TIDMFST
RNS Number : 6319K
Frontier Smart Technologies Grp Ltd
30 August 2019
For immediate release 30 August 2019
Frontier Smart Technologies Group Limited
('Frontier', the 'Group' or the 'Company')
Half-Year Results
Frontier Smart Technologies Group Limited (AIM: FST), a pioneer
in technologies for Digital Radio and Smart IoT devices, announces
its half-year results for the six months ended 30 June 2019
('H1-2019' or the 'period').
Summary
-- Results for H1-2019 are in line with the Group's trading
update issued in May 2019. In H1-2019:
o Revenues were US$14.2 million (H1-2018: US$17.0 million)
o Adjusted EBITDA(1) loss was US$1.3 million (H1-2018: loss
US$2.1 million)
o Trading EBITDA(2) loss was US$1.8 million (H1-2018: loss
US$2.1 million)
o Period-end cash was US$3.6 million (31 December June 2018:
US$3.8 million)
o Net debt was US$2.7 million (31 December 2018: net debt US$2.5
million)
Notes:
(1) Adjusted EBITDA is defined as earnings before interest, tax,
depreciation, amortisation, and before share-based payments and
restructuring charges.
(2) Trading EBITDA means Adjusted EBITDA less R&D costs
capitalised in compliance with IAS 38 'Intangible Assets'.
For Further Enquiries:
Frontier Smart Technologies Group Limited +44 (0) 20 7391 0630
Anthony Sethill, Chief Executive Officer
---------------------
Jonathan Apps, Chief Financial Officer
---------------------
Patrick Hannon, Vice President, Corporate
Development
---------------------
N+1 Singer (Nominated Adviser and Broker) +44 (0) 20 7496 3000
---------------------
Sandy Fraser / Lauren Kettle / Ben Farrow
---------------------
About Frontier Smart Technologies Group Limited
Frontier Smart Technologies is a pioneer in technologies for
Digital Radio and Smart IoT devices. The Group's customers include
many leading consumer audio brands: Bose, Denon, harman/kardon,
JBL, Onkyo, Panasonic, Sony, Yamaha, Altec Lansing, Blaupunkt,
Grundig, Hama, Klipsch, Marshall, Pioneer, Pure, Roberts,
TechniSat, Teufel and many more. Established in 2001, the Group is
headquartered in London, with engineering, sales and operations
teams in Cambridge, Timisoara (Romania), Hong Kong and Shenzhen.
For more information, see frontiersmart.com.
Forward-looking statements
The information in this release is based on management
information. This announcement includes statements that are forward
looking in nature. Forward looking statements involve known and
unknown risks, assumptions, uncertainties and other factors which
may cause the actual results, performance or achievements of the
Group to be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements. Except as required by the AIM Rules and
applicable law, the Group undertakes no obligation to update,
revise or change any forward-looking statements to reflect events
or developments occurring after the date of this announcement.
MAR
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation. Upon the publication of this
announcement via a regulatory information service, this inside
information is now considered to be in the public domain.
Overview of H1-2019 performance
Group H1-2019 revenues were US$14.2 million (H1-2018: US$17.0
million) and Trading EBITDA loss, after the capitalisation of
R&D costs, was US$1.8 million (H1-2018: Trading EBITDA loss of
US$2.1 million). Adjusted EBITDA loss was US$1.3 million (H1-2018:
Adjusted EBITDA loss of US$2.1 million).
Digital Radio (DAB and Smart Radio) revenues were US$13.1
million (H1-2018: US$14.9 million) reflecting increased competition
for low cost DAB solutions, partly offset by a stronger performance
in Smart Radio.
Digital Radio Adjusted EBITDA was US$1.6 million (H1-2018:
US$3.0 million).
R&D expenditure for Digital Radio in the period was US$1.0
million. The major development programme over the last 12 months
has been the Group's new Smart Radio solution, Venice X, which
entered mass production at the end of Q2-2019.
Smart IoT revenues in H1-2019 were US$1.1 million (H1-2018:
US$2.2 million). This business line is switching its focus from
smart audio hardware modules to licensing.
A significant reduction in Research & Development costs
resulted in the Adjusted EBITDA loss for Smart IoT reducing to a
loss of $2.7 million (H1-2018: loss of US$4.7 million).
The Group achieved gross margin of US$5.3 million (H1-2018:
US$7.1 million). In percentage terms, gross margin fell from 42% to
38% of revenues, with both business lines seeing a narrowing of
margins partly due to price pressure and partly due to product
mix.
R&D expenditure was reduced by 39% to US$2.8 million
(H1-2018: US$4.6 million) due largely to a US$1.8 million reduction
in Smart IoT R&D expenditure. Group sales and administrative
expenses fell 15% to US$4.0 million (H1-2018: US$4.7 million).
Central group Adjusted EBITDA loss was US$0.2 million (H1-2018:
US$0.5 million) an improvement of US$0.3 million due to a reduction
in professional fees.
From 1 January 2019, the Group has adopted IFRS 16 "Leases".
This has primarily affected the accounting for leasehold properties
occupied by the Group and has resulted in overheads reducing by
US$0.42 million and depreciation and interest costs increasing by
US$0.4 million and US$0.02 million, respectively.
EBITDA can be calculated as:
H1-2019 H1-2018
US$'000 US$'000
--------- ---------
Revenue 14,168 17,042
Cost of sales (8,831) (9,906)
--------- ---------
Gross margin 5,337 7,136
Other income 150 -
Research and development (2,769) (4,563)
Sales and administrative expenses (3,977) (4,683)
--------- ---------
Adjusted EBITDA (1,259) (2,110)
--------- ---------
Capitalised research and development (560) -
--------- ---------
Trading EBITDA (1,819) (2,110)
Below Adjusted EBITDA, the Group reports non-recurring costs,
interest, tax, depreciation and amortisation.
At 30 June 2019, the Group's gross cash balance was US$3.6
million (31 December 2018: US$3.8 million; 30 June 2018: US$3.4
million). This equates to a net cash position of US$(2.7) million
(31 December 2018: net cash US$(2.5) million; 30 June 2018:
US$(3.2) million).
Group pre-tax loss was US$3.5 million (H1-2018: loss US$4.5
million) with a loss per share of 8.23 cents (H1-2018: loss 10.86
cents).
The Board
Following the emergence of Science Group plc ('Science Group')
as the Group's largest shareholder, the following changes were made
to the composition of Frontier's Board. In July 2019 Martin
Harriman, Non-Executive Director, stepped down from the Board and
in August, Sir Hossein Yassaie, Chairman, and the Group's other
Non-Executive Director, Paul Taylor, stepped down from the Board.
In September, Science Group's Martyn Ratcliffe and Sarah Cole are
expected to take positions on the Board following the publication
of the Company's Interim Results - with Martyn becoming Chairman of
the Board and Sarah becoming a Non-Executive Director.
Anthony Sethill
Chief Executive Officer
30 August 2019
Consolidated Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
Note 30 June 2019 30 June 2018 2018
$'000 $'000 $'000
Revenue 4 14,168 17,042 41,754
Cost of sales (8,831) (9,906) (24,613)
------------------------------------- ---- ------------- ------------- ------------
Gross profit 5,337 7,136 17,141
------------------------------------- ---- ------------- ------------- ------------
Other income 150 - 300
Research & development(1) (2,769) (4,563) (7,457)
Sales & administrative expenses (3,977) (4,683) (8,604)
Adjusted EBITDA(2) (1,259) (2,110) 1,380
---- ------------- -------------
Amortisation (1,192) (1,261) (2,461)
Depreciation (548) (214) (381)
Non-recurring costs - (234) (729)
Share based payment (138) (279) (507)
Total administrative expenses (8,474) (11,234) (19,839)
Operating loss (3,137) (4,098) (2,698)
Finance income 1 1 1
Finance charges (266) (394) (588)
------------------------------------- ---- ------------- ------------- ------------
Loss before taxation (3,402) (4,491) (3,285)
Taxation (85) (154) 330
------------------------------------- ---- ------------- ------------- ------------
Loss for the Period (3,487) (4,645) (2,955)
------------------------------------- ---- ------------- ------------- ------------
Other comprehensive income/
(expense)
Items that will be reclassified
subsequently to profit or
loss
Exchange differences on
translating foreign operations (24) (384) (828)
Other comprehensive income/(expense)
for the period (24) (384) (828)
------------------------------------- ---- ------------- ------------- ------------
Total comprehensive loss
for the period (3,511) (5,029) (3,783)
------------------------------------- ---- ------------- ------------- ------------
(1) Research & development expensed is net of the
capitalised Venice X development costs of $560k (HY2018: Nil)
(FY2018: $619k).
(2) Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, share option charge and non-recurring
costs but includes the capitalised development cost credit
Loss per share
------- --------
Basic & diluted earnings
per share
- From continuing operations 5(8.23)c (10.86)c (6.90)c
Consolidated Condensed Statement of Financial Position at 30
June 2019
Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2019 2018 2018
Assets $'000 $'000 $'000
Non-current assets
Goodwill 6 10,840 11,273 10,892
Other intangible assets 7 5,708 6,999 6,275
Property, plant and
equipment 8 2,314 579 419
18,862 18,851 17,586
----------------------------- ------ --------- --------- ------------
Current assets
Inventories 3,845 6,253 2,839
Tax receivable 340 170 340
Trade and other receivables 9 9,133 7,458 9,294
Cash and cash equivalents 3,559 3,385 3,817
----------------------------- ------ --------- --------- ------------
Total current assets 16,877 17,266 16,290
----------------------------- ------ --------- --------- ------------
Total assets 35,739 36,117 33,876
----------------------------- ------ --------- --------- ------------
Liabilities
Current liabilities
----------------------------- ------ --------- --------- ------------
Trade and other payables 10 18,957 18,646 14,928
----------------------------- ------ --------- --------- ------------
Total current liabilities 18,957 18,646 14,928
----------------------------- ------ --------- --------- ------------
Other liabilities >
1 year 1,206 - -
Total liabilities 20,163 18,646 14,928
----------------------------- ------ --------- --------- ------------
Equity
Share capital 12 6,848 6,844 6,847
Share premium 187,971 187,971 187,971
Share based payment
reserve 9,666 9,300 9,528
Foreign exchange reserve (9,877) (9,409) (9,853)
Retained earnings (179,032) (177,235) (175,545)
Total equity 15,576 17,471 18,948
----------------------------- ------ --------- --------- ------------
Total equity and liabilities 35,739 36,117 33,876
----------------------------- ------ --------- --------- ------------
Consolidated Condensed Statement of Changes in Equity
for the period ended 30 June 2019
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2019
(audited) 6,847 187,971 9,528 (175,545) (9,853) 18,948
Share-based payments - - 138 - - 138
Issue of share capital 1 - - - - 1
Transactions with
owners 1 - 138 - - 139
--------- -------- --------- --------- ---------- -------
Loss for the period - - - (3,487) - (3,487)
Other comprehensive
losses
Exchange differences
on translating foreign
operations - - - - (24) (24)
Total comprehensive
loss - - - (3,487) (24) (3,511)
--------- -------- --------- --------- ---------- -------
At 30 June 2019
(unaudited) 6,848 187,971 9,666 (179,032) (9,877) 15,576
========= ======== ========= ========= ========== =======
Consolidated Condensed Statement of Changes in Equity
for the period ended 30 June 2018
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2018
(audited) 6,836 187,971 9,021 (172,590) (9,025) 22,213
Share-based payments - - 279 - - 279
Issue of share capital 8 - - - - 8
Transactions with
owners 8 - 279 - - 287
----- -------- --------- --------- ---------- -------
Loss for the period - - - (4,645) - (4,645)
Other comprehensive
losses
Exchange differences
on translating foreign
operations - - - - (384) (384)
Total comprehensive
loss - - - (4,645) (384) (5,029)
----- -------- --------- --------- ---------- -------
At 30 June 2018
(unaudited) 6,844 187,971 9,300 (177,235) (9,409) 17,471
===== ======== ========= ========= ========== =======
Consolidated Condensed Statement of Changes in Equity
for the period ended 31 December 2018
Share
based Foreign
Share Share payment Retained exchange Total
capital premium reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2018
(audited) 6,836 187,971 9,021 (172,590) (9,025) 22,213
Share-based payments - - 507 - - 507
Issue of share capital 11 - - - - 11
Transactions with
owners 11 - 507 - - 518
--------- -------- --------- --------- ---------- -------
Loss for the period - - - (2,955) - (2,955)
Other comprehensive
losses
Exchange differences
on translating foreign
operations - - - - (828) (828)
Total comprehensive
loss - - - (2,955) (828) (3,783)
--------- -------- --------- --------- ---------- -------
At 31 December 2018
(audited) 6,847 187,971 9,528 (175,545) (9,853) 18,948
========= ======== ========= ========= ========== =======
Consolidated Condensed Cash Flow Statement
for the period ended 30 June 2019
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 2019 30 June 2018 2018
$'000 $'000 $'000
Cash flows from operating activities
Loss before taxation (3,402) (4,491) (3,285)
Amortisation 1,192 1,261 2,461
Depreciation 548 214 381
Share based payments 138 279 507
Net interest paid 265 393 587
(Increase)/ decrease in inventories (1,006) (1,469) 1,945
Decrease/ (increase) in trade
and other receivables 161 (3,050) (4,886)
Increase/ (decrease) in trade
and other payables 3,196 520 (3,572)
Foreign exchange movements 32 55 355
Tax refund - - 373
Net cash provided by/(used
in) operating activities 1,124 (6,288) (5,134)
------------------------------------------ ------------- ------------- ------------
Cash flow from investing activities
------------------------------------- --- ------------- ------------- ------------
Purchase of property, plant
and equipment (100) (397) (403)
Purchase on intangible assets (629) (37) (729)
Net cash (used in) investing
activities (729) (434) (1,132)
------------------------------------------ ------------- ------------- ------------
Cash flow from financing activities
Loan repayments - (420) (3,989)
Loan proceeds - 2,992 6,876
Proceeds from issue of share
capital 1 8 11
Loan interest payable (245) (394) (588)
Lease payments (410) - -
Interest receivable 1 1 1
Net cash (used in) / provided
by financing activities (653) 2,187 2,311
------------------------------------------ ------------- ------------- ------------
Net change in cash and cash
equivalents (258) (4,535) (3,955)
------------------------------------------ ------------- ------------- ------------
Cash and cash equivalents at
beginning of period 3,817 7,920 7,920
Exchange differences on cash
and cash equivalents - - (148)
Cash and cash equivalents at
end of period 3,559 3,385 3,817
------------------------------------------ ------------- ------------- ------------
Condensed Notes to the Interim Report
for the period ended 30 June 2019
1. Nature of operations and general information
Frontier Smart Technologies Group Limited and subsidiaries' (the
'Group') principal activity is that of commercial exploitation of
wireless infrastructure technologies with commercial propositions
for the consumer electronic sector.
Frontier Smart Technologies Group Limited is the Group's
ultimate parent company. It is incorporated in the Cayman Islands.
The address of Frontier Smart Technologies Group Limited's
registered office is Elgin House, 119 Elgin Avenue, George Town,
Grand Cayman, Cayman Islands. Frontier Smart Technologies Group
Limited's shares are listed on the Alternative Investment Market of
the London Stock Exchange. Frontier Smart Technologies Group
Limited's consolidated condensed interim financial statements are
presented in US Dollars ($).
The financial information set out in this interim report does
not constitute statutory accounts. The interim financial statements
have not been audited or reviewed by the Group's auditor. The
Group's statutory financial statements for the year ended 31
December 2018 are available from the Group's website. The auditor's
report on those financial statements was unqualified.
2. Accounting Policies
Basis of Preparation
These interim condensed consolidated financial statements are
for the six months ended 30 June 2019. They have been prepared
following the recognition and measurement principles of IFRS as
adopted by the European Union. The condensed set of financial
statements included in this interim report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting", as adopted by the European Union. They do not
include all of the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 31 December
2018.
These financial statements have been prepared on the going
concern basis and under the historical cost convention.
These condensed consolidated interim financial statements have
been prepared in accordance with the accounting policies adopted in
the last annual financial statements for the year to 31 December
2018.
3. IFRS 16 'Leases'
IFRS 16: Leases came into effect on 1 January 2019, this is the
first set of accounts which incorporates the adoption of the new
standard.
The main impact of the standard is to capitalise the Group's
rental leases as "right-of-use assets" within Property, Plant and
Equipment on the Statement of Financial Position with corresponding
liabilities representing the commitment to fulfil those lease
obligations. The assets are then depreciated over the life of the
lease and a notional interest charge is made against the
liability.
The standard allows for different transition options and the
Group has adopted the Modified Retrospective: Asset equals
liability approach, resulting in the Group adopting the standard
from 1 January 2019 with no adjustment to reserves or comparative
numbers. On adoption, the Group's assets increased by US$2.3m with
liabilities increasing by the same value. The group has elected not
to recognise a lease liability for short term leases (leases of
expected term of 12 months or less) or for leases of low value.
Payments made under such leases are expensed on a straight-line
basis. In addition, certain variable lease payments are not
permitted to be recognised as lease liabilities and are expensed as
incurred.
For the six months to 30 June 2019 reported EBITDA has increased
by US$0.42m as a result of rental costs no longer being charged to
overhead expenses. Additional depreciation and interest costs of
US$0.4m and US$0.02m respectively have been incurred.
The adoption of this new Standard has resulted in the Group
recognising a right-of-use asset and related lease liability in
connection with all former operating leases except for those
identified as low-value or having a remaining lease term of less
than 12 months from the date of initial application.
The following is a reconciliation from IAS17 to IFRS 16 at 1
January 2019:
Carrying amount IFRS 16 carrying
at 31 December amount at
2018 1 January
2019
$000 $000
Reclassification Remeasurement
$000 $000
Property,
plant & equipment 419 - 2,344 2,763
---------------- ------------------ --------------- -----------------
Lease liabilities - - (2,344) (2,344)
---------------- ------------------ --------------- -----------------
The following is a reconciliation of total operating lease
commitments as 31 December 2018 to the lease liabilities recognized
at 1 January 2019:
$000s
Total operating lease commitments disclosed
at 31 December 2018 2,743
Leases with remaining lease term of less
than 12 months (356)
Operating leases before discounting 2,387
Discounted using incremental borrowing rate (43)
--------------------------------------------- ------
Total lease liability recognised under IFRS
16 at 1 January 2019 2,344
--------------------------------------------- ------
Of which are:
* Current lease liabilities 779
* Non-current lease liabilities 1,565
4. Revenue by sector
Unaudited Audited
Unaudited 30 June 31 December
30 June 2019 2018 2018
$'000 $'000 $'000
Radio 13,074 14,862 35,688
Smart IoT 1,094 2,180 6,066
Revenue 14,168 17,042 41,754
---------- ------------- --------- ------------
In accordance with IFRS 15, the Group's revenue disaggregated by
pattern of revenue recognition is as follows:
For the year ended 30 June 2019 (unaudited)
Goods Services Total
$'000 $'000 $'000
Goods transferred at a
point in time 13,965 - 13,965
Services transferred over
time 30 173 203
-------- ---------- --------
Total 13,995 173 14,168
======== ========== ========
For the year ended 30 June 2018 (unaudited)
Goods Services Total
$'000 $'000 $'000
Goods transferred at a
point in time 16,357 - 16,357
Services transferred over
time 17 668 685
-------- ---------- --------
Total 16,374 668 17,042
======== ========== ========
For the year ended 31 December 2018 (audited)
Goods Services Total
$'000 $'000 $'000
Goods transferred at
a point in time 40,525 - 40,525
Services transferred
over time 43 1,186 1,229
-------- ---------- --------
Total 40,568 1,186 41,754
======== ========== ========
Segmental information
Management currently identifies three divisions as operating
segments.
For the period ended Radio Smart Group Total
30 June 2019 (unaudited) IoT
$'000 $'000 $'000 $'000
Revenue 13,074 1,094 - 14,168
Cost of sales (8,115) (716) - (8,831)
-------- -------- ------- --------
Gross profit 4,959 378 - 5,337
-------- -------- ------- --------
Other income - 150 - 150
Research & development (958) (1,811) - (2,769)
Sales & administrative
expenses - other (2,353) (1,427) (197) (3,977)
------------------------------ -------- -------- ------- --------
Adjusted EBITDA 1,648 (2,710) (197) (1,259)
------------------------------ -------- -------- ------- --------
Non-recurring costs - - - -
Amortisation of intellectual
property (1,192) - - (1,192)
Depreciation (484) (64) - (548)
Share based payment - - (138) (138)
-------- -------- ------- --------
Total administrative
expenses (4,987) (3,152) (335) (8,474)
-------- -------- ------- --------
Loss from continuing
operations (28) (2,774) (335) (3,137)
Net finance payable (18) (2) (245) (265)
Loss before taxation (46) (2,776) (580) (3,402)
-------- -------- ------- --------
For the period ended Radio Smart Group Total
30 June 2018 (unaudited) IoT
$'000 $'000 $'000 $'000
Revenue 14,862 2,180 - 17,042
Cost of sales (8,647) (1,259) - (9,906)
---------- ---------- -------- ----------
Gross profit 6,215 921 - 7,136
---------- ---------- -------- ----------
Research & development (976) (3,587) - (4,563)
Sales & administrative
expenses - other (2,218) (1,995) (470) (4,683)
-------------------------------- ---------- ---------- -------- ----------
Adjusted EBITDA 3,021 (4,661) (470) (2,110)
-------------------------------- ---------- ---------- -------- ----------
Non-recurring costs - - (234) (234)
Amortisation of intellectual
property (1,261) - - (1,261)
Depreciation (171) (43) - (214)
Share based payment - - (279) (279)
---------- ---------- -------- ----------
Total administrative
expenses (4,626) (5,625) (983) (11,234)
---------- ---------- -------- ----------
Profit/ (loss) from continuing
operations 1,589 (4,704) (983) (4,098)
Net finance payable 1 - (394) (393)
Profit/ (loss) before
taxation 1,590 (4,704) (1,377) (4,491)
---------- ---------- -------- ----------
For the period ended Radio Smart Group Total
31 December 2018 (audited) IoT
$'000 $'000 $'000 $'000
Revenue 35,688 6,066 - 41,754
Cost of sales (20,198) (4,415) - (24,613)
---------- ---------- -------- ----------
Gross profit 15,490 1,651 - 17,141
---------- ---------- -------- ----------
Other income - 300 - 300
Research & development (1,254) (6,203) - (7,457)
Sales & administrative
expenses - other (3,901) (3,878) (825) (8,604)
-------------------------------- ---------- ---------- -------- ----------
Adjusted EBITDA 10,335 (8,130) (825) 1,380
-------------------------------- ---------- ---------- -------- ----------
Amortisation of intellectual
property (2,460) (1) - (2,461)
Depreciation (300) (81) - (381)
Non-recurring costs - - (729) (729)
Share based payment - - (507) (507)
---------- ---------- -------- ----------
Total administrative
expenses (7,915) (9,863) (2,061) (19,839)
---------- ---------- -------- ----------
Profit/ (loss) from continuing
operations 7,575 (8,212) (2,061) (2,698)
Net finance payable 1 - (588) (587)
Profit/ (loss) before
taxation 7,576 (8,212) (2,649) (3,285)
---------- ---------- -------- ----------
5. Loss per share
The calculation of the basic loss per share is based on the loss
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the period. The impact of
the share options on the loss per share is anti-dilutive.
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
$'000 $'000 $'000
Loss for the period
attributable to equity
shareholders $3,487 $4,645 $2,955
Weighted average number
of 10p ordinary shares 42,381,800 42,784,343 42,813,487
(Loss) per share -
basic and diluted (8.23)c (10.86)c (6.90)c
6. Goodwill
Frontier
Smart Technologies Frontier
Microsystems Total
$'000 $'000 $'000
Cost
At 1 January 2018 (audited) 11,548 8,051 19,599
Foreign exchange in period (275) - (275)
Additions - - -
------------------- -------------- ------
At 30 June 2018 (unaudited) 11,273 8,051 19,324
Foreign exchange in period (381) (457) (838)
Additions - - -
------------------- -------------- ------
At 31 December 2018 (audited) 10892 7,594 18,486
Foreign exchange in period (52) (37) (89)
Disposals - - -
At 30 June 2019 (unaudited) 10,840 7,557 18,397
=================== ============== ======
Impairment
At 1 January 2018 (audited) - 8,051 8,051
Foreign exchange in period - - -
------------------- -------------- ------
At 30 June 2018 (unaudited) - 8,051 8,051
Foreign exchange in period - (457) (457)
------------------- -------------- ------
At 31 December 2018 (audited) - 7,594 7,594
Foreign exchange in period - (37) (37)
------------------- -------------- ------
At 30 June 2019 (unaudited) - 7,557 7,557
Net book amount at 30
June 2019 (unaudited) 10,840 - 10,840
=================== ============== ======
Net book amount at 30
June 2018 (unaudited) 11,273 - 11,273
=================== ============== ======
Net book amount at 31
December 2018 (audited) 10,892 - 10,892
=================== ============== ======
7. Other intangible assets
Marketing Customer Other Licence &
intellectual intellectual intellectual Development
property property property fees Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2018 (audited) 5,411 2,286 13,804 21,426 42,927
Foreign exchange on opening
balances (129) (54) (330) 167 (346)
Additions - - - 37 37
Disposals - - - (19,393) (19,393)
------------- ------------- ------------- ------------ --------
At 30 June 2018 (unaudited) 5,282 2,232 13,474 2,237 23,225
Foreign exchange on opening
balances (178) (76) (454) (2) (710)
Additions - - - 692 692
Disposals - - - - -
------------- ------------- ------------- ------------ --------
At 31 December 2018 (audited) 5,104 2,156 13,020 2,927 23,207
Foreign exchange on opening
balances (24) (10) (62) (4) (100)
Additions - - - 629 629
Disposals - - - (3) (3)
At 30 June 2019 (unaudited) 5,080 2,146 12,958 3,549 23,733
============= ============= ============= ============ ========
Amortisation
At 1 January 2018 (audited) 2,886 1,017 9,234 21,418 34,555
Foreign exchange on opening
balances (80) (28) (255) 166 (197)
Charge in period 275 96 873 17 1,261
Disposals - - - (19,393) (19,393)
At 30 June 2018 (unaudited) 3,081 1,085 9,852 2,208 16,226
Foreign exchange on opening
balances (108) (38) (347) (1) (494)
Charge period 260 93 822 25 1,200
Disposals - - - - -
------------- ------------- ------------- ------------ --------
At 31 December 2018 (audited) 3,233 1,140 10,327 2,232 16,932
Foreign exchange on opening
balances (21) (10) (65) - (96)
Charge in period 259 91 822 20 1,192
Disposals - - - (3) (3)
At 30 June 2019 (unaudited) 3,471 1,221 11,084 2,249 18,025
============= ============= ============= ============ ========
Net book amount at 30
June 2019 (unaudited) 1,609 925 1,874 1,300 5,708
============= ============= ============= ============ ========
Net Book amount at 30
June 2018 (unaudited) 2,201 1,147 3,622 29 6,999
============= ============= ============= ============ ========
Net book amount at 31
December 2018 (audited) 1,871 1,016 2,693 695 6,275
============= ============= ============= ============ ========
Intellectual property
Intellectual property relates to the valuation of beneficial
licence agreements, trade names and customer relationships at the
date of their original acquisition.
Licence & development fees
Intellectual property
Intellectual property relates to the valuation of beneficial
licence agreements, trade names and customer relationships in
Frontier Smart at the date of their original acquisition.
Licence & development expenditure
The Group capitalises certain licence, third-party development
fees and internally generated development where, in the view of
management, they have intrinsic value to ongoing software and
hardware development programmes. Additions in the year relate to
technology on new projects essential to the future development of
new generation solutions. The capitalised costs are amortised in
accordance with the Group accounting policy and are subject to a
regular impairment reviews.
During the year all licences that no longer provide any benefit
to the Group have been disposed of from the Financial Statements,
the carrying value of these licences was nil.
Marketing
Marketing-related intangible assets are defined as those assets
that are primarily used in the marketing or promotion of products
and services. The Frontier solutions are well known and preferred
by a majority of the consumer electronic brands who specifically
instruct their manufacturers to use Frontier modules and solutions
in their audio systems.
Customer relationships
Customer-related intangible assets may consist of customer
lists, order or production backlogs, customer contracts and
relationships, and non-contractual customer relationships. Frontier
has developed relationships with both consumer electronic brands
and manufacturers. The customer relationship valuation captures the
economic benefits of having these trading relationships.
Impairment reviews
The Directors have considered impairment indicators for all
intangible assets and tested for impairment in conjunction with
their testing for goodwill, in accordance with the Group's
accounting policy.
8. Property, Plant and Equipment
Plant and Office Fixtures Office Buildings
machinery equipment and fittings Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2018 (audited) 2,493 70 4,160 - 6,723
Foreign exchange on opening
balances - - (4) - (4)
Additions 286 - 111 - 397
Disposals (2,268) (70) (2,608) - (4,946)
----------- ----------- -------------- ------------------ -------
At 30 June 2018 (unaudited) 511 - 1,659 - 2,170
Foreign exchange on opening - - - - -
balances
Additions - - 6 - 6
Disposals - - - - -
----------- ----------- -------------- ------------------ -------
At 31 December 2018 (audited) 511 - 1,665 - 2,176
Foreign exchange on opening
balances - - (3) - (3)
Additions 45 - 55 - 100
Right-of-use assets adjustment
on transition to IFRS
16 - - - 2,344 2,344
Disposals - - (14) - (14)
At 30 June 2019 (unaudited) 556 - 1,703 2,344 4,603
=========== =========== ============== ================== =======
Amortisation
At 1 January 2018 (audited) 2,473 70 3,769 - 6,312
Foreign exchange on opening
balances - - 11 - 11
Charge in period 57 - 157 - 214
Disposals (2,268) (70) (2,608) - (4,946)
At 30 June 2018 (unaudited) 262 - 1,329 - 1,591
Foreign exchange on opening
balances - - (1) (1)
Charge period 58 - 109 - 167
Disposals - - - - -
----------- ----------- -------------- ------------------ -------
At 31 December 2018 (audited) 320 - 1,437 - 1,757
Foreign exchange on opening
balances - - (2) - (2)
Charge in period 56 - 91 401 548
Disposals - - (14) - (14)
At 30 June 2019 (unaudited) 376 - 1,512 401 2,289
=========== =========== ============== ================== =======
Net book amount at 30
June 2019 (unaudited) 180 - 192 1,943 2,314
=========== =========== ============== ================== =======
Net Book amount at 30
June 2018 (unaudited) 249 - 330 - 579
=========== =========== ============== ================== =======
Net book amount at 31
December 2018 (audited) 191 - 228 - 419
=========== =========== ============== ================== =======
9. Trade and other receivables
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Trade receivables 6,969 5,339 7,799
Other debtors 1,003 854 857
Prepayments and accrued income 1,161 1,265 638
Trade and other receivables 9,133 7,458 9,294
------------------------------- --------- --------- ------------
Trade and other receivables are usually due within 30 - 60 days
and do not bear any effective interest rate.
The fair value of these short term financial assets is not
individually determined as the carrying amount is a reasonable
approximation of fair value.
10. Trade and other payables
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Trade payables 8,959 7,353 5,715
Other payables 711 1,391 566
Accruals 2,005 3,364 2,073
Contract liabilities 226 - 247
Loan 6,308 6,538 6,327
Lease 748 - -
Trade and other payables 18,957 18,646 14,928
------------------------- --------- --------- ------------
Loan
Frontier Smart Technologies Group Limited entered into a loan
facility agreement in October 2015 for a maximum of GBP5,000,000.
The loan accrued interest monthly at 6.25% above three-month LIBOR
with interest repayable in 12 quarterly instalments commencing 29
December 2015. Capital repayments were payable quarterly in ten
instalments commencing March 2016, made up of nine instalments of
GBP300,000 and a final instalment of GBP2,300,000. The loan carried
a fixed and floating charge over all the property, assets and
undertakings of the Group.
This loan was repaid on 23 May 2018 and replaced by a new
revolving credit facility with Clydesdale of GBP5,000,000 over
three years. The facility accrues interest monthly at 4.75% above
three-month LIBOR with interest repayable quarterly, interest on
any amount not drawn down is 1.9%. The loan carries a fixed and
floating charge over all the property, assets and undertakings of
the Group. At the 30 June 2019 the amount drawn down was
GBP5,000,000. The loan carries certain covenants on the business
which are monitored at a historic and forecast level on a monthly
and quarterly basis by the Board.
11. Leases
The Group has leases for all office buildings. With the
exception of short-term leases and leases of low-value underlying
assets, each lease is reflected on the balance sheet as a
right-of-use asset and a lease liability.
Each lease generally imposes a restriction that, unless there is
a contractual right for the Group to sublet the asset to another
party, the right-of-use asset can only be used by the Group. Leases
are either non-cancellable or may only be cancelled by incurring a
substantive termination fee. The Group is prohibited from selling
or pledging the underlying leased assets as security. For leases
over office buildings the Group must keep those properties in a
good state of repair and return the properties in their original
condition at the end of the lease.
The table below describes the nature of the Group's leasing
activities by type of right-of-use asset recognised on the balance
sheet:
Right-of-use No of Range Average No. of No. of No. of No. of
asset right-of-use of term remaining leases leases leases leases
assets term of with with purchase with variable with
leased lease extension options payments termination
options linked options
to an
index
Office
buildings 4 1-5 years 2.75 years 4 0 0 0
-------------- ---------- ----------- -------------- -------------- -------------- -------------
Lease liabilities
Lease liabilities are presented in the statement of financial
position as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
$'000 $'000 $'000
Current 748 - -
Non-current 1,206 - -
1,954 - -
------------ --------- --------- ------------
12. Share capital
Unaudited Unaudited Audited
30 June 2019 30 June 2018 31 December 2018
Authorised
100,000,000 ordinary shares
of 10p 10,000,000 10,000,000 10,000,000
Allotted, issued and fully
paid 42,853,494 42,825,554 42,853,025
$ 6,847,549 6,843,975 6,847,490
----------------------------- --------------- --------------- -------------------
The movement in the number of
shares is as follows:
Number of
ordinary shares
At 1 January 2018 42,766,171
Shares issued 59,383
At 30 June 2018 42,825,554
Shares issued 27,471
At 31 December 2018 42,853,025
Shares issued 469
At 30 June 2019 42,853,494
--------------- -----------------
All shares are equally eligible to receive dividends and the
repayment of capital and represent equal votes at meetings of
shareholders with the exception of 2,119,841 shares held jointly by
the Employee Benefit Trust and participants for the purpose of the
Company's joint share ownership plan in relation to which all
voting rights have been waived.
Allotments
13 June 2019, 469 ordinary shares of 10p were issued in relation
to the exercise of share options by employees.
13. Financial Instruments
The Group uses financial instruments comprising cash and cash
equivalents, other loans and various other short-term instruments
such as trade receivables and trade payables which arise from its
operations. The main purpose of these financial instruments is to
fund the Group's business strategy and the short-term working
capital requirements of the business.
Financial assets by category
The categories of financial asset included in the balance sheet
and the headings in which they are included are as follows:
30 June 2019
(unaudited)
Loans Non Balance
and financial sheet
receivables assets total
$'000 $'000 $'000
Goodwill - 10,840 10,840
Other intangibles
assets - 5,708 5,708
Property, plant
and equipment - 2,314 2,314
Inventories - 3,845 3,845
Trade receivables
Other receivables 7,972 - 7,972
Prepayments and
accrued income 1,161 - 1,161
Tax receivable 340 - 340
Cash and cash
equivalents 3,559 - 3,559
Total 13,032 22,707 35,739
============ ========== =======
30 June 2018
(unaudited)
Loans Non Balance
and financial sheet
receivables assets total
$'000 $'000 $'000
Goodwill - 11,273 11,273
Other intangibles
assets - 6,999 6,999
Property, plant
and equipment - 579 579
Inventories - 6,253 6,253
Trade receivables 5,339 - 5,339
Other receivables 854 - 854
Prepayments and
accrued income 1,265 - 1,265
Tax receivable 170 - 170
Cash and cash
equivalents 3,385 - 3,385
------------ ---------- -------
Total 11,013 25,104 36,117
============ ========== =======
31 December 2018
(audited)
Loans Non Balance
and financial sheet
receivables assets total
$'000 $'000 $'000
Goodwill - 10,892 10,892
Other intangibles
assets - 6,275 6,275
Property, plant
and equipment - 419 419
Inventories - 2,839 2,839
Trade receivables 7,799 - 7,799
Other receivables 857 - 857
Prepayments and
accrued income - 638 638
Tax receivable - 340 340
Cash and cash equivalents 3,817 - 3,817
Total 12,473 21,403 33,876
============ ========== =======
Financial liabilities by category
The categories of financial liability included in the balance
sheet and the headings in which they are included are as
follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
30 June 30 June 30 June 30 June 31 December 31 December
2019 2019 2018 2018 2018 2018
Other Other Other
financial financial financial
liabilities liabilities liabilities
at at at
amortised amortised amortised
cost Fair Value cost Fair Value cost Fair Value
$'000 $'000 $'000 $'000 $'000 $'000
Trade payables 8,959 8,959 7,353 7,353 5,715 5,715
Other payables 937 936 1,391 1,391 813 813
Accruals
and deferred
income 2,005 2,005 3,364 3,364 2,073 2,073
Lease 1,954 1,954 - - - -
Loan 6,308 6,308 6,538 6,538 6,327 6,327
Total 20,163 20,163 18,646 18,646 14,928 14,928
============== ============= ============== ============= ============== =============
All financial assets and liabilities are stated at amortised
cost.
The Group is exposed to a variety of financial risks which
result from both its operating and investing activities. The Board
is responsible for co-ordinating the Group's risk management and
focuses on actively securing the Group's short to medium term cash
flows. Long term financial investments are managed to generate
lasting returns.
The Group does not actively engage in the trading of financial
assets and has no financial derivatives. The most significant risks
to which the Group is exposed are described below:
Credit risk
The Group's credit risk is primarily attributable to its trade
receivables, recoverable taxation and cash and cash equivalents.
The amounts presented in the balance sheet are net of any allowance
for doubtful receivables, estimated by the Directors. The Group has
a concentration of credit risk due to exposure from a limited
number of customers. This is managed at the highest level in the
Group. Cash at bank is all held with highly rated banks, the
suitability of which is periodically reviewed. The Group monitors
debtor levels continuously and all customers have defined credit
limits.
Credit risk management
The credit risk is managed on a group basis based on the Group's
credit risk management policies and procedures.
The credit risk in respect of cash balances held with banks and
deposits with banks are managed via diversification of bank
deposits and are only with major reputable financial
institutions.
The Group continuously monitors the credit quality of new
customers. Where available, external credit ratings and/or reports
on customers are obtained and used. The group's policy is to deal
only with credit worthy counterparties. The standard credit terms
range between 30 and 90 days. The ongoing credit risk is managed
through regular review of ageing analysis, together with credit
limits per customer.
Liquidity risk
The Group holds all of its financial assets as cash or cash
equivalents which are entirely liquid. Trade receivables are
recorded in the normal course of business and have maturities of
less than three months. The Directors prepare rolling cash flow
forecasts and would seek to raise additional funding whenever a
shortfall in facilities is forecast. Details of the funding status
of the Group are included in the going concern paragraph in the
principal accounting policies.
All the current financial liabilities recorded in the balance
sheet are expected to result in cash outflow within six months of
the year end, with the exception of the revolving credit facility
which is disclosed in note 10.
The Group is exposed to interest rate risk on its loan. The
Group does not manage this risk with the use of derivatives. No
other liabilities accrue interest.
Currency risks
The Group is exposed to translation foreign exchange risk in
connection with its investment in Frontier Smart Technologies
Limited whose subsidiaries are Frontier Silicon (Hong Kong) Ltd
incorporated in Hong Kong and Frontier Silicon SRL incorporated in
Romania. The Group does not hedge any transactions. As a result,
the Group is subject to foreign currency risk in respect of
accounting for its investment in the subsidiaries.
14. Post Balance Sheet Events
Since the period end, Martin Harriman and Paul Taylor have
resigned as non-executive directors (30 July and 14 August,
respectively). In addition, Sir Hossein Yassaie has resigned as
non-executive chairman with effect from 14 August.
On 27 August 2019, Science Group have taken a majority stake in
the Company and in addition have subscribed for 4 million new
ordinary shares in the Company at a subscription price of 25p.
These new shares were admitted to AIM on 28 August 2019. As
disclosed to the market on 21 August it is expected that Martyn
Ratcliffe and Sarah Cole (both existing directors of Science Group)
will step up to the Board of Frontier with effect from 2 September
2019.
- Ends -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DGGDIIBDBGCC
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