at FY18 levels,
Utilities & Communications average revenue growth
rate is conservatively assumed to be 20%. Operating
expenses reflect the FY20 business plan. The value
in use assessment is sensitive to changes in each of
these assumptions. This ‘downside scenario’ would
result in the recoverable amount being in excess of the
carrying value. A likely material impairment would need
to be considered if any key assumption did not meet,
substantially meet, or exceed that calculated.
p 55
Financial Statements
The Directors have determined that no impairment is
required as CGU1 continues to have a useful life and
that the current carrying value of the CGU1 does not
exceed its value in use.
+ ikeGPS platform – 6 years
+ IKE application and features – 6 years
+ Spike application and features - 6 years
The CGU2 was determined to be the intangible
assets associated with the Spike Business totalling
$1,381,000. The basis upon which CGU2 was
determined has changed from that used in FY18. The
assets relating to the software development kit were
added to CGU2 on the basis that these assets now
relate predominantly to the Spike Business.
Sensitivity analysis was performed on key assumptions;
Spike revenue is assumed at FY18 levels as the Group
more fully develops partner opportunities focused on
the Geospatial and Enterprise application markets.
An estimate of the cashflows required to market and
sell the Group’s products was based on the business
plan for FY20. A pre-tax discount rate of 12% was used
to establish the net present value. This value in use
assessment is sensitive to changes in each of these
assumptions. A fair value approach, using revenue
multiples to value CGU2, was also used to corroborate
the output of the value in use assessment. A likely
material impairment would need to be considered if
any key assumption in the value in use or fair value
assessments did not meet, substantially meet, or
exceed that calculated.
The Directors have determined that no impairment is
required as CGU2 continues to have a useful life and
that the current carrying value of the CGU2 does not
exceed its value in use.
Intangible Assets
Information about significant areas of estimation
uncertainty and critical judgments in applying
accounting policies that have the most significant
effect on the amount recognised in the financial
statements are the measurement and impairment of
intangible assets.
Annually the Directors are required to assess the
appropriateness of the asset’s amortisation period.
In addition to the above, the Group makes judgments
about the amount of costs to capitalise as part of
the development asset. The Group’s intangible asset
capitalisation policy is used to assist in making
these judgements. The Group capitalises direct
labour costs into its development asset. The costs
applied are based on judgment as to the nature of
work employees performed, and the amount of time
spent on the task. This is assessed jointly by the
engineering and finance functions. Information about
significant areas of estimation uncertainty and critical
judgments in applying accounting policies that have
the most significant effect on the amount recognised
in the financial statements are the measurement and
impairment of intangible assets.
3. New and amended standards
adopted by the Group
NZ IFRS 15 Revenue from Contracts with Customers
NZ IFRS 15 supersedes NZ IAS 11 Construction
Contracts, NZ IAS 18 Revenue and Related
Interpretations and it applies to all revenue arising from
contracts with customers, unless those contracts are
in the scope of other standards. The new standard
establishes a five-step model to account for revenue
arising from contracts with customers. Under NZ IFRS
15, revenue is recognised at an amount that reflects the
consideration to which an entity expects to be entitled
in exchange for transferring goods or services to a
customer.
The standard requires entities to exercise judgement,
taking into consideration all of the relevant facts and
circumstances when applying each step of the model
to contracts with their customers.
The five-step model for recognising revenue from
contracts with customers requires consideration of the
following steps:
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
using the straight-line method over their estimated
useful lives and is recognised in the profit and loss.
For the current year the Directors have assessed the
useful economic lives and determined that no change
is required. The current estimated useful lives:
+ Identifying the contract
+ Identifying the individual performance obligations within the
contract
+ Determining the transaction price
+ Allocating the transaction price to distinct performance
obligations
+ Recognising revenue
p 56
ikeGPS FY19 Annual Report NZ IFRS 15 Revenue
We have provided the table below that provides the key judgements made on the application of NZ IFRS 15 across
each revenue type with standardised terms and conditions. The Group has applied a practical expedient permitted
by the standard; therefore, no significant financing component exists on contract liabilities less than one year.
New Business
Revenue Type
Description
Key Judgements
Outcome
Timing of revenue
Hardware
Device
ikeGPS sells Spike
devices through direct
orders and online
software.
Utility and Communication
No major judgement required.
N/A
Point in time
Recognised when the
unit is received by the
customer.
Revenue Type
Description
Key Judgements
Outcome
Timing of revenue
IKE4 Solution
Subscription
The IKE4 Solution is
marketed to the utility &
communications market
as an all-in-one package
which includes the IKE4
device, preconfigured
IKE Field Android mobile
application and online
access to IKE Office - a
cloud-based software
platform that enables
customers to measure
and analyse assets
captured with the IKE4
device.
Customers are required
to renew software
subscriptions to allow
continued access to the
IKE Office online cloud
functionality and the
ability to customise and
add new forms onto the
IKE4 device.
The contract for an IKE4 Device,
IKE Field and IKE Office is
generally sold as a packaged
solution. Management has
determined the individual
performance obligations
within the contract. The total
contract price is allocated to
each performance obligation.
Where possible management
uses external comparatives to
identify standalone performance
obligations and respective price.
Where an external comparative
is not available, management’s
judgement was applied.
Determining when each
performance obligation is fulfilled.
IKE Analyze
Solution
Providing an end to
end technical solution
for customers;
performing pole loading
analysis and make
ready engineering
assessments.
Determining when each
performance obligation is fulfilled.
Initially the customer performs
data collection, the customer also
receives an annual subscription to
access IKE Field and Office.
Once customer data is collected it
is uploaded into IKE Office where
IKE performs the analysis and
completes requested reports.
Management has
determined that the
IKE4 Device, Software
licence (IKE Field)
and Subscription
(IKE Office) are
distinct performance
obligations of the
IKE4 Solution. In
determining this
management has
relied on market
comparables to
establish standalone
performance
obligations.
Customers use the
IKE Field and IKE
Office solution to
store and analyse
data, customise
and add new
forms, for project
management and to
access to additional
tools. Along with
integration capability
these performance
obligations can be
described as ‘stand
ready’ services which
can be recognised
over time.
The business is
required to perform
certain activities
as per the scoping
document for each
customer. Once the
activity is complete
the Group will
recognise the revenue.
Point in Time
Both the IKE4 device
and IKE Field mobile
application are
recognised at the
point in time when the
device is sent to the
customer
Over time
IKE Office is
recognised over the
term of the contract.
Over time
Subscription software
recognised over time.
Point in time
Each transaction
(completed record)
is recognised when
the performance
obligation has been
completed.
p 57
Financial Statements
Impact of adoption
The Group has adopted the NZ IFRS 15 Revenue from Contracts with Customers from 1 April 2018 which resulted
in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In
accordance with the transition provisions in NZ IFRS 15, the Group has elected to use themodified retrospective
method and has recognised the cumulative effect of applying NZ IFRS 15 as an adjustment to the opening
balance of retained earnings on 1 April 2018.
The impact on the Group’s retained earnings as at 1 April 2018
Closing retained earnings 31 March 2018
IKE Field decrease in contract liabilities
Opening retained earnings 1 April 2018
2018
$'000's
(41,088)
274
(40,814)
(ref. “a.” below)
(a) On adoption of NZ IFRS 15 the IKE Field portion of IKE4 transactions are recognised at a point in time. The
adjustment made to retained earnings reflects the amount of revenue deferred at 31 March 2018 related to IKE
Field.
NZ IFRS 9 Financial Instruments
The new NZ IFRS 9 replaces the provisions of NZ IAS 39 that relate to the recognition, classification, measurement
and impairment of financial assets. The Group has applied NZ IFRS 9 retrospectively and has chosen not to
restate comparatives as there was no material impact.
Classification and measurement
The classification and measurement of the Group’s financial assets and liabilities upon adoption of NZ IFRS 9 is
outlined below:
Financial Assets
NZ IAS 39 Classification
NZ IAS 39 Measurement
NZ IFRS 9 classification and
measurement
Cash and cash equivalents
Loans and receivables
Amortised cost
Trade and other receivables
Loans and receivables
Amortised cost
Amortised cost
Amortised cost
Financial Liabilities
Trade and other payables
Other financial liabilities at
amortised cost
Amortised cost
Amortised cost
p 58
ikeGPS FY19 Annual Report Impact of adoption
For trade receivables the Group has recognised
expected credit losses by applying the simplified
approach permitted by NZ IFRS 9, which requires
expected lifetime losses to be recognised from initial
recognition of the receivables.
The Group has reviewed the ageing analysis of trade
receivables, historical credit loss experience, individual
customer characteristics, customer market segment
and economic environment to determine the expected
credit loss rate. This rate is applied to outstanding
gross trade receivables as at 31 March 2019 to
calculate the allowance for expected credit losses.
4. Significant accounting policies
Basis of consolidation
Subsidiaries
Subsidiaries are all entities (including structured
entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with
the entity and has the ability to affect those returns
through its power over the entity. Subsidiaries are
fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from
the date that control ceases.
New standards not yet adopted
Transactions eliminated on consolidation
The following standard has been published but is not
yet effective and has not been adopted by the Group.
NZ IFRS 16, ‘Leases’, replaces the current guidance in
NZ IAS 17. Under NZ IFRS 16, a contract is, or contains,
a lease if the contract conveys the right to control
the use of an identified asset for a period of time in
exchange for consideration. Under NZ IAS 17, a lessee
was required to make a distinction between a finance
lease (on balance sheet) and an operating lease (off
balance sheet).
NZ IFRS 16 now requires a lessee to recognise a lease
liability reflecting future lease payments and a ‘right-of-
use asset’ for virtually all lease contracts. Included is
an optional exemption for certain short-term leases and
leases of low-value assets; however, this exemption can
only be applied by lessees.
The Group is in the process of performing a detailed
assessment of the financial impact of the standard.
The application of the standard requires the Group to
make several judgments. These include determining
the lease term, the discount rate applicable and the
underlying foreign exchange rate. We note that the
Groups current lease commitments are included in note
19 Commitments and Contingencies.
The standard is effective for accounting periods
beginning on or after 1 January 2019. The Group
intends to adopt NZ IFRS 16 from 1 April 2019.
Intra-Group transactions, balances, and any unrealised
gains arising from intra-Group transactions, are
eliminated in preparing the consolidated financial
statements. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent
that there is no evidence of impairment.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each the
Group’s subsidiaries are measured using the currency
of the primary economic environment in which the
entity operates ("the functional currency").
The functional currency of the Company is NZ dollars.
The functional currency of the Group's USA subsidiary
is US dollars. These financial statements are presented
in NZ dollars, which is the Group's presentation
currency.
Transactions and balances
Foreign currency transactions are initially translated
to functional currencies at the rates of exchange
prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the
settlement of such transactions and from the
revaluation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
p 59
Financial Statements
Group companies
The results and financial position of the US subsidiary
are translated into the presentation currency as follows:
+ assets and liabilities are translated at the closing rate at the date
of the balance sheet;
+ income and expenses are translated at average exchange rates
(unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the dates of
the transactions); and
+ all resulting exchange differences are recognised in other
comprehensive income.
When a foreign operation is sold, such exchange
differences are reclassified to profit or loss in the
consolidated statement of profit or loss and other
comprehensive income.
Goods and Services Tax
All amounts are shown exclusive of Goods and Services
Tax (GST) and other indirect taxes except for trade
receivables and trade payables that are stated inclusive
of GST.
Financial instruments
From 1 April 2018, the group classifies its financial
assets as measured at amortised cost.
The classification depends on the entity’s business
model for managing the financial assets and the
contractual terms of the cash flows.
A financial instrument is recognised if the Group
becomes a party to the contractual provisions of the
instrument. Regular purchases and sales of financial
assets are accounted for at trade date, i.e. the date
that the Group commits itself to purchase or sell the
asset. Financial assets are derecognised if the Group’s
contractual rights to the cash flows from the financial
assets expire or if the Group transfers the financial
asset to another party without retaining control
or substantially all risks and rewards of the asset.
Financial liabilities are derecognised if the Group’s
obligations specified in the contract expire or are
discharged or cancelled.
Financial assets are non-derivative financial
instruments with fixed or determinable payments that
are not quoted in an active market. They include trade
and other receivables, cash and cash equivalents. They
are included in current assets, except for loans and
receivables greater than 12 months which are included
in non-current assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances
and call deposits.
Trade and other receivables
Trade and other receivables arise when the Group
provides money, goods and services directly to a
debtor with no intention of selling the receivable. They
are included in current assets, except for those with
maturities greater than 12 months after the end of the
reporting period which are classified as non-current
assets.
At initial recognition, the group measures a financial
asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss (FVPL), transaction
costs that are directly attributable to the acquisition of
the financial asset.
They are recognised initially at their fair value and
subsequently measured at amortised cost using the
effective interest method
Financial liabilities
Amortised cost assets that are held for collection of
contractual cash flows where those cash flows represent
solely payments of principal and interest are measured
at amortised cost.
Financial liabilities measured at amortised cost are
non-derivative financial liabilities, including trade and
other payables.
Trade and other payables
Interest income from these financial assets is included in
finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised
directly in profit or loss and presented in other gains/
(losses) together with foreign exchange gains and
losses. Impairment losses are presented as separate line
item in the statement of profit or loss.
Trade and other payables are obligations to pay for
goods and services that have been acquired in the
ordinary course of business from suppliers. Accounts
payable are classified as current liabilities if payment is
due within one year or less (or in the normal operating
cycle of the business if longer). If not, they are
presented as non-current liabilities.
They are recognised initially at their fair value and
subsequently measured at amortised cost using the
effective interest method.
p 60
ikeGPS FY19 Annual Report Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured
at cost less accumulated depreciation and impairment
losses.
+ it is technically feasible to complete the software product so
that it will be available for use;
+ management intends to complete the software product and use
or sell it;
+ there is an ability to use or sell the software product;
+ it can be demonstrated how the software product will generate
probable future economic benefits;
Cost includes expenditures that are directly attributable
to the acquisition of the asset.
+ adequate technical, financial and other resources to complete
the development and to use or sell the software product are
available; and
Depreciation
Depreciation is recognised in profit or loss on a straight-
line basis over the estimated useful lives of each part of
an item of property, plant and equipment.
Depreciation methods, useful lives and residual values
are reviewed and adjusted, if appropriate, at each
reporting date.
Office furniture and
equipment
Plant and equipment
IT equipment
20% - 33%
20% - 50%
33% - 50%
Gain and losses on Disposals are determined by
comparing proceeds with the carrying amount. These
are included in profit or loss.
Intangible assets
Research and development
All research costs are recognised as an expense when
they are incurred.
Capitalised development costs
The Group capitalises employee and consultants’
costs directly related to development. The Group
regularly reviews (at least annually) the carrying value
of capitalised development costs to ensure they are
not impaired. Management has reviewed the expected
remaining useful life of assets and concluded that the
development costs for all products are amortised over
periods of 6 years to reflect the expected useful life of
the assets.
Development costs that are directly attributable to the
design and testing of identifiable and unique software
products controlled by the Group are recognised as
intangible assets when the following criteria are met:
p 61
+ the expenditure attributable to the software product during its
development can be reliably measured.
Other development expenditures that do not meet
these criteria are recognised as an expense as
incurred. Development costs previously recognised
as an expense are not recognised as an asset in a
subsequent period.
Impairment of non-financial assets
Intangible assets under development are not
subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
The carrying amount of the Group’s other assets are
reviewed at each balance date to determine whether
there is any indication of impairment or objective
evidence of impairment. If any such indication exists,
the assets recoverable amount is estimated.
Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate
that reflects current market assessments for the time
value of money and the risks specific to the asset for
which estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset
(cash generating unit) is reduced to its recoverable
amount. An impairment loss is recognised in profit
or loss immediately. Where an impairment loss
subsequently reverses, the carrying amount of the
asset (cash generating unit) is increased to the revised
estimate of its recoverable amount, but only to the
extent that the increased carrying amount does not
exceed the carrying amount that would have been
determined had no impairment loss been recognised
for the asset (cash generating unit) in prior years. A
reversal of an impairment loss is recognised in profit
or loss immediately.
Financial Statements
Impairment of financial assets
Government grants
From 1 April 2018 the Group assesses impairment
on a forward-looking basis, the expected credit
loss associated with its financial assets carried at
amortised cost. The Group will assess if there has been
a significant increase in credit risk by assessing market
conditions, forward looking estimates and previous
financial history of counterparts.
For trade receivables the Group applies the simplified
approach permitted by NZ IFRS 9, which requires
expected lifetime losses to be recognised from initial
recognition of the receivables.
The expected credit losses on these financial assets
are assessed using a provision matrix, adjusted for
factors that are specific to the receivables including
customers historical credit loss experience, individual
customer characteristics, customer market segment
and economic environment.
The Group write’s off a financial asset when there
is information indicating default or delinquency
in payments, the probability that they will enter
bankruptcy, liquidation or other financial reorganisation
and there is no real prospect of recovery.
Leased assets
Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under
operating leases (net of any incentives received from
the lessor) are charged to profit or loss on a straight-
line basis over the term of the lease.
Inventory
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on
a weighted average cost, and includes expenditure
incurred in acquiring the inventories and bringing them
to their existing location and condition. Cost comprises
direct materials, direct labour and production overhead.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make
the sale.
Government grants relate to assistance by Callaghan
Innovation who manage the Business Research and
Development (R&D) grants scheme on behalf of the
New Zealand Government.
When the grant relates to an expense item, it is
recognised as income on a systematic basis over the
periods necessary to match the grant to the costs that
it is intended to compensate.
Government grants are recognised at their fair value
where there is reasonable assurance that the grants
will be received, and all attaching conditions will be
complied with.
Employee benefits
Liabilities for wages and salaries, including non-
monetary benefits and accumulating sick leave that
are expected to be settled wholly within 12 months
after the end of the period in which the employees
render the related service are recognised in respect
of employees’ services up to the end of the reporting
period and are measured at the amounts expected to
be paid when the liabilities are settled. The liabilities are
presented as current employee benefit obligations in
the consolidated balance sheet.
The Group recognises a liability and an expense for
bonuses where contractually obliged or where there is a
past practice that has created a constructive obligation.
For defined contribution plans, the group pays
contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual
or voluntary basis. The group has no further payment
obligations once the contributions have been paid.
The contributions are recognised as employee benefit
expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund
or a reduction in the future payments is available.
p 62
ikeGPS FY19 Annual Report Share-based payment
IKE4 rental revenue
The Group operates an employee option scheme
(equity-settled) under which employees receive the
option to acquire shares at a predetermined exercise
price. The options are measured at fair value at grant
date using the Black Scholes model with the fair value
recognised as an employee benefit expense in profit or
loss with a corresponding increase in equity. The total
expense is recognised over the vesting period, which
is the period over which all of the specified vesting
conditions are to be satisfied. At the end of each
period, the Group revises its estimate of the number of
options that are expected to vest based on the service
conditions. It recognises the impact of the revision
to original estimates, if any, in share-based payment
reserve with a corresponding change to share based
compensation reserve in equity.
Revenue
The Group derives its revenue from the sale of product
and related services, subscription revenue and end to
end technical pole data analysis. Revenue is recognised
when performance obligations have been satisfied.
A performance obligation has been satisfied when
control of the good or service associated with the
performance obligation has been transferred to the
customer.
Effective from 1 April 2018 the Group adopted NZ
IFRS 15 Revenue from contracts with Customers. The
change in accounting policies and key judgements are
set out in section 3 above.
The Group has applied the modified retrospective
method of adopting NZ IFRS 15. Therefore, prior year
revenue is measured at fair value of the consideration
received or receivable. Sale of product revenue is
recognised when the products are shipped, and
significant risks and rewards of ownership have been
transferred or when the services are provided to the
customer.
IKE 4 rental revenue is derived from fees charged to
customer on a monthly basis for the use of an IKE4 unit
and for access to IKE Field and Office.
Leases of the IKE 4 unit are considered operating
leases as the Group retains the significant portion of
the risks and rewards of ownership Rental payments
received (net of any incentives) are recognised as lease
revenue in profit or loss on a straight-line basis over the
period of the lease.
Subscription revenue for access to IKE Field and Office
is recognised in accordance with the policy below on
subscription revenue.
Subscription revenue
Is recognised as the services are provided to the
customers. Consideration received in advance (of the
service being provided), is recognised in the balance
sheet as contract liabilities.
IKE Analyze solution revenue
IKE Solution revenue is derived from our end to
end pole and wire analysis solution. The complete
solution offering provides mobile field devices to
capture data, software to support the collection of
fast standardised data, completion of pole annotation
analysis, completion of pole loading analysis and
performing make ready engineering analysis. Revenue
is recognised when the data has been analysed and
the customer requirements outlined in the engagement
statement of work have been completed.
Other operating revenue
Other operating revenue includes consulting and
training revenue. Revenue is recognised when the
services are performed.
Consideration received prior to the service being
provided is recognised in the balance sheet as deferred
revenue.
Sale of product
Finance income and expenses
Revenue from the sale of product is derived from
the sale of the Group’s laser measurement devices,
associated software, accessories and warranty
support. Revenue is recognised when the products
are shipped to the customer being the point at which
control is considered to have transferred to the
customer.
Interest income is recognised as it accrues, using the
effective interest method. Finance expenses comprise
interest expense on borrowings, recognised using the
effective interest method.
p 63
Financial Statements
Current and deferred income tax
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.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by
the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Current and deferred tax is recognised in profit or loss, 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.
Earnings per share
The Group presents earnings per share (“EPS”) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the year.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of shares that would be issued on conversion of all of the dilutive potential ordinary shares into
ordinary shares.
Other reserves
Share-based payments reserve
The share-based payments reserve is used to recognise the grant date fair value of options issued to employees
but not exercised.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income as described in the foreign currency translation accounting policy and accumulated in a separate reserve
within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
p 64
ikeGPS FY19 Annual Report 5.
Operating segments
The CEO and senior management team are the Group’s operating decision makers. During FY19 the Group’s
selling activities were focused and organised into two customer segments namely Utility & Communications and
New Business. The Utility & Communications segment includes sales to companies involved in the broadband
fiber roll out in the United States. New Business includes Signage, Architecture Engineering and Construction
(AEC) and Geospatial.
Within the Utilities & Communications segment the Group sold the IKE4 device and corresponding annual
subscription revenue. The Group also offered an end to end technical solution to customers performing make
ready engineering (MRE) projects. Revenue related to this solution has increased during the period and is now
reported on separately to management.
The segment reporting format reflects the Group’s management and internal reporting structure. Contribution is
after allocating cost of goods sold. Reporting of overheads and balance sheet position is not undertaken at a level
lower than the Group as a whole. Geographically, revenue is substantially generated in the United States.
2019
2018
Utility &
Communication
New Business Group
Utility &
Communication
New Business Group
$'000's
$'000's
$'000's
$'000's
$'000's
$'000's
3,587
466
1,825
4,228
1,441
547
640
-
36
575
-
-
4,227
466
1,862
4,803
1,441
547
5,350
(3,226)
(7,216)
(5,092)
4,607
1,970
6,577
116
793
-
-
116
793
2,894
1,027
3,921
246
57
-
-
246
57
3,978
(3,231)
(7,473)
(6,726)
Sale of product and
services (Point in Time)
IKE4 rental
Subscription (Overtime)
Contribution
IKE Analyze solution (Point
in Time)
Contribution
Gross Profit
Sales and marketing costs
Net attributable (other
corporate income and
expenses)
Net loss before tax
p 65
Financial Statements
6.
Revenue and expenses
Revenue
Sale of product
IKE4 rental
IKE Analyze Solution
Subscription
Services
Operating revenue
Government grants
Total revenue and other income
2019
2018
$'000's
$'000's
4,058
466
1,441
1,862
169
7,996
102
8,098
6,504
116
246
715
151
7,732
125
7,857
$'000's
1,862
274
81
2,217
4,058
(155)
3,903
2019 revenue restated based on the prior year revenue accounting policy
2019
Subscription revenue
Adjustment to retained earnings on adoption of IFRS 15
Adjustment for subscription revenue recognised under prior year accounting policy
Subscription revenue restated under prior year accounting policy
Sale of product
Adjustment for sale of product revenue recognised under prior year accounting policy
Sale of product revenue restated under prior year accounting policy
In the current year, no customer within a particular operating segment represented more than 10% of revenue
(FY18: $1,838,000 in total, $1,045,000 in Utility & Communication segment, and $793,000 in New Business
segment).
Government grants are in relation to cost subsidies from Callaghan Innovation for research and development.
Under the conditions of the Callaghan Innovation grant the Group is required to submit an independent review
report on the eligibility of the costs claimed. This report is outstanding at balance date but does not represent a
significant unfulfilled condition.
Reconciliation of contract liability balances
2019
2018
Opening contract liabilities balance
Revenue recognised that was included in contract liabilities at the beginning of the period
Decrease on adoption of IFRS 15
Subscription revenue recognised
Unsatisfied performance obligations for the current year
Closing contract liabilities balance
p 66
$'000's
1,205
(274)
(861)
1,231
1,301
$'000's
150
-
(150)
1,205
1,205
ikeGPS FY19 Annual Report Operating expenses
Operating expenses consist of operations costs, sales and marketing expenses, engineering and research
expenses and corporate expenses.
Operating Expenses
Note Below
2019
2018
Audit of financial statements
Audit and review of financial statements
Other services
Other assurance services.
Tax compliance services.
Total other services
Total fees paid to auditor
Amortisation of development asset
Amortisation of patents and software
Depreciation
Total amortisation and depreciation
Employee benefit expense
Share-based payment
External contractors and consultants
Employee benefit expense capitalised.
Operating lease expenses
Direct selling and marketingt.
Impairment of assets.
Bad debt and write off expense
Other operating expenses.
Total operating expenses
Notes
$'000's
$'000's
141
146
6
20
26
167
975
-
117
1,092
6,158
188
360
(603)
370
1,160
-
26
8
28
36
182
1,204
16
171
1,391
6,503
68
243
(1,224)
395
906
166
91
1,604
10,522
2,017
10,738
1
2
3
4
5
6
7
1. Other assurance services comprise the review of government grant claims.
2. Tax compliance services relates to assistance to review and file the Group’s tax return.
3. All of amortisation and $117,000 of depreciation are included in engineering and research expenses. The balance of depreciation
totalling to $248,000 is included in cost of sales (2018: $216,000).
4. Relates to employee benefit expense, external contractors and consultants’ expenses that are directly attributable to the development
of intangible assets and have been capitalised.
5. Selling and marketing expenses includes expenses incurred mainly in relation to promotional activities which include travel,
commissions and other direct marketing expenses
6.
Impairment of assets in 2018 Financial Statements include IKE3 intangible assets of $83,000, Smart Measure Pro intangible assets of
$42,000 and other fixed assets of $41,000. The remaining asset impairment of $125,000 is included in cost of sales.
7. Other operating expenses include corporate advisory, travel, engineering expenses, facilities and IT expenses.
p 67
Financial Statements
7. Cash and cash equivalents
Cash at bank
Call / term deposits
Total
2019
2018
$'000's
$'000's
1,675
1,800
3,475
2,235
351
2,586
An overdraft facility of NZ$250,000 with BNZ and a factoring facility of US$300,000 with Bluevine is in place. BNZ
has perfected security interest in all present and after acquired property of ikeGPS Limited. On the BNZ facility
there is an outstanding guarantee to another party of $75,000.
8.
Inventory
Finished goods
Components
Total inventory
2019
2018
$'000's
$'000's
777
914
450
770
1,691
1,220
Included in cost of sales is $1,139,000 (2018: $2,956,000) relating to the amount of inventory recognised as an
expense in the year.
9. Trade and other receivables
Trade receivables
GST receivable
Grants receivable
Other receivables
2019
2018
$'000's
1,268
45
46
11
$'000's
1,151
74
85
48
Total trade and other receivables
1,370
1,358
The Group has $791,988 of trade receivables past due but not impaired at balance date. (2018: $299,580)
30 - 90 Days
90 days +
Total past due
$207,697
$584,291
$791,988
Trade receivables is net of provision for doubtful debts of $17,559.
p 68
ikeGPS FY19 Annual Report 10. Trade and other payables
Trade payables
Accrued expenses
Total trade and other payables
11. Subsidiaries
2019
2018
$'000's
$'000's
252
253
505
302
397
699
Investment
Name of entity
Country of incorporation
Principal activity
2019
2018
ikeGPS Limited
New Zealand
Product development and business
operations
ikeGPS Inc.
USA
Business operations
1,000
1,000
2,000
1,000
1,000
2,000
ikeGPS Limited and ikeGPS Inc. are 100% (2018: 100%) owned by the Company.
All subsidiaries have 31 March balance dates.
12. Current and deferred tax
The Group’s tax expense/ (benefit) comprises:
Deferred tax
Income tax expense /(credit)
2019
2018
$'000's
$'000's
(4)
(4)
6
6
Prima facie income tax expvense on pre-tax accounting loss from operations reconciles to the accounting loss
from operations and reconciles to the income tax expense/(credit) in the financial statements as follows:
Net loss before income tax
Prima facie income tax credit at 28%
Non-deductible expenses
Unrecorded tax losses
Income tax expense /(credit)
p 69
2019
2018
$'000's
(5,092)
(1,425)
198
1,223
(4)
$'000's
(6,726)
(1,883)
37
1,852
6
Financial Statements
The Group has unrecognised tax losses of $18,682,000 (2018: $16,046,000), arising from New Zealand operations
available for use against future taxable profits subject to meeting the requirements of continuous ownership
provision stated in the Income Tax Act 2007.
A tax asset in respect of these losses has not been recognised due to the uncertainty of when the unused tax
losses can be utilised.
2019
2018
$'000's
$'000's
13
4
17
19
(6)
13
2019
2018
$'000's
49,263
5,000
1,250
(381)
$'000's
45,252
3,725
387
(101)
55,132
49,263
2019
2018
78,450,255
64,270,910
-
-
12,019,312
14,179,345
90,469,567
78,450,255
Deferred tax opening balance
Recognised through profit or loss
Deferred tax closing balance
Deferred tax asset relates to employee entitlements.
13. Contributed equity
Share capital
On issue at beginning of year
Issued under share placement
Issued under share purchase plan
Less listing costs offset against issue proceeds
Total share capital
Share capital on issue
Fully paid total shares at beginning of year
Ordinary shares issued on settlement of options
New shares offered
Fully paid ordinary shares
p 70
ikeGPS FY19 Annual Report 14. Property, plant and equipment
Plant &
equipment
Leasehold
improvements
Office furniture
& equipment
Development
equipment
Total
$'000's
$'000's
$'000's
$'000's
$'000's
1,592
10
(383)
1,219
1,219
183
-
1,402
510
229
121
(383)
477
477
253
-
730
742
672
28
-
-
28
28
-
-
28
28
-
-
-
28
28
-
-
28
-
-
700
16
(135)
581
581
287
(156)
712
422
156
43
(135)
486
486
105
(143)
448
95
264
58
-
(48)
10
10
10
(7)
13
48
2
3
(48)
5
5
7
(7)
5
5
8
2,378
26
(566)
1,838
1,838
480
(163)
2,155
1,008
387
167
(566)
996
996
365
(150)
1,211
842
944
Cost
Balance at 1 April 2017
Additions
Disposals
Balance at 31 March 2018
Balance at 1 April 2018
Additions
Disposals
Balance at 31 March 2019
Depreciation
Balance at 1 April 2017
Depreciation for the year
Impairment
Disposals
Balance at 31 March 2018
Balance at 1 April 2018
Depreciation for the year
Disposals
Balance at 31 March 2019
Carrying amounts
At 31 March 2018
At 31 March 2019
p 71
Financial Statements
15. Intangible assets
Cost
Balance at 1 April 2017
Additions
Disposals
Balance at 31 March 2018
Balance at 1 April 2018
Additions
Disposals
Balance at 31 March 2019
Amortisation and impairment losses
Balance at 1 April 2017
Amortisation for the year
Impairment
Disposals
Balance at 31 March 2018
Balance at 1 April 2018
Amortisation for the year
Impairment
Disposals
Development assets
Patents and
software
Total
$'000's
7,569
1,224
(324)
8,469
8,469
651
-
9,120
3,537
1,204
124
(324)
4,541
4,541
975
-
-
$'000's
174
-
-
174
174
-
-
174
158
16
-
-
174
174
-
-
-
$'000's
7,743
1,224
(324)
8,643
8,643
651
-
9,294
3,695
1,220
124
(324)
4,715
4,715
975
-
-
Balance at 31 March 2019
5,516
174
5,690
Carrying amounts
At 31 March 2018
At 31 March 2019
3,928
3,604
-
-
3,928
3,604
Intangible assets are all recognised within and owned by ikeGPS Group Limited, incorporated in New Zealand.
Development assets
Additions to internally generated development assets for the year relates to the continued development of the
platform, features to enhance Spike and IKE products including web and mobile applications.
p 72
ikeGPS FY19 Annual Report
16. Financial instruments and financial risk management
Financial instruments
The Group’s principal financial instruments comprise cash balances, trade and other receivables, trade and other
payables and employee entitlements.
The following table shows the designation of the Group’s financial instruments:
2019
2018
Financial Assets
at amortised cost
Financial
liabilities at
amortised cost
Total carrying
value
Loans and
receivables
Financial
liabilities at
amortised cost
Total carrying
value
$'000's
$'000's
$'000's
$'000's
$'000's
$'000's
3,475
1,370
4,845
-
-
-
-
-
-
-
226
252
253
731
3,475
1,370
4,845
226
252
253
731
2,586
1,285
3,871
-
-
-
-
-
-
-
364
302
397
2,586
1,285
3,871
364
302
397
1,063
1,063
Financial assets
Cash and cash
equivalents
Trade and other
receivables
Total financial assets
Financial liabilities
Employee entitlements
Trade payables
Accrued expenses
Total financial liabilities
Financial risk factors
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, foreign currency
risk and interest rate risks which arise in the normal course of the Company and Group’s business. The Group
uses different methods to measure and manage different types of risks to which it is exposed. Liquidity risk is
monitored through the development of future rolling cash flow forecasts.
p 73
Financial Statements
Credit risk
The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure
equal to the carrying amount of these instruments. Financial instruments which potentially subject the Group to
credit risk principally consist of cash and cash equivalents, and trade and other receivables. All cash and cash
equivalents in New Zealand are held with high credit quality counterparties, being trading banks with "AA-" grade
or better credit ratings, and a Moody’s A1 rating in the USA. The Group does not require collateral or security from
its trade receivables. The Group performs credit checks and ageing analyses and monitoring of specific credit
allowances. The Group does not anticipate any material non-performance of those customers. The total impaired
trade receivables as at balance date is $17,559.
At balance date 65% (2018: 85%) of the Group’s cash and cash equivalents were with one bank. The Group has no
other concentrations of credit risk.
Maximum exposure to credit risk at balance date
2019
2018
Cash at bank
Trade and other receivables
Total
Liquidity risk
$'000's
$'000's
3,475
1,370
4,845
2,586
1,285
3,871
Liquidity risk is the risk that the Group cannot pay contractual liabilities as they fall due. Group finance monitors
rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs.
Such forecasting takes into consideration the Group’s forward financing plans and commitments. Based on this
the Group believes that it has sufficient liquidity to meet its obligations as they fall due for the next 12 months.
The Group has an overdraft facility of NZ$250,000 and access to a US$300,000 factoring facility in place to cover
potential shortfalls.
The following table sets out the undiscounted cash flows for all financial liabilities of the Group:
2019
2018
Contractual cash
flows
6 months or
less
No stated
maturity
Contractual
cash flows
6 months or
less
No stated
maturity
$'000's
$'000's
$'000's
$'000's
$'000's
$'000's
226
252
253
731
-
252
253
505
226
-
-
364
302
397
226
1,063
-
302
397
699
364
-
-
364
Employee entitlements
Trade payables
Accrued expenses
Total financial liabilities
p 74
ikeGPS FY19 Annual Report Foreign currency risk management
The Group is exposed to foreign currency risk on its sales and a significant portion of its expenses that are
denominated in USD which is different to the Group’s presentation currency. The Group currently does not hedge
its exposures arising from its transactions denominated in a foreign currency.
At 31 March 2019, had the local currency strengthened / weakened against the USD by 10% the pre-tax loss would
have been (higher)/lower as follows:
Carrying value of FX impacted financial instruments
+10%
-10%
$'000's
$'000's
$'000's
USD 839
USD 869
USD 118
USD 20,257
(110)
(114)
7
2,714
140
145
(28)
(3,317)
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Intercompany balance foreign
Interest rate risk management
The Group’s interest rate risk arises from its cash balances. The Group currently has no significant exposure to
interest rate risk other than in relation to the amount held at the bank. A reasonably expected movement in the
prevailing interest rate would not materially affect the Group’s financial statements.
17. Capital management
The capital structure of the Group consists of equity raised by the issue of ordinary shares in the Company. The
Group manages its capital to ensure the entities in the Group are able to continue as a going concern. The Group
is not subject to any externally imposed capital requirements.
In the current financial year, the Group completed a Private Placement and Share Purchase Plan raising
$5,869,000. The Group’s aim is to maintain a sufficient capital base so as to maintain investor and creditor
confidence and to sustain future development of the business. The Group’s capital requirements are regularly
reviewed by the Board of Directors.
There have been no material changes in the Group’s management of capital from the previous year.
This note should be read in conjunction with note 2; Going Concern which outlines the material uncertainty around
the Group’s going concern assumption and the FY20 plan that Directors believe will enable the Group to continue
operations.
18. Fair value estimation
The fair value of the Group’s financial assets and liabilities does not materially differ from their carrying value due
to their short maturities.
The Group’s financial instruments are measured at amortised cost.
p 75
Financial Statements
19. Commitments and contingencies
Non-cancellable operating leases
Less than one year
Between one and five years
Total
Operating leases are in relation to rented premises and photocopiers.
The Group advises there are no contingencies.
20. Cash used in operations
Loss for the year
Less investment interest received
Non-cash items included in net loss
Depreciation
Amortisation of intangible assets
Asset impairment
Materials write off
Debtor write off
Deferred tax expense
Share option expense
Write off of obsolete materials and assets
Foreign exchange (gains)/losses
Add/(less) movement in working capital items
Decrease/(Increase) in trade and other receivables
Decrease/(Increase) in inventories
Decrease/(Increase) in prepayments
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in deferred revenue
Increase/(Decrease) in employee entitlements
2019
2018
$'000's
$'000's
307
621
928
340
95
435
2019
2018
$'000's
(5,088)
(31)
$'000's
(6,732)
(6)
365
975
-
-
26
(4)
188
13
26
387
1,220
291
296
91
6
68
-
71
1,558
2,424
(65)
(470)
(22)
(182)
369
(135)
(505)
(463)
997
325
(551)
1,055
136
1,499
Net cash used in operating activities
(4,035)
(2,809)
p 76
ikeGPS FY19 Annual Report
21. Basic and diluted earnings per share
Total loss for the year attributable to the owners of the parent
Ordinary shares issued
Basic loss per share
2019
2018
$'000's
(5,088)
$'000's
(6,732)
90,469,567
72,707,662
$(0.06)
$(0.09)
The potential shares are anti-dilutive in nature. The diluted loss per share is therefore the same as the undiluted
EPS at ($0.06) and ($0.09) for the respective periods.
22. Share based payments
Share options are granted to directors and selected employees to retain, reward and motivate such individuals to
contribute to the growth and profitability of the Group.
Options outstanding at 31 March 2019 have a contractual life from grant date of between 2.5 and 3 years.
Options can be exercised at any time after vesting and unexercised options expire at the end of the contract or
if the employee leaves the Group. The Group has no legal or constructive obligation to repurchase or settle the
options in cash. Any share to be issued on the exercise of the option will be issued on the same terms and will
rank equally in all respects with the ordinary shares in the company on issue.
Movements in the number of share options outstanding and their related average exercise prices are as follows:
At 1 April
Granted
Forfeited
Expired
2019
2018
Average
Exercise Price
Options (’000’s)
Average
Exercise Price
Options
(’000’s)
0.50
0.55
0.59
0.66
$0.52
1,155
2,775
(50)
(530)
3,350
$0.97
$0.36
$0.98
$1.08
$0.50
2,515
600
(285)
(1,675)
1,155
Out of the 3,350,000 outstanding options (2017: 1,155,000), 1,950,840 (2018: 574,993) had vested and were
exercisable at 31 March 2019.
p 77
Financial Statements
Options outstanding
Share options outstanding at the end of the year have the following expiry date and exercise price.
Year Granted
Expiry date
Exercise price
Number of options
2019
Term remaining
(years)
Number of
options
2016
2016
2016
2017
2017
2018
2018
2019
30-Sep-18
31-Dec-18
31-Mar-19
31-Mar-20
30-Jun-20
31-Mar-21
31-Mar-21
31-Dec-21
$0.72
$0.70
$0.63
$0.40
$0.29
$0.54
$0.54
$0.64
Measurement of fair value
80,000
100,000
375,000
400,000
200,000
400,000
200,000
1,100,000
1,400,000
250,000
1.00
1.25
2.00
2.00
2.75
2018
Term
remaining
(years)
0.50
0.75
1.00
2.00
2.25
The Company determined the fair value of options issued using the Black Scholes valuation model. The significant
inputs to the model were:
Fair value of options issued in the year
$0.11, $0.12, $0.13, $0.19
$0.01, $0.05
2019
2018
Weighted average share price
Exercise price
Volatility
Dividend yield
Risk free interest rate
23. Related parties
Short term benefits to directors and senior management
Share option expense directors and senior management
$0.55
$0.40
$0.54 - $0.64
$0.29 - $0.40
30%
Nil
1.79% - 2.15%
30%
Nil
2.54%
2019
2018
$'000's
2,238
172
$'000's
2,100
24
Key management are identified as the Chief Executive Officer, Chief Technology Officer, Chief Financial Officer,
Chief Operating Officer, SVP Utilities & Communication, and Directors.
24. Subsequent events
There are no subsequent events.
p 78
ikeGPS FY19 Annual Report
Directory
ikeGPS Group Limited
Level One, 42 Adelaide Road
Mount Cook
Wellington 6021
Telephone: +64 4 382 8064
Directors of ikeGPS Group Limited
Richard Gordon Maxwell Christie
Bruce Harker
Alex Knowles
Glenn Milnes
Frederick Lax
William Morrow
Legal Advisers
Chapman Tripp
10 Customhouse Quay
PO Box 993
Wellington 6140
Telephone: +64 4 499 5999
Auditor
PricewaterhouseCoopers
PwC Centre 10 Waterloo Quay Pipitea,
Wellington 6011
Telephone: +64 4 462 7000
Share Registrar
Link Market Services Limited
PO Box 91976, Auckland 1142
Level 7 Zurich House
21 Queen Street, Auckland 1010
Telephone: +64 9 375 5998
Bankers
Bank of New Zealand
Harbour Quays, Ground Floor,
60, Waterloo Quay, Wellington 6011
Private Bag 39806,
Wellington Mail Centre,
Lower Hutt 5045
www.ikegps.com
p 79
p 80