toumaz limited - frontier smart tech · 2015-09-29 · toumaz limited is a pioneer in low-power,...
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29 September 2015
Toumaz Limited
Half year results Toumaz Limited (AIM: TMZ, ‘Toumaz’, or the ‘Group’), a pioneer in low-power, wireless semiconductor
technologies for digital audio and healthcare, has published its results for the six months ended 30 June
2015.
Financial highlights
Revenues up 30% at £14.0m (H1 2014: £10.8m)
Gross profit up 40% to £6.3m (H1 2014: £4.5m)
EBITDA loss at £5.5m (H1 2014: loss £5.6m)
R&D expenditure: £6.2m (H1 2014: £5.1m)
As at 30 June 2015, the cash balance was £5.5m
Frontier Silicon - Digital Audio
Digital Audio revenues increased by 34% to £13.8m (H1 2014: £10.3m), since April, the business has been EBITDA positive. The Board expects a strong performance in the second half of 2015, with
record shipments in August.
The Group has a leading global position in the DAB market and gross margins which reflect this. The connected audio business is growing rapidly from a small base, driven in particular by global demand
for streaming services, such as Spotify and Apple Music.
The prospects for 2016 are good. In June Toumaz signed an agreement to include Google Cast
technology in its next generation connected audio solution, due to ship in mid-2016.
This business unit is expected to be cash generative and EBITDA positive in 2016.
Sensium Healthcare - Patient Monitoring
The Group now has a system that demonstrably works having resolved all the technical issues from
its initial trials in 2014. This enhanced version of SensiumVitals® is now deployed into NHS hospitals as well as internationally. Although the system is well received as an improvement in patient care, it
is taking longer than expected for the economic case to be made conclusively, i.e. that the costs of
installing the system and its operation are outweighed by the benefits of earlier intervention in the treatment of deteriorating patient health.
The Board is now conducting a detailed review of the business model adopted to date, using internal
resources and external advisers. This will establish in the near future the optimum way for Toumaz to
secure value from the intellectual property behind the SensiumVitals® system.
Financing
At the end of June 2015, the Group had £5.5m in cash. Cash burn is seasonally significantly higher in
the first half of the year than the second half. The Board has implemented an overhead reduction plan and R&D spend has peaked.
The Group expects to be able to fund its operations to the point of cash generation, without recourse
to a further equity raise as a result of the review into the Sensium Healthcare business, the continued good performance in Digital Audio and the prospective availability of a modest debt facility.
Anthony Sethill, CEO of Toumaz, commented:
“Our Digital Audio business - Frontier Silicon - is performing well. The development of the Sensium Healthcare business is slower than envisaged. “Accordingly, the Board is reviewing its options to best exploit the SensiumVitals® system and its IP. “We expect to be cash generative from the middle of 2016. We are fully focussed on optimising shareholder value.”
Enquiries:
Toumaz Limited +44 (0)20 7391 0630
Anthony Sethill, Chief Executive Officer Jonathan Apps, Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Broker) +44 (0)20 7418 8900
Richard Kauffer/Euan Brown
Instinctif Partners +44 (0)20 7457 2020
Adrian Duffield/Chantal Woolcock
About Toumaz (www.toumaz.com)
Toumaz Limited is a pioneer in low-power, wireless semiconductor and software technologies for
digital audio and healthcare. The company has two divisions, Frontier silicon and Sensium Healthcare. Frontier Silicon provides chips, modules and software for digital radio and connected audio devices.
Sensium Healthcare develops wireless solutions for patient monitoring.
Overview
The Group’s results have been largely driven by a strong performance in Digital Audio. Group
revenues were up 30% at £14.0m (H1 2014: £10.8m), with a 34% increase in Digital Audio revenues
at £13.8m (H1 2014: £10.3m).
Gross profit improved 40% to £6.3m (H1 2014: £4.5m) while Group EBITDA loss remained flat at £5.5m (H1 2014: loss £5.6m).
Digital Audio has benefitted from strong growth in digital radio and connected audio. In both lines of
business, the Group has secured significant design wins which augur well for the rest of this year and
2016. In June, the Group announced that its next generation connected audio solution would support Google’s Cast technology.
R&D expenditure on Digital Audio has now peaked and is expected to reduce in the second half of
2015 and into 2016. In March, the Group completed development of its 4th generation digital radio
chip. In connected audio, the Group has decided no longer to develop its own silicon chip and instead will base its next generation solution on 3rd party silicon.
This new approach delivers significant savings on R&D cash expenditure and also fits well with
Google’s preferred way of working. Following this decision, the Group is making a non-cash impairment of £3.0m of capitalised licensed IP costs for assets that no longer have value to the
company.
As a discrete business unit, Digital Audio has been EBITDA positive since April. Looking forward, the business is expected to deliver robust profits and cash generation in a rapidly expanding market.
The Healthcare business is focused on securing trials in major hospitals in key territories in order to
deliver data which demonstrate the benefits of the system and which can be published in peer-
reviewed journals. The business is making solid progress in securing these reference sites and is currently undertaking trials in two major NHS teaching hospitals – Queen Elizabeth Hospital
Birmingham and St James’s University Hospital Leeds. The intention is to publish results from these trials in order to accelerate commercial deployments in 2016.
In light of the slower than expected commercial uptake, the Group has scaled back its product
development plans and has reduced its Healthcare R&D budget.
The Board is also conducting a detailed review of the business model adopted to date, using internal
resources and external advisers. This will establish the optimum way for Toumaz to secure value from the intellectual property behind the SensiumVitals system.
Current trading and outlook
Group full year revenues for 2015 are expected to be lower than originally forecast, primarily due to slow progress in Healthcare.
The Group is expecting Digital Audio to show double digit revenue growth and product margins after
record shipments in August, in line with Board expectations. With careful cash management, EBITDA
losses for the full year 2015 should be reduced from those reported in 2014.
The prospects for the Digital Audio business in 2016 are good. The agreement to include Google Cast technology in its next generation connected audio solution is due to ship in mid-2016. This business is
expected in 2016 to be cash generative and profitable at the EBITDA level.
At the end of June 2015, the Group had £5.5m in cash and is expected to be cash generative from H2
2016.
Frontier Silicon - Digital Audio
Frontier Silicon, the Group’s digital audio division, has performed strongly in the first half of 2015. In
digital radio, the business retains its strong leadership position in a market delivering positive growth. The introduction of the Group’s 4th generation digital radio chip enables the business to maintain
product margins at healthy levels.
The Group is using its expertise in radio and internet technologies as a platform from which to
expand its position in the rapidly emerging connected audio sector. In June, the Group announced it was working with Google on a next generation solution, due for release in mid-2016. Digital Radio
In digital radio, revenues in the first half of 2015 were up 17% to £8.7m (H1 2014: £7.4m).
The Group has maintained its strong market leadership position – with sales boosted by the continuing international adoption of DAB, especially in Germany, Netherlands and Norway. In April,
Norway became the first country in the world to set a firm date for the switch from analogue to digital (2017) – and Switzerland is expected to follow in 2020-24.
The Group completed the development of its 4th generation digital radio chip (“Kino 4”) in March; and has made its first shipments to customers. Volumes are growing quickly and products incorporating
the new chip, from brands including Sony, Yamaha and Denon, will be on retail shelves in Q4 this
year.
At the IFA consumer electronics show in Berlin in September, the Group launched a new solution, based on Kino 4, which will enable manufacturers more easily to develop DAB digital radios with
colour screens – significantly reducing the costs (and increasing expected volumes) for this product
category. These devices will be shipping in the first half of 2016.
Connected Audio
The connected audio business saw an 80% jump in revenues to £5.1m (£2.8m in H1 2014) - driven by market growth and a strong competitive performance of the Group’s existing connected audio
solution. The Group is seeing the benefits of its relationship with Spotify and its investment in
additional functionality, such as hybrid radio (combining DAB and IP in a single device), multi-room technologies and new smartphone apps.
In June, the Group announced it was one of a small number of solution providers to be selected to
incorporate Google’s Cast technology within its next generation connected audio platform. This new
solution is expected to ship in mid-2016 (later than previously anticipated following the inclusion of the Google technology and associated changes to product design).
R&D Expenditure The development costs associated with the completion in March of the 4th generation digital radio
chip and the ongoing investment in connected audio development contributed to a higher R&D spend
in H1 2015. With the business no longer developing its own connected audio silicon, and Kino 4 completed, R&D expenditure will be reduced from H2 2015.
Sensium Healthcare
Q1 saw two significant developments for the Healthcare business. In February, the Group regained the North American distribution rights for SensiumVitals®; and in March, following field trials in 2014,
a programme to improve the robustness and usability of the system was completed.
Both of these developments are essential building blocks required to secure the long term commercial
value of the system. The first small scale trial of the new enhanced system began in Q2 at Clinimark, an FDA-approved facility for the clinical testing of medical devices.
The business is concentrating on securing trials with major academic hospitals with a view to
publishing clinical and healthcare economic results in peer-reviewed journals. These results should provide the necessary evidence to encourage those hospitals to roll-out the system more broadly and
allow them to act as reference sites for other potential accounts. The Group’s key territories are the
UK, France, Germany and North America.
Since March, five new trials have started using the new enhanced system. These trials include two high profile NHS hospitals: Queen Elizabeth Hospital, Birmingham and St James’s University Hospital,
Leeds – both of which will be undertaking studies to ascertain the impact of the system.
The division has reduced expenditure on product development – focusing only on incremental
enhancements which will facilitate earlier adoption of the system.
Financial Review
Group H1 revenues were up 30% to £14.0m (2014 £10.8m) with gross margin up 40% to £6.3m
(2014: £4.5m). The growth in Group revenue follows a similar growth in the first half of 2014 of 32%. Frontier Silicon (Digital Audio) revenues grew by 34% to £13.8m from £10.3m in the first half
of 2015.
Digital radio revenue growth (17% year on year) was primarily due to growth in the German, Dutch and Scandinavian markets, Norway having announced definitive dates for a switch off of the analogue
signal in 2017.
Connected audio revenues increased by 80% to £5.1m (H1 2014: £2.8m) primarily due to the uptake
of the Group’s solutions for Spotify Connect and Internet Radio.
Healthcare revenues of £0.2m (H1 2014: £0.5m) included revenues from the North American distributor which, following the termination of that agreement in early 2015, will not recur. Revenues
in 2015 derive from sales of SensiumVitals® patches and bridges together with grant income.
Overall gross margins are 44.8% (2013: 42.1%), and gross profit has increased by £1.7m.
EBITDA loss can be calculated as:
Six months to 30 June 2015 Six months to 30 June 2014
Revenue
£'000
14,027
£'000
10,788
Cost of sales 7,736 6,244
Gross profit 6,291 4,544
Research and development 6,239 5,133
Sales and admin expenses 5,517 4,962
EBITDA (loss) (5,465) (5,591)
Research and development costs are expensed where possible and mainly reflect the final spend on bringing the fourth generation digital radio solution to market (which now shipping in quantity), and
the development of the next generation connected audio solutions.
The Board believes that the research and development expenditure of the Group has peaked and will reduce in absolute terms from that seen to date
Sales and admin expenses have increased due to the planned growth in SensiumVitals® sales and marketing and sales support personnel numbers.
EBITDA has remained broadly unchanged.
Other non-trading costs included in the full profit and loss account primarily comprise the non-cash employee share based payments and amortisation and depreciation.
The Board took the decision in Q2 2015 to end its development of its own silicon platform and to use
commercially available silicon to support its immediate next generation connected audio solutions. This decision has resulted in an impairment of the carrying value of intangible assets - in this case,
certain of the licensed IP purchased by the Group to enable it to design and build the silicon wafers.
In developing its own silicon, the Group had sub-contracted with Imagination Technologies plc for
certain of the elements of design. An agreement was signed in August 2015 whereby Imagination Technologies was granted rights to certain of these licences to allow them to continue development
of the chip. When Imagination Technologies brings the solution to market, the Group will receive a
volume based royalty.
The impairment charge booked reflects the Board’s estimate of the assets affected offset by the fair
value of the future royalty revenue streams. Accordingly, a non-cash impairment charge of £3.0m has been taken. This charge falls below EBITDA.
Group pre-tax loss was £10.7m (2014: loss £7.5m) with a loss per share of 0.61p (2014: loss 0.46p).
The increase in loss is largely attributable to the impairment charge.
Cash and cash equivalents at 30 June 2015 were £5.5m (31 Dec 2014: £12.5m) and the balance at
31 August 2015 was £4.6m. Historically, the Group has a cyclical business whereby cash is consumed primarily in the first half of the year with the second half showing only a modest decline. The Board
expects that trend to continue in 2015. The Group is in advanced discussions to complete a modest debt facility which will give it greater resilience on its cash position.
Unaudited Interim Results for the six month period ended 30 June 2015 Statement of Comprehensive Income for the period ended 30 June 2015
Note
Unaudited
Six months
Ended
30 June
2015
Unaudited
Six months
Ended
30 June
2014
Audited
Year
ended
31
December
2014
£'000 £'000 £'000
Revenue 14,027 10,788 26,238
Cost of sales (7,736) (6,244) (14,800)
Gross profit 6,291 4,544 11,438
Amortisation of intangible
assets (1,355) (1,269) (2,456)
Impairment 6 (3,016) - -
Depreciation (230) (210) (419)
Share based payment (678) (375) (825)
Research & development (6,239) (5,133) (11,750)
Sales & administrative
expenses - other (5,517) (4,962) (9,452)
Total administrative
expenses (17,035) (11,949) (24,902)
Loss from continuing
operations (10,744) (7,405) (13,464)
Finance income 12 49 68
Finance charges - (118) (119)
Loss before taxation (10,732) (7,474) (13,515)
Taxation 436 (95) 1,273
(10,296) (7,569) (12,242)
Other comprehensive
(expense)/income
Items that will be
reclassified subsequently to
profit or loss
Exchange differences on
translating foreign operations (11) (18) 22
Other comprehensive
income/(expense) for the
period (11) (18) 22
Total comprehensive loss
for the period (10,307) (7,587) (12,220)
Basic and diluted loss per
share attributable to
owners of the parent 4 (0.61)p (0.46)p (0.74)p
Consolidated Statement of Financial Position
at 30 June 2015
Note
Unaudited
30 June
2015
Unaudited
30 June
2014
Audited
31 December
2014
Assets £'000 £'000 £'000
Non-current assets
Goodwill 5 19,118 19,118 19,118
Other intangible
assets
6 14,271 18,011 17,260
Property, plant and
equipment
737 612 578
34,126 37,741 36,956
Current assets
Inventories 2,935 3,045 1,564
Tax receivable - 1,709 1,500
Trade and other
receivables
7 4,796 3,657 4,141
Cash and cash
equivalents
5,521 13,173 12,513
Total current
assets
13,252 21,584 19,718
Total assets 47,378 59,325 56,674
Liabilities
Current liabilities
Trade and other
payables
8 9,134 7,330 8,863
Total liabilities 9,134 7,330 8,863
Equity
Share capital 9 4,257 4,189 4,195
Contingent
consideration
- 109 -
Share premium 115,251 115,082 115,251
Share based payment
reserve
4,003 2,942 3,325
Foreign exchange
reserve
(105) (134) (94)
Retained earnings (85,162) (70,193) (74,866)
Total equity 38,244 51,995 47,811
Total equity and
liabilities
47,378 59,325 56,674
Consolidated Statement of Changes in Equity
for the period ended 30 June 2015
Share
Capital Contingent
consideration
Share premium
Share based
payment reserve
Retained earnings
Foreign exchange
reserve Total
equity £'000 £’000 £'000 £'000 £'000 £’000 £'000 At 1 January 2015 4,195 - 115,251 3,325 (74,866) (94) 47,811
Share-based payments
- - - 678 -
- 678
Contingent shares issued
- - - - -
- -
Issue of share capital 62 - - - - - 62
Transactions with owners
62 - - 678 - - 740
Loss for the period - - - - (10,296) - (10,296)
Other comprehensive losses
Exchange differences on translating foreign operations
-
-
-
-
-
(11)
(11)
Total comprehensive loss
- - - - (10,296) (11) (10,307)
At 30 June 2015 4,257 - 115,251 4,003 (85,162) (105) 38,244
Share
capital Contingent
consideration Share
premium
Share based
payment reserve
Retained earnings
Foreign exchange
reserve Total
equity £'000 £’000 £'000 £'000 £'000 £’000 £'000 At 1 January 2014 4,101 318 114,881 2,567 (62,624) (116) 59,127
Share-based payments - - - 375 - - 375
Contingent shares issued 8 (209) 201 - - - -
Issue of share capital 80 - - - - - 80
Transactions with owners
88 (209) 201 375 - - 455
Loss for the period - - - - (7,569) - (7,569)
Other comprehensive losses
Exchange differences on translating foreign operations
-
-
-
-
-
(18)
(18)
Total comprehensive loss
- - - - (7,569) (18) (7,587)
At 30 June 2014 4,189 109 115,082 2,942 (70,193) (134) 51,995
Share
capital
Contingent
consideration
Share
premium
Share
based payment
reserve
Retained
earnings
Foreign exchange
reserve
Total
equity £'000 £’000 £'000 £'000 £'000 £’000 £'000
At 1 January 2014 4,101 318 114,881 2,567 (62,624) (116) 59,127
Share-based payments
- - - 825 -
- 825
Issue of share capital 83 - 63 - - - 146
Cost of share issue - - - - - - -
Deferred
consideration – retention element
-
- - (67) -
- (67)
Contingent shares
issued
11 (318)
307 - -
-
-
Transactions with
owners 94 (318) 370 758 - - 904
Loss for the period - - - - (12,242) - (12,242)
Other comprehensive
losses
Exchange differences
on translating foreign operations
-
-
-
-
-
22
22
Total
comprehensive loss - - - - (12,242) 22 (12,220)
At 31 December 2014
4,195 - 115,251 3,325 (74,866) (94) 47,811
Consolidated Cash Flow Statement
For the period ended 30 June 2015
UnauditedSix months ended 30 June 2015
UnauditedSix months ended 30 June 2014
Audited Year
ended 31 December
2014
£'000 £'000 £'000
Cash flows from operating activities
Loss before taxation (10,732) (7,474) (13,515)
Amortisation 1,355 1,269 2,456
Depreciation 230 210 419
Impairment of prepayments 3,016 - -
Share based payments 678 375 825
Net interest (received)/ paid (12) 69 51
(Increase)/ decrease in inventories (1,371) (1,570) (89)
Decrease/(increase) in trade and other
receivables (622) 582 817
(Decrease)/ increase in trade and other
payables 271 (929) 604
Foreign exchange movements (11) (18) 22
Tax (paid)/ refund 1,999 916 1,722
Net cash outflow from operating
activities (5,199) (6,570) (6,638)
Cash flow from investing activities
Purchase of property, plant and equipment (399) (185) (356)
Purchase on intangible assets (1,385) (1,555) (1,991)
Interest (paid)/ received (12) (69) (51)
Acquisition of subsidiaries, net of cash - - -
Net cash used in investing activities (1,796) (1,809) (2,398)
Cash flow from financing activities
Proceeds from issue of share capital - 3 -
Share issue costs - - -
Net cash inflow from financing activities 3 3 -
Net change in cash and cash equivalents (6,992) (8,376) (9,036)
Cash and cash equivalents at beginning of
period 12,513 21,549 21,549
Cash and cash equivalents at end of
period 5,521 13,173 12,513
Notes to the Interim Report
For the period ended 30 June 2015
1. Nature of operations and general information
Toumaz Limited and subsidiaries' ('the Group') principal activity is that of commercial exploitation of
wireless technologies with commercial propositions for the digital audio and healthcare sectors.
Toumaz Limited is the Group's ultimate parent company. It is incorporated in the Cayman Islands. The address of Toumaz Limited's registered office is Elgin House, 119 Elgin Avenue, George Town, Grand
Cayman, Cayman Islands. Toumaz Limited's shares are listed on the Alternative Investment Market of the London Stock Exchange.
Toumaz Limited's consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company.
The financial information set out in this interim report does not constitute statutory accounts. The
Group's statutory financial statements for the year ended 31 December 2014 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 2015.
They have been prepared following the recognition and measurement principles of IFRS. 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
2014.
These financial statements have been prepared on the going concern basis and under the historical
cost convention. The Group reported cash on the balance sheet at 30 June 2015 of £5.5m and the Board believes that when the underlying performance and recent initiatives are taken into account (as
set out below), that the going concern basis of preparation is appropriate.
the seasonal nature of the Group’s cash burn
research and development spend has peaked
overhead spend has been restricted
the outcome of the review into the healthcare business
the strong trading performance of Frontier Silicon
the realistic prospect of a debt facility
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 2014.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.
3. Revenue by sector
Unaudited
30 June
2015
Unaudited
30 June
2014
Audited
31 December
2014
£'000 £'000 £'000
Digital Radio 8,685 7,444 18,020
Connected Audio 5,105 2,835 7,472
Healthcare 237 509 746
Revenue 14,027 10,788 26,238
4. 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 and share warrant on the loss per share is anti-dilutive.
Basic loss per share
Unaudited Six
months ended
30 June 2015
Unaudited Six
months ended
30 June 2014
Audited Year
ended 31
December 2014
Loss for the period
attributable to
equity
shareholders £10,296,000 £7,569,000 £12,242,000
Weighted average
number of 0.25p
ordinary shares 1,702,925,947 1,675,547,064
1.677.866.400
(Loss) per share -
basic and diluted (0.61)p (0.46)p (0.74)p
5. Goodwill
Frontier
Silicon
Toumaz
Healthcare
Toumaz
Microsystems Total
£’000 £'000 £'000 £'000
Cost
At 1 January 2014 8,536 10,582 5,951 25,069
Additions - - - -
At 30 June 2014 8,536 10,582 5,951 25,069
Additions - - - -
At 31 December 2014 8,536 10,582 5,951 25,069
Additions - - - -
At 30 June 2015 8,536 10,582 5,951 25,069
Impairment
At 1 January 2014 - - 5,951 5,951
Charge in period - - - -
At 30 June 2014 - - 5,951 5,951
Charge in period - - - -
At 31 December 2014 - - 5,951 5,951
Charge in period - - - -
At 30 June 2015 - - 5,951 5,951
Net book amount at 30 June 2015 8,536 10,582 - 19,118
Net book amount at 30 June 2014 8,536 10,582 - 19,118
Net book amount at 31 December
2014 8,536 10,582 - 19,118
Toumaz Healthcare Goodwill relating to Toumaz Healthcare results from the acquisition of Toumaz Healthcare Limited
(formerly Toumaz UK Limited ) on 3 November 2005.
Toumaz Microsystems
Goodwill relating to Toumaz Microsystems results from the acquisition of Future Waves UK Limited and Toumaz Asia on 20 May 2009.
Frontier Silicon Goodwill relating to Frontier Silicon results from the acquisition of Frontier Silicon Ltd on 20 August
2012.
6. Other intangible assets
Marketing
intellectual
property
Customer
intellectual
property
Intellectual
property
Licence &
development
fees Total £’000 £’000 £'000 £'000 £'000
Cost
At 1 January 2014 4,000 1,690 17,009 14,571 37,270
Additions - - - 1,555 1,555
At 30 June 2014 4,000 1,690 17,009 16,126 38,825
Additions - - - 436 436
At 31 December 2014 4,000 1,690 17,009 16,562 39,261
Additions - - - 1,383 1,383
At 30 June 2015 4,000 1,690 17,009 17,945 40,644
Amortisation
At 1 January 2014 533 188 8,559 10,265 19,545
Charge in period 200 70 634 365 1,269
At 30 June 2014 733 258 9,193 10,630 20,814
Charge period 200 71 634 282 1,187
At 31 December 2014 933 329 9,827 10,912 22,001
Charge period 200 70 634 452 1,356
Impairment - - - 3,016 3,016
At 30 June 2015 1,133 399 10,461 14,380 26,373
Net book amount at 30 June 2015 2,867 1,291 6,548 3,565 14,271
Net Book amount at 30 June 2014 3,267 1,432 7,816 5,496 18,011
Net book amount at 31 December 2014 3,067 1,361 7,182 5,650 17,260
Intellectual property
Intellectual property relates to the valuation of beneficial licence agreements, trade names and customer relationships in Sensium Healthcare and Frontier Silicon at the date of their original
acquisition.
Licence & development fees
The licences relate to technology on new projects essential to the future development of the new generation digital chips. The licences will be amortised in accordance with the Group accounting policy
and will be subject to an annual impairment review.
Impairment
In the period to 30 June 2015 the Company resolved to cease designing its own silicon for its next generation connected audio solution and to use third party silicon. Subsequently, in August 2015, a
termination agreement was signed with Imagination Technologies who had been designing the chip on the company's behalf.
At the time the decision was taken to cease development of its own silicon, the company was carrying £4.5m of licensed IP on its balance sheet in respect of third party licences purchased to enable the chip
development. The Board has reviewed these licences for impairment and considers that they are no longer required for the on-going development of the company's other products. Included in the
termination agreement with Imagination Technologies, who will continue to develop the solution, are provisions for royalty income to the company on future sales of Imagination products. The Board
believes that a fair value of the expected future royalty streams is £1.5m. Consequently in the first half
of 2015, the Company has recognised an impairment of £3.0m against the carrying value of the licensed
IP. In the second half year the remaining licensed IP will be de-recognised and the Company will recognise a contingent receivable in respect of pending royalty income from Imagination Technologies.
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.
7. Trade and other receivables
Unaudited 30 June
2015
Unaudited 30 June
2014
Audited
31 December
2014 £'000 £'000 £'000
Trade receivables 2,992 2,037 2,021
Other debtors 807 637 689
Prepayments and accrued income 997 983 1,431
Trade and other receivables, net 4,796 3,657 4,141
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.
8. Trade and other payables
Unaudited
30 June
2015
Unaudited
30 June
2014
Audited
31
December
2014
£'000 £'000 £'000
Trade payables 5,205 4,096 2,782
Other payables 468 263 738
Accruals and deferred income 3,461 2,971 5,343
Trade and other payables 9,134 7,330 8,863
The fair value of trade and other payables has not been disclosed as, due to their short duration,
management considers the carrying amounts recognised in the balance sheet to be a reasonable
approximation of their fair value.
9. Share capital
Unaudited
30 June
2015
Unaudited
30 June
2014
Audited 31
December
2014
£ £ £
Authorised
4,000,000,000 ordinary shares of
0.25p 10,000,000 10,000,000 10,000,000
Allotted, issued and fully paid 1,702,925,947
1,675,547,0
64
1,677,866,400
£ 4,257,315 4,188,868 4,194,666
The movement in the number of
shares is as follows:
Number of
ordinary shares
At 1 January 2014 1,640,553,901
Shares issued 34,993,163
At 30 June 2014 1,675,547,064
Shares issued 2,319,336
At 31 December 2014 1,677,866,400
Shares issued 25,059,547
At 30 June 2015 1,702,925,947
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 105,300,174 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
30 January 2015, 24,865,103 ordinary shares of 0.25p were issued ("JSOP Shares") pursuant to the implementation by the Company of the joint share ownership schedule to the LTIP ("JSOP").
22 April 2015, 194,444 ordinary shares 0f 0.25p were issued in relation to the exercise of share options
by employees.