TIDMUTW
RNS Number : 7990K
Utilitywise plc
13 April 2018
13 April 2018
Utilitywise plc
("Utilitywise", the "Company" or the "Group")
Early adoption of IFRS 15
Utilitywise, a leading independent utility cost management
consultancy, today provides an update regarding the financial
impact of its early-adoption of the accounting standard IFRS 15
(Revenue from Contracts with Customers) on 1 August 2017,
interpretations of which are mandatory for future accounting
periods from 1 January 2018.
As previously notified, there is no impact on the cash flows of
the Group, as a result of the adoption of this accounting
standard.
The final results of the Group for the year ended 31 July 2017
("FY17") were announced on 22 March 2018 and were the final results
of the Group to recognise revenue in accordance with the accounting
standard IAS 18 (Revenue).
The FY17 final results stated that, given the delay in
announcement of those results, the priority of the Board of
Directors was to finalise and publish the 2017 Annual Report as
soon as possible. The change in accounting policy for revenue
recognition and the time required to prepare restated information
and the detailed disclosures of the financial effect of the
adoption of IFRS 15 would further delay the finalisation of the
financial statements for the year ended 31 July 2017. Accordingly,
separate publication of the financial effects of the adoption of
IFRS15 on the Group for FY17 would be made in due course. Those
financial impacts are now set out below.
Summary impact of adoption of IFRS 15
IAS 18 requires that revenue is recognised when it is "probable
that future economic benefit will flow" to the Group. The Group's
accounting policy to comply with IAS 18 in respect of energy
procurement contracts was to recognise revenue upon the
commencement of a new customer contract or upon the signature of a
Renewal Contract, respectively. In respect of a Renewal Contract,
this is on the grounds that it is considered "probable" that the
renewed contract will ultimately be honoured by the customer, which
meets the recognition requirements of IAS 18, the Group having no
further contractual obligations in respect of those
transactions
The FY17 final results included a qualitative summary of the
impact of the adoption of IFRS15, a summary of which is as
follows:
-- IFRS 15 requires that revenue is recognised at the
"transaction price" when certain contractual obligations are met
but with any "variable consideration" elements of the price
recognised when it is "highly probable" that there will be no
reversal of that revenue.
-- Initial revenue is recognised on procurement contracts when
the transaction price can be reliably estimated and it is highly
probable that there will be no material reversal of variable
consideration amounts in subsequent periods.
-- Given that there can be a significant time delay between the
signature of a Renewal Contract and the contract subsequently
commencing, it is considered that the delay means that the
likelihood of the contract being honoured remains probable, as
required by IAS 18, but does not meet the "highly probable"
condition of IFRS 15. It is determined that the highly probable
condition is met when the renewed contract comes into effect,
rather than upon the signature of the Renewal Contract. This has
the effect of deferring revenue to later accounting periods, as a
result of the adoption of IFRS 15.
-- Separately identifiable, incremental costs associated with
this deferred revenue, primarily relating to attributable
commission payments, will also be deferred and recognised in the
same accounting period as the revenue to which they directly
relate.
On 31 July 2017, the Group announced the financial impacts of
the early-adoption of IFRS 15. Those impacts included a difference
in respect of the initial revenue recognition value, having
previously been c. 85% of contract value under IAS 18 and adjusted
to 80% of initial contract value under IFRS 15.
As a result of the subsequent review and amendments to the
Group's revenue accounting policies, as announced on 17 January
2018, 29 January 2018 and in the FY17 final results and FY17 Annual
Report, it is now considered that the value of initial revenue
recognition on procurement contracts meets the requirements of both
IAS 18 and IFRS 15. Accordingly, other than the timing of
recognition of revenue (and associated costs) on same supplier
renewal contracts, there are no other material differences in
revenue policy and estimation methodology compared to the IAS 18
policy.
Summary financial impact of transition to IFRS 15
The summary impacts of the transition to IFRS15 on the Group's
revenue, Adjusted EBITDA(1) and Adjusted(2) loss before tax ("LBT")
for the year ended 31 July 2017 are set out below:
GBP'm FY17 FY17 FY17
Revenue Adjusted Adjusted
EBITDA LBT
Existing GAAP (IAS 18 basis) 67.8 (8.6) (8.5)
Recognition of renewals
on contract commencement (4.4) (4.4) (4.4)
Deferral of commissions - 1.3 1.3
Discounting adjustments
- revenue 0.7 0.7 0.7
Discounting adjustments
- finance charges - - (0.5)
IFRS 15 basis 64.1 (11.0) (11.4)
-------- --------- ---------
The summary impacts of the transition to IFRS15 on the Group's
total balance sheet equity as at 31 July 2017 and 31 July 2016 are
set out below:
GBP'm FY17 FY16
Group Group
equity equity
Existing GAAP (IAS 18 basis) (15.6) 16.3
Cumulative impact of earlier
years on equity (14.3) (11.4)
In year profit before tax
impacts (2.9) (2.9)
Taxation effects - adjustments
at headline tax rate 0.4 0.5
Unrecognised deferred tax
assets (0.4) (0.5)
IFRS 15 basis (32.8) 2.0
------- -------
(1) EBITDA means earnings before interest, taxation,
depreciation and amortisation, stated before exceptional income and
costs, non-cash accounting charges for share based payments and
amortisation of intangible assets acquired through business
combinations
(2) Adjusted loss before tax is stated before exceptional income
and costs, non-cash accounting charges for share based payments and
amortisation of intangible assets acquired through business
combinations
For further information please contact:
Utilitywise plc 0330 303 0233
Brendan Flattery (CEO)
Richard Laker (CFO)
finnCap (NOMAD and broker) 020 7220 0500
Matt Goode / Henrik Persson (Corporate
Finance)
Simon Johnson (Corporate Broking)
Liberum (Joint broker) 020 3100 2000
Robert Morton / Steve Pearce
Redleaf Communications 020 3757 6865
Robin Tozer / Elisabeth Cowell utilitywise@redleafpr.com
About Utilitywise
Utilitywise is a leading independent utility cost management
consultancy, which has established trading relationships with a
number of major UK and European energy suppliers and provides
services to its customers designed to assist them in achieving
better value out of their energy contracts, reduced energy
consumption and lower carbon footprint. Utilitywise is a UK company
quoted on the AIM market of the London Stock Exchange. For more
information, please visit www.utilitywise.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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