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Investing
Innovating
Delivering
Annual Report
& Accounts
2018
A UK leader in the provision
of online legal services
Highlights
Exceeded market expectations
Delivered higher than predicted revenue and profit
despite relatively flat market conditions.
Conveyancing Alliance ('CAL')
The acquisition of CAL in December 2016 has proved
a success in its first full year in the Group. Planned
synergies have been achieved and the Company has
delivered strong organic growth.
Investing for the future
The Group continues to re-invest a proportion of its
gross margin to generate growth in future years. Part of
this has been taking on some new senior hires and more
development resource to help facilitate further growth.
Innovating in new products
The Group has always looked to develop new products
as well as continually improving its existing ones.
This year saw the launch of ULS Complete which
lenders are already using with other products in
development to be launched soon.
Delivered growth
Despite the uncertain economic environment and the
continued sluggish housing market, the business continued
its track record of increasing year-on-year profits.
To find out
more go to
ulstechnology.com
Revenue
£30.7m +38%
Revenue is generated principally from the completion of conveyancing
cases and also the associated sales of searches and ID checks.
£30.7m
(2018)
£22.3m
(2017)
£20.7m
(2016)
Profit before tax
£2.7m -23%
IFRS measure of profit which is after exceptional costs.
£2.7m
(2018)
£3.5m
(2017)
£3.1m
(2016)
Profit before tax (underlying)
£5.5m +25%
Non-IFRS measure of profit which excludes items not likely to impact
future cash flows (see page 17).
£5.5m
(2018)
£4.4m
(2017)
£3.8m
(2016)
Contents
Overview
01 Highlights
02 At a glance
03
Investment case
Strategic Report
06 Chairman’s statement
08 Our business model
10 Our market
12 Our strategy
14 Chief Executive’s statement
16 Financial review
18 Principal risks and uncertainties
Governance
22 Board of Directors
24 Directors’ report
27
Independent auditor’s report
Financial Statements
34 Consolidated Income Statement
Consolidated statement of
34
comprehensive income
35 Consolidated Balance Sheet
Consolidated statement
36
of changes in equity
37 Consolidated statement
38
of cash flows
Notes to the consolidated
financial statements
62 Parent Company Balance Sheet
Parent Company statement
63
of changes in equity
Notes to the Parent Company
financial statements
64
69 Company information
Must reads
Investment Case
03
Page 03
Our business model
08
Page 08
12
14
Our strategy
Page 12
Chief Executive’s statement
Page 14
ULS Technology Annual Report & Accounts 2018
01
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
At a glance
Our vision
To become the leading service provider of technology
comparison solutions to the Legal Services, Financial
Services and Property sectors. Our central and unerring
focus will be to help an increasing number of consumers
to move home as easily and cost-effectively as possible.
Our mission
To help home-owners and potential home-owners
who are making important lifetime decisions to have
the best possible experience, and feel they have
received excellent value.
Our strategy
Always improving
We will consistently strive to understand
exactly what our end-users and business
partners want and deliver this to them.
Innovation
We will develop new products and services
that enable us to hold a competitive
advantage over other firms in our market.
Growth
Through constantly improving and trying to
perfect the products and services we offer,
we will attract increased new business from
our existing business partners. Additionally,
we will forge new relationships to increase
new business, including acquiring other
businesses where appropriate to do so.
What we do
We bring together consumers and solicitors
utilising technology supported by excellent
customer service. We provide consumers
with choice, price competition and quality
ratings. We provide solicitors and
conveyancers with the opportunity to
win work with no upfront cost.
Our distribution
channels
We primarily provide our services through
white-labels to mortgage brokers, banks,
building societies and price comparison
websites amongst others. Our service allows
our partners to provide their customers
choice and enables them to complete
mortgage applications efficiently.
02
Revenue
£30.7m
Revenue is generated principally
from the completion of
conveyancing cases and also
the associated sales of searches
and ID checks.
EBITDA
(underlying)
£6.4m
EBITDA (underlying) excludes
exceptional items (see
reconciliation on page 17).
Conveyancing
completions
83,756
A conveyancing completion is
when the conveyancing
transaction has been marked
as completed on the ULS
platform by the conveyancer
and revenue is recognised.
Conveyancing
instructions
123,847
A conveyancing instruction is the
point where a customer chooses
a conveyancer through the ULS
platform. This provides a strong
indication of future revenues.
Instructions typically take three
or four months to complete with
around 70% reaching completion.
Investment Case
Profitable
Growth
Cash
Generative
The Group has a long track record of
profitable growth. It has increased its
market share and has plenty of scope to
maintain this momentum via organic and
acquisitive growth.
The Group is highly cash generative, turning
a high percentage of profit into cash. This
allows it to invest in future growth, product
development and acquisitions whilst still
paying a dividend.
Innovating
Progressive
Dividend
The growth and cash generation of the
business has allowed it to pay a progressive
dividend. The Directors intend to continue to
pursue this policy of increasing the
dividend payment each year.
Investing
Proprietary IT
The websites and the sophisticated background
technology that the Group operates are all built
in-house. The Group has a strategy of continual
innovation and improvement.
Independent
Unlike many of the Group’s competitors,
the business does not undertake any
conveyancing itself. This allows it to give
consumers an independent choice and
engenders a feeling of trust in the quality
ratings that the Group publishes on each
solicitor or conveyancer on its panel.
Delivering
ULS Technology Annual Report & Accounts 2018
03
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Case Study
ULS Complete:
Lender Panel Management
In 2015 ULS set out its strategy to expand the business through the
acquisition of new lender partners.
With new challengers coming into the lender market, there was a clear
opportunity for ULS Technology to leverage its technology, relationship
management and compliance skills to help existing partners and develop
new relationships. Lenders face a constant pressure to reduce overheads,
increase efficiency and reduce risk and our Panel Management proposition
helps them achieve exactly that. ULS is able to take on the administration
of a lender’s existing panel of approved solicitors or to develop a panel from
scratch, using technology to streamline initial and ongoing due diligence
activity. Uniquely, ULS offers an additional risk mitigation layer through the
oversight capabilities provided by Legal Eye, a group Company.
The process begins with a conveyancing firm applying to join the lender’s panel
via an online application. This is validated against verified data sources using a
series of proprietary checks. Once a firm is panelled, our systems monitor the
firm to ensure it continues to meet the standards required by the lender.
The ULS LPM product went live in August 2016 with its first lender partner.
ULS has continued to develop the service and the combination of enhanced
due diligence, better oversight and reduced overheads for lenders has led to
winning Panel Management mandates from further lenders, with over 1,500
law firms now enrolled on the panels.
The latest enhancement to the proposition was the launch of the ULS
Connect portal in 2018, which enables the LPM system to be integrated into
both the lender’s mortgage origination systems and the conveyancer’s case
management systems. ULS Connect also provides a host of additional
features for the lender, including electronic offer delivery and integrated law
firm validation.
04
Strategic
Report
06 Chairman’s statement
08 Our business model
10 Our market
12 Our strategy
14 Chief Executive’s statement
16 Financial review
18 Principal risks and uncertainties
ULS Technology Annual Report & Accounts 2018
05
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Chairman’s statement
The year has been one of strong growth with a focus on putting building blocks in place
to enable the Group to continue along its growth path.
Review of the year
Board changes
Outlook
In April 2018 Ben Thompson stood down
as CEO. The Board would like to thank Ben
for his contribution to the business over the
last few years. At the same time, we have
been delighted to appoint Steve Goodall as
our new CEO, a year after he joined the
Group as Managing Director. Steve has
made a big impact on the Group since
joining, growing our introducer base,
broadening the market we address and
driving product development. I am sure
that Steve will continue this success in his
new role.
I am also delighted to welcome Elaine
Bucknor to our Board as an additional Non-
Executive Director. Elaine is a member of
the Group Technology Executive team at
Sky and I am sure her knowledge and
experience in the technology space will
benefit the Group greatly.
Peter Opperman will be stepping down
from the Board at the AGM. Peter joined the
Company in 2011 as Chairman and oversaw
the Group’s listing in 2014. I would like to
thank Peter for all the time and effort he has
put in since joining the Group and for his
support since I took over as Chairman. We
have started the search for a replacement
Non-Executive Director who will chair the
Audit Committee.
The Board is positive about the outlook for
the business and sees potential to continue
to increase market share as well as to grow
through broadening our product base.
Commentary on the housing market
suggests that current conditions will remain
for some time, so our focus on market share
will continue and we see plenty of scope to
build on our position.
Recent reviews of the housing market by the
DCLG (Department for Communities and
Local Government) and legal services by
CMA (Competition and Markets Authority)
call for more transparency of fees and more
competition. These are areas addressed by
our products so we feel any changes to
market practices will be favourable for us.
Geoff Wicks
Independent Chairman
ULS Technology plc
26 June 2018
Profit before tax
£2.7m
IFRS measure of profit which
is after exceptional costs.
£3.1m
(Profit before tax 2016)
£3.5m
(Profit before tax 2017)
£1.5m
(Profit before tax 2015)
£2.3m
(Profit before tax 2014)
The year saw tremendous growth in all
areas for the Company. Organic growth in
the core business has been excellent as
new introducers have come on stream
during the year; the acquisition of CAL in
December 2016 meant that we had a full
12 months of their numbers, which have
also seen significant growth; both of which
demonstrate the effectiveness of our
strategy to concentrate on growing our core
business by focusing on market share while
carefully targeting acquisitions in our market.
Reported profit before tax fell but this was
simply due to the increase in the estimated
earnout payable on the CAL acquisition
due to their excellent performance. The
underlying position remained one of growth.
At the same time the housing market
remained fairly flat with housing transactions
slightly up year-on-year. However, it was not
the same picture across the country. The
South-East, in particular, seemed to suffer
from lower transaction volumes but other
areas such as the West Midlands and the
North-West were quite buoyant. Our national
footprint means that we have been less
impacted by these regional variations.
Product development has always been a
focus of the business and we have been
increasing activity in this area over the last
year. The Group’s Lender Panel Management
solution went live at the start of the period
with customers now using it.
Final dividend
Subject to approval by shareholders at
the Annual General Meeting to be held on
25 July 2018, the Board proposes a final
dividend of 1.15p per share, payable on
3 August 2018 to those shareholders on
the register at the close of business on
6 July 2018. This, together with the interim
dividend of 1.15p per share already paid,
takes the total proposed distribution relating
to the year ending 31 March 2018 to 2.30p
per share.
06
The year saw tremendous
growth in terms of
transactions, revenue and
underlying profit… coupled
with organic growth both
within CAL and the core
business.
Geoff Wicks
Independent
Chairman
Revenue
£30.7m
Revenue is generated principally from the completion
of conveyancing cases and also the associated sales
of searches and ID checks.
EBITDA (underlying)
£6.4m
EBITDA (underlying) excludes exceptional
items (see reconciliation on page 17).
£22.3m
(Revenue in 2017)
£20.7m
(Revenue in 2016)
£3.4m
(EBITDA in 2016)
£4.5m
(EBITDA in 2017)
£10.6m
(Revenue in 2014)
£16.3m
(Revenue in 2015)
£2.7m
(EBITDA in 2015)
£1.7m
(EBITDA in 2014)
ULS Technology Annual Report & Accounts 2018
07
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Our business model
ULS Compare:
How our core business model works
We bring consumers and legal professionals together via housing market
comparison services, delivered through our systems.
We partner with solicitors and conveyancing firms to create panels that
compete for consumers' business on price, location and service rating.
Consumer
1.
Introducer
2.
s
t
n
e
m
y
a
P
7.
4.
5.
P
a
y
m
e
n
t
s
Solicitor
3.
6.
Payments
1.
2.
A house buyer approaches
a lender, mortgage broker or
other intermediary.
The mortgage broker uses the
ULS eConveyancer platform to
identify a solicitor to undertake the
conveyancing, filtering by price,
location, service rating and the
user’s requirements.
3.
The ULS platform instructs the
selected solicitor to undertake
the conveyancing.
4.
The solicitor sends their letter of
engagement to the house buyer,
executes the conveyancing and
invoices the house buyer on
completion of the transaction.
5.
The house buyer pays the solicitor
(typically as part of the transaction
completion monies).
6.
The solicitor pays fees to ULS
via the eConveyancer platform.
Solicitors also generate additional
revenues for ULS by using the
platform to perform legal searches
and ID checks.
7.
ULS remits a proportion of the
fees to the mortgage broker or
other intermediary.
From an accounting point of view, in the above model, Introducer = supplier and solicitor = customer
The above model represents ULS Complete which generates the majority of revenue for Group.
08
How we create value for stakeholders
ULS has created an ecosystem where there are benefits for all parties involved.
This is why the system is successful and allowed it to be sustainable over many years.
Benefits
for Consumers
Benefits
for Introducers
Benefits
for Solicitors
ULS Technology Annual Report & Accounts 2018
09
Cost Saving ULS aims to reduce the cost of services to users by creating price competition between providers.VolumeULS connects service providers with a large pool of potential clients via intermediaries, increasing work flow at a low cost of acquisition.Scope ULS enables intermediaries to offer their customers a range of conveyancing services from a wide choice of providers nationwide at competitive prices.ChoiceULS increases the choice of services available to users by aggregating a broad range of providers via a single platform.Market ReachULS provides a platform for service providers such as lawyers with low brand recognition to raise their profile, helping them attract new business.RewardULS allows intermediaries to access multiple related services from a single interface, helping them to generate multiple sales from their customer in one sitting and to increase profitability.ServiceULS provides ratings on its providers helping the consumers to make an informed choice.Time savingULS’ user-friendly interface is designed to reduce the time taken to complete the sales process, further enhancing broker ROI.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Our market
Over the period, housing transactions increased slightly but remain markedly below
long-term average levels, particularly as a percentage of the total residential housing stock.
Mortgage
lending
Housing
transactions
Drivers of
demand impact
our market.
House
building
Interest
rates
10
There are a variety of factors contributing to
the relatively subdued performance of the
housing market. The following are among
the strongest headwinds we are seeing;
increase will continue, as interest rates are
expected to rise again, encouraging more
people to switch their mortgages from one
lender to another.
• Historically low levels of housing stock
available for purchase.
• Lower consumer confidence in some
employment sectors and regions,
coupled with a degree of ‘Brexit’
related uncertainty for many.
• Transaction costs for moving home
being prohibitively high for many.
• Tighter mortgage affordability stress-
testing implemented by the regulator,
making obtaining mortgages for some
people harder than it used to be.
• Various changes to the tax treatment
of private landlords and Buy to Let
mortgages.
However, there have been several measures
introduced by the Government over this
reporting period to encourage the housing
market remain active and fair. For example,
the Stamp Duty threshold for first time buyers
('FTBs') has been permanently raised,
meaning a lower entry cost onto the housing
ladder for many. There has been a significant
£10 billion boost to the Help to Buy Equity
Scheme, enabling a projected additional
135,000 people to buy a home. On top of
this, there have been announcements that
will result in increased construction of new
homes including a commitment from the
Government to build 300,000 new
units annually.
As we look forward, we expect this positive
intervention to continue the growth in FTB
activity. This may for the first time in a long
while result in FTBs making up a larger
percentage of new housing transactions than
home movers, who, without comparable
stimulus packages, may be becoming
increasingly stuck.
The raft of tax and regulatory changes
applied to the private rental sector and
landlords resulted in fewer Buy to Let
mortgages being completed for new
purchases. The recent changes are fully
washing through now and it is expected
that this market segment will remain steady,
albeit reduced from recent levels.
Outside of housing transactions, re-
mortgaging activity increased over the period
– and probably more so than most experts
predicted. This opened up new conveyancing
opportunities for ULS and, although the
increment is quite small overall, this upswing
has been helpful. It is likely that this gentle
On balance, we expect a slightly more active
housing market in the coming year; largely
due to improved FTB activity, with other
segments remaining broadly as they were
over this last year. We are, however, mindful
of ongoing political and economic
uncertainty and therefore are prudently
planning for similar market conditions to
those of the year we have just reported on.
ULS appears to be moving into a sweet
spot, where we can build technology for a
variety of existing and new business
partners, ensuring our customers receive an
improved and modernised conveyancing
and home moving experience.
Our mission is to create and drive change
and to ensure our business partners and
end-users are optimally positioned to benefit
from this. ULS will strive to make innovation,
together with continuous improvement and
refinement of existing products and services,
the key drivers of growth and momentum for
the Group.
Beyond the world of mortgages, we continue
to see an increased focus on the process of
home moving. For example, the Department
for Communities & Local Government (DCLG)
commissioned a white paper in December
2017, targeted on a call for evidence on
making the home buying process cheaper,
faster and less stressful for all stakeholders
– in particular consumers themselves. We
welcomed this engagement, as these
objectives are integral to what ULS is striving
to achieve: better outcomes for all customers
involved in home moving.
We also saw an increasing desire from some
of our existing and prospective lender
partners to focus more on the entire
mortgage experience: some want to engage
with ULS to ensure better consumer
outcomes, whilst others have unwieldy
processes and high overheads that can be
addressed through new conveyancing-
related technologies. This is an area where
ULS enjoyed some success over this
reporting period and will continue to invest
actively in over coming years to help lenders
to improve their processes and reduce costs.
Property transactions and forecasts (thousands)
1,703
1,493
1,330
1,202
1,207 1,235
1,158
1,134
921
928
897
879
796
2007
2008
2009
2010
2011
2012
2013 2014 2015
2016
2017
2018
2019
* Years are to 31 March
* Historical data is per HMRC
* Forecast is per OBR (published March 2018)
Total ULS completions v Total UK market
Total ULS completions
Total UK market
350.0
300.0
250.0
200.0
150.0
100.0
2012
2013
2014
2015
2016
2017
2018
* Both lines based to 100 in FY2012
ULS Technology Annual Report & Accounts 2018
11
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Our strategy
The Group strategy is to grow market share and value through focusing on continual
improvement, innovation and quality. We will also endeavour to acquire
complementary businesses to ULS where appropriate to do so.
Conveyancing market
The conveyancing market continues to
evolve and adapt to ever increasing
changes in technology, competition,
regulation and consolidation.
The traditional high street solicitor remains,
in effect, the Group’s largest competitor.
However, with consumers increasingly
acquiring mortgages and related
conveyancing through intermediaries, or
through researching and buying
conveyancing online, we are seeing the
continued strengthening of the larger firms.
These firms are generally geared up to
receiving and processing bulk volumes of
conveyancing at more competitive prices
to the consumer and with generally more
efficient service outcomes.
Lenders are also increasingly looking to align
more closely, directly or indirectly, with these
larger firms. Their drivers are commercial
reasons and to generate economies of scale,
but also to ensure a more consistent overall
customer experience, combined with tighter
governance, controls and security.
Wherever lenders require this, ULS is ideally
placed to link lenders to these larger firms
through technology.
Our opportunity to continue
organic growth
ULS is optimally positioned to maximise
opportunities from today’s market shape
and also to be at the forefront of change
and opportunity in the future. Our business
model and technology platforms enable
us to provide a comprehensive menu of
conveyancing firms and services to all
parties. Perhaps most importantly, we can
now offer this technology and service to
every market segment where conveyancing
is bought today.
The Group has close, and often long-
standing, contractual relationships with larger
solicitors and conveyancers. ULS acquires
new work on behalf of these firms and has
built technology platforms for this business
to be quoted, instructed, submitted and
monitored – all at a fixed and known
acquisition cost that enables firms to
plan and scale their operations, as well as
invest in process refinement and service
improvements for customers.
ULS now acquires conveyancing from
mortgage intermediaries, mortgage lenders,
estate agents, house builders and directly
via consumer online portals. Market share
growth will be pursued in each of these
segments, as we help more business
partners to provide outstanding
conveyancing services to their customers.
New products
ULS is focussing on how conveyancing can
be done better. Looking at other industries
and parallel markets, conveyancing has a
long way still to go before it can be considered
a straightforward and fully tech-enabled
experience. Despite the improvements made
over recent years, there remains far too much
paperwork, duplication, intensive processing
and confusing terminology.
Market Share
2.8%
2018
ULS is optimally
positioned to
continue to
maximise
opportunities
and grow
market share.
Completions
83,756
2018
12
The recent Government white paper on the
home moving process specifically focussed
on how this can be modernised, simplified
and improved. From a ULS perspective, the
current process inefficiencies and potential
market intervention play directly in our favour.
We have already built technology that
improves some of the process, but there are
many more opportunities to address. Our
continuous improvement and innovation will
deliver new products and features in this area.
We are also developing a number of new
products for lenders such as ULS Complete,
launched in the last year, which helps manage
and monitor a lender’s wide panel of solicitors
and conveyancers. We are continuing to
develop new products to help lenders.
Acquisitions
The Group always looks at possible
opportunities to make complementary
acquisitions of businesses in sectors that
we understand.
Most recently, towards the end of the
previous financial year 2017, we acquired
Conveyancing Alliance Holdings Limited
(CAL). This was a highly earnings enhancing
acquisition that enabled us to forge inroads
into providing conveyancing technology and
services to smaller mortgage intermediaries
and estate agents.
We are delighted with how well CAL has
performed since acquisition and the
management and staff have worked well
with ULS to create new opportunities and
generate growth momentum for the Group.
We will continue to look at acquiring other
complementary businesses as and when
appropriate to do so.
Spotlight on
Our solicitor team
Our solicitor team works with over 100 solicitor firms nationwide for
our eConveyancer or ULS Compare product, choosing firms who
demonstrate the appropriate technical skills and capacity, together
with a passion for conveyancing. Every firm commits to agreed service
and pricing levels and offers a no sale no legal fee guarantee.
We regularly monitor the quality and capacity of panel firms and work
with them to continuously improve the consumer’s experience. Our
proprietary onboarding process and ongoing due diligence activity
provide additional assurance to consumers and partners alike and our
helpdesk supports all parties throughout the transaction.
We monitor and log any expressions of dissatisfaction – by consumer
or introducer – and their resolution, using this information to spot
trends, identify potential issues at individual firms, share best practice
and improve performance.
ULS also provides conveyancing firms with tools to help protect
themselves and their clients against fraud, together with access to our
online case update system, which we monitor to ensure that matters
are progressing as expected and clients are kept fully up-to-date.
> 100
SOLICITOR
FIRMS TO
CHOOSE
FROM
ULS Technology Annual Report & Accounts 2018
13
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Chief Executive’s statement
ULS has had a very strong year. We have successfully grown our share of new
conveyancing, building our presence and strength in all market segments that we
cover. Whilst we have continued to grow our core business, I am particularly pleased
to highlight the impressive momentum built by CAL, who we acquired in the
previous financial year.
Overview of operational
performance
Last year we invested in developing new
technology to enable us to offer a more
comprehensive range of conveyancing
services to mortgage lenders. We also
acquired CAL to drive stronger progress in
providing conveyancing to both smaller
mortgage intermediaries and estate agents.
Both strategies have delivered results.
In terms of lenders, we have won new
contracts throughout the year, taking the
total number of lenders we work with to
nine. Some of these new relationships have
required us to provide similar services to
those that we had been offering previously.
However, we also won new types of work
as a result of our new technology solutions
for lenders.
We will continue our efforts in building further
and deeper relationships with lenders and will
do so by understanding what they need, both
for today and for the future, and delivering
exactly this for them. We strongly believe that
there remains significant upside for the
Group in this area.
With regard to intermediaries, ULS has
always had a strong pedigree in this market
segment. Historically it has forged long term
relationships with many of the large national
mortgage brokers, networks and clubs.
However, relationships with the smaller
intermediary firms - most typically directly
authorised and regulated by the FCA – were
relatively undeveloped. Acquiring CAL has
enabled the Group to experience very strong
growth in this market segment. CAL provides
its ‘Broker Conveyancing’ technology
platform and services to these smaller
intermediaries and has built some very
healthy momentum throughout this
last year.
In terms of estate agency, ULS already helps
home sellers to select the best estate agent
to sell their home for them, based on a
unique range of performance criteria. The
Group built this technology platform
(Estateagent4me) to enable contact with
home sellers before they were potentially sold
conveyancing from the estate agent. ULS has
started to transact new conveyancing in this
area directly with home movers via this route.
Additionally, through CAL’s two estate agency
brands (Agency Convey and Conveyancing
Alliance), the Group now provides
conveyancing technology directly to an
increasing number of estate agents.
CAL has therefore proved to be a
tremendous acquisition and I would like to
recognise and congratulate them for their
excellent performance and work ethic over
this last year, which has contributed
significantly to the Group’s overall results.
Strategic progress
ULS has always been clear that its strategic
focus will be to grow its conveyancing market
share, year on year. Over the last few years
we have designed and built technology
platforms to provide conveyancing services
to all market segments.
This means that we now have a foot in
every camp;
a.
b.
c.
d.
Mortgage Intermediaries – we provide
them with technology to help their
customers re-mortgage, move home
or buy a property to let.
Lenders – we provide technology for
their branch staff to help their customers.
We also offer platforms for lenders to
help them with their re-mortgage
conveyancing as well as some of their
automated documentation movement
and quality controls.
Estate Agents – mostly through CAL,
the Group now provides conveyancing
technology to enable estate agents to
help their own customers.
House builders – ULS provides unique
technology specifically designed to
improve all-round conveyancing
communication and speed of execution
in this sector.
e.
Consumer portals – ULS provides
white labelled B2C conveyancing
platforms, enabling its platform partners
to offer conveyancing services directly to
their customers. HomeOwners Alliance,
where ULS currently holds a 35% stake,
is one of these.
We will continue to improve and innovate in
each of these areas to enable our business
partners to improve their customer
experience and the Group to build its market
share further.
Outlook
Our aim is simple and that is to outperform
our competitors and the market itself.
We have positioned the business to target
continued growth even in a flat market by
focussing on growing market share through
establishing new introducer relationships.
Brexit related uncertainty and the possibility
of rising interest rates will likely present both
challenges and new opportunities.
We are very pleased with how the Group
has performed over this last year and are
excited about how various forces (e.g. DCLG,
Housing White Paper) are combining to
position the Group for even stronger
relevance and growth. We know there
remains a lot of upside growth for us to
chase and earn the right to win.
We very much look forward to what we
know will be an exciting FY19.
Steve Goodall
Chief Executive Officer
ULS Technology plc
26 June 2018
14
It has been a
strong year for
ULS with the
Group significantly
increasing
market share.
Steve Goodall
Chief Executive
Officer
46,692
(Conveyancing
completions in 2014)
68,479
(Conveyancing
instructions in 2014)
46,566
(Conveyancing
completions in 2015)
62,548
(Conveyancing
instructions in 2015)
53,830
(Conveyancing
completions in 2016)
74,657
(Conveyancing
instructions in 2017)
56,789
(Conveyancing
completions in 2017)
89,208
(Conveyancing
instructions in 2017)
83,756
(Conveyancing
completions in 2018)
123,847
(Conveyancing
instructions in 2018)
ULS Technology Annual Report & Accounts 2018
15
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Financial review
The Group delivered significant profit growth and increased market share.
2017
£000’s
2016
£000’s
Underlying PBT
5,513
4,364
(671)
(642)
474
395
Capitalised
development resource
Amortisation
of capitalised
development resource
Adjusted
underlying PBT
Cash and debt
The Group continued to generate positive
operating cash flow:
• Scheduled payments of £1 million made
against the term loan with HSBC;
• RCF balance with HSBC reduced by
£1 million although ability to draw down
that additional amount remains;
5,316
4,117
• Dividends paid of £1.5 million;
• Leverage fell from 0.69 to 0.29 as at
31 March 2018; and
• First contingent consideration payment
due to previous owners of CAL in July
2018 estimated at £2.9 million.
Leverage is calculated as net debt against
underlying EBITDA.
The underlying position of the Group is that it
continues to turn a significant proportion of its
profit into cash, which we expect to allow
payment of a progressive dividend, while still
investing in the growth of the business. Where
opportunities exist, the business will also take
on debt facilities to fund acquisition growth
and we currently use a guideline of having a
maximum leverage of one times EBITDA
which it is currently well below. Our bank
covenants allow for much higher leverage.
During the year more development projects
were undertaken and more resource taken
on as we continue to invest in the future of
the Company. Additionally, a limited amount
of external resource was used and the
acquisition of CAL increased the spend in
this area (as they also capitalise
development, which they outsource entirely).
Key performance indicators
Our key performance indicators are set out
on pages 1 and 2.
Shares and dividends
In December 2017, the Group paid an interim
dividend of 1.15 pence per share. We have
proposed a final dividend of 1.15 pence per
share in line with our aim of paying the total
dividend in two equal amounts.
No new shares have been issued in the year.
Conveyancing Alliance
Holdings Limited
On the 19 December 2016, the Group
acquired the entire share capital of
Conveyancing Alliance Holdings Limited and
its wholly owned subsidiary, Conveyancing
Alliance Limited. This was for an initial cash
consideration of £7.2 million plus an amount
for free cash, together with an earn-out until
31 March 2019 to be wholly satisfied in
cash. The excellent performance of CAL
during the year has resulted in us upgrading
the estimated contingent consideration
amount payable. We are now estimating that
we will pay the full earn-out amount which is
£5.3 million.
Summary
• Revenue £30.7 million (2016: £22.3 million).
• Gross margin £12.5 million (2016:
£9.5 million).
• Underlying PBT £5.5 million (2016:
£4.4 million).
• PBT £2.7 million (2016: £3.5 million).
• Net debt £1.9 million (2016: £3.5 million).
• Group continues to pay a progressive
dividend.
•
Increase in underlying EBITDA of 25%.
Results
The Group delivered significant profit growth
in 2018 with underlying profit before tax up by
25%. Approximately £0.7 million of this
growth was due to CAL being included in the
numbers for the full year as opposed to just
over three months in the prior year. Reported
PBT actually fell year-on-year. This was due
to an increase of £1.4 million in the expected
contingent consideration relating to the
acquisition of CAL. As a Board the key
profitability measure we use is underlying
PBT. We believe that this measure gives a
better guide to the longer term cash
generating ability of the Group.
Capitalisation of internal
IT resource
In accordance with accounting rules, we
capitalise internal and external IT resource
where there is a clear definable project and
we can identify a profitable revenue stream.
The capitalisation is shown under intangible
assets and amortised over the expected
useful life of the asset. However, it is useful to
look at the impact on profit if we had purely
expensed all of this type of expenditure and
we do this in the table opposite. This gives a
closer indication as to the cash generative
ability of the business rather than looking at
reported profit.
16
Underlying PBT
Profit before taxation (PBT)
Amortisation of intangible assets arising on acquisition
Exceptional operating costs
Acquisition activity costs
Adjustment to expected contingent consideration
Exceptional operating costs
NPV adjustment of deferred consideration
Underlying PBT
Underlying EBITDA
Underlying PBT
Finance income
Finance costs
Amortisation (excluding arising on acquisition)
Depreciation
Underlying EBITDA
2018
£000’s
85
2,062
2017
£000’s
386
–
2018
£000’s
2, 735
540
2,147
91
5,513
2018
£000’s
5,513
(6)
135
474
274
6,390
2017
£000’s
3,456
204
386
318
4,364
2017
£000’s
4,364
(12)
83
395
271
5,101
The Group has
continued to
grow long-term
profitability.
John Williams
Finance Director
ULS Technology Annual Report & Accounts 2018
17
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Principal risks and uncertainties
Risk Areas
Potential Impact
Mitigation
Loss of key introducer
The contract with Lloyds Banking
Group delivers significant gross
margin.
The loss of this contract would
clearly have a significant impact on
the scale and performance of the
Group although there are a number
of parts to the contract.
Loss of key panel firms
The Group operates a panel of
over 100 solicitors and licensed
conveyancer firms, but the largest
firms receive significant
percentages of the work.
Macro-economic
conditions
The revenue of the business is
closely linked with the number of
transactions in the UK housing
market.
New products
The Group continually looks to
innovate and develop new
products.
Competition
There are a number of
competitors of varying sizes
across the market.
The loss of a major panel firm could
impact on the Group’s ability to fulfil
all the orders it receives and could
reduce price competition.
The Group is widening its routes to market and has
now reduced the share of gross margin attributable to
this contract to below 35%. Additionally, it works
closely with Lloyds Banking Group to ensure it is
delivering a high level of service and constantly
enhancing the service being offered.
The Group builds strong relationships with its panel of
firms thereby enabling it to constantly monitor their
capacity and service levels. The Group actively looks
to recruit new firms onto its panel across a range of
sizes to maintain sufficient capacity within the model,
keep prices at a competitive level, while keeping
quality of service high. The Group takes reputation
risk seriously and new firms have to pass certain
criteria before they are allowed on the panel.
Changes in interest rates, house
prices, government policy, GDP
growth and wider economic factors
can positively or negatively impact
the number of housing transactions.
The Group continue to widen its distribution channels
by increasing the number of introducers as well as the
markets they operate in. This means that the Group is
not solely reliant on growth in the general market for its
own growth.
When developing products there is a
risk that products developed are not
commercially successful or cost
more to develop than planned.
The Group plans to continually gather and obtain
market research prior to the launch of any new
initiative. It also conducts post completion audits to
enable and promote continuous improvement.
Where there is competition there is
always a risk that others will gain a
competitive edge and either make it
more difficult to win new introducers
and/or to retain existing introducers.
The Group is focused on continual improvement,
innovation, quality and resilience in order to maintain
its competitive advantage and values existing
introducers as much as potential new ones.
Additionally, while the Group is increasing its market
share it still holds a relatively small percentage and
there is plenty of scope for growth. There are also
opportunities within competitors as illustrated by the
acquisition of CAL.
IT systems
The Group is dependent on its IT
systems to be able to provide its
services.
Computer systems are inherently
open to failure or security breaches.
These could impact the ability of the
Group to be able to provide its
service and serious failures could
result in the loss of introducers.
The Group ensures that anti-virus software is
kept up-to-date and regular penetration tests are
performed. The main servers are located off-site at
dual locations, enabling immediate failover in the
event of a server becoming unavailable at one of
the locations.
Acquisitions
The Group has made acquisitions
and plans to continue to be
acquisitive.
Making acquisitions is inherently
risky. Risks include over paying, not
achieving expected synergies and
impact on the existing business due
to distraction of management.
The general strategy of the Group is to acquire
businesses in sectors it understands, to undertake
proper due diligence, gain a good understanding
of the corporate culture and to resource sufficiently
and effectively.
The Strategic Report was approved by the Board of Directors on 26 June and was signed on its behalf by:
Steve Goodall
Chief Executive Officer
ULS Technology plc
John Williams
Finance Director
ULS Technology plc
18
During the year more development
projects were undertaken and
more resource taken on as
we continue to invest in the
future of the Company.
ULS Technology Annual Report & Accounts 2018
19
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Case Study
Corporate Social
Responsibility and
Rethink Mental Illness
ULS supports the valuable and important charity Rethink Mental
Illness who help millions of people affected by mental illness by
challenging attitudes and changing lives. Rethink Mental Illness help
people affected by mental illness across England to get through
crises, to live independently and to realise they are not alone.
In 2017, Jill White, panel relationship manager on the ULS solicitor
team, trained for and ran the London Marathon in aid of Rethink
Mental Illness as well as initiating many activities across the Group.
Soup days became a favourite as staff got a choice of delicious
homemade soups for a donation. Along with regular staff raffles,
the help of generous donations from panel solicitor firms and
others Jill was massively supported.
A great group effort meant Jill and ULS raised £7,200 by
the end of 2017. Lots more activity is planned for 2018.
1st
£7,200
RAISED BY JILL
AND ULS BY THE
END OF 2017
20
Governance
22 Board of Directors
24 Directors’ report
27 Independent auditor’s report
ULS Technology Annual Report & Accounts 2018
21
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Board of Directors
Geoff Wicks
Independent Chairman
Geoff Wicks was CEO of Group NBT plc,
a specialist in online brand protection and
digital asset management, from 2001 until he
led the sale of the business to HgCapital in
2011. He remained as part of the Group NBT
business, now renamed NetNames, as a
Non-Executive Director until 2013.
Geoff spent much of his earlier career at
Reuters, including heading divisions in the
UK, France and Nordic regions, and latterly
was Director of Corporate Communications.
Prior to Reuters, Geoff worked in the banking
and insurance industries.
John Williams
Finance Director
John joined the business in January 2011 at
the point of Lloyds Development Capital
(LDC) investment in the Group. Prior to joining
the Company, John was Finance Director at
Stortext FM Limited, a private equity backed
SaaS business specialising in document
management. There, he led a merger
process before taking the lead in a
successful trade sale of the merged entity
to Box-it Limited.
John is a chartered accountant, having
qualified with Ernst & Young, before he
gained blue-chip experience with Motorola
in a number of roles.
Steve Goodall
Chief Executive Officer
Steve joined the Company as Managing
Director in May 2017 and has been
responsible for the day to day management
of the Company’s products and services.
In addition, Steve has been instrumental in
building the Company's success in tailoring
conveyancing services and technology for
lenders as well as introducing and
commercialising new products and services
for existing and new B2B relationships.
Prior to joining ULS, Steve worked for Legal
& General Surveying Services ('LGSS') for
over 15 years, most recently holding the
post of Managing Director. During his
tenure, he successfully transformed LGSS
from a modest surveying business into the
number one, market leading property risk
and valuation distribution business, which in
2016 handled over 500,000 valuation
instructions and generated revenue of
approximately £80 million.
Steve was awarded the Royal Institute of
Chartered Surveyors’ Fellowship in 2012
and also holds numerous high-profile
industry awards, both personally and on
behalf of LGSS.
22
Andrew Weston
Co-founder and IT Director
Andrew co-founded ULS in 2003. He started
his career developing and implementing
software solutions at PE International plc and
Vintner Computer Systems. He founded his
own businesses: Weston Computing, in
1995; and Weston Technology in 2000.
Andrew has spent the last 14 years
building property, financial and legal services
applications for the Group and also
co-founded ehips Ltd (now known as
United Home Services Ltd) in 2007, which
is now part of ULS.
Peter Opperman
Non-Executive Director
Peter joined the Company in January 2011
at the point that LDC invested in the
business. Peter has spent over 20 years in
executive and Non-Executive roles working
in private equity backed businesses.
Peter is currently Non-Executive
Chairman of private equity backed
companies Zenergi Limited, Adestra
Limited, Decision Technology Limited and
Connect Managed Services Limited.
Peter will be stepping down from the
Board at the AGM.
Elaine Bucknor
Independent Non-Executive Director
Elaine joined as Non-Executive Director in
June 2018. She is currently Sky Plc’s Group
Chief Information Security Officer and a
Group Director in its Technology Executive
team. Elaine has over 20 years in operational
and strategic technology consultancy and
leadership roles, with multinational market
leaders in the telecommunications, media,
technology, travel, financial and public
sectors. She has advised at Board level on
technology capabilities to enable scalable
growth and resilience in highly disruptive
markets and specialises in shaping and
executing innovative technology strategies.
Elaine is a key sponsor on a number of
programmes to encourage more women into
technology-based careers and is also a
member of a number of industry councils in
the Technology and Cyber Security sectors.
ULS Technology Annual Report & Accounts 2018
23
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Directors’ report
The Directors present their report and the financial
statements of ULS for the year ended 31 March 2018.
Principal activity
Review of business and future developments
The Company acts as a holding company for its three subsidiaries and
provides management services to its subsidiary companies.
The review of the business and future developments is outlined in the
Chairman’s statement on pages 6 and 7 and the Chief Executive’s
Statement on pages 14 and 15.
The main subsidiary, United Legal Services Limited, develops and
provides software that supports the provision of online legal
comparison services, particularly in the conveyancing sector. Its
disruptive technology creates competition amongst the providers of
legal services to the benefit of the consumer. Conveyancing Alliance
Limited operates in a similar fashion.
Legal-Eye Limited provides risk management and compliance
services to solicitors and licensed conveyancers.
United Home Services Limited develops, hosts and operates web
based systems that provide property information, including energy
performance certificates (EPCs). It is has also developed a commercial
proposition for the estate agency comparison product. Its operations
are currently immaterial to the Group.
Directors
Dividends
A final dividend in respect of the year ended 31 March 2017 of 1.10
pence per share was paid on 4 August 2017. An interim dividend of
1.15 pence per share was paid on 22 December 2017. A final dividend
of 1.15 pence per share is proposed by the Directors subject to
approval at the AGM.
The Directors of the Company during the year and their beneficial interest in the ordinary shares and share options of the Company at 31 March
2018 are set out below:
Peter Opperman
Andrew Weston
John Williams
Ben Thompson
Geoffrey Wicks
Directors’ remuneration
Ordinary shares
Share options
2018
2017
2,704,625
1,276,625
48,291
53,333
52,000
2,704,625
1,276,625
48,291
20,000
52,000
2018
–
226,898
485,809
2017
–
226,898
485,809
1,618,698
1,942,337
–
–
4,134,874
4,101,541
2,331,405
2,655,044
The following table sets out an analysis of the pre-tax remuneration for the year ended 31 March 2018 for the individual Directors who held office in
the Company during the year:
2018
Salary/fees
£
2018
Bonuses
£
2018
Benefits
in kind
£
–
210
2,374
15,000
3,325
–
2018
Sub Total
£
–
35,110
154,544
167,500
186,742
36,726
580,622
2018
Share-based
payment
£
–
–
9,840
14,162
36,890
–
60,892
2018
Total
£
–
35,110
164,384
181,662
223,632
36,726
641,514
2017
Total
£
21,780
35,051
138,845
147,222
250,552
35,050
628,500
–
–
40,000
40,000
25,000
–
105,000
20,909
Nigel Hoath
Peter Opperman
Andrew Weston
John Williams
Ben Thompson
Geoffrey Wicks
–
34,900
112,170
112,500
158,417
36,726
454,713
Nigel Hoath resigned as a Director on 2 August 2016.
Ben Thompson resigned as a Director on 4 April 2018.
24
Share options and warrants
The share-based payment of £60,892 (2017: £42,159) to Directors represents the share-based expense relating to share options
issued in prior years. The following share options table comprises share options held by Directors who held office during the year
ended 31 March 2018:
John Williams
John Williams
Ben Thompson
Ben Thompson
Ben Thompson
Andrew Weston
Options held
at 31 March
2017
Options
granted in
period
Options
exercised in
period
Options
held at
31 March 2018
Exercise
price (p)
Exercisable
from
Exercisable
to
258,911
226,898
970,918
647,279
324,140
226,898
–
–
–
–
–
–
–
–
323,639
–
–
–
258,911
226,898
647,279
647,279
324,140
226,898
40.00
76.75
39.50
47.50
76.75
76.75
18/08/17
21/12/19
28/11/17
30/03/18
21/12/19
21/12/19
17/08/24
20/12/26
27/11/24
29/03/25
20/12/26
20/12/26
Employee involvement
Financial instruments and risks
The Group places considerable value on the involvement of its
employees and has continued to keep them informed on matters
affecting them as employees and on the various factors affecting the
performance of the Group. This is achieved through informal
discussions between Group management, operating company
management and employees as well as regular ‘town hall’ meetings.
The Group operates an EMI share option scheme and, as well as
options issued to Directors as shown above, options have also been
issued to and are held by a significant number of employees.
Substantial shareholders
The Company has been notified of the following interests of three
per cent or more in its issued share capital as at 31 March 2018.
Shareholder
Kestrel Partners LLP
Schroder Investment Management
Nigel Hoath
Unicorn Asset Management Ltd
Herald Investment Management Ltd
Lombard Odier Asset Management
(Europe) Ltd
BlackRock
Peter Opperman*
Canaccord Genuity Group Inc
No. of shares
13,048,800
7,000,000
6,351,789
4,550,200
4,400,000
%
20.13
10.80
9.80
7.02
6.79
3,992,580
6.16
2,794,022
2,704,625
2,700,000
4.31
4.17
4.16
* Peter Opperman Non-Executive Director
Research and development
The Group develops software products in-house and CAL uses an
external provider to do the same. These are capitalised in line with the
accounting policies shown on page 39.
The Group’s operations expose it to a variety of liquidity, credit and
interest rate risks. Details of the use of financial instruments by ULS
and these risks are contained in pages 56 to 58 of the financial
statements.
Corporate governance
ULS Technology plc and its subsidiaries are committed to high
standards of corporate governance. The Directors recognise the
importance of sound corporate governance and confirm that they aim
to comply with best practice appropriate for a company of its nature
and scale.
Audit Committee
The Audit Committee is chaired by Peter Opperman and includes
Geoff Wicks. It meets at least twice a year and may invite other
Directors to attend its meetings. The Committee is responsible for
reviewing a wide range of matters, including half-year and annual
results before their submission to the Board, and for monitoring the
controls that are in force to ensure the integrity of information reported
to the shareholders. The Audit Committee will also meet with the
auditors without the presence of the Executive Directors.
During the year the Company received a Corporate Reporting Review
enquiry from the Financial Reporting Council (‘FRC’) in respect of
certain matters in the Group’s 2017 financial statements which
resulted in an internal review of these points. As a result of this review
the Company identified an error in its 2017 consolidated statement of
cash flows which has resulted in a reclassification of £318,000 from
interest paid to decrease in trade and other payables from the
amounts previously disclosed.
The FRC review was based on the annual report and accounts and
does not benefit from detailed knowledge of the business or an
understanding of the underlying transactions entered into.
Accordingly, while all points raised by the FRC have been resolved,
this provides no assurance that the report and accounts are correct in
all material respects; the FRC’s role is not to verify the information
provided but consider compliance with reporting requirements. FRC
letters are written on the basis that the FRC accepts no liability for
reliance on them by the Company or any third party, including but not
limited to investors and shareholders.
ULS Technology Annual Report & Accounts 2018
25
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Directors’ report continued
Remuneration Committee
Directors’ responsibilities statement
The Remuneration Committee is chaired by Geoff Wicks and includes
Peter Opperman. It meets at least twice a year and no Director is
permitted to participate in discussion or decisions concerning his own
remuneration. The Remuneration Committee reviews the performance
of the Executive Directors. It sets and reviews the scale and structure
of their remuneration, the basis of their remuneration and the terms
of their service agreements with due regard to the interests of
shareholders. In determining the remuneration of Executive Directors,
the Remuneration Committee will seek to enable the Group to attract
and retain staff of the highest calibre. The Remuneration Committee
will also make recommendations to the Board concerning the
allocation of share options to employees.
Nominations Committee
The Nominations Committee is chaired by Peter Opperman and
includes Geoff Wicks. It meets at least twice a year and is responsible
for reviewing the size, structure and composition of the Board,
succession planning, the appointment and/or replacement of
additional Directors and for making appropriate recommendations
to the Board.
Share dealing code
The Group has adopted a share dealing code for Directors and
applicable employees of the Group for the purpose of ensuring
compliance by such persons with the provisions of the AIM rules
relating to dealings in the Group’s securities (including, in particular,
Rule 21 of the AIM rules). The Directors consider that this share
dealing code is appropriate for a company whose shares are
admitted to trading on AIM. The Group takes proper steps to
ensure compliance by the Directors and applicable employees
with the terms of the share dealing code and the relevant provisions
of the AIM rules (including Rule 21).
Website publication
The Directors are responsible for ensuring the annual report and the
financial statements are made available on a website. Financial
statements are published on the Group’s website in accordance with
legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from legislation
in other jurisdictions. The maintenance and integrity of the Group’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Disclosure of information to auditors
The Directors confirm that, in so far as each Director is aware:
• There is no relevant audit information of which the Group’s auditor
is unaware; and
• The Directors have taken all steps that they ought to have taken
as Directors to make themselves aware of any relevant audit
information and to establish that the Group’s auditor is aware of
that information.
The Directors are responsible for preparing the strategic report,
Directors’ report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared the
consolidated financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and the Parent Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (UK
Accounting Standards and applicable laws). Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs and
profit and loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them
consistently;
• Make judgments and accounting estimates that are reasonable
and prudent;
• State whether applicable IFRSs and UK Accounting Standards
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions, and disclose with reasonable accuracy at any time the
financial position of the Group, and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Auditors
Grant Thornton UK LLP are the appointed auditor of ULS Technology
plc. A resolution to reappoint them as auditors and to authorise the
Directors to agree their remuneration will be placed before the
forthcoming Annual General Meeting of the Company.
Approved by the Board of Directors and signed on its behalf:
Steve Goodall
CEO
ULS Technology plc
John Williams
Finance Director
ULS Technology plc
26 June 2018
Company number: 07466574
26
•
•
•
•
Independent auditor’s report
to the members of ULS Technology plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of ULS Technology plc (the
‘parent company’) and its subsidiaries (the ‘Group’) for the year ended
31 March 2018 which comprise the consolidated income statement,
the consolidated statement of comprehensive income, the
consolidated balance sheet, the consolidated statement of changes in
equity, the consolidated statement of cash flows, notes to the
consolidated financial statements, including a summary of significant
accounting policies, the parent company balance sheet, the parent
company statement of changes in equity, and notes to the parent
company financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been
applied in the preparation of the Group financial statements is
applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union. The financial reporting framework
that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 ‘Reduced
Disclosures Framework’ (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
the financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31 March 2018
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation
to which the ISAs (UK) require us to report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
the Directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the Group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements
are authorised for issue.
Overview of our audit approach
• Overall materiality: £249,000, which represents 5% of the Group’s
profit before taxation, after adding back the exceptional expense
relating to the adjustment to consideration payable on a previous
acquisition;
• The key audit matters were identified as impairment of goodwill
and other intangible assets; and
• We performed a full scope audit covering ULS Technology plc, the
parent company, and its five wholly owned subsidiaries; and targeted
procedures on ULS Technology plc Employee Benefit Trust .
Key audit matters
The graph below depicts the audit risks identified and their relative
significance based on the extent of the financial statement impact and
the extent of management judgement.
the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
High
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our
report. We are independent of the Group and the parent company in
accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
t
c
a
p
m
i
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
i
f
l
a
i
t
n
e
t
o
P
Low
Who we are reporting to
Low
Extent of management judgement
High
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Debt
Investments
Payables
Management override of controls
Employee remuneration
Revenue
Capitalisation of intangible asset development costs
Impairment of goodwill and other intangible assets
ULS Technology Annual Report & Accounts 2018
27
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
Independent auditor’s report
to the members of ULS Technology plc continued
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Key Observations
The calculations and
forecasts used by
management were
considered reasonable.
There have been no
material misstatements
identified within either
the goodwill balances or
other intangible assets
within the consolidated
balance sheet.
Our audit work included, but was not restricted to:
• Obtaining management’s assessment of the relevant CGUs
used in the impairment calculation and comparing this
information to our understanding of the business units and
operating structure of the Group
• Testing the assumptions utilised in the impairment models by
calculation of our own estimates of growth rates and
discount rates to evaluate management’s point estimate
• Challenging management assessment of impairment
indicators relating to intangible assets by inputting less
favourable assumptions into a sensitivity analysis of key
factors, such as revenue and cost growth
• Testing the accuracy of management’s forecasting through a
comparison of budget to actual data and historical variance
trends and checking the cash flows for exceptional or
unusual items or assumptions to consider whether
management has a robust process for assessing impairment
The Group’s accounting policy on impairment of intangible assets
is shown in the principal accounting policies under the sub-
heading “Impairment of non-current assets including goodwill”
and related disclosures are included in notes 10 and 13.
Impairment of goodwill
and other intangible
assets
Management are required to make
an annual assessment to
determine whether the Group’s
goodwill and other intangible
assets, which are valued at
£17.7 million, are impaired.
The process for assessing
whether assets are impaired under
International Accounting Standard
(IAS) 36 Impairments of assets is
complex. It involves determining
the value in use through
forecasting cash flows related to
cash generating units (CGUs) and
the determination of the
appropriate discount rate and
other assumptions to be applied
which are highly judgemental and
can significantly impact the results
of the impairment review.
We therefore identified the
impairment of goodwill and other
intangible assets as a significant
risk, which was one of the most
significant assessed risks of
material misstatement.
We did not identify any key audit matters in respect of the parent company.
28
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit
work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent
Financial statements
as a whole
Performance
materiality used to
drive the extent of
our testing
Communication of
misstatements to
the audit committee
£249,000 which is 5% of the Group’s profit
before taxation, after adding back the
exceptional expense relating to the adjustment
to consideration payable on a previous
acquisition. This benchmark is considered the
most appropriate because it is a key
performance indicator for both management
and users of the financial statements.
Materiality for the current year is higher than
the level that we determined for the year ended
31 March 2017 to reflect the increased revenue
and profitability of the Group.
£186,000 which we based on 5% of net
assets, but reduced it to the level of Group
performance materiality. This benchmark is
considered the most appropriate because the
parent company’s principal activity is that of a
holding company and therefore does not
generate any revenues.
Materiality for the current year is higher than
the level that we determined for the year ended
31 March 2017 to reflect the increased revenue
and profitability of the Group.
75% of financial statement materiality.
75% of financial statement materiality.
£12,450 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£9,300 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall
materiality and the tolerance for potential uncorrected misstatements.
Overall materiality (group)
Overall materiality (parent)
25%
25%
75%
75%
Tolerance for potential uncorrected misstatements
Performance materiality
ULS Technology Annual Report & Accounts 2018
29
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Independent auditor’s report
to the members of ULS Technology plc continued
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a
thorough understanding of the Group's business, its environment and
risk profile and in particular included:
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
• Evaluation by the Group audit team of identified components to
assess the significance of that component and to determine the
planned audit response based on a measure of materiality;
Our opinion on other matters prescribed by
the Companies Act 2006 is unmodified
• Understanding the Group’s internal control environment by
performing process walkthroughs and documenting the controls
covering the Key Audit Matter, revenue, payables, debt and
employee remuneration.;
• Performing full scope audit of the financial statements of the
parent company, ULS Technology plc, which includes 100% of
the Group’s investments;
• Performing a full scope audit of the financial statements of United
Legal Services Limited, United Homes Services Limited, Legal-
Eye Limited and Conveyancing Alliance Limited, the trading
entities within the Group, and Conveyancing Alliance (Holdings)
Limited, an intermediate holding company; and
• Performing targeted procedures on ULS Technology Employee
Benefit Trust, primarily in respect of the shares held in the parent
company at the balance sheet date and share movements during
the period.
Other information
The Directors are responsible for the other information. The other
information comprises the information included in the annual report
set out on pages 1 to 69, other than the financial statements and our
auditor’s report thereon. Our opinion on the financial statements does
not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the Directors’
report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the strategic report and the Directors’ report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report
under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic
report or the Directors’ report.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the parent company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit
30
Responsibilities of Directors for the financial
statements
As explained more fully in the Directors’ responsibilities statement set
out on page 26, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the parent company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Mark Bishop FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
26 June 2018
ULS Technology Annual Report & Accounts 2018
31
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
32
Financial
Statements
34 Consolidated Income Statement
34 Consolidated statement of comprehensive income
35 Consolidated Balance Sheet
36 Consolidated statement of changes in equity
37 Consolidated statement of cash flows
38 Notes to the consolidated financial statements
62 Parent Company Balance Sheet
63 Parent Company statement of changes in equity
64 Notes to the Parent Company financial statements
69 Company information
ULS Technology Annual Report & Accounts 2018
33
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Consolidated Income Statement
for the year ended 31 March 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit before exceptional expenses
Exceptional admin expenses
Operating profit
Finance income
Finance costs
Exceptional finance costs
Profit before tax
Tax expense
Profit for the financial year attributable to the Group’s equity shareholders
Earnings per share from operations
Basic earnings per share (£)
Diluted earnings per share (£)
Notes
1
3
2
5
6
6
7
8
8
2018
£000’s
30,672
(18,192)
12,480
(7,378)
5,102
(2,147)
2,955
6
(135)
(91)
2,735
(769)
1,966
2017
£000’s
22,260
(12,796)
9,464
(5,233)
4,231
(386)
3,845
12
(83)
(318)
3,456
(581)
2,875
0.0305
0.0284
0.0443
0.0421
Consolidated statement of comprehensive income
for the year ended 31 March 2018
Profit for the financial year
Total comprehensive income for the financial year attributable to the owners of the parent
2018
£000’s
1,966
1,966
2017
£000’s
2,875
2,875
34
Consolidated Balance Sheet
as at 31 March 2018
Assets
Non-current assets
Intangible assets
Goodwill
AFS financial assets
Investment in associates
Property, plant and equipment
Long-term receivables
Prepayments
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Capital and reserves attributable to the Group’s equity shareholders
Share capital
EBT reserve
Share premium
Capital redemption reserve
Share based payment reserve
Retained earnings
Total equity
Non-current liabilities
Borrowings
Deferred/contingent consideration
Deferred taxation
Current liabilities
Trade and other payables
Borrowings
Current tax payable
Total liabilities
Total equity and liabilities
Notes
2018
£000’s
2017
£000’s
13
10
11
12
14
16
16
15
16
17
18
20
28
7
19
20
6,720
11,008
100
547
272
200
153
7,064
11,008
100
549
516
200
173
19,000
19,610
55
1,511
2,889
4,455
23,455
259
(527)
4,585
113
267
4,643
9,340
2,750
2,100
747
5,597
6,184
2,000
334
8,518
14,115
23,455
40
1,676
2,242
3,958
23,568
259
–
4,585
113
151
4,145
9,253
3,750
2,613
1,092
7,455
4,229
2,000
631
6,860
14,315
23,568
The financial statements were approved by the Board of Directors on 26 June 2018 and were signed on its behalf by:
Steve Goodall
Chief Executive Officer
ULS Technology plc
Company number: 07466574
John Williams
Finance Director
ULS Technology plc
ULS Technology Annual Report & Accounts 2018
35
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
Consolidated statement of changes in equity
for the year ended 31 March 2018
Capital
redemption
reserve
£000’s
Share-based
payments
reserve
£000’s
Retained
earnings
£000’s
Share
premium
£000’s
4,585
–
–
–
–
–
–
4,585
4,585
–
–
–
–
–
–
–
–
113
–
–
–
–
–
–
113
113
–
–
–
–
–
–
–
–
4,585
113
Total
Equity
£000’s
7,185
2,875
2,875
–
72
(879)
(807)
9,253
2,148
2,875
2,875
1
–
(879)
(878)
4,145
4,145
9,253
1,966
1,966
–
(293)
–
277
(1,452)
(1,468)
4,643
1,966
1,966
(1,050)
205
141
277
(1,452)
(1,879)
9,340
80
–
–
(1)
72
–
71
151
151
–
–
–
(25)
141
–
–
116
267
Balance at 1 April 2016
Profit for the year
Total comprehensive income
Exercise of options
Share-based payments
Payment of dividends
Total transactions with owners
Balance at 31 March 2017
Balance at 1 April 2017
Profit for the year
Total comprehensive income
Purchase of shares by EBT
Exercise of options
Share-based payments
Deferred taxation share options
Payment of dividends
Total transactions with owners
Share
capital
£000’s
259
–
–
–
–
–
–
259
259
–
–
–
–
–
–
–
–
Balance at 31 March 2018
259
EBT
reserve
£000’s
–
–
–
–
–
–
–
–
–
–
–
(1,050)
523
–
–
–
(527)
(527)
36
Consolidated statement of cash flows
for the year ended 31 March 2018
Cash flow from operating activities
Profit for the financial year before tax
Finance income
Finance costs
Loss on disposal of plant and equipment
Share of loss from associate
Amortisation
Depreciation
Share-based payments
Tax paid
Changes in working capital
Increase in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash inflow from operating activities
Cash flow from investing activities
Purchase of intangible software assets
Purchase of property, plant and equipment
Disposal of property, plant and equipment
Acquisition of subsidiary (net of cash acquired)
Payment of deferred consideration
Interest received
Net cash used in investing activities
Cash flow from financing activities
Dividends paid
Interest paid
New loans
Repayment of loans
Shares Traded by EBT
Net cash generated (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
Notes
5
6
12
13
14
13
14
28
5
32
6
20
20
2018
£000’s
2,735
(6)
226
–
2
1,014
274
141
(1,134)
3,252
(15)
185
2,431
5,853
(670)
(30)
–
–
(1,080)
6
(1,774)
(1,452)
(135)
–
(1,000)
(845)
(3,432)
647
2,242
2,889
Restated
2017
£000’s
3,456
(12)
401
1
26
599
271
72
(625)
4,189
(18)
(246)
(386)
3,539
(642)
(281)
4
(6,989)
(1,080)
12
(8,976)
(879)
(83)
7,000
(2,140)
–
3,898
(1,539)
3,781
2,242
ULS Technology Annual Report & Accounts 2018
37
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the consolidated financial statements
Principal accounting policies
Basis of preparation
The Consolidated Financial Statements of ULS Technology plc and its subsidiaries (together, 'the Group') have been prepared in accordance with
International Financial Reporting Standards ('IFRS'), as adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
IFRS is subject to amendment and interpretation by the International Accounting Standards Board ('IASB') and the IFRS Interpretations
Committee, and there is an on-going process of review and endorsement by the European Commission. These accounting policies comply with
each IFRS that is mandatory for accounting periods ending on 31 March 2017.
The financial statements have been prepared under the historical cost convention. The principal accounting policies set out below have been
consistently applied to all periods presented.
Going Concern
The Board and Key Management routinely plan future activities including forecasting future cash flows. They have reviewed their plans and
formed a judgement that the Group has adequate resources to continue as a going concern for at least 12 months from the date of signing of the
financial statements. In arriving at this judgement, the Directors have reviewed the cash flow projections of the Group for the foreseeable future
and have considered existing commitments together with financial resources available to the Group.
Basis of consolidation
The Consolidated Financial Statements incorporate the results of ULS Technology plc ('the Company') and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so
as to obtain benefits from its activities and the ability to use its power over the investee to affect the returns from the investee.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement from the
effective date of acquisition and up to the effective date of disposal, as appropriate. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Business combinations
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 31 March 2018. All subsidiaries have a
reporting date of 31 March.
The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions
between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of
acquisition, or up to the effective date of disposal, as applicable.
Acquisition-related costs are expensed as incurred.
Interest in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.
Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control
over those policies.
The post-tax results of associates are incorporated in the Group’s results using the equity method of accounting. Under the equity method,
investments in associates are carried in the Consolidated Balance Sheet at cost as adjusted for post-acquisition changes in the Group’s share
of the net assets of the associate, less any impairment in the value of investment. Losses of associates in excess of the Group’s interest in that
associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of the joint venture or associate.
Employee benefit trust
The Directors consider that the Employee Benefit Trust (EBT) is under the de facto control of the Company as the trustees look to the Directors to
determine how to dispense the assets. Therefore the assets and liabilities of the EBT have been consolidated into the Group accounts. The EBT’s
investment in the Company’s shares is eliminated on consolidation and shown as a deduction against equity. Any assets in the EBT will cease to
be recognised in the Consolidated Balance Sheet when those assets vest unconditionally in identified beneficiaries.
38
Revenue recognition
Revenue recognised represents the value of all services provided during the period at selling price exclusive of Value Added Tax.
Revenue is recognised on completion of the legal services. For a conveyancing transaction, this will be on completion of the property transaction
and if the transaction falls through prior to completion no fees will be payable by the consumer to the solicitor or by the solicitor (customer) to the
Company or by the Company to the introducer (supplier).
The proportion of the fee that the Company receives on completion of a conveyancing transaction that is remitted to a third party (introducer),
such as a mortgage broker or intermediary, is recognised as a cost of sale. This is because the Group bears most of the credit risk, delivers the
service and sets the pricing.
Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses related to transactions with other components of the same entity), whose operating results are regularly
reviewed by the entity’s Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available. The Chief Operating Decision Maker has been identified as the Board of
Executive Directors, at which level strategic decisions are made.
Details of the Group’s reporting segments are provided in note 1.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred.
Exceptional operating expenses are non-recurring in nature and of a material size. Items are classified as exceptional to aid the understanding of
the underlying performance of the business.
Finance income and costs
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates the
interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or
payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately
recognised. Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less
accumulated impairment losses, if any.
Other intangible assets
Capitalised development expenditure
An internally-generated intangible asset arising from development expenditure is recognised if, and only if, all of the following criteria have
been demonstrated:
• The technical feasibility of completing the intangible asset so that it will be available for use of sale;
• The intention to complete the intangible asset and use or sell it;
• The ability to use or sell the intangible asset;
• How the intangible asset will generate probable future economic benefits;
• The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• The ability to measure reliably the expenditure attributable to the intangible asset during its development.
• The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised,
development expenditure is expensed in the period in which it is incurred.
Amortisation is calculated so as to write off the cost of an asset, net of any residual value, over the estimated useful life of that asset as follows:
Capital development expenditure – Straight line over 4–7 years
Development expenditure not meeting the criteria to be capitalised totalled £28,000 (2017: £66,000).
ULS Technology Annual Report & Accounts 2018
39
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the consolidated financial statements
Principal accounting policies continued
Brand names and customers lists
Brand names and customer lists acquired in a business combination that qualify for separate recognition are recognised as intangible assets
at their fair values.
Amortisation is calculated so as to write off the cost of an asset on a straight line basis, net of any residual value, over the estimated useful life
of that asset as follows:
Customer and introducer relationships – 10 to 12 years
Brand names – 10 years
Acquired technology platform – 9 years
The estimated useful economic life of customers acquired in the acquisition of Legal Eye has been reduced from 20 years to 10 years after
reviewing the levels of churn since acquisition. The effect of this change in the year was to increase the amortisation charge by £48,000 net
of tax.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and less any recognised impairment losses. Cost includes
expenditure that is directly attributable to the acquisition or construction of these items. Subsequent costs are included in the asset’s carrying
amount only when it is probable that future economic benefits associated with the item will flow to the Group and the costs can be measured
reliably. All other costs, including repairs and maintenance costs, are charged to the Consolidated Income Statement in the period in which they
are incurred.
Depreciation is provided on all property, plant and equipment and is calculated on a straight-line basis as follows:
Leasehold improvements – Over the life of the lease
Computer equipment – 25% on cost
Fixtures and fittings – 25% on cost
Depreciation is provided on cost less residual value over the asset’s useful life. The residual value, depreciation methods and useful lives are
annually reassessed.
Each asset’s estimated useful life has been assessed with regard to its own physical life limitations and to possible future variations in those
assessments. Estimates of remaining useful lives are made on a regular basis for all equipment, with annual reassessments for major items.
Changes in estimates are accounted for prospectively.
The gain or loss arising on disposal or scrapping of an asset is determined as the difference between the sales proceeds, net of selling costs,
and the carrying amount of the asset and is recognised in the Consolidated Income Statement.
Impairment of non-current assets including goodwill
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units)
that is expected to benefit from the synergies of the combination. Each unit to which goodwill is allocated represents the lowest level within the
entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the
unit may be impaired.
At each Balance Sheet reporting date the Directors review the carrying amounts of the Group’s tangible and intangible assets, other than
goodwill, to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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 of the time value of money and the risks
specific to the asset for which the 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
or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its carrying amount,
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit
pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
40
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate
of its recoverable amount, but so 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 or cash-generating unit in prior periods. A reversal of an impairment loss is recognised
in the Consolidated Income Statement immediately.
Inventories
Work in progress is valued on the basis of direct costs attributable to jobs under completion at the reporting date.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with original
maturities of three months or less.
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs. Financial assets and financial liabilities are
measured subsequently as described below.
Financial assets
The Group classifies its financial assets as ‘loans and receivables’ and available for sale (AFS) financial assets. The Group assesses at each
Balance Sheet reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after the Balance Sheet date, which are classified as non-current assets.
Loans and receivables are classified as ‘trade and other receivables’ in the Consolidated Balance Sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. Significant financial difficulty, high probability of bankruptcy or a financial
reorganisation and default are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between
the asset’s carrying amount and the present value of the estimated future cash flows discounted at original effective interest rate. The loss is
recognised in the Income Statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off are credited in the Consolidated Income Statement.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred.
AFS financial assets
AFS financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other
categories of financial assets. The Group’s AFS financial assets includes the Group’s 15% share in Financial Eye Limited.
The equity investment in Financial Eye Limited is measured at cost less any impairment charges, as its fair value cannot currently be estimated
reliably. Impairment charges are recognised in profit or loss.
Financial liabilities
The Group’s financial liabilities include trade and other payables, borrowings and contingent consideration.
Trade payables and borrowings are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Contingent consideration is measured at fair value at each reporting date with movements recognised as a profit or loss.
A financial liability is de-recognised when it is extinguished, discharged, cancelled or expires.
Current taxation
Current taxation for each taxable entity in the Group is based on the taxable income at the UK statutory tax rate enacted or substantively enacted
at the Balance Sheet reporting date and includes adjustments to tax payable or recoverable in respect of previous periods.
ULS Technology Annual Report & Accounts 2018
41
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the consolidated financial statements
Principal accounting policies continued
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial information. However, if the deferred tax arises from the initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet reporting date and
are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated Income Statement, except where
they relate to items that are charged or credited directly to equity or other comprehensive income in which case the related deferred tax is also
charged or credited directly to equity or other comprehensive income.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Employment benefits
Provision is made in the financial information for all employee benefits. Liabilities for wages and salaries, including non-monetary benefit
and annual leave obliged to be settled within 12 months of the Balance Sheet reporting date, are recognised in accruals.
The Group’s contributions to defined contribution pension plans are charged to the Consolidated Income Statement in the period to which the
contributions relate.
Leasing
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
Equity and reserves
Equity and reserves comprises the following:
•
•
•
•
•
•
'Share capital' represents amounts subscribed for shares at nominal value.
'EBT reserve' represents cost of shares bought and sold through the Employee Benefit Trust.
'Share premium' represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
'Capital redemption reserve' represents the nominal value of re-purchased share capital.
'Share-based payment reserve' represents the accumulated value of share-based payments expensed in the profit and loss.
'Retained earnings' represents the accumulated profits and losses attributable to equity shareholders.
Share-based employee remuneration
The Group operates share option based remuneration plan for its employees. None of the Group’s plans are cash settled.
Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by reference to
the fair value of the equity instruments granted. This fair value is appraised at the grant date using the Black-Scholes model.
All share-based remuneration is ultimately recognised as an expense in profit and loss with a corresponding credit to retained earnings.
The expense is allocated over the vesting period. Other than the requirement to be an employee at the point of exercise there are no other
vesting requirements and all share options are expected to become exercisable. Subsequent revisions to this give rise to an adjustment to
cumulative share-based compensation which is recognised in the current period. The number of vested options ultimately exercised by
holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs, are allocated to share capital up to
the nominal (par) value of the shares issued with any excess being recorded as share premium.
Restatement of prior year Consolidated statement of cash flows
The 2017 numbers in the Consolidated statement of cash flow has been restated, Please see page 25 for further details.
42
Contingent liabilities
No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as
contingent liabilities unless the outflow of resources is remote.
New and amended International Financial Reporting Standards adopted by the Group
There were no new standards, amendments to standards or interpretations which are effective for the first time this year applicable to or which
had a material effect on the Group.
International Financial Reporting Standards in issue but not yet effective
At the date of authorisation of these Consolidated Financial Statements, the IASB and IFRS Interpretations Committee have issued standards,
interpretations and amendments which are applicable to the Group.
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these Consolidated Financial
Statements, the following may have an impact going forward:
New/Revised International Financial
Reporting Standards
IFRS 9
Financial Instruments:
Classification and Measurement
Effective date:
annual periods
beginning on or after:
1 January 2018
IFRS 15
Revenue from Contracts with Customers 1 January 2018
IFRS 16
Leases
1 January 2019
EU adopted
Impact on Group
Yes
Yes
Yes
No material impact
No material impact
Most operating leases will be
capitalised on the Balance Sheet
IFRS 9 ‘Financial Instruments’ will supersede IAS 39 ‘Financial Instruments: Recognition and Measurement’ and is effective for annual periods
beginning on or after 1 January 2018. IFRS 9 covers classification and measurement of financial assets and financial liabilities, impairment of
financial assets and hedge accounting. The Group expects to adopt IFRS 9 on 1 April 2018. Management note that given current operations the
anticipated impact is expected to be limited to a review of expected credit losses on receivables, although the impact is not expected to be
material. At transition the Group will take the choice not to restate comparatives.
IFRS 15 ‘Revenue from Contracts with Customers’ will supersede IAS 18 ‘Revenue’, and is effective for annual periods beginning on or after
1 January 2018. IFRS 15 provides a single model for accounting for revenue arising from contracts with customers, focusing on the identification
and satisfaction of performance obligations. The Group expects to adopt IFRS 15 on 1 April 2018. The Group has evaluated the impact of IFRS
15 and determined that it will not have a material effect on the financial statements.
IFRS 16 ‘Leases’ provides a new model for lessee accounting in which all leases, other than short-term and small-ticket-item leases, will be
accounted for by the recognition on the Balance Sheet of a right-to-use asset and a lease liability, and the subsequent amortisation of the right-
to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after 1 January 2019.The Group expects to adopt
IFRS 16 on 1 April 2019. The requirements of IFRS 16 will extend to the Group’s operating leases for land & buildings (note 24) and as such the
Group expects a material impact with these leases being recognised on the Consolidated Balance Sheet.
There are no other standards and interpretations in issue but not yet adopted that the Directors anticipate will have a material effect on the
reported income or net assets of the Group.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates and
judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the Balance
Sheet reporting date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
ULS Technology Annual Report & Accounts 2018
43
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the consolidated financial statements
Principal accounting policies continued
Estimates
The following are the significant estimates used in applying the accounting policies of the Group that have the most significant effect on the
financial statements:
Fair value of intangible assets acquired in business combinations
In determining the fair value of intangible assets acquired in business combinations, estimates have been used by a specialist valuation
company on behalf of management, using information supplied by management, in order to determine the fair values using appropriate
modelling techniques.
Impairment review
The Group assesses the useful life of intangible assets to determine if there is a definite or indefinite period of useful economic life; this requires
the exercise of judgement and directly affects the amortisation charge on the asset. The Group tests whether there are any indicators of
impairment at each reporting date. Discounted cash flows are used to assess the recoverable amount of each cash generating unit, and this
requires estimates to be made. If there is no appropriate method of valuation of an intangible asset, or no clear market value, management
will use valuation techniques to determine the value. This will require assumptions and estimates to be made.
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets.
Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment.
Contingent consideration arising on business combinations
Contingent consideration is payable based on the future performance of an acquisition to the former shareholders. The likelihood of payment
and ultimate value payable are a matter of judgement.
Contingent Consideration occurs in the circumstances where an element of the consideration for an acquired business is determined based
upon one or more criteria that are achievable in future periods. The most commonly applied is the achievement of forecast profitability. A defined
value of consideration will be payable based on such achievement, and any underperformance against those targets will be credited back to
the Consolidated Income Statement.
Judgements
The following are the significant judgements used in applying the accounting policies of the Group that have the most significant effect on the
financial information:
Capitalisation of development expenditure
The Group applies judgement in determining whether internal research and development projects meet the qualifying criteria set out in IAS 38 for
the capitalisation of development expenditure as internally generated intangible assets. The particular uncertainty and judgment centres around
whether a project will be commercially successful, particularly in the pre-revenue phase.
44
1. Segmental reporting
Operating segments
Management identifies its operating segments based on the Group’s service lines, which represent the main product and services provided by
the Group. The Group of similar services which makes up the Group’s Comparison Services segment represents more than 95% of the total
business. Additionally the Board reviews Group consolidated numbers when making strategic decisions and, as such, the Group considers that
it has one reportable operating segment. All sales are made in the UK.
Revenues from customers who contributed more than 10% of revenues were as follows:
Customer 1
Customer 2
Customer 3
2. Operating profit
Operating profit is stated after charging:
Fees payable to the Group’s auditors for the audit of the annual financial statements
Fees payable to the Group’s auditors and its associates for other services to the Group:
– Audit of the accounts of subsidiaries
– Tax compliance services
– Tax advisory services
– Audit-related assurance services
Amortisation
Depreciation
Operating lease rentals payable:
– Office and equipment
3. Exceptional administrative expenses
Acquisition expenses (including abortive costs)
Adjustment to expected contingent consideration
2018
£000’s
5,854
4,255
2,890
2017
£000’s
3,523
2,785
2,606
2018
£000’s
2017
£000’s
27
21
–
3
15
1,014
274
68
2018
£000’s
85
2,062
2,147
27
17
7
2
–
599
271
53
2017
£000’s
386
–
386
Part of the consideration for CAL is contingent on their performance in the period between acquisition and 31 March 2019. The Board
periodically reviews CAL’s performance and updates its estimate of the final consideration payable. The adjustment to the expected contingent
consideration in the table above reflects the fact that CAL have performed above initial expectations and the Board have therefore increased its
estimate of the final consideration payable. The estimate is now at the maximum payable and therefore there should be no further increases.
ULS Technology Annual Report & Accounts 2018
45
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
4. Directors and employees
The aggregate payroll costs of the employees, including both management and Executive Directors, were as follows:
Staff costs
Wages and salaries
Social security costs
Pension costs
Average monthly number of persons employed by the Group during the year was as follows:
By activity:
Production
Distribution
Administrative
Management
Remuneration of Directors
Emoluments for qualifying services
Pension contributions
Social security costs
Highest paid Director
Remuneration
The highest paid Director received share options as shown in the Directors’ report on page 25.
A breakdown of the emoluments for Directors can be found in the Directors’ report on page 24.
Key management personnel are identified as the Executive Directors and Steve Goodall.
2018
£000’s
4,225
573
223
5,021
2017
£000’s
3,115
471
51
3,637
2018
Number
2017
Number
25
31
19
12
87
22
20
18
10
70
2018
£000’s
2017
£000’s
621
21
74
716
628
2
89
719
2018
£000’s
2017
£000’s
224
251
46
Notes to the consolidated financial statements continued Remuneration of key management
Emoluments for qualifying services
Pension contributions
Social security costs
2018
£000’s
2017
£000’s
887
22
90
999
628
2
89
719
No share options have been issued to Directors during the 2018 financial year; see page 25 and 322,500 share options were issued to
Steve Goodall.
323,639 share options have been exercised during the year by Ben Thompson, (2017: none).
Payments of pensions contributions have been made on behalf of Directors (see page 24).
Share option expense relating to key management other than Directors included in the above table was £21,000 (2017: £nil)
5. Finance income
Bank interest
6. Finance costs
Interest on borrowings
Exceptional Finance costs
NPV adjustment of deferred consideration
2018
£000’s
6
2018
£000’s
(135)
(91)
(226)
2017
£000’s
12
2017
£000’s
(83)
(318)
(401)
ULS Technology Annual Report & Accounts 2018
47
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
7. Taxation
Analysis of credit in year
Current tax
United Kingdom
2018
£000’s
2017
£000’s
UK corporation tax on profits for the year
850
608
Deferred tax
United Kingdom
Origination and reversal of temporary differences
Corporation tax charge
The differences are explained as follows:
Profit before tax
UK corporation tax rate
Expected tax expense
Adjustments relating to prior year
Adjustment for changes in tax rate
Adjustment for additional R&D tax relief
Adjustment for non-deductible expenses
– Expenses not deductible for tax purposes
– Other permanent differences
Income tax charge
Deferred tax
Deferred tax liabilities at applicable rate for the period of 19%:
Opening balance at 1 April
– Property, plant and equipment and capitalised development spend temporary differences
– Deferred tax recognised on acquisitions of Legal Eye and Conveyancing Alliance (note 28)
– Deferred tax on share options
Deferred tax liabilities – closing balance at 31 March
(81)
769
2018
£000’s
2,735
19%
520
(56)
–
(140)
461
(16)
769
(27)
581
2017
£000’s
3,456
20%
691
(113)
(2)
(159)
164
–
581
2018
£000’s
2017
£000’s
1,092
119
(96)
(368)
747
438
10
644
–
1,092
48
Notes to the consolidated financial statements continued 8. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to Ordinary Shareholders by the weighted average number of
Ordinary Shares outstanding during the year.
Basic earnings per share
Total basic earnings per share
Total diluted earnings per share
2018
£
0.0305
2017
£
0.0443
0.0284
0.0421
The earnings and weighted average number of Ordinary Shares used in the calculation of basic earnings per share were as follows:
Earnings used in the calculation of total basic and diluted earnings per share
Number of shares
2018
£000’s
1,966
2017
£000’s
2,875
2018
Number
2017
Number
Weighted average number of Ordinary Shares for the purposes of basic earnings per share
64,549,992
64,828,057
Taking the Group’s share options and warrants into consideration in respect of the Group’s weighted average number of ordinary shares for the
purposes of diluted earnings per share, is as follows:
Number of shares
Dilutive (potential dilutive) effect of share options, conversion shares and warrants
2018
Number
2017
Number
4,589,034
3,542,525
Weighted average number of ordinary shares for the purposes of diluted earnings per share
69,139,026
68,370,582
9. Subsidiaries
Details of the Group’s subsidiaries are as follows:
Name of subsidiary
Principal activity
United Legal
Services Limited
United Home
Services Limited
Development and hosting of internet based software
applications for legal services businesses
Development and hosting of internet based software
applications for property services businesses
Legal-Eye Limited
Compliance consultancy services for solicitors
Conveyancing Alliance
(Holdings) Limited
Intermediary non-trading holding company
Class of
shares
Place of
incorporation
and operation
Ordinary
England & Wales
% ownership held
by the Group
2018
100%
2017
100%
Ordinary
England & Wales
100%
100%
Ordinary
Ordinary
England & Wales
England & Wales
100%
100%
100%
100%
Conveyancing
Alliance Limited
Development and hosting of internet based software
applications for legal services businesses
Ordinary
England & Wales
100%
100%
ULS Technology Annual Report & Accounts 2018
49
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
10. Goodwill
Opening value at 1 April
Acquired in the year (see note 28)
Closing value at 31 March
Goodwill split by CGU is as follows:
Core
Legal Eye
CAL
2018
£000’s
11,008
–
11,008
2018
£000’s
3,297
1,227
6,484
11,008
2017
£000’s
4,524
6,484
11,008
2017
£000’s
3,297
1,227
6,484
11,008
The recoverable amounts of intangible assets and goodwill was determined using value-in-use calculations, based on cash flow projections
from a formally approved 12 month forecast which has been extrapolated into perpetuity. A growth rate of 2% has been applied to extrapolate
the cash flows by reference to the long-term growth rate of the UK economy. The pre-tax discount rate for each CGU was in the range 12.0%
to 15.6% which reflecting current market assessments of the time value of money and specific risks.
The analysis performed calculates that the recoverable amount of each CGU’s assets exceeds their carrying value, as such no impairment
was identified. For the Legal Eye CGU the excess of recoverable amount over carrying value was £189,000. If the pre-tax discount rate was
increased by or the growth rate reduced by one percentage point then the recoverable amount would equal the carrying value. The Board
have also reviewed the key assumptions in the forecast and the risks in the business. Margins are expected to remain consistent and the
Board considers there to be no significant customer concentration. For all other CGUs there is significant headroom.
The Legal Eye CGU is increasingly becoming indistinct from the Core CGU with resource being shared and a joint product offering in terms
of ULS Complete (see page 4). The Directors have judged that Legal Eye remains a distinct CGU but will continue to evaluate that on an
ongoing basis.
11. AFS financial assets
Opening value at 1 April
Closing value at 31 March
2018
£’000
100
100
2017
£’000
100
100
The Group acquired 15% of Financial Eye on 27 February 2015 as a separately identifiable part of the transaction in which Legal Eye was acquired.
12. Investment in associates
Opening value at 1 April
Share of losses for the year
Closing value at 31 March
2018
£’000
549
(2)
547
2017
£’000
575
(26)
549
The Group acquired 35% of Homeowners Alliance Ltd on 29 February 2016. Homeowners Alliance Ltd’s place of incorporation and operation
is in the UK.
The associate is not material to the Group’s results.
50
Notes to the consolidated financial statements continued 13. Intangible assets
Cost
At 1 April 2016
Additions
Acquired within business combination (note 28)
Disposals
At 31 March 2017
Additions
Disposals
At 31 March 2018
Accumulated amortisation
At 1 April 2016
Charge
Acquired within business combination (note 28)
Disposals
At 31 March 2017
Charge
Disposals
At 31 March 2018
Net book value
At 1 April 2016
At 31 March 2017
At 31 March 2018
Amortisation is included within administrative expenses.
Capitalised
development
expenditure
£000’s
Acquired
technology
platform
£000’s
Customer and
Introducer
relationships
£000’s
Brands
£000’s
Total
£000’s
2,675
642
130
(29)
3,418
670
–
4,088
929
395
61
(29)
1,356
474
–
1,830
1,746
2,062
2,258
–
–
1,117
–
1,117
–
–
1,071
–
2,548
–
3,619
–
–
226
–
342
–
568
–
–
3,972
642
4,137
(29)
8,722
670
–
1,117
3,619
568
9,392
–
36
–
–
36
124
–
160
–
1,081
957
73
135
–
–
208
359
–
567
998
3,411
3,052
25
33
–
–
58
57
–
1,027
599
61
(29)
1,658
1,014
–
115
2,672
201
510
453
2,945
7,064
6,720
ULS Technology Annual Report & Accounts 2018
51
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
14. Property, plant and equipment
Cost
At 1 April 2016
Additions
Acquired within business combination (note 28)
Disposals
At 31 March 2017
Additions
Disposals
At 31 March 2018
Accumulated depreciation
At 1 April 2016
Charge
Acquired within business combination (note 28)
Disposals
At 31 March 2017
Charge
Disposals
At 31 March 2018
Net book value
At 1 April 2016
At 31 March 2017
At 31 March 2018
15. Inventories
Work in progress
52
Leasehold
improvements
£000’s
Computer
equipment
£000’s
Fixtures
and fittings
£000’s
569
–
–
–
569
–
–
569
292
119
–
–
411
119
–
530
277
158
39
429
280
40
(130)
619
30
(48)
601
267
136
20
(130)
293
139
(48)
384
162
326
217
84
1
8
(9)
84
–
–
84
38
16
2
(4)
52
16
–
68
46
32
16
Total
£000’s
1,082
281
48
(139)
1,272
30
(48)
1,254
597
271
22
(134)
756
274
(48)
982
485
516
272
2018
£’000
55
2017
£’000
40
Notes to the consolidated financial statements continued 16. Trade and other receivables
Current assets
Trade receivables
Other receivables
Pre-payments
Non-current assets
Pre-payments
Long-term receivables (loans to associate)
The Directors consider the carrying value of trade and other receivables is approximate to its fair value.
Details of the Group’s exposure to credit risk is given in Note 21.
17. Cash and cash equivalents
Cash at bank (GBP)
2018
£’000
1,017
307
187
1,511
153
200
353
2017
£’000
1,179
282
215
1,676
173
200
373
2018
£’000
2,889
2017
£’000
2,242
At March 2018 and 2017 all significant cash and cash equivalents were deposited with major clearing banks in the UK with at least an ‘A’ rating.
18. A) Share capital
Allotted, issued and fully paid
The Company has one class of Ordinary share which carries no right to fixed income nor has any preferences or restrictions attached.
Ordinary shares of £0.004 each
2018
No
64,828,057
64,828,057
£000’s
259
259
2017
No
64,828,057
64,828,057
£000’s
259
259
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one class of share.
Shares issued and fully paid
Beginning of the year
New shares issue
Shares issued and fully paid
During the year the Company has not issued any new ordinary shares (2017: no shares issued).
2018
Number
2017
Number
64,828,057
64,828,057
–
–
64,828,057
64,828,057
ULS Technology Annual Report & Accounts 2018
53
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
18. B) Share-based payments
Ordinary share options:
The Group operates an EMI share option scheme to which the Executive Directors and employees of the Group may be invited to participate
by the remuneration committee. Options are exercisable at a price equal to the closing price of the Company’s share on the day prior to the date
of grant. The options vest in three equal tranches, three, four and five years after date of grant. The options are settled in equity once exercised.
Where the individual limits for an EMI scheme the options will be treated as unapproved but within the same scheme rules.
If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves
the Group before the options vest.
Options were valued using the Black-Scholes option-pricing model. The following table shows options issued which were outstanding as at
31 March 2018:
Date of grant
18 August 2014
28 November 2014
30 March 2015
21 August 2015
4 March 2016
7 November 2016
21 December 2016
2 May 2017
Exercise
price (£)
Share price at
date of grant (£)
Options in issue
as 31 March 2018
0.4000
0.3950
0.4750
0.5350
0.5600
0.7025
0.7675
1.0600
0.4800
0.3950
0.4750
0.5350
0.5600
0.7025
0.7675
1.0600
722,992
647,279
647,279
77,670
64,828
595,576
1,231,661
322,500
The Group recognised total expenses of £141,000 (2017: £72,000) related to share options accounted for as equity-settled share-based payment
transactions during the year.
A reconciliation of option movements over the year to 31 March 2018 is shown below:
As at 31 March 2018
As at 31 March 2017
Number of
options
4,552,364
322,500
(47,465)
(517,614)
4,309,785
Weighted average
exercise price
£
0.56
1.06
0.60
0.40
0.62
Number of
options
3,178,218
1,853,127
(466,036)
(12,945)
4,552,364
Weighted average
exercise price
£
0.43
0.76
0.44
0.40
0.56
Outstanding at 1 April
Granted
Forfeited prior to vesting
Exercised
Outstanding at 31 March
54
Notes to the consolidated financial statements continued 19. Trade and other payables
Trade payables
PAYE and social security
VAT
Other creditors
Accruals and deferred income
Deferred/contingent consideration
20. Borrowings
Secured – at amortised cost
– Bank loan
Current
Non-current
Reconciliation of liabilities arising from financing activites
Balance at 1 April 2017
Loan repayments
Subtotal
Balance at 31 March 2018
2018
£000’s
1,942
126
725
27
789
2,575
6,184
2017
£000’s
2,039
100
586
21
494
989
4,229
2018
£000’s
2017
£000’s
4,750
4,750
2,000
2,750
4,750
5,750
5,750
2,000
3,750
5,750
Bank loans
Total debt
£'000
5,750
(1,000)
£'000
5,750
(1,000)
4,750
4,750
Summary of borrowing arrangements:
•
In December 2016, it took out a five year term loan for £5 million and a £2 million revolving cash flow facility. Both have a current interest rate
of 1.55% above LIBOR. The term loan is subject to repayments of £250,000 plus accrued interest quarterly. At the end of the financial period
£1 million was drawn down on the revolving cash flow facility.
• Loans are secured by way of fixed and floating charges over all assets of the Group.
• Amounts shown represent the loan principals; accrued interest is recognised within accruals – any amounts due at the reporting date are
paid within a few days.
ULS Technology Annual Report & Accounts 2018
55
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
21. Financial instruments
Classification of financial instruments
The Group has AFS financial assets (see note 11) which are measured at cost less impairment cost.
The tables below set out the Group’s accounting classification of each class of its financial assets and liabilities.
Financial assets
Loans and receivables (note 16)
AFS asset (note 11/12)
Cash and cash equivalents (note 17)
Loans and other receivables
2018
£000’s
1,524
647
2,889
5,060
2017
£000’s
1,661
649
2,242
4,552
The investment in HomeOwners Alliance Limited represents a 35% equity interest in an unlisted company acquired in 2016. The investment in
Financial Eye Limited represents a 15% equity interest in an unlisted company acquired in 2015. All of the above financial assets carrying values
are approximate to their fair values, as at 31 March 2018 and 2017.
Financial liabilities
Financial liabilities measured at amortised cost (note 22)
Borrowings (note 20)
Measured at amortised cost
2018
£000’s
2,758
4,750
7,508
2017
£000’s
2,554
5,750
8,304
Current loan instruments are linked to LIBOR with a margin of 1.55% per annum, which is a fairly standard market rate.
Financial assets and financial liabilities measured at fair value in the Consolidated Balance Sheet are grouped into three Levels of a fair value
hierarchy.
The three Levels are defined based on the observability of significant inputs to the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
• Level 3: unobservable inputs for the asset or liability.
The Group carries none of its assets at fair value. The only financial liability carried at fair value is the contingent consideration (carried at fair
value through profit or loss).
The fair value of contingent consideration related to the acquisition of Conveyancing Alliance Holdings Limited (see note 28) is estimated using
a present value technique.
For Conveyancing Alliance Holdings Limited, the £4,674,000 fair value is using as estimated amount of consideration due adjusting for risk and
discounting at 16.2%. The estimated consideration before discounting is £5,272,000. The discount rate used is 16.2%, based on the Group’s
estimated weighted average cost of capital at the reporting date, and therefore reflects the Group’s credit position. Sensitivity analysis using a
+/- 1% change in the discount rate gives a fair value range of £4,643,000 to £4,706,000.
56
Notes to the consolidated financial statements continued Level 3 fair value measurements
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
Balance at 1 April 2017
Acquired through business combination
Payments made
Movement in consideration
Movement in NPV
Balance at 31 March 2018
Contingent consideration
2018
£000’s
3,602
–
(1,080)
1,404
748
4,674
2017
£000’s
1,841
2,523
(1,080)
–
318
3,602
Financial instrument risk exposure and management
The Group’s operations expose it to degrees of financial risk that include liquidity risk, credit risk and interest rate risk.
This note describes the Group’s objectives, policies and process for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented in notes 15, 16, 17, 19, and 20.
Liquidity risk
Liquidity risk is dealt with in note 22 of this financial information.
Credit risk
The Group’s credit risk is primarily attributable to its cash balances and trade receivables. The Group does not have a significant concentration of
risk, with exposure spread over a number of third parties.
All of the Group’s trade and other receivables have been reviewed for indicators of impairment. The Group suffers a very small incidence of credit
losses. However, where management views that there is a significant risk of non-payment, a specific provision for impairment is made and
recognised as a deduction from trade receivables.
Impairment provision
The amount of trade receivables past due but not considered to be impaired at 31 March is as follows:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than one year
Total
2018
£000’s
126
2017
£000’s
99
2018
£000’s
2017
£000’s
74
4
39
12
129
122
10
8
21
161
The credit risk on liquid funds is limited because the third parties are large international banks with a credit rating of at least A.
The Group’s total credit risk amounts to the total of the sum of the receivables and cash and cash equivalents, as described in note 17.
Interest rate risk
The Group has secured debt as disclosed in note 20. The interest on this debt is linked to LIBOR and therefore there is an interest rate risk.
However, the relative amount of debt outstanding is low which limits the risk.
The balances disclosed above represent the principal debt. Interest is paid quarterly, and all interest due has either been paid at each reporting
date, or is paid within a few days of that date – in the latter case, interest accrued is included within accruals.
The Group’s only other exposure to interest rate risk is the interest received on the cash held on deposit, which is immaterial.
ULS Technology Annual Report & Accounts 2018
57
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
22. Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due.
In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities as they fall due.
The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due. The table below shows the
undiscounted cash flows on the Group’s financial liabilities as at 31 March 2018 and 2017, on the basis of their earliest possible contractual maturity.
At 31 March 2018
Trade payables
Other payables
Accruals
Deferred and contingent consideration
Loans
At 31 March 2017
Trade payables
Other payables
Accruals
Deferred and contingent consideration
Loans
Total
£000’s
Within
2 months
£000’s
Within
2–6 months
£000’s
6–12 months
£000’s
1–2 years
£000’s
Greater than
2 years
£000’s
1,942
27
789
5,272
4,917
12,947
1,942
27
789
–
–
2,758
–
–
–
–
1,544
1,544
–
–
–
2,707
534
3,241
–
–
–
2,565
1,051
3,616
–
–
–
–
1,788
1,788
Total
£000’s
Within
2 months
£000’s
Within
2–6 months
£000’s
6–12 months
£000’s
1–2 years
£000’s
Greater than
2 years
£000’s
2,039
21
494
4,553
6,043
13,150
2,039
21
494
–
–
2,554
–
–
–
–
1,562
1,562
–
–
–
1,080
550
1,630
–
–
–
1,453
1,081
2,534
–
–
–
2,020
2,850
4,870
The amounts payable for loans, as presented above, include the quarterly interest payments due in accordance with the terms described in note
20 in addition to the repayment of principal at maturity.
23. Capital management
The Group’s capital management objectives are:
• To ensure the Group’s ability to continue as a going concern; and
• To provide long-term returns to shareholders.
The Group defines and monitors capital on the basis of the carrying amount of equity plus its outstanding loan notes, less cash and cash
equivalents as presented on the face of the Consolidated Balance Sheet and further disclosed in notes 17 and 20.
The Board of Directors monitors the level of capital as compared to the Group’s commitments and adjusts the level of capital as is determined
to be necessary by issuing new shares. The Group is not subject to any externally imposed capital requirements.
These policies have not changed in the year. The Directors believe that they have been able to meet their objectives in managing the capital of
the Group.
58
Notes to the consolidated financial statements continued The amounts managed as capital by the Group for the reporting period under review are summarised as follows:
Total Equity
Cash and cash equivalents
Capital
Total Equity
Borrowings
Financing
Capital-to-overall financing ratio
24. Operating lease arrangements
2018
£000’s
9,340
2,889
12,229
9,340
4,750
14,090
0.87
The Group does not have an option to purchase any of the operating leased assets at the expiry of the lease periods.
Payments recognised as an expense
Minimum lease payments
Non-cancellable operating lease commitments
Not later than 1 year
Later than 1 year and not later than 5 years
25. Financial commitments
There are no other financial commitments.
26. Retirement benefit plans
2018
£000’s
68
2018
£000’s
42
35
77
2017
£000’s
9,253
2,242
11,495
9,253
5,750
15,003
0.77
2017
£000’s
53
2017
£000’s
56
37
93
The Group operates a defined contribution pension scheme for its employees. The pension cost charge represents contributions payable by the
Group and amounted to £223,000 (2017: £51,000).
27. Related party transactions
Directors:
P Opperman
G Wicks
N Hoath (resigned 2 August 2016)
B Thompson
A Weston
J Williams
For remuneration of Directors please see note 4 and the more detailed disclosures in the Directors’ Report on page 24.
Dividends paid to Directors are as follows:
Peter Opperman
Geoff Wicks
Nigel Hoath
Ben Thompson
Andrew Weston
John Williams
2018
£000’s
2017
£000’s
58
1
–
1
27
1
35
1
100
–
17
1
ULS Technology Annual Report & Accounts 2018
59
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
28. Business combinations
During the prior year, the Group acquired 100% of the issued ordinary share capital of Conveyancing Alliance Holdings Limited and its 100%
subsidiary Conveyancing Alliance Limited, companies incorporated in England and Wales:
Principal activity
Conveyancing comparison software and services
Proportion of
voting equity
interest acquired
(%)
Consideration
transferred
100%
10,552,000
Date of
acquisition
19 Dec 16
The primary purpose of the acquisition of Conveyancing Alliance Limited was to enhance the earnings of the Group and its market share in the
conveyancing comparison market.
Consideration transferred
Cash
Contingent consideration
Total consideration
Assets acquired and liabilities recognised at the date of acquisition:
Current assets
Cash and cash equivalents
Trade and other receivables
Non-current assets
Goodwill
Intangible assets
Tangible assets
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax
£000’s
8,029
2,523
10,552
£000’s
1,040
221
6,484
4,076
26
(598)
(697)
10,552
Goodwill is primarily related to growth expectations, expected future profitability, the skill and expertise of Conveyancing Alliance’s workforce and
expected synergies. Goodwill is not expected to be deductible for tax.
The contingent consideration is based on a range of between 0.5 and 1.75 times annualised PBT of Conveyancing Alliance for the period
between completion to 31 March 2018 and also for the 12 months ending 31 March 2019. The undiscounted value of this element of the
consideration has been estimated at £3,473,000. The total undiscounted consideration including that already paid is capped at £13,329,000.
60
Notes to the consolidated financial statements continued Net cash inflow on acquisition of subsidiaries
Consideration paid in cash
Less: cash and cash equivalent balances acquired
2017
£000’s
8,029
(1,040)
6,989
The acquiree was included in the consolidated financial information for the first time in 2017, with revenue of £1,446,000 and a net profit of
£239,000 included. If the acquiree had been in the Group from 1 April 2016, Group revenues for the year ended 31 March 2017 would have
been £26,012,000 and net profit would have been £3,625,000.
Acquisition-related expenses of £212,000 were incurred in the acquisition of Conveyancing Alliance. These are included within exceptional admin
expenses in the consolidated Income Statement for the year ended 31 March 2017.
For further details of the contingent consideration see page 67.
29. Contingent liabilities
The Directors are not aware of any contingent liabilities within the Group or the Company at 31 March 2018 and 2017.
30. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
31. Events after the Balance Sheet date
There have been no reportable subsequent events between 31 March 2018 and the date of signing this report.
32. Dividends paid
Final dividend for the year ended 31 March 2017 of 1.10p (2017: 0.26p) per share
1st Interim dividend 1.15p (2017: 1.10p) per share
Total dividends paid
2018
£000’s
711
741
1,452
2017
£000’s
168
711
879
As well as the dividends paid as shown in the table above, the Board proposes a final dividend of £741,000 (1.15 pence per share) in respect of
the year ended 31 March 2018 and subject to approval at the Annual General Meeting. As the final dividend is declared after the Balance Sheet
date it is not recognised as a liability in these financial statements.
ULS Technology Annual Report & Accounts 2018
61
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
ULS Technology Annual Report & Accounts 2018
Parent Company Balance Sheet
as at 31 March 2018
Assets
Non-current assets
Investments
Non-current receivables
Deferred tax asset
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Capital and reserves attributable to the Group’s equity shareholders
Share capital
Share premium
Capital redemption reserve
Capital contribution reserve
Share-based payment reserve
Opening retained earnings
Profit for the year
Deferred tax on share options
Payment of dividends
Total retained earnings
Total equity
Non-current liabilities
Borrowings
Provisions
Current liabilities
Trade and other payables
Borrowings
Total liabilities
Total equity and liabilities
Notes
2018
£000’s
2017
£000’s
2
3
3
7
5
6
4
5
17,414
17,511
62
172
86
–
17,648
17,597
673
43
716
259
601
860
18,364
18,457
259
4,585
113
–
293
3,621
377
125
(1,452)
2,671
7,921
2,750
2,100
4,850
3,593
2,000
5,593
10,443
18,364
259
4,585
113
77
152
1,569
2,931
–
(879)
3,621
8,807
3,750
2,613
6,363
1,287
2,000
3,287
9,650
18,457
The financial statements were approved by the Board of Directors on 26 June and were signed on its behalf by:
Steve Goodall
Chief Executive Officer
ULS Technology plc
Company number: 07466574
62
Parent Company statement of changes in equity
for the years ended 31 March 2018
Share
capital
£000’s
Share
premium
£000’s
Capital
redemption
reserve
£000’s
Capital
contribution
reserve
£000’s
Share-based
payments
reserve
£000’s
Retained
earnings
£000’s
Balance at 1 April 2016
259
4,585
113
Profit for the year
Total comprehensive income
Share-based payments
Payment of dividends
Total transactions with owners
Balance at 31 March 2017
Balance at 1 April 2017
Profit for the year
Total comprehensive income
Transfer to share-based
payment reserve
Share-based payments
Deferred tax on share options
Payment of dividends
Total transactions with owners
–
–
–
–
–
259
259
–
–
–
–
–
–
–
–
–
–
–
–
4,585
4,585
–
–
–
–
–
–
–
–
–
–
–
–
113
113
–
–
–
–
–
–
–
Balance at 31 March 2018
259
4,585
113
35
–
–
42
–
42
77
77
–
–
(77)
–
–
–
(77)
–
80
–
–
72
–
72
152
152
–
–
77
64
–
–
141
293
Total
Equity
£000’s
6,641
2,931
2,931
114
(879)
(765)
1,569
2,931
2,931
–
(879)
(879)
3,621
8,807
3,621
8,807
377
377
–
–
125
(1,452)
(1,327)
2,671
377
377
–
64
125
(1,452)
(1,263)
7,921
ULS Technology Annual Report & Accounts 2018
63
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the Parent Company financial statements
1. Parent Company accounting policies
Basis of Preparation
The annual financial statements of ULS Technology plc (the Parent Company financial statements) have been prepared in accordance with
Financial Reporting Standard 100 Application of Financial Reporting Requirements ('FRS 100') and Financial Reporting Standard 101 Reduced
Disclosure Framework ('FRS 101').
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, these
financial statements do not include:
• certain comparative information as otherwise required by EU endorsed IFRS;
• certain disclosures regarding the Company’s capital;
• a statement of cash flows;
•
•
the effect of future accounting standards not yet adopted;
the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with the Company’s wholly owned subsidiaries.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures are included
in the Company’s Consolidated Financial Statements. These financial statements do not include certain disclosures in respect of:
•
•
financial instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and
fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value).
As permitted by section 408 of Companies Act 2006, a separate Income Statement for the Company has not been included in these
financial statements.
The principal accounting policies adopted in the preparation of the financial statements as set out below have been consistently applied
to all periods presented.
Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
financial instrument.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs. Financial assets and financial liabilities are
measured subsequently as described below.
Financial assets
The Company classifies its financial assets as ‘loans and receivables’. The Company assesses at each Balance Sheet reporting date whether
there is objective evidence that a financial asset or a group of financial assets is impaired.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after the Balance Sheet date, which are classified as non-current assets.
Loans and receivables are classified as ‘trade and other receivables’ in the Balance Sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all
amounts due according to the original terms of the receivables. Significant financial difficulty, high probability of bankruptcy or a financial
reorganisation and default are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between
the asset’s carrying amount and the present value of the estimated future cash flows discounted at original effective interest rate. The loss is
recognised in the Income Statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off are credited in the Income Statement.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred.
64
Financial liabilities
The Company’s financial liabilities include trade and other payables, borrowings and contingent consideration.
Trade payables and borrowings are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
Contingent consideration is measured at fair value at each reporting date with movements recognised as a profit or loss.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Investments
Investments in subsidiaries are shown within the parent undertaking’s financial statements at cost, less any provision for impairment in value.
Investments in associates are accounted for at cost less impairment in the individual financial statements.
Current taxation
Current taxation for each taxable entity in the Company is based on the taxable income at the UK statutory tax rate enacted or substantively
enacted at the Balance Sheet reporting date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial information. However, if the deferred tax arises from the initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet
reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement, except where they relate
to items that are charged or credited directly to equity or other comprehensive income in which case the related deferred tax is also charged
or credited directly to equity or other comprehensive income.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Employment benefits
Provision is made in the financial information for all employee benefits. Liabilities for wages and salaries, including non-monetary benefit
and annual leave obliged to be settled within 12 months of the Balance Sheet reporting date, are recognised in accruals.
The Company’s contributions to defined contribution pension plans are charged to the Income Statement in the period to which the
contributions relate.
Leasing
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
Equity and reserves
Equity and reserves comprises the following:
•
•
•
•
•
'Share capital' represents amounts subscribed for shares at nominal value.
'Share premium' represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
'Capital redemption reserve' represents the nominal value of re-purchased share capital.
'Share based payment reserve' represents the accumulated value of share-based payments expensed in the profit and loss.
'Retained earnings' represents the accumulated profits and losses attributable to equity shareholders.
ULS Technology Annual Report & Accounts 2018
65
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the Parent Company financial statements continued
1. Parent Company accounting policies continued
Share-based employee remuneration
The Company operates share option based remuneration plan for its employees. None of the Company’s plans are cash settled.
Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by reference
to the fair value of the equity instruments granted. This fair value is appraised at the grant date using the Black-Scholes model.
All share-based remuneration is ultimately recognised as an expense in profit and loss with a corresponding credit to retained earnings.
The expense is allocated over the vesting period. Other than the requirement to be an employee at the point of exercise there are no other
vesting requirements and all share options are expected to become exercisable. Subsequent revisions to this give rise to an adjustment to
cumulative share-based compensation which is recognised in the current period. The number of vested options ultimately exercised by
holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs, are allocated to share capital up
to the nominal (par) value of the shares issued with any excess being recorded as share premium.
Contingent liabilities
No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are
disclosed as contingent liabilities unless the outflow of resources is remote.
2. Investments
The Company holds the issued share capital of the following companies:
Company name
Principal activity
United Legal
Services Limited
United Homes
Services Limited
Development and hosting of internet based software
applications for legal services businesses
Development and hosting of internet based software
applications for property services businesses
Legal-Eye Limited
Compliance consultancy services for solicitors
Conveyancing Alliance
(Holdings) Limited
Conveyancing
Alliance Limited
Home Owners
Alliance Limited
Intermediary non-trading holding company
Development and hosting of internet based software
applications for legal services businesses
Operation of website for home owners and
prospective home owners
Class of
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Financial Eye Limited
Financial compliance consultancy services for solicitors Ordinary
Place of
incorporation
and operation
UK
UK
UK
UK
UK
UK
UK
Home Owners Alliance Limited is considered to be an associate company and is accounted for accordingly.
Cost
As at 1 April 2016
Acquisitions (See notes 12 of the Group accounts)
Share-based payment reserve
As at 31 March 2017
Loan movement
Impairment in value of Legal Eye
Share-based payment reserve
As at 31 March 2018
Investments
in Group
undertakings
£000’s
Investments in
associates
£000’s
Loans to
associates
£000’s
6,212
10,552
72
16,836
–
(200)
3
16,639
575
–
–
575
–
–
–
575
100
–
–
100
100
–
–
200
% ownership held
by the Company
2018
100
100
100
100
100
35
15
2017
100
100
100
100
100
35
15
Total
£000’s
6,887
10,552
72
17,511
100
(200)
3
17,414
The holding value of the investment in Legal-Eye Limited has been reduced after an annual impairment review. For details of the review please
see note 10 in the consolidated accounts.
66
3. Receivables
Current receivables:
Amounts owed by Group undertakings
Other debtors
Prepayments
During the year, other debtors relating to a loan to the EBT were impaired by £250,000.
Non-current receivables:
Prepayments
4. Trade and other payables
Trade payables
Amounts owed to Group undertakings
Social security and other taxes
Accruals
Deferred consideration
5. Borrowings
Current liabilities:
Bank loans
Non-current liabilities:
Bank loans
6. Provisions
Non-current liabilities:
Deferred/contingent consideration
2018
£000’s
12
595
66
673
2018
£000’s
62
2018
£000’s
31
654
29
305
2,574
3,593
2018
£000’s
2,000
2018
£000’s
2,750
2018
£000’s
2,100
2017
£000’s
76
106
77
259
2017
£000’s
86
2017
£000’s
26
63
–
209
989
1,287
2017
£000’s
2,000
2017
£000’s
3,750
2017
£000’s
2,613
ULS Technology Annual Report & Accounts 2018
67
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ULS Technology Annual Report & Accounts 2018
Notes to the Parent Company financial statements continued
7. Share capital
Allotted, issued and fully paid
The Company has one class of Ordinary share which carries no right to fixed income nor has any preferences or restrictions attached.
Ordinary shares of £0.004 each
2018
No
64,828,057
64,828,057
£000’s
259
259
2017
No
64,828,057
64,828,057
£000’s
259
259
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one class of share.
Shares issued and fully paid
Beginning of the year
New shares issue
Shares issued and fully paid
No new shares were issued during the year.
Allotments during the year
Year ended March 2018
Share issue
Year ended March 2017
Share issue
Ordinary share options:
2018
Number
2017
Number
64,828,057
64,828,057
–
–
64,828,057
64,828,057
Number
–
Number
–
Par value
£000’s
–
Par value
£000’s
–
The Company operates a share option scheme to which the Executive Directors and employees of the Group may be invited to participate by the
remuneration committee. Disclosures relating to the Company’s share options are detailed in note 18B to the Group financial statements, there
being no difference between the Company and Group disclosures.
8. Related party transactions
Related party transactions with third parties other than the Company’s subsidiaries are disclosed in note 27 to the Consolidated Financial Statements.
9. Post Balance Sheet events
There have been no reportable subsequent events between 31 March 2018 and the date of signing this report.
10. Dividends paid
Final dividend for the year ended 31 March 2017 of 1.10p (2017: 0.26p) per share
1st Interim dividend 1.15p (2017: 1.10p) per share
Total dividends paid
2018
£000’s
711
741
1,452
2017
£000’s
168
711
879
As well as the dividends paid as shown in the table above, the Board proposes a final dividend of £741,000 (1.15 pence per share) in respect of
the year ended 31 March 2018 and subject to approval at the Annual General Meeting. As the final dividend is declared after the Balance Sheet
date it is not recognised as a liability in these financial statements.
68
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Company information
Directors
Geoff Wicks – Non-Executive Chairman
Steve Goodall – Chief Executive Officer
John Williams – Finance Director
Andrew Weston – Co-founder and IT Director
Peter Opperman – Independent Non-Executive Director
Elaine Bucknor – Independent Non-Executive Director
Nominated adviser & broker:
Numis Securities Limited
The London Stock Exchange
Building
10 Paternoster Square
London
EC4M 7LT
Registered address:
The Old Grammar School
Church Road
Thame
Oxfordshire
OX9 3AJ
Independent auditor:
Grant Thornton UK LLP
3140 Rowan Place
John Smith Drive
Oxford Business Park South
Oxford
OX4 2WB
Company registration number:
07466574
Solicitors:
Dentons UKMEA LLP
One Fleet Place
London
EC4M 7WS
Financial public relations:
Walbrook PR Limited
4 Lombard Street
London
EC3V 9HD
Registrar:
Equiniti Limited
Aspect House
Spencer Road
Lancing
BN99 6DA
ULS Technology Annual Report & Accounts 2018
69
U
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1
8
The Old Grammar School
Church Road, Thame, OX9 3AJ
T: 01844 262392 F: 08432 906959
W: www.ulstechnology.com
E: enquiries@ulstechnology.com