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IMImobile PLCAnnual Report &Financial Statements31st March 2016
Company Registration: 08802718
IMImobile is a cloud communications software and solutions provider that helps companies use mobile and digital technologies to communicate and engage with customers.
The Group operates across the UK, Americas, MEA and India, with clients in the mobile communications, banking, utilities, government, media, gaming and retail sectors.
Group Highlights
Strategic ReportChairman’s StatementChief Executive’s Statement Financial Review
GovernanceCorporate Social ResponsibilityDirectors’ ReportStatement of Directors’ ResponsibilitiesCorporate Governance ReportIndependent Auditor’s Report
Financial StatementsConsolidated Income StatementConsolidated Statement of Comprehensive IncomeConsolidated Statement of Changes in EquityConsolidated Statement of Financial PositionConsolidated Cash Flow StatementNotes to the Consolidated Financial StatementsCompany Balance SheetNotes to the Company Financial StatementsProfessional Advisors
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444546474849798082
Contents
Welcome to IMImobile
Atlanta
Dubai
London
Hyderabad
Johannesburg
Europe & Americas
56%of revenue from
Europe & Americas
Middle East & Africa
28%of revenue from
Middle East & Africa
India & SE Asia
16%of revenue from India & SE Asia
Top clients across the Group
IMImobile is a cloud communications software and solutions provider that helps companies use mobile and digital technologies to communicate and engage with customers.
We are operating in fast-growing mobile and technology markets fuelled by the rapid rise of smartphone usage globally.
Our Products
textlocal
Enterprise cloud communications platform enabling IT to create and deliver multi-channel digital customer journeys faster.
Mobile and social chat application for contact centres to improve productivity, sales and customer service.
Built for radio and television broadcasters to enrich audience engagement and live programming across mobile, digital and social.
A cloud-based messenger platform that enables businesses of any size to harness SMS messaging to improve customer engagement and marketing ROI.
Leading multi-channel campaign management platform to deliver personalised marketing campaigns in realtime.
The market leading content management system for end-to-end delivery of content services across all digital touchpoints.
With over 16 years’ experience and a track record of international service delivery we are the trusted partner to blue chip organisations worldwide.
Atlanta
Dubai
London
Hyderabad
Johannesburg
Europe & Americas
56%of revenue from
Europe & Americas
Middle East & Africa
28%of revenue from
Middle East & Africa
India & SE Asia
16%of revenue from India & SE Asia
Top clients across the Group
IMImobile is a cloud communications software and solutions provider that helps companies use mobile and digital technologies to communicate and engage with customers.
We are operating in fast-growing mobile and technology markets fuelled by the rapid rise of smartphone usage globally.
Our Products
textlocal
Enterprise cloud communications platform enabling IT to create and deliver multi-channel digital customer journeys faster.
Mobile and social chat application for contact centres to improve productivity, sales and customer service.
Built for radio and television broadcasters to enrich audience engagement and live programming across mobile, digital and social.
A cloud-based messenger platform that enables businesses of any size to harness SMS messaging to improve customer engagement and marketing ROI.
Leading multi-channel campaign management platform to deliver personalised marketing campaigns in realtime.
The market leading content management system for end-to-end delivery of content services across all digital touchpoints.
With over 16 years’ experience and a track record of international service delivery we are the trusted partner to blue chip organisations worldwide.
1IMImobile PLCAnnual Report & Financial Statements 31st March 2016
10.7
0
10
20
30
40
50
60
38.543.4
61.6
48.9
FY13 FY15FY14 FY16
REVENUE (£M)
0
10
20
30
40
23.5
27.9
36.5
30.0
FY13 FY15FY14 FY16
GROSS PROFIT (£M)
0
2
4
6
8
10
6.1
7.2
9.2
FY13 FY15FY14 FY16
EBITDA (£M)
0
2
4
6
8
10
6.9
8.8
10.6
8.8
FY13 FY15FY14 FY16
CASH GENERATED FROM OPERATIONS (£M)
• Revenue up 26% to £61.6m (2015: £48.9m) of which 11% is organic¹ growth
• Gross profit up 22% to £36.5m (2015: £30.0m) of which 10% is organic¹ growth
• EBITDA² up 17% to £10.7m (2015: £9.2m)• Adjusted profit after tax³ up 21% to £6.8m (2015: £5.6m)• Profit after tax on a statutory basis of £2.2m (2015: £3.4m loss)
reflecting share-based payments, impairment charges and costs in relation to acquisition activities
• Good contribution from Europe and Americas with gross profit growth of 21%
• Organic⁴ recurring revenue growth in MEA of 58%• Diluted adjusted EPS growth of 13% to
10.4p (2015: 9.2p⁵)• Cash generated from operations of £10.6m (2015: £8.8m) with
strong cash conversion of 99% (2015: 96%)• Cash and cash equivalents at 31 March 2016 of £15.0m
(2015: £14.6m)
Operational highlights of the Group• Organic growth from all regions and business units• New major client wins in all regions • Renewal of all major contracts falling due in the period • Textlocal launched in India with over 1,500 paying customers within the first 6 months• Re-branding and simplification of product suite completed with new version releases of core products• Acquisition and successful integration of Archer Digital (“Archer”), trading well since acquisition in September 2015
¹ Excluding the impact of the Archer acquisition and adjusting for the full year impact of Textlocal.² EBITDA is defined as operating profit/(loss) before depreciation, amortisation, fees incurred in relation to IPO and acquisition activities, impairment charges and share-based compensation See note 9 for a reconciliation.³ Adjusted profit after tax is defined by the Group as profit/(loss) after tax before fees incurred in relation to IPO and acquisition activities, impairment charges, share-based compensation, de-recognition of deferred tax assets and amortisation of acquired intangibles. See note 9 for a reconciliation.⁴ Excluding the impact of the Archer acquisition.⁵ Restated – see note 9
£61.6mRevenue up 26%
£36.5mGross profit up 22%
£10.7mEBITDA up 17%
Financial highlights of the Group
2
StrategicReport
3IMImobile PLCAnnual Report & Financial Statements 31st March 2016
John Allwood
It is my pleasure to introduce this year’s annual report and financial statements, the first since I took over as Chairman.
It is yet again hugely satisfying for the Board to present a year of strong, profitable and cash-generative growth for the Group.
The year has seen further development of our product offering, investment in sales and marketing and the completion of the acquisition of Archer Digital which joined the IMImobile family in September 2015.
IMImobile helps organisations to address the changing demands of consumers. Their customers increasingly expect communication via their preferred mobile channels, and we help companies to manage the complexity that this creates. We have been through another year of significant change in all markets and our software and solutions are vital to organisations looking to undertake any form of digital transformation. According to Gartner’s 2016 CEO survey 50% of CEOs expect digitalisation to transform their industries by 2020.
In the year to 31 March 2016 revenue grew by 26% to £62m and gross profit grew by 22% to £37m. It has been particularly satisfying to have achieved growth in all regions and business units of the Group during the
year. We have continued to make controlled investment in product, and sales and marketing activities, which we expect to deliver further profitable growth in future years.
The acquisition of Archer Digital consolidates our position in Africa and provides a platform to develop our enterprise business in the region. It offers access to key customer sectors beyond existing mobile operator clients to our portfolio of software products and solutions. The acquisition has bedded in well and the early signs are positive.
The acquisition of Textlocal in October 2014 has also continued to deliver against expectations with good growth in the core UK business and international expansion into the Indian market during the year.
The executive team continue to review potential acquisition targets and the Board is confident that the executive team have the requisite track record and experience in executing an acquisition growth strategy as opportunities arise.
Cash generation has been strong during the year, with cash generated from operations of more than £10m. The Group remains debt-free, having settled the consideration for Archer Digital from existing resources.
Non-Executive Chairman
John AllwoodNon-Executive Chairman
“It is yet again hugely satisfyingfor the Board to present a year of strong, profitable and cash-
generative growth for the Group.”
4
“Our core product offering and services are better than ever
and position the Group well for continued growth in all of the regions in which we operate.”
Our balance sheet is strong with net cash of £15m, providing the Board with the flexibility to invest in the business as well as return capital to shareholders via on-market purchases of IMImobile shares. Over the last six months there has been a lot of M&A activity in our sector and we believe that the landscape will continue to evolve in the next 12 months. We have, and will continue to, review acquisition opportunities to optimise value for shareholders but only if they deliver superior and sustainable long-term returns which are in keeping with our acquisition parameters. In the absence of significant acquisition opportunities and in accordance with our own strict return parameters, the Board will review all the options available to it, including a return of capital, taking into account the financial resources of the Company, the Company’s share price and future funding requirements in order to provide the best possible returns for our shareholders.
Our strategy of creating intellectual property in software and mobile technologies that can be deployed in global markets is unchanged, and the executive and management teams continue to successfully execute against this. Our people are one of our greatest assets and I would like to thank the entire IMImobile team for their continued dedication and hard work, and to congratulate them on yet another successful year. The strategy relies on keeping and attracting talented executives and it is incumbent upon me to ensure we have the appropriate rewards and incentives in place for executives and employees to share in the success of the Company. This will be reviewed over the coming months.
In summary, our core product offering and associated services are better than ever and position the Group well for continued growth in all of the regions in which we operate.
I also would like to take this opportunity to thank Vish, founder of the Company, who has stepped aside as Chairman. He provided a true long-term vision for the management of the Company and I am grateful that Vish remains very much involved with IMImobile in the role of Non-Executive Director. As a result, we will continue to receive the benefit of his strategic and management guidance as and when necessary.
Chairman’s Statement
John AllwoodNon-Executive Chairman
5IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Jay PatelChief ExecutiveWe are pleased to report that we have recorded a year of operational, financial and strategic progress across all business units of the Group. We have significantly grown our recurring revenue base and achieved profitable cash generative growth, whilst continuing to invest in product development. We have also executed an acquisition in South Africa and delivered on our objective to roll out Textlocal, our previous acquisition, into new geographic markets.
Market overviewAs I stated last year, we are living in a period of great change driven by technology, the ubiquity of mobile networks, increasing processing power of mobile devices and the falling costs of cloud computing. These themes are disrupting many industries and providing tremendous opportunities for value creation. This disruption is continuing and arguably accelerating with the launch of new technologies and initiatives around artificial intelligence, voice recognition and interactive messaging channels by the large global technology businesses such as Facebook and Apple.
These changes are revolutionising consumer behaviour across the world as the proliferation of connected devices transforms the relationships between consumers and service providers. There is an overwhelming need for companies like banks, mobile
operators, retailers, brands and utilities to focus on improving customer experience, particularly through digital channels. We are focused on helping clients to fully utilise mobile and digital technologies to improve customer engagement.
Our strategy has been to ensure that our software products and solutions are network, channel and device agnostic so that our clients have a partner that is able to deliver the right experience for their customers across a customer base that may be highly fragmented in its use and adoption of technologies. We also believe that as consumers adopt the new technologies they won’t necessarily discard old technologies and channels of communication and our clients will need software and solutions that adapt to this fragmentation.
Our addressable market is fragmented, highly competitive and fast changing with IT and communication vendors of all sizes looking to offer services for mobile and digital transformation. According to Forrester’s Market estimates, organisations will spend £90 billion on systems and processes for mobile engagement in 2017 and, according to Gartner, global IT spend will reach $3.5 trillion, 42% of this is being spent on communications. Spend on software is a small fraction of these totals but all reports suggest that the amounts spent on
“We are pleased to report that we have recorded a year of operational, financial and strategic progress across all business units of the Group.”
Jay PatelChief Executive
6
our specific area of expertise, cloud communications software for customer engagement, will increase substantially over the next few years.
We also expect to benefit from the increasing penetration of smartphones and data coverage in the emerging markets, particularly across India and Africa. An additional 1.3 billion smartphone subscribers are expected in India and the MEA region over the period from 2015 to 2021 and we believe that as a trusted vendor to the mobile operators in these regions we will be at the forefront of their customer engagement and new business activities.
As an organisation we started in the pre-smartphone age of 2G networks and we have established a strong track record of delivering innovation to blue-chip enterprises around the world and we believe that our continued growth is supported by market trends in all regions.
Software and solutions offeringA key initiative over the last year has been to simplify and reposition our technology and product offering to enhance the go-to-market strategy and to make it easier to sell and roll-out our platform and applications. The product portfolio is delivered from our global cloud infrastructure and offers a suite of end user business applications and a core Platform-as-a-Service offering.
IMIconnectIMIconnect is a cloud-based platform that helps time and resource constrained IT teams to quickly and easily automate customer interactions across communication channels such as SMS, Voice, Social Media and Facebook. For example, using visual drag-and-drop tools to automate messages and responses, reduces the time and complexities inherent in a programming-intensive approach.
We have invested considerable resources into this platform over the year adding additional communication channels and developer tools and we believe this platform can be a key enabler of future growth as an increasing number of businesses across all sectors adopt digital transformation agendas.
IMIcampaignIMIcampaign is a cloud campaign management application designed for multi-channel communication. It allows marketing departments to create, manage, deploy, monitor and adapt marketing campaigns targeted at a customer’s mobile device. Channels supported include SMS, MMS, email, social media, mobile internet and USSD. The product supports different types of campaigns such as promotional, event-triggered, targeted, interactive, progressive and multi-wave campaigns.
IMIcampaign is fully integrated within the internal processes and systems of a client and provides a real-time snapshot of customer behaviour using the campaign dashboard which allows businesses to track campaign activity at all times. The product is used by mobile operators, retailers and gaming companies.
IMIdigital IMIdigital helps organisations to offer mobile content services such as video and audio to different devices across multiple channels. The products reduce the time to market and ensure cross border consistency through the end-to-end service delivery platform including content licensing, web-portal, as well as app development.
IMIdigital powers more than 350 international content services and 14 billion billing transactions across the globe for trusted and recognised brands such as Universal Music Group, MTN, Aircel, Airtel and Orange across multiple international territories. We have continued to develop this set of products and during the last year we have added and deployed video and audio streaming capabilities.
IMIchatIMIchat is a cloud application that enables contact centres to improve their customer interactions whilst optimising their operational costs and efficiency. This product allows for real-time agent interactions for either customer support or sales across multiple messaging channels including SMS, Facebook Messenger and In-app chat channels.
Contact centre specific functionality includes message templates where contact centre agents can choose pre-configured messages to improve the speed of interactions and ensure consistency. Additional capabilities include a queue management system, management of permitted discourse and the ability to tag conversations with keywords to enable efficient tracking of conversations. Over the last year we have added new channel capabilities, an enhanced user interface and adapters for integrating into other contact centre applications. The application is now used by leading retail banks, insurers and utilities.
IMIsocialIMIsocial is a cloud application that centrally collates high volumes of inbound customer audience messages from multiple social channels such as Facebook, Twitter, SMS, YouTube and Instagram, allowing broadcasters to use audience generated content in their programming. This allows for real-time audience interaction as well as premium rate services such as competitions and voting, therefore transforming audience engagement into improved ratings and revenue.
Chief Executive’s Report continued
7IMImobile PLCAnnual Report & Financial Statements 31st March 2016
All the key products support multi-tenancy and are hosted and managed within the IMIcloud which provides a highly available and scalable data centre and network infrastructure, including industry leading levels of availability and disaster recovery. The IMIcloud supports our integrations and connectivity with mobile network operators, device environments (such as Apple and Google), payment gateways and other third party service providers.
We operate a private cloud co-located in five data centres across the UK, US and India and our platform modules have been deployed with geo-redundancy to offer 99.99% service availability. We have also supported certain clients and applications on a public cloud infrastructure.
The infrastructure, platform and software applications are all supported by our Virtual Network Operations Centre (“VNOC”) operating 24/7 across support centres in the UK and India. The VNOC teams in India are ITIL certified and aligned to ITIL best practice guidelines. We are ISO 9000 and 27001 accredited and operate several services within a PCI DSS compliant environment.
Our cloud infrastructure and applications today process over 13 billion SMS messages per year, 15 billion voice flows, and 14 billion commerce transactions.
Regional performanceThe Group is managed commercially and strategically on a regional basis with centralised resources for software development, finance and general management. A key operating metric for each region is gross profit as there are considerable differences in gross margins across regions, product lines and revenue models. Gross profit additionally measures most directly the value of the software and associated services delivered by the Group which excludes the impact of network infrastructure, third party hardware and content costs.
Strategic Report
The product gives editors, producers, and presenters real-time feedback on audience reactions, comments and sentiment in one accessible, easy-to-use dashboard with an auto filter on content preferences. Over the last year the latest version of IMIsocial has been rolled out to leading broadcasters such as the BBC and other major media houses powering their audience engagement programmes.
TextlocalTextlocal is a cloud-based, self-serve platform that allows SMEs to gain instant, affordable access to SMS messaging capabilities. The platform simplifies the creation, deployment and management of mobile messaging campaigns and services.
Textlocal is a Software-as-a-Service business messaging tool that enables businesses of any size to harness SMS messaging capabilities to increase customer engagement and marketing ROI. The product was acquired in October 2014 and since then we have invested in adding sophisticated data import capabilities, target group definition, audit logs and role-based access control which make the product ideally suited for enterprise usage, whilst also providing an extremely intuitive yet simple to operate interface. The Textlocal product is being used across a range of industries by companies like Makro, Pizza Hut, Costcutter, Tastecard and Lottoland.
“Our strategy has been to ensure that our software
products and solutions are network, channel and device agnostic so that our clients
have a partner that is able to deliver the right experience for
their customers.”
8
Chief Executive’s Report continued
¹ Defined as the full year to 31 March 2016 compared with the full year to 31 March 2015.
Regional performanceEurope and the Americas
£19.9mGross Profit
2015: (£16.4m)
A number of our deployments have also been recognised by industry during the year; including the ‘Best Use of Social Media in Telecom Industry’ at the Youth Marketing Awards 2016 as well as being shortlisted as a finalist for the ‘Best Loyalty Programme within the Telecoms sector’ category, along with O2, for the Priority £1 lunch campaign.
We continue to invest in establishing our operations in the Americas and have significantly grown gross profit in the region. We now have contracts with Cricket and GoPhone as well as early pilots with other major operator groups. We will continue to invest in the region, as it is the largest single addressable market for our product set.
Gross profits in this region have risen strongly by 21% year on year. Organic growth accounted for 9% of this. Like for like¹ gross profit growth from Textlocal was above 10%.
Growth in the region came from a number of new significant contract wins with a mobile operator, an electronics retailer and a gaming business as well as additional business from existing financial services clients. We also renewed all significant contracts falling due in the year including a two year extension with the region’s largest customer, a tier-one high street bank, and a three year renewal with a leading utility provider.
Mobile operators remain our largest customer sector, and we are currently positioned as a trusted, integrated and reliable partner to all the major UK operators. We have also retained our position as one of the leading providers of carrier billing products in the UK market. Furthermore, we have made progress in the financial services sector, which is undergoing rapid change due to mobile and digital technologies.
There are live deployments of all of our products and platforms in the Europe and Americas region with new versions of IMIcampaign, IMIconnect, IMIchat, IMIsocial and Textlocal launched and deployed in the year. We have successfully upsold new deployments of our products to existing clients, and on the back of these successes we have also started to invest in a reseller and partnership strategy through which we hope to build greater distribution.
9IMImobile PLCAnnual Report & Financial Statements 31st March 2016
¹ Excluding the impact of the Archer Digital acquisition
Regional performanceMiddle East and Africa
£11.4mGross Profit
2015: (£8.6m)
to clients across banking, satellite television services, mobile operators, retailers and municipalities in South Africa. The company has experienced year on year growth since its inception in 2005, has 50 employees and is based in Johannesburg. This acquisition supports the Group’s international growth plans, as well as providing access to customers in key target sectors.
The Group continues to see numerous opportunities in Africa for enterprises to use mobile as an engagement channel driven by the explosion of mobile devices and better networks as well as the limitations of physical infrastructure. We intend to utilise Archer’s existing infrastructure and market presence to cross-sell IMImobile’s product suite and to offer Archer’s technology and products to new international markets outside of South Africa. Trading since September has been in line with our expectations.
Currency volatility in South Africa and Nigeria, as well political and regulatory uncertainty, could create short-term obstacles. However we remain very positive about opportunities in the region and our proven ability to deliver solutions for the leading blue chip companies operating in this region.
Our business performed well this year driven by an increase of 58% in our recurring revenue from our existing and new contracts with mobile operators in the region.
Strategic Report
Overall organic1 year on year gross profit growth was 15% and this lower figure reflects the expected fall in license revenues from the exceptionally high level of non-repeating license revenues recognised in the previous year. The acquisition of Archer Digital in September 2015 contributed to 32% gross profit growth in the Middle East and Africa.
IMImobile has long-term contracts with the leading mobile operator groups for deployments of IMIdigital and IMIcampaign in multiple countries. We work with mobile operators that serve nearly 500 million customers representing 40% of all mobile subscribers in the region.
Our clients’ significant investment in increasing mobile coverage across Africa is providing opportunities for people to consume more content and we work closely with our clients to create, deliver and operate these content services across different mobile channels. We believe there are strong foundations for growth. The number of smartphone connections is expected to increase from 245 million today to over 585 million by 2020 (Ericsson Mobility Report). There is also a strong pipeline of operator contracts in deployment which will contribute to profit in the coming years in the region.The acquisition of Archer Digital (“Archer”) for a cash consideration of $5.6m was a major highlight during the year. Archer was founded in 2005 and provides a feature-rich suite of mobile engagement products
10
Regional performanceIndia and SE Asia
£5.3mGross Profit
2015: (£5.0m)
Chief Executive’s Report continued
the first six months and we believe that the market for cloud communications software will grow rapidly in the region. We are well placed to leverage this trend with our suite of cloud applications.
IMImobile is proud to have been selected as a partner of BBC Media Action and The Gates Foundation to provide free mobile health education services to nearly 10 million families and one million community health workers across India, facilitated through the Government of India’s Ministry of Health and Family Welfare Department. This programme was developed by BBC Action Media and powered by our IMIconnect platform nationwide, ensuring that pre-recorded audio health messages became available to millions of women and expectant mothers throughout India.
We are pleased to report that after a strong second half we have returned to growth in India with an overall gross profit increase of 4%.
This growth reflects a significant increase in new sales with a new voice services contract signed with a major operator in Myanmar and a major deployment of IMIcampaign in a license deal in Nepal as well as various smaller wins with leading ecommerce businesses, FMCG brands and financial services clients. There continued to be a decline in the monthly recurring revenue from certain operator customers. However, we now believe this has stabilised.
During the year, we have also successfully renewed a number of multi-year contracts with four of the major operators in India that serve over 350 million customers. We also won a three year contract to provide services on a pan-India basis, previously having only provided coverage in part of the country.
We have also successfully launched the Textlocal platform in India with over 1,500 paying customers in
Products and Technology
IMImobile Business Applications and Platforms
textlocal
FinanicalServices
Utilites Retail Healthcare PublicSector
ContactCentre
Logistics Travel
Global Managed Infrastructure & Enablers
Global scalability for potential operational leverage
Connectivity
13 billionmessages p.a.
IntelligentNetwork
Gateways
600+ servicesdeployed
Payments
14 billion billingtransactions p.a.
DeviceOptimsation
10,000+ devicefingerprints
VoiceGateway
15 billion voiceflows p.a.
Strategic Report
IMIcloud
IMIcloud
11
13IMImobile PLCAnnual Report & Financial Statements 31st March 201612
Case Study: Retail BankHelping to digitise key customer journeys to improve the retail banking experience.
What we do: IMImobile has been working with a number of retail banks worldwide. Initially being selected as a global messaging partner, IMImobile is now helping retail banks with key strategic digital transformation initiatives using its IMIconnect digital customer engagement platform including:
• Embedding digital customer communication to improve existing business processes (such as automated balance notifications and application status alerts).
• Deployment of real-time fraud prevention solutions.• Improvement of contact centre efficiency with
two-way interactive messaging.
Fast forward the creation of mobile and digital customer engagement
Click to call
SMS confirmation
In app pushmessaging
Balancealerts
Livechat
15IMImobile PLCAnnual Report & Financial Statements 31st March 201614
What we do: O2 is the commercial brand of Telefónica UK Limited and is a leading digital communications company with the highest customer satisfaction of any mobile provider according to Ofcom. IMImobile delivers more than 600 million customer interactions across 700 multi-channel campaigns a year using IMIcampaign.
By creating and managing the delivery of campaigns across SMS, MMS, and email, IMImobile enables O2 to deliver personalised communication to their customers, helping the company provide better services, enhance customer satisfaction and increase revenue.
Case Study: O2Helping to deliver personal contextual marketing.
“O2’s goals are to enhance its market position and retain its reputation for customer satisfaction. IMImobile is an essential part of
the team that makes that happen.” Head of Marketing Operations at Telefónica UK Ltd (O2).
17IMImobile PLCAnnual Report & Financial Statements 31st March 201616
What we do: IMIdigital has been designed to support the management and delivery of digital content to the complete universe of mobile and desktop devices. It provides content management, billing solutions and marketing tools which enable service providers to merchandise and monetise digital content utilising a single platform. Many leading content publishers, brands and retailers
have chosen IMIdigital to provide a range of revenue generation and customer loyalty solutions. For example, IMImobile have worked in partnership with Warner Music International who utilise IMIdigital for the distribution and merchandising of Warner’s extensive digital catalogue across international territories.
Case Study: Warner Music International Enabling the end-to-end delivery of digital content services.
“We value the flexibility, reliability and scalability of the IMIdigital solution and have partnered to deliver some innovative projects.
The platform allows us to distribute our music in all digital formats to consumers around the globe and is supported by
reliable reporting and accounting capabilities.”VP, Artist Services, Warner Music International
19IMImobile PLCAnnual Report & Financial Statements 31st March 201618
Case Study: Home InsuranceUsing two-way mobile chat to transform the customer service experience.
What we do: IMImobile has been working with one of the UK’s leading providers of breakdown and home insurance services, helping the business to connect with their growing customer base and manage their field force employees. IMImobile provides IMIchat, interactive messaging software, to enable contact centre agents to have a
real-time conversation with customers using two-way SMS. From the IMIchat dashboard, agents can manage multiple SMS conversations, send real-time updates and answer any customer enquiries.
“It’s not just a faster service for customers and agents; it’s a messaging solution that
allows a great deal of personalisation.” Service Delivery Manager of a leading Home Insurance Services Group
20
Growth strategy and outlookOur growth strategy has remained consistent over a number of years.
There are structural growth trends from which we benefit, particularly the movement towards the use of cloud software and infrastructure for enhancing customer experience. We also operate in highly competitive markets with technology vendors of all sizes competing for the attention of enterprises as they pursue the benefits of digital and mobile transformation.
We are confident that we can grow organically in these markets on the basis of strong existing customer relationships and an innovative culture that will help us to secure new relationships. We currently have over 70 clients with revenues over £0.1m p.a. of which 20 have revenues over £0.5m p.a. and 11 clients with over £1m p.a. We believe that we can steadily grow the number of clients and the average size of the contracts as mobile and digital engagement strategies become a business imperative.
In order to develop our relationships we need to continually innovate and we believe that our track record of delivering innovation over the last fifteen years has underpinned our growth to date. We have committed technical resources in India and the UK and believe that we can cost-effectively continue to commit R&D resources to innovate. We are encouraged by the progress we have made with the latest versions of our cloud product suite and we hope to create additional growth opportunities through a partnership and channel strategy for greater distribution.
We also believe that selective geographic expansion can enhance organic growth and we have invested in establishing operations in the USA and Myanmar, in the USA because we see large opportunities for our core product set and in Myanmar there is substantial greenfield opportunity for our core products and solutions.
Jay PatelChief Executive
We continue to look for acquisitions that can accelerate growth and have clear criteria for selection in what is a very fragmented market. Our primary objective is to look for organisations that have close, recurring and substantial relationships with large blue chip corporates delivering mobile and digital strategies or technologies. We believe that over time we should be able to increase the scale of the client relationships. We also consider companies with complementary products that can be delivered to our major customer groups.
We aim to maintain a strong balance sheet as there are many acquisition and consolidation opportunities. However, we are confident in our organic growth and strategic position and believe it is important to wait for the right opportunity, particularly when valuations look stretched for many small privately owned companies. We are pleased with all the material acquisitions we have made in the Group since foundation (WIN plc, Textlocal and Archer) and will continue to consider selective opportunities.
The 2017 financial year has started well with many opportunities for growth across all regions and business units. As a result of our stable client relationships, pipeline of new deployments and high mix of recurring, repeating and transactional revenues we have good visibility of future performance. We will continue to invest in more sales and marketing activities and product development to establish a leading position in growth markets, and we are confident of our prospects for the year ahead.
The Gartner Reports described herein (the “Gartner Reports”), represent research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this Annual Report) and the opinions expressed in the Gartner Reports are subject to change without notice. This contains statistical data, estimates and forecasts that are based on independent industry publications or reports or other publicly available information, as well as other information based on our internal sources. This information involves a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors.
Financial Review
22
Financial Review
Group performance at a glance
Key performance indicators (KPIs)
This section sets out the KPIs for the Group during the year ended 31 March 2016.
Group revenue and gross profit
For the year to 31 March 2016 total revenue increased by 26% to £61.6m (2015: £48.9m) and gross profit increased by 22% to £36.5m (2015: £30.0m). The Board considers that gross profit is the key operational measure of performance in the business. Group geographical split of revenues and gross profit is as follows:
The Europe and Americas region gross profit grew by 21% in the year. Gross margin in Europe and Americas in the year was 57.6%, down slightly from 58.5% in 2015 in part as a consequence of the inclusion of full year results of the lower margin Textlocal business.
Year ended 31 March 2016 2015 Growth Revenue £m £mEurope & Americas 34.5 28.0 23%Middle East & Africa 17.0 11.3 50%India & South East Asia 10.1 9.6 5%Total 61.6 48.9 26%
Year ended 31 March 2016 2015 Growth Gross profit £m £mEurope & Americas 19.9 16.4 21%Middle East & Africa 11.3 8.6 32%India & South East Asia 5.3 5.0 4%Total 36.5 30.0 22%
1 Adjusted profit before tax is defined by the Group as profit/(loss) before tax before fees incurred in relation to IPO and acquisition activities, impairment charges, share-based compensation and amortisation of acquired intangibles. See note 9 for a reconciliation.2 Adjusted profit after tax is defined by the Group as profit/(loss) after tax before fees incurred in relation to IPO and acquisition activities, impairment charges, share-based compensation and amortisation of acquired intangibles. See note 9 for a reconciliation.3 Adjusted EPS uses adjusted profit after tax as defined above.
Year ended 31 March 2016 2015Growth / (decline)
£m £mRevenue 61.6 48.9 26%Gross Profit 36.5 30.0 22%Gross Margin 59.3% 61.4%EBITDA 10.7 9.2 17%EBITDA Margin 17.3% 18.7%Operating profit before share-based payments and exceptional items 8.4 6.7 25%Profit / (loss) before tax 4.2 (2.3) (282%)Adjusted profit before tax1 8.5 6.7 26%Profit / (loss) after tax 2.2 (3.4) (167%)Adjusted profit after tax2 6.8 5.6 21%Diluted EPS 5.2p (13.5p) (139%)Diluted adjusted EPS3 10.4p 9.2p 13%Cash at period end 15.0 14.6 3%
23IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Excluding the impact of the Archer acquisition gross profit in the Middle East & Africa (MEA) region grew by 15% to £9.9m (2015: £8.6m). Gross profit from recurring revenue contracts in MEA increased by 58% year on year. This growth was partially offset by a decline in non-repeating license fee income recognised in the prior year which was not repeated to the same extent this year. When including the post-acquisition gross profit generated by Archer the regional gross profit grew by 32% to £11.4m. Gross margin in MEA reduced to 67.0% from 76.2%, reflecting the decreased proportion of license fees recognised during the period and the inclusion of the lower margin Archer business.
The Indian and SEA region gross profit increased in the year by 4% to £5.3m (2015: £5.0m). Gross margin declined slightly to 51.9% compared with 52.5% from the previous year as a result of the increase in the lower margin sales to non-operator customers who typically have a lower gross margin because of the cost of third party mobile infrastructure.
Operating costs before amortisation, depreciation, impairment costs, share-based payments and exceptional items
Operating costs before amortisation, depreciation, impairment costs, share-based payments and exceptional items in the year were £25.8m (2015: £20.9m). This reflects the full year inclusion of Textlocal and the post-acquisition costs of Archer as well as additional investment in sales and marketing across the Group.
EBITDA1 and operating profit before share-based payments and exceptional items
EBITDA for the year to 31 March 2016 was £10.7m (2015: £9.2m) and operating profit before share-based payments and exceptional items was £8.4m (2015: £6.7m) representing an increase of 25% against the prior year.
Group cash flow and working capital
Year end cash and cash equivalents were £15.0m (2015: £14.6m). There were no bank borrowings at 31 March 2016 (2015: £nil). Cash generated from operations was £10.6m (2015: £8.8m) and represents an operating cash flow conversion of 99% of EBITDA (2015: 96%).
Group working capital is made up as follows:
Trade receivables and payables include “pass through” amounts generated from mobile payment transactions. The receivables are from mobile operators and payables to customers who use IMImobile’s payment APIs. The gross value of these transactions is excluded from revenues and cost of sales as the Group accounts only for the commission earned on such transactions within revenue as it is not the principal obligor in the arrangement. The value of pass through transactions included in trade and other receivables at 31 March 2016 is £3.1m (2015: £3.2m) and £6.3m (2015: £5.2m) in trade and other payables.
Trade and other receivables has increased during the year as a result of the inclusion of Archer Digital. The value of trade and other receivables included from Archer Digital at 31 March 2016 is £1.5m (2015: £nil), the additional increase is mainly attributable to the increase in monthly run rate revenues compared to the previous year.
Trade and other payables has increased during the year as a result of the inclusion of Archer Digital. The value of trade and other payables included from Archer Digital at 31 March 2016 is £1.6m (2015: £nil). An increase of pass through transactions of £1.1m referred to above as well as an increase in cost of sales as a result of higher revenues compared to the previous year have also contributed to the overall increase.
Strategic Report
1 EBITDA is defined as operating profit/(loss) before depreciation, amortisation, fees incurred in relation to IPO and acquisition activities, impairment charges and share-based compensation. See note 9 for the reconciling items.
As at 31 March 2016 2015£m £m
Cash and cash equivalents 15.0 14.6Trade and other receivables 24.3 19.7Trade and other payables (excluding deferred income) (22.6) (18.3)Net working capital 16.7 16.0
24
Group profit after tax
Profit after tax was £2.2m (2015: loss of £3.4m) after the impact of exceptional costs of £0.6m (2015: £1.7m), share-based payment charges net of deferred tax of £3.7m (2015: £6.7m), amortisation of acquired intangibles of £0.3m (2015: £nil) and de-recognition of deferred tax assets of £nil (2015: £0.5m). Adjusted profit after tax was £6.8m (2015: £5.6m) representing an increase of 21% against the prior year.
Earnings per share
Diluted earnings per share was 5.2p (2015: loss 13.5p). Diluted adjusted EPS grew by 13% to 10.4p (2015: 9.2p).
Other financial information
Group taxation
The tax charge for the year was £1.9m (2015: £1.1m). The adjusted effective rate of tax1 for the year was 19.9% (2015: 16.7%).
Other intangible assets
During the year to 31 March 2016 the Group capitalised £1.0m of development costs (2015: £0.2m) and acquired £2.1m of intangible assets as a result of the acquisition of Archer Digital. In addition to this, expenditure during the year on software and trademarks and licences was £0.6m (2015: £0.5m).
Property, plant and equipment
Capital expenditure on property, plant and equipment during the year was £2.0m (2015: £1.0m) and acquired £0.2m of property, plant and equipment as a result of the acquisition of Archer Digital.
Goodwill
Goodwill held at 31 March 2016 was £19.8m (2015: £17.9m) following the acquisition of Archer Digital. There were no other changes to the carrying amount of goodwill in the year.
Deferred tax
Deferred tax assets at 31 March 2016 were £0.5m (2015: £0.9m) following the write-off of deferred tax on the flowering share plan recognised in the prior year.
Deferred tax liabilities at 31 March 2016 were £0.4m (2015: £nil) recognised on identifiable intangible assets acquired in Archer, which do not offset with deferred tax assets held by the Group.
Available-for-sale financial assets
During the year the Group increased its holding in the available-for-sale financial asset held at the start of the year by £0.1m which also resulted in an impairment of the existing holding by £0.2m.
Non-current liabilities
As well as the deferred tax liabilities above, the provision for defined benefit gratuity increased to £0.5m (2015: £0.4m).
Financial Review continued
1 Adjusted tax as a proportion of adjusted profit before tax, as reconciled in note 9.
25IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Principal risks and uncertainties of the Group
The Board has overall responsibility for managing risk. Risks are formally identified and recorded in a risk register, which is reviewed by the Board at each full board meeting. Risks are evaluated based on likelihood and potential impact, and the register records current mitigating controls to reduce risk, together with any required actions to further reduce risk to appropriate levels. The Board do not consider there to have been any significant changes in the severity of the risks during the year.
Risk Area Potential Impact Mitigation of RisksExchange rate fluctuations A significant proportion of the Group’s
revenue is generated overseas and is denominated in Indian Rupees, US Dollars, South African Rand and Nigerian Naira and cash deposits are held in multiple foreign currencies, most significantly the Nigerian Naira and US Dollar. Therefore the Group is exposed to foreign currency risk due to fluctuations in exchange rates. This may result in gains or losses with respect to movements in exchange rates which may be material a nd may also cause fluctuations in reported financial information that are not necessarily related to the Group’s operating results.
The Group naturally mitigates this risk by offsetting its cost base in the same currencies where possible and by closely monitoring exchange rate fluctuations.
Customer relationships A proportion of the Group’s business is derived from supplying ongoing services to customers based on formal contracts. Despite historically low levels of customer attrition and the longevity of many of the Group’s relationships with its core customers, it is possible that customer attrition rates may increase in the future due to increased competition, the take-over or merger of major customers or changes in market demand.
The Group has procedures in place to minimise the risk of events of this nature occurring such as diversifying its customer base, and maintaining strong relationships with its customers, as well as signing long-term contracts with customers.
Dependence on key personnel The Group’s future success is substantially dependent on the continued services and performance of its senior management including the Group’s Directors, each of whom has significant relevant experience.
The Group provides meaningful long-term incentives to the executive team and key employees as well as offering competitive remuneration packages.
Regulatory compliance Certain of the Group’s UK activities are regulated by PhonepayPlus an agency of OFCOM which has responsibility for the regulation of mobile payments in the UK. The Group is required to comply with the PhonepayPlus code of practice when it provides premium rate services in the UK. PhonepayPlus has the ability to impose fines, suspend services or impose certain other sanctions where its code of practice is breached. Such fines, suspensions or other sanctions can be imposed when the Group has failed to adequately deal with due diligence and/or risk management of the customer which has breached the code of practice.
The Group follows detailed procedures for the sign up of new services as well as regular monitoring and risk assessment of ongoing services. In addition to this key personnel from the Group meet regularly with the regulator in order to review market trends and collaborate on certain matters.
Strategic Report
26
Principal risks and uncertainties of the Group
Risk Area Potential Impact Mitigation of RisksTechnological change The Group operates in markets that
are subject to constant technological development, evolving industry standards and changes in customer needs. Therefore the Group is subject to the effects of actions by competitors in these markets and relies on its ability to anticipate and adapt to constant technological changes taking place in the industry. To maintain its strong position in the market, the Group needs to successfully market its products and services and respond to both commercial actions by competitors and other competitive factors affecting these markets, anticipating and adapting promptly to technological changes, changes in consumer preferences and general economic, political and social conditions.
The Group spends approximately 4-5% of revenues on research and development as well as employing product and solution specialists who monitor market developments and keep the product offering relevant for the markets in which the Group operates.
Significant failure or interruption to network or IT systems
The Group’s business depends on providing customers with highly reliable platforms and services. Unanticipated network, or other, interruptions (whether accidental or otherwise) may occur as a result of system failures, including hardware or software failures, which affect the quality, or cause an interruption in the Group’s supply of services. Such failures can result from a variety of factors within the Group’s control, including human error, equipment failure, power loss, failure of services related to the internet and telecommunication networks, physical or electronic security breaches, as well as factors outside of the Group’s control, such as sabotage, vandalism, system failures of network service providers, fire, earthquake, adverse weather and other natural disasters, water damage, fibre optic cable cuts, power loss not caused by the Group and terrorism.
The Group’s infrastructure is hosted mainly using third party data centres, with major platforms and systems also benefiting from geographical redundancy. Third party hardware and software support contracts are in place. Connectivity to multiple networks also provides mitigation against elements of this risk.
The Strategic Report was approved by the Board and signed on its behalf by:
Mike JefferiesGroup Finance Director4th July 2016
Financial Review continued
27IMImobile PLCAnnual Report & Financial Statements FY2016
Corporate SocialResponsibility
28
Corporate Social Responsibility
IntroductionIMImobile is a Global business committed to operating to the highest ethical standards and integrity. We care deeply about the impact we have on our employees, our customers and the wider community.
We are a signed-up partner to the UN Global Compact initiative, following the principles relating to human rights, labour practices the environment and anti-corruption.
We focus our efforts in three main areas:1. Social and charitable endeavours2. Minimising our environmental impact3. The health and well-being of our staff
Social and charitable endeavoursAt IMImobile we are passionate about helping others, and support a diverse range of charitable initiatives. During the year to 31 March 2016 we have supported Great Ormond Street Hospital Charity, Scope, The Vodafone Foundation, Get Kids Going!, the Krishnamurti Foundation and the Indian Prime Minister’s National Relief Fund as part of the appeal for support following the major Nepal earthquake in April 2015.
We also continue to assist the fund raising efforts of a wide range charities who use our direct carrier billing integrations offering the ability to receive donations via premium SMS.
Our services have also been used to support activities for BBC Children in Need, with which we have worked with for over 10 years.
In the last year we were also engaged by BBC Media Action and the Bill and Melinda Gates Foundation to provide a solution delivering free health education to nearly 10 million women across India.
Minimising our environmental impactWe are committed to our environmental responsibilities and have a broad set of initiatives to ensure that our environmental impact is limited, these include;
• Minimising business travel by the use of video, web or telephone conferencing facilities
• Recycling or environmentally sound disposal of IT equipment
• Encouraging good practices in the offices, including recycling, limited use of disposable cups and glasses and efficient use of printers and photocopiers
• Actively supporting and encouraging the use of the Cycle to Work Scheme
Many of our solutions reduce the environmental impact of certain processes of our customers, reducing waste and consuming fewer resources. Examples of this include the delivery of paperless statements and the general move towards digital engagement via various communications channels.
Health and well-being of staffIn a business that creates intellectual property and provides professional services to its customers, our employees are clearly one of our major competitive advantages, and we are very proud that we have a large number of staff who have been with the business for more than 5 years. We have a strong management and leadership team across the Group and are focussed on providing a safe, comfortable and enjoyable environment for our employees to work in. We actively promote health and well-being (as well as a bit of healthy competition!) actively sponsoring, and supporting various sporting activities outside of work including soccer, cricket, cycling and badminton.
We are an equal opportunities employer and try to act fairly on all of our dealings relating to recruitment, training and development.
29IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Director’s Report
30
Directors’ Report
The Directors present their annual report and audited financial statements on the affairs of IMImobile PLC for the year ended 31 March 2016.
Results and dividends
The results for the year are set out in the consolidated income statement on page 44. The Directors are not recommending a dividend for the year.
Directors
The following Directors served on the Board of the Company during the year and subsequently:
Executive DirectorsMr Shyamprasad (Shyam) Bhat Mr Michael (Mike) JefferiesMr Jayesh (Jay) Patel
Non-executive DirectorsMr Charles (John) AllwoodMr Viswanatha (Vish) AlluriMr Simon Blagden
The Directors and their beneficiaries have the following beneficial interests in the ordinary share capital of the Company:
There were no changes in Directors’ interests between 1 April 2016 and the date of these financial statements.
Details of related party transactions involving Directors of the Company are given in note 17 to the financial statements.
Directors’ emoluments
The remuneration of the Directors of the Company was as follows:
31 March 2016 31 March 2016 31 March 2016 31 March 2015
Number % of share capital
% of voting rights1
% of voting rights
Vish Alluri - - 15.9% 16.2%Shyam Bhat - - 2.8% 2.8%Mike Jefferies 45,000 0.1% 0.1% 0.1%Jay Patel 3,082,500 6.3% 5.1% 3.4%John Allwood 10,000 0.0% 0.0% 0.0%
Basic salary
Cash bonus Pension Benefits in kind
31 March 2016 Total
31 March 2015Total
Executive Directors £000 £000 £000 £000 £000 £000Shyam Bhat 61 - - 2 63 61Mike Jefferies 170 50 7 - 227 368Jay Patel 200 - 6 - 206 975
Non-executive Directors
John Allwood 50 - - - 50 38Vish Alluri 31 - - 3 34 52Simon Blagden 45 - - - 45 34
557 50 13 5 625 1,528
1 The Company’s issued share capital consists of 49,166,334 ordinary shares with a nominal value of 10p each (“Ordinary Shares”), each share having equal voting rights. The Company does not hold any Ordinary Shares in treasury and therefore the number of Ordinary Shares with voting rights is 49,166,334. In addition, there are 11,299,599 Ordinary Shares which are issuable to Vish Alluri and Shyam Bhat upon the exercise of rights. Vish Alluri and Shyam Bhat have an option to convert their shares in IMI Mobile Private Limited into shares in IMImobile PLC. Vish Alluri has an option over shares which represent 15.9% of the voting rights of the Company. Shyam Bhat has an option over shares which represent 2.8% of the voting rights of the Company. Until such time as the option is exercised the voting rights can be exercised pursuant to each of the B Shares held by the nominee for Vish Alluri and Shyam Bhat. Therefore, when calculating voting rights, shareholders should use the figure of 60,465,933 as the denominator.
31IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Interests in share options
Set out below are details of options granted to the Directors which are ultimately over shares in IMImobile PLC:
All options are dependent upon continuing employment except for 191,250 of Mike Jefferies’ options which are dependent upon meeting performance targets of 20% average annual compound growth in the Group’s adjusted EPS from a baseline set when the options were granted to the vesting date. All options vest over a period of 0-4 years and expire 10 years from the grant date.
* Amended from 600,000 in prior year financial statements.
† On 30 March 2016 Jay Patel exercised his option to acquire 1,050,000 shares in the Company. The option was granted before the Company was listed on AIM in June 2014. The gain on the exercise of the option was £1,531,000.
Pension contributions
The number of Directors who:
Contributions paid by the company in respect of such Directors were as follows:
Amounts accrued by Directors under the scheme are as follows:
Highest paid Director
Companies Act 2006 requires certain disclosures about the remuneration of the highest paid Director taking into account emoluments, gains on exercise of share options and amounts receivable under long-term incentive schemes. On this basis, the highest paid Director in the year was Jay Patel and details of his remuneration are disclosed above.
1 April 2015Number of
options
Number of options
granted
Number of options exercised
31 March 2016
Number of options
Weighted average exercise
price (pence)
Earliestexercise
date
Vish Alluri 720,000* - - 720,000 28 27/06/2014Shyam Bhat 1,725,000 - - 1,725,000 18 27/06/2014Mike Jefferies 638,424 - - 638,424 27 27/06/2014
Jay Patel† 1,800,000 - 1,050,000 750,000 50 30/06/2015
31 March 2016Number
31 March 2015Number
Are members of a defined benefit pension scheme 2 2Are members of a money purchase pension scheme 2 2
31 March 2016£000
31 March 2015£000
Vish Alluri - -Shyam Bhat - -Mike Jefferies 7 7
Jay Patel 6 6
13 13
31 March 2016£000
31 March 2015£000
Vish Alluri 13 12
Shyam Bhat 23 22
36 34
Governance
32
Strategic Report
The Strategic Report covers pages 3 to 26. The Company has chosen to set out likely future developments in this Strategic Report that would otherwise be required to be disclosed in the Directors’ Report.
Financial risk management objectives and policies
Disclosures relating to financial risk management objectives and policies, including our policy for hedging are set out in note 26 to the consolidated financial statements and disclosures relating to exposure to price risk and credit risk are outlined in note 26.
Supplier payment policy
The Company has no trade creditors because it is a parent company and does not generate trading revenues. Accordingly, no disclosure can be made of year-end trade creditor days. However, the Group’s policy is to settle the terms of payment with suppliers when agreeing the terms of each transaction and to ensure that suppliers are made aware of the terms of payment and to abide by the terms of payment. The average trade creditors for the Group, expressed as a number of days, were 152 (2015: 152).
Related part transactions
Disclosures relating to related party transactions are set out in note 17 to the consolidated financial statements.
Charitable and political donations
No charitable or political donations were made by the Company.
Charitable donations made by the Group in the year were £29,000 (2015: £40,000). Political donations were £nil in both years.
Employees
The number of employees and their remuneration is set out in note 6.
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
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 formal and informal meetings. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.
The Group complies with all applicable labour laws in the respective jurisdictions in which it operates.
Going concern
In determining whether the financial statements can be prepared on the going concern basis, the Directors considered the Company’s and Group’s business activities together with factors likely to affect its future development, performance and its financial position including cash flows, liquidity position and the principal risks and uncertainties relating to its business activities, as given in the Strategic Report.
Based on cash flow forecasts which take into account the Directors’ best estimate of current sales orders and opportunities, expenditure forecasts as well as the Group’s current cash balance the Directors consider it appropriate to prepare the financial statements on the going concern basis. For further details please refer to note 1.
Directors’ Report continued
33IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Auditor
In the case of each of the persons who are Directors of the Company at the date when this report is approved:
• as far as each of the Directors is aware, there is no relevant audit information (as defined in the Companies Act 2006) of which the Company’s auditor is unaware; and
• each of the Directors has taken all the steps that he ought to have taken as a Director to make himself aware of any audit information (as defined) and to establish that the Company’s auditor is aware of that information.
This confirmation should be given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Deloitte LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.
Approved by the Board of Directors and signed on behalf of the Board
Mike JefferiesGroup Finance Director4th July 2016
Governance
34
Statement of Directors’ Responsibilities
35IMImobile PLCAnnual Report & Financial Statements 31st March 2016
The Directors are responsible for preparing the Annual 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 are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law including FRS 101 “Reduced Disclosure Framework”). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing the parent company 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 UK Accounting Standards have been followed; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:
• properly select and apply accounting policies;• present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient
to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• make an assessment of the company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company 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 company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
This responsibility statement was approved by the Board of Directors and is signed on its behalf by:
Mike JefferiesGroup Finance Director4th July 2016
Statement of Directors’ Responsibilities
Governance
36
Corporate Governance Report
37IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Bhat is a founder of the business and has more than twenty years experience in engineering and new product development. He is responsible for the creation of all the engineering and mobile products and platforms. Bhat is an engineering graduate from the highly prestigious Indian Institute of Technology, Bombay.
Shyam BhatCTO and FounderAge: 56
The Board of IMImobile PLC is committed to ensuring that an effective and appropriate corporate governance framework exists in the Group, given the size and complexity of the Group’s operations.
Board of Directors
Vish AlluriNon-Executive Director and FounderAge: 62
Vish founded IMImobile with a vision of harnessing India’s intellectual resources to develop an IPR centric technology company. While recognising the potential of the rapidly evolving mobile data space, Vish was aware that fast growth was needed to keep pace with ever changing technology. Vish therefore set out to build a company which would liberate mobile operators and media companies of technological complexities thus enabling them to realise their revenue potential.
Vish has extensive experience in technology and was previously involved in setting up an Indian hi-tech consumer services company in the healthcare sector. Vish is a Chartered Accountant.
Jay is the CEO of IMImobile and has been working with the Company for 14 years, initially as a venture capital investor but since 2010 as Managing Director of the Group and since 2013 as CEO. He has a wide range of operational and strategic experience in growing and selling high growth businesses. Jay has previously held executive positions at Spark Ventures, UBSWarburg and BSkyB. He is a qualified Chartered Accountant with KPMG and holds degrees from INSEAD and the London School of Economics.
Jay PatelChief Executive Age: 46
Mike JefferiesGroup Finance DirectorAge: 38
Mike joined IMImobile in 2010 when it acquired WIN plc. Since then Mike has headed the Group finance function. Before that he worked for Star Trac Inc, a US based manufacturer and distributor of commercial fitness equipment and previous to that for Whirlpool Corporation. Mike has a degree in accounting and finance and is a Chartered Management Accountant.
IntroductionThis corporate governance report forms part of the directors’ report. As an AIM listed company we are not required to comply with the UK Corporate Governance Code (the Code). This report shows how the Group has applied the principles of good corporate governance and is not a statement of compliance as required by the Code.
Denotes member of audit committee Denotes member of remuneration and nomination committee
Governance
38
The Board of IMImobile PLC is committed to ensuring that an effective and appropriate corporate
governance framework exists in the Group.
John Allwood is a Non-Executive Director of TalkTalk Telecom Group plc and Independent Non-Executive Chairman of Adgorithms plc. He has spent his career in media and telecoms holding a number of senior positions including Chief Executive of Orange UK, Finance Director and Chief Executive of Mirror Group plc, Finance Director and COO of Mecom Group plc and Managing Director of Telegraph Media Group Limited. He is a governor of Exeter University.
John holds a B.A (Hons) in Economics and Statistics from Exeter University, as well as being a fellow of the Institute of Chartered Accountants of England and Wales.
John AllwoodNon-Executive ChairmanAge 64
Simon Paul Blagden, CBENon-Executive DirectorAge: 54
Simon, CBE, has over 20 years’ experience in the telecoms and IT industry, living and working in most regions of the world across a truly international career. Following 5 years at GEC Plessey as International Commercial Manager and then Country General Manager, Simon joined The Quante Group as UK Managing Director. In 1995, he joined Quante’s main board as International CEO, with operations in over 50 countries worldwide, and he led the sale of the company to 3M in 2000.
Simon was appointed a Member of The Order of The British Empire in 1997, and Commander of The Order of The British Empire in 2016 for services to industry. He is also non-executive Co-Chairman of Fujitsu Telecommunications Europe Limited. He served as Chairman of the Supervisory Board at Pegg Capital AG. He served as Director of International Operations of Spescom Ltd and also served as Executive Director.
39IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Board responsibilities and composition
The Board comprises three executive directors and three non-executive directors. The Board meets at least eight times a year and is responsible for ensuring the business delivers shareholder value, setting the strategy, monitoring the performance of the Company and ensuring that a reliable system of controls exists within the business.
Details of attendance of board meetings throughout the year are shown in the table below:
Board committees
The Board carries out its duties with the support of the board committees.
Audit committee
The audit committee has a primary responsibility for monitoring the Group’s internal controls and ensuring that the financial performance of the Group is properly measured and reported on. The committee receives and reviews reports from the Group’s management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The audit committee meets at least twice a year and has unrestricted access to the Group’s auditors.
The chairman of the audit committee is John Allwood and its other members are Vish Alluri and Simon Blagden.
Details of attendance of audit committee meetings throughout the year are shown in the table below:
Remuneration and nomination committee
The remuneration and nomination committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The remuneration and nomination committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time.
The remuneration and nomination committee is also responsible for ensuring that the Board has a formal and transparent appointment procedure and has primary responsibility for reviewing the balance and effectiveness of the Board and identifying the skills needed by the Board and those individuals who might best provide them.
The chairman of the remuneration committee is Simon Blagden and its other members are Vish Alluri and John Allwood.
Number of meetings Meetings attendedJohn Allwood 8 8Jay Patel 8 8
Mike Jefferies 8 8
Shyam Bhat 8 8
Vish Alluri 8 8
Simon Blagden 8 8
Number of meetings Meetings attendedJohn Allwood 2 2Vish Alluri 2 2
Simon Blagden 2 2
Governance
40
Details of attendance of remuneration and nomination committee meetings throughout the year are shown in the table below:
Investor relations
The Board recognises the importance of maintaining good relations with shareholders. Following the announcement of interim and full year results a series of meetings are scheduled with institutional shareholders and the CEO and Group Finance Director. During these sessions the performance of the Company is discussed and shareholders have an opportunity to raise any concerns.
Shareholders also have the opportunity to share views or concerns and to meet with management during the Annual General Meeting.
Information relating to the Company, trading performance and copies of any regulatory announcements can be found on the Company’s website at www.imimobile.com.
Corporate Governance Report continued
Number of meetings Meetings attendedJohn Allwood 2 2
Vish Alluri 2 2
Simon Blagden 2 2
41IMImobile PLCAnnual Report & Financial Statements 31st March 2016
We have audited the financial statements of IMImobile PLC for the year ended 31 March 2016 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement and the related notes 1 to 35. 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 (United Kingdom Generally Accepted Accounting Practice) including FRS101 “Reduced Disclosure Framework”.
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.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
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 2016 and of the Group’s profit and the parent company’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• 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.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the Group financial statements, the Group in addition to applying IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the Group financial statements comply with IFRSs as issued by the IASB.
Independent auditor’s report to the members of IMImobile PLC
Governance
42
Opinion on other matter prescribed by the Companies Act 2006
In our opinion 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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where 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.
David Griffin FCA (Senior statutory auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory Auditor
London, UK4th July 2016
Independent auditor’s report to the members of IMImobile PLC continued
43IMImobile PLCAnnual Report & Financial Statements 31st March 2016
FinancialStatements
44
For the year ended 31 March 2016
The accompanying notes are an integral part of the consolidated financial statements and are all attributable to continuing operations.
Consolidated Income Statement
Notes Year ended 31 March 2016
Year ended31 March 2015
£000 £000Revenue 2, 5 61,630 48,876Cost of sales (25,108) (18,848)
Gross profit 5 36,522 30,028
Operating costs:
Other operating costs (25,833) (20,872)
Depreciation and amortisation (2,692) (2,442)
Share based payment charge 22 (3,362) (7,294)IPO and acquisition related costs 4 (376) (1,575)Impairment of available-for-sale financial assets 12 (176) (145)Operating profit / (loss) 4,083 (2,300)
Investment income 7 81 13Profit / (loss) before tax 4,164 (2,287)
Tax 8 (1,923) (1,076)Profit / (loss) for the year 2,241 (3,363)
Profit / (loss) for the year attributable to:
Equity holders of the company 3,410 (5,975)Non-controlling interest (1,169) 2,612Profit / (loss) for the year 2,241 (3,363)
EBITDA1 10,689 9,156
Basic earnings / (loss) per share 9 7.1p (13.5p)Adjusted basic earnings per share 9 14.1p 12.6pDiluted earnings / (loss) per share 9 5.2p (13.5p)Adjusted diluted earnings per share 9 10.4p 9.2p
1 EBITDA is defined as operating profit / (loss) before depreciation, amortisation, fees incurred in relation to IPO and acquisition activities, impairment charges and share-based compensation.
45IMImobile PLCAnnual Report & Financial Statements 31st March 2016
For the year ended 31 March 2016
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated Statement of Comprehensive Income
Year ended 31 March 2016
Year ended31 March 2015
£000 £000Profit / (loss) for the year 2,241 (3,363)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Equity holders of the parent (79) 1,066
Non-controlling interest 33 352Other comprehensive income for the year (46) 1,418
Total comprehensive income / (expense) for the year 2,195 (1,945)
Total comprehensive income / (expense) for the year attributable to:
Equity holders of the parent 3,331 (4,909)Non-controlling interest (1,136) 2,964Total comprehensive (expense) / income for the year 2,195 (1,945)
Financial Statements
46
Consolidated Statement of Changes in Equity
For the year ended 31 March 2016
The accompanying notes are an integral part of the consolidated financial statements.
Share capital
Share premium
Translation reserve
Share-based
payment reserve
Capital restructuring
reserve
Retained Earnings /
(Deficit)
Total equity attributable
to share-holders
of parent
Non- controlling
interestTotal
equity£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 31 March 2014
4,524 8,283 2,178 1,272 (8,538) 6,176 13,895 - 13,895
Capital restructuring (2,295) 16,230 - - (20,502) (6,546) (13,113) 6,546 (6,567)Profit / (loss) for the year - - - - - (5,975) (5,975) 2,612 (3,363)Foreign exchange differences
- - 1,066 - - - 1,066 352 1,418
Share based payment charge
- - - 7,294 - - 7,294 - 7,294
Proceeds from share issue
2,505 27,509 - - - - 30,014 - 30,014
Issue of shares as part of acquisition
71 929 - - - 0 1,000 - 1,000
Cost of share issue - (2,055) - - - - (2,055) - (2,055)
Cancellation of share options
- - - (2,697) - - (2,697) - (2,697)
Balance at 31 March 2015
4,805 50,896 3,244 5,869 (29,040) (6,345) 29,429 9,510 38,939
Profit / (loss) for the year - - - - - 3,410 3,410 (1,169) 2,241Foreign exchange differences
- - (79) - - - (79) 33 (46)
Share based payment charge
- - - 3,362 - - 3,362 - 3,362
Proceeds from share issue
113 1,488 - (1,570) - - 31 - 31
Deferred consideration as part of acquisition
- - - (1,000) - - (1,000) - (1,000)
Deferred tax on share options
- - - - - 22 22 - 22
Balance at 31 March 2016
4,918 52,384 3,165 6,661 (29,040) (2,913) 35,175 8,374 43,549
47IMImobile PLCAnnual Report & Financial Statements 31st March 2016
As at 31 March 2016
The accompanying notes are an integral part of the consolidated financial statements.
The financial statements of IMImobile PLC (Company number: 08802718) were approved by the Board and authorised for issue on 4th July 2016.
Signed on behalf of the Board
Mike JefferiesGroup Finance Director
Consolidated Statement of Financial Position
NotesAs at
31 March 2016As at
31 March 2015£000 £000
Non-current assets
Goodwill 10 19,770 17,934Other intangible assets 11 4,355 1,678Available-for-sale financial assets 12 202 279Property, plant and equipment 13 4,658 4,285Deferred tax assets 20 499 911
Total non-current assets 29,484 25,087
Current assetsCash and cash equivalents 14 15,039 14,617Trade and other receivables 15 24,336 19,745Total current assets 39,375 34,362
Current liabilitiesTrade and other payables 18 (24,476) (20,104)Total current liabilities (24,476) (20,104)
Net current assets 14,899 14,258
Non-current liabilities
Provision for defined benefit gratuity 19 (463) (406)Deferred tax liabilities 20 (371) -Total non-current liabilities (834) (406)
Net assets 43,549 38,939
Equity attributable to the owners of the parentShare capital 21 4,918 4,805Share premium 21 52,384 50,896Translation reserve 3,165 3,244Share-based payment reserve 6,661 5,869Capital restructuring reserve 21 (29,040) (29,040)Retained earnings (2,913) (6,345)
Equity attributable to shareholders of the parent 35,175 29,429
Non-controlling interest 8,374 9,510Total equity 43,549 38,939
Financial Statements
48
For the year ended 31 March 2016
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated Cash Flow Statement
NotesYear ended
31 March 2016Year ended
31 March 2015£000 £000
Cash generated from operations 23 10,633 8,816Tax paid (1,867) (582)Net cash from operating activities 8,766 8,234
Investing activitiesInterest received 81 13
Purchases of intangible assets (1,533) (672)
Purchases of property, plant & equipment (2,006) (967)Disposal of property, plant & equipment 28 15Purchase of share in available-for-sale investment 12 (99) -Acquisition of subsidiary as part of capital restructuring - (23,464)Acquisition of subsidiary net of cash acquired 29 (3,612) (6,395)Deferred consideration as part of acquisition (1,000) -Acquisition related costs (376) (1,575)Net cash used in investing activities (8,517) (33,045)
Financing activitiesProceeds from issuance of Ordinary shares 31 30,000Net cash generated by financing activities 31 30,000
Net increase in cash and cash equivalents 280 5,189Cash and cash equivalents at beginning of the year 14,617 9,305Effect of foreign exchange rate changes 142 123Cash and cash equivalents at end of the year 14 15,039 14,617
49IMImobile PLCAnnual Report & Financial Statements 31st March 2016
As at 31 March 2016
1. Basis of preparation
The consolidated financial statements for the years ended 31 March 2015 and 2016 have been prepared under the International Financial Reporting Standards as adopted for use in the European Union in accordance with Article 4 of the IAS Regulation (EC) No. 1606/2002.
The financial information contained in the consolidated financial statements for the years ended 31 March 2015 and 2016 has been prepared applying the recognition and measurement principles set out in International Financial Reporting Standards as adopted for use in the European Union.
The consolidated financial statements of IMImobile PLC and its subsidiaries, hereafter referred to as “the Group”, are prepared under the historical cost convention except for available-for-sale financial assets. The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.
Going Concern
The Company’s business activities, together with factors likely to affect its future development, performance and position are set out in the Strategic Report and Director’s Report.
At 31 March 2016 the Group had net assets of £43.5 million including £15.0 million of cash and cash equivalents (31 March 2015: net assets of £38.9 million including £14.6 million of cash and cash equivalents).
In determining whether the consolidated financial statements should be prepared on the going concern basis, the Directors considered the Company’s and the Group’s business activities together with factors likely to affect its future development, performance and its financial position including cash flows, liquidity position and the principal risks and uncertainties relating to its business activities.
Based on cash flow forecasts which take into account the Directors’ best estimate of current sales orders and opportunities, expenditure forecasts as well as the Group’s current cash balance, the Directors consider it appropriate to prepare the Company’s financial statements on the going concern basis.
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March each year. Control is achieved when the Company:
• has the power over the investee;• is exposed, or has rights, to variable return from its involvement with the investee; and• has the ability to use its power to affect its returns.
The results of subsidiaries acquired or disposed of in any year are included in the consolidated income statement from the date of acquisition or up to the date of disposal.
Goodwill is measured as the excess of the sum of consideration transferred. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment.
Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies into line with those used by the Group. Inter-company balances and transactions, including inter-company profits and unrealised profits and losses are eliminated on consolidation.
The Group applies the acquisition method to account for business combinations. The consideration transferred for
Notes to the Consolidated Financial Statements
Financial Statements
50
the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree 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. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in the income statement.
Entities included under common control
The following entities are considered to be under the control of the Group and therefore have been included in the consolidated financial statements for the years ended 31 March 2015 and 2016:
* acquired during the year ended 31 March 2016.** incorporated during the year ended 31 March 2016.*** dissolved during the year ended 31 March 2016.**** formerly Wireless Information Network Limited.
New accounting pronouncements adopted on 1 April 2015
On 1 April 2014 the Group adopted the following new accounting policies to comply with amendments to IFRS. The accounting pronouncements, none of which are considered by the Group as significant on adoption, are: - Amendments to IAS 19 “Defined Benefit Plans: Employee Contributions”; and- “Improvements to IFRS 2011–2013 cycle”.
New accounting pronouncements to be adopted on 1 April 2016 The following pronouncements which are potentially relevant to the Group have been issued by the IASB are effective for annual periods beginning on or after 1 January 2016 and have been endorsed for use in the EU:
Name of entity Country ofIncorporation
Local currency
Percentage holding in each year
1 IMImobile VAS Limited Bangladesh Bangladeshi Taka 76%2 IMImobile VAS Limited FZE UAE UAE Dirham 76%3 IMImobile Europe Limited United Kingdom UK Pound Sterling 100%4 IMImobile SAT Limited United Kingdom UK Pound Sterling 85%5 IMImobile VAS Latin America S.A. Panama US Dollar 76%
6 Skinkers Limited United Kingdom UK Pound Sterling 100%7 Chilli Digital Europe Limited United Kingdom UK Pound Sterling 100%8 IMD Europe Kft*** Hungary Hungarian Forint 100%10 WIN Wireless Network Systems AG Switzerland Swiss Franc 100%11 WIN Limited United Kingdom UK Pound Sterling 100%12 Tap2Bill Limited **** United Kingdom UK Pound Sterling 100%13 IMImobile VAS Nigeria Limited Nigeria Nigerian Naira 76%14 IMImobile VAS Private Limited Sri Lanka Sri Lankan Rupee 76%15 IMImobile Inc USA US Dollar 100%16 IMI Mobile Private Limited India Indian Rupee 76%17 IMImobile VAS Costa Rica S.A. Costa Rica US Dollar 100%18 IMImobile Holdings Limited United Kingdom UK Pound Sterling 100%19 Txtlocal Limited United Kingdom UK Pound Sterling 100%20 Textlocal Limited United Kingdom UK Pound Sterling 100%21 IMImobile African Holdings Limited** United Kingdom UK Pound Sterling 100%22 IMImobile South Africa 1 Limited** United Kingdom UK Pound Sterling 86%23 IMImobile South Africa 2 Limited** United Kingdom UK Pound Sterling 100%24 Lenco International Limited* British Virgin Islands US Dollar 89%25 Lenco Technology Group Limited* British Virgin Islands US Dollar 89%26 Archer Digital Limited* South Africa South African Rand 89%27 IMImobile Limited FZE** UAE UAE Dirham 100%
Notes to the Consolidated Financial Statements
51IMImobile PLCAnnual Report & Financial Statements 31st March 2016
- Amendments to IAS 1 “Disclosure Initiative”;- Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortisation”; - Amendments to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations”; and- “Improvements to IFRS: 2012–2014 cycle”.
New accounting pronouncements to be adopted on or after 1 April 2017
On 1 April 2017 the Group will adopt “Recognition of Deferred Tax Assets for Unrealised Losses, Amendments to IAS 12” and “Disclosure Initiative, Amendments to IAS 7” which are effective for accounting periods on or after 1 January 2017 and which have not yet been endorsed by the EU.
The Group is currently confirming the impacts of the above new pronouncements on its results, financial position and cash flows, which are not expected to be material.
2. Accounting policies
The principal accounting policies set out below have been applied consistently by the Group entities:
Foreign currencies
Items included in the consolidated financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in UK Pounds Sterling (“the presentational currency”).
Foreign currency transactions are translated into the presentational currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Translation differences on financial assets, such as equities classified as available-for-sale, are included in other comprehensive income.
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; (b) equity items other than retained earnings have been translated at historical rates in line with IAS 21; (c) income and expenses for each income statement are translated at average exchange rates; and (d) all resulting exchange differences are recognised in other comprehensive income.
Goodwill arising on the acquisition of a foreign entity is treated as an asset of the foreign entity and translated at the closing rate.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be insignificant.
Financial Statements
52
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future of cash flows of the investment have been impacted.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand, deposits and other short-term highly liquid invest-ments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Trade payables
Trade payables are not interest-bearing and are stated at their nominal value.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period and measured at fair value. Fair value changes are recognised directly in equity, through other comprehensive income, except for impairment losses which are recognised in the consolidated income statement.
Intangible assets
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the ac-quiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each cash gen-erating unit (“CGU” or “unit”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the 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 CGU level.
Notes to the Consolidated Financial Statements
53IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b) Trademarks and licences
Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of 10 years.
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three to five years.
(c) Software
Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:
• it is technically feasible to complete the software product so that it will be available for use;• management intends to complete the software product and use or sell it;• there is an ability to use or sell the software product;• it can be demonstrated how the software product will generate probable future economic benefits;• adequate technical, financial and other resources to complete the development and to use or sell the
software product are available; and• the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed 10 years.
Impairment of assets
Goodwill or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the consolidated income statement.
Financial Statements
54
Property, plant and equipment
The initial cost of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated income statement during the financial period in which they are incurred.
Projects under which assets are not ready for their intended use are carried at cost and are only depreciated once they are ready for use.
When assets are sold, their cost and accumulated depreciation are eliminated and any gain or loss resulting from their disposal is included in the consolidated income statement.
Depreciation is computed on a straight-line basis over the estimated useful lives of operational assets.
The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.
Employee benefits
Other post-employment obligations
The Group has a post-employment unfunded gratuity benefit plan for Indian employees of IMI Mobile Private Limited. The entitlement of these benefits is subject to a vesting period of five years in the case of early separation, based on final salary and years of service in India.
The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged to the consolidated income statement in the period in which they arise.
The Projected Unit Credit Method is used to determine the present value of the defined benefit obligation and the related current service cost and, where applicable, past service cost.
These obligations are valued periodically by independent qualified actuaries.
Defined contribution plan
The Group operates defined contribution plans for employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. These contributions are expensed in the period they are incurred.
Estimated useful life
Computers and servers 3-6 yearsOffice equipment 2-5 yearsFurniture & fixtures 2-10 yearsVehicles 8 yearsLeasehold improvements Lower of estimated useful life and lease term
Notes to the Consolidated Financial Statements
55IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Employee share-based payments
The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
• including any market performance conditions (for example, an entity’s share price);• excluding the impact of any service and non-market performance vesting conditions (for example,
profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
• including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. Where options are cancelled by the Group and settled in cash the expense is accelerated in the period in which the options are settled, with the cash payment recognised in the share-based payment reserve.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated income statement, with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
The social security contributions payable in connection with the grant of the share options are payable by the employee.
Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, performance conditions, exercise restrictions and behavioural considerations.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
Company Share Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Financial Statements
56
Where the Group enters into arrangements to deliver multiple elements (licensing, servicing and maintenance), such elements are separated for recognition based on stand-alone value where sold and delivered separately. If such elements cannot be separated they are treated as a single deliverable and recognised over the period of delivery when the criteria for recognition have been met and customer acceptance received. Amounts incurred but not yet billed are classified as unbilled amounts in work in progress. Where the Group acts as principal in the sale of goods and content, revenue is recognised on a gross basis.
Monthly recurring revenue
Revenues from monthly recurring revenue contracts are recognised proportionally over the period during which the services are rendered. Revenue from content related sales is recognised on delivery of the content, when all significant contractual obligations have been satisfied, the significant risks and rewards of ownership have been transferred and no effective ownership control is retained. Revenues are billed up to 60 days after month end and classified as amounts billable not yet invoiced until this point.
Billing revenues recognised within turnover relate only to the commission earned on hosting each service and are recognised at the point of delivery to the customer. Pass through revenues collected on behalf of the customers are not recognised within turnover.
Licence, one-off and professional service revenue
Revenue from sale of end user licences is recognised at fair value on customer acceptance following installation at the customer’s locations as per the terms of the contract.
Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognised using the original effective interest rate.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
Taxation
Current tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Notes to the Consolidated Financial Statements
57IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interest in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the statement of income, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease, except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
3. Critical accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affects the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on manage-ment’s best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. The key sources of estimation uncertainty at the reporting date derive from management assumptions in respect of:
Revenue recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The determination of whether the revenue recognition criteria as specified under IAS 18 are met requires judgement. Where revenues are verified by third parties, revenues are accrued based on platform data. Differences are adjusted for upon receipt of third party reports.
Where contracts include more than one deliverable element, each element and deliverables are assigned to one, or more, separate units of accounting based on their fair value. Revenue is recognised on a milestone basis, based on the judgement of management, as each deliverable is met.
Financial Statements
58
Goodwill and impairment reviews
The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as Goodwill and if negative, it is recognised in the consolidated income statement.
Judgement is required in determining the fair value of identifiable assets, liabilities and contingent assets and liabilities assumed in a business combination and the fair value of the consideration payable. Calculating the fair values involves the use of significant estimates and assumptions, including expectations about future cash flows, discount rates and the lives of assets following purchase.
Debtor recoverability
The Group’s trade receivables are stated after allowances for bad and doubtful debts based on management’s judgement of recoverability on an individual customer basis. The credit worthiness of individual customers is assessed based on their financial strength using available information, communication with the customer and the historic trading relationship.
Cash generating units
Judgement is also required in identifying the cash generating units to which goodwill is associated for the purpose of goodwill impairment testing. Identification of cash generating units involves an assessment of whether assets or groups of assets generate cash flows that are largely independent. Goodwill is then allocated to each identified cash generating unit that is expected to benefit from the synergies of the business combinations from which goodwill has arisen.
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy above. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates which have been detailed within the notes to the consolidated financial statements.
Research and development
IAS 38 requires the Group to capitalise and subsequently amortise development costs when the requirements of an internally generated intangible have been met and costs can be measured reliably. The determination of whether costs incurred in the development of software have met the criteria per IAS 38 requires judgement. Following a review of the criteria the Directors have concluded that expenditure on development has not met the criteria for capitalisation as it is not possible to accurately distinguish between the research and development phases of each project during the periods covered by the consolidated financial statements. As a result all research and development expenditure has been treated as an expense within the consolidated income statement of the period incurred, except to the extent is has been capitalised in note 11.
Taxation including deferred taxation
The Group’s tax charge is the sum of total current and deferred tax charges. The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items. Provisions for tax contingencies require management to make judgements and estimates in relation to tax audit issues and exposures. Tax benefits are not recognised unless it is probable that the tax position will be sustained.
Share based payments
The fair value is determined at grant date and expensed over the vesting period based on the estimate of the proportion of the shares which will vest. The schemes include performance conditions, including achieving targets for the Group’s EPS. The probability of whether these performance targets will be met based on the latest Group forecasts is re-assessed on a six monthly basis.
The accounting policies in relation to these items are disclosed in note 2.
Notes to the Consolidated Financial Statements
59IMImobile PLCAnnual Report & Financial Statements 31st March 2016
4.Operating profit / (loss)
Operating profit / (loss) for the year is stated after charging:
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
5. Business and geographical segments
The Group’s operating segments are established on the basis of those components of the Group that are evaluated regularly by the Chief Operating Decision Maker in deciding how to allocate resources and in assessing performance.
The Chief Operating Decision Maker considers results principally by geographical region, which forms the Group’s operating and reporting segments. Geographically, the operating segments are defined as Europe and Americas (Europe being substantially all to the UK where revenue during the year was £33,474,277 (2015: £27,243,754)), India and South East Asia (SEA) and Middle East and Africa (MEA), which also represent the Group’s reportable segments. The performance of the operating segments is assessed based on a measure of revenue and gross profit (the result for the segment). Any sales between segments are carried out at arm’s length. As costs are shared across geographies, results from gross profit to profit after tax are assessed on a consolidated basis only. The Group does not regularly provide information in relation to the assets or liabilities of operating segments to management.
Geographical revenue and results
The following is an analysis of the Group’s revenue and results by geographical segment:
Year ended 31 March 2016
Year ended31 March 2015
£000 £000
Depreciation of property, plant and equipment 1,910 2,219
Amortisation of intangible assets 366 223
Amortisation of intangible assets added on acquisition 416 -
Impairment of available-for-sale financial assets 176 145
Operating lease rentals 612 797
Staff costs (note 6 - including share-based payment charge) 20,273 21,604
IPO and acquisition related costs 376 1,575
Loss on disposal of PPE and intangible assets 28 15
Impairment of trade receivables 435 640
Foreign exchange losses 71 742
Research and non-capitalised development costs 2,382 2,266
Year ended 31 March 2016
Year ended31 March 2015
£000 £000
Fees payable to the Group’s auditor and their associates for the audit of the group’s annual report and financial statements:
- Group 147 130
- Company 4 3
Total audit fees 151 133
Fees payable to the group’s auditor and their associates for other services to the group:
Non audit services – IPO Preparation - 250
Financial Statements
60
During the year revenues from Customer A and Customer B accounted for 12% (2015: 14%) and 16% (2015: 15%) of the Group’s revenue.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2 for each period. The revenue from external parties reported is measured in a manner consistent with that in the consolidated income statement. Revenues are attributed to countries on the basis of the customer’s location.
The Group measures segment profit and loss as gross profit as reported. The Group does not allocate general administration, marketing and sales expenses to segments.
Europe and Americas
India and SEA MEA Total
Year ended 31 March 2016 £000 £000 £000 £000
Revenue from external companies 34,525 10,134 16,971 61,630
Intersegment revenues - 79 - 79
Gross profit 19,896 5,264 11,362 36,522
Other operating costs (25,833)
Depreciation and amortisation (2,692)
Share-based payment charge (3,362)
IPO and acquisition related costs (376)
Impairment of AFS financial assets (176)
Operating profit 4,083
Investment income 81
Profit before tax 4,164
Tax (1,923)
Profit after tax 2,241
Non-current assets 21,527 2,792 5,165 29,484
Year ended 31 March 2015
Revenue from external companies 27,978 9,610 11,288 48,876
Intersegment revenues - 578 - 578
Gross profit 16,381 5,048 8,599 30,028
Other operating costs (20,872)
Depreciation and amortisation (2,442)
Share based payment charge (7,294)
IPO and acquisition related costs (1,575)
Impairment of AFS financial assets (145)
Operating loss (2,300)
Investment income 13
Loss before tax (2,287)
Tax (1,076)
Loss after tax (3,363)
Non-current assets 20,596 3,565 926 25,087
Notes to the Consolidated Financial Statements
61IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Additional voluntary disclosures
Alternative revenue model and results
The following disclosures are provided for additional purposes only and does not form part of the Group’s seg-mental reporting under IFRS 8. In addition to geographical performance, the Chief Operating Decision Maker also considers the performance of the Group in line with its revenue model, which has also been disclosed below. The Group’s revenue models are defined as:
1. Monthly recurring revenue which is made up of a combination of the following; (a) Contracted, recurring revenues (b) Non-contracted, repeating revenues, and, (c) Transactional revenues, typically a share of consumer spend. 2. License, one-off and professional service revenues.
These alternative revenue models arise in all geographical segments. The following is an analysis of the Group’s revenue and result by revenue model:
6. Employee benefits
Details of Directors’ remuneration and interests are provided in the audited section of the Directors’ Report and should be regarded as part of these financial statements.
Year ended 31 March 2016
Year ended31 March 2015
Staff costs for the Group during the year: £000 £000
Wages and salaries 15,567 13,113
Social Security and Taxes 1,109 903
Share options granted to Directors and employees 3,362 7,294
Pension costs – Defined contribution plan 155 120
Pension costs – Defined benefit plan 80 174
20,273 21,604
Year ended 31 March 2016
Year ended31 March 2015
Average monthly number of people employed: Number Number
Sales and Managed solutions 233 223
Development and Product Management 233 217
Operations and Technical Support 149 151
Common Functions 111 89
726 680
Monthlyrecurring revenue
Licence, one-off and
professional services Total
Year ended 31 March 2016 £000 £000 £000
Revenue from external companies 58,250 3,380 61,630
Intersegment revenues - 79 79
Gross profit 33,420 3,102 36,522
Year ended 31 March 2015
Revenue from external companies 43,601 5,275 48,876
Intersegment revenues - 578 578
Gross profit 25,068 4,960 30,028
Financial Statements
62
7. Investment income
8. Tax
The deferred tax adjustment in respect of prior periods relates to deferred tax recognised on the flowering share plan in the prior year.
The total tax charge for the year can be reconciled to the result per consolidated income statement as follows:
Taxation for each region is calculated at the rates prevailing in the respective jurisdictions. Prior year adjustments relate to the routine confirmation and agreement of the final tax position in local jurisdictions.
Year ended 31 March 2016
Year ended31 March 2015
Current tax £000 £000
India tax expense 13 (6)
UK tax expense 453 522
Other foreign tax expense 62 80
Withholding tax expense 969 592
Adjustments in respect of prior periods 33 13
1,530 1,201
Deferred tax (see note 20)
Current year (39) (125)
Adjustments in respect of prior periods 432 -
393 (125)
1,923 1,076
Year ended 31 March 2016
Year ended31 March 2015
£000 £000
Profit / (loss) before tax 4,164 (2,287)
Tax at the UK corporation tax rate of 20% (2015: 21%) 833 (480)
Effect of overseas tax rates 66 (367)
Expenses not deductible for tax purposes 407 57
Tax losses on which deferred tax not recognised 83 1,323
Temporary differences on which deferred tax not recognised 108 -
Effect of change in UK tax rate 46 2
Utilisation of tax losses and other deductions (15) -
Tax adjustments in respect of previous years 465 13
De-recognition of deferred tax asset - 578
Enhanced tax relief on research and development expenditure (70) (50)
Total tax charged in the income statement 1,923 1,076
Notes to the Consolidated Financial Statements
Year ended 31 March 2016
Year ended31 March 2015
£000 £000
Other interest income 81 13
63IMImobile PLCAnnual Report & Financial Statements 31st March 2016
The Finance Act 2013 reduced the UK standard rate of corporation tax from 21% to 20% from 1 April 2015. The Finance Act 2015 reduces the UK standard rate of corporation tax from 20% to 19% from 1 April 2017 and from 19% to 18% from 1 April 2020. All UK deferred tax assets and liabilities have been recognised at 18% (2015: 20%). A further reduction in the corporation tax rate to 17%, rather than 18%, from 1 April 2020 was announced in the 2016 Budget. However, this further rate change was not substantively enacted at the balance sheet date, so its effect is not reflected in these financial statements.
9. Earnings per share (‘EPS’)
The comparative figures have been restated to exclude the profits attributable to non-controlling interests when calculating basic EPS. The diluted and adjusted diluted EPS comparative figures have been restated to remove the effect of share options as they are anti-dilutive at a statutory level, and include the impact of the remaining IFRS 2 charge per option in the statutory and adjusted result.
To provide more meaningful comparative information on the Group’s profitability, a number of non-GAAP adjust-ed profit measures are used in this annual report and financial statements. Summarised below is a reconciliation between statutory results to adjusted results. The adjusted profit after tax earnings measure is also used for the purpose of calculating adjusted earnings per share.
Year ended31 March 2016
Year ended31 March 2015
(restated)pence pence
Basic EPS 7.1p (13.5p)
Adjusted basic EPS 14.1p 12.6p
Diluted EPS 5.2p (13.5p)
Adjusted diluted EPS 10.4p 9.2p
Year ended31 March 2016
Year ended31 March 2015
(restated)Million Million
Weighted average number of ordinary shares for the purpose of basic EPS 48.1 44.3
Effect of exchange of Ordinary B Shares (see note 21) 11.3 11.3
Effect of dilutive potential ordinary shares: share options 6.0 5.3
Weighted average number of ordinary shares for the purpose of diluted EPS 65.4 60.9
Statutory results
Share-based
payment charge
IPO and acquisition
related costs
Impairment of AFS
financial asset
Amortisation of acquired intangibles Other*
Adjusted Results
Year ended 31 March 2016
£000 £000 £000 £000 £000 £000 £000
Revenue 61,630 - - - - - 61,630
Gross profit 36,522 - - - - - 36,522
Operating profit 4,083 3,362 376 176 416 - 8,413
Profit before tax 4,164 3,362 376 176 416 - 8,494
Tax (1,923) 353 (40) - (83) - (1,693)
Profit after tax 2,241 3,715 336 176 333 - 6,801
EBITDA 6,775 3,362 376 176 - - 10,689
Basic EPS (pence) 7.1 7.7 0.7 0.4 0.7 (2.5) 14.1
Diluted EPS (pence) 5.2 5.7 0.5 0.3 0.5 (1.8) 10.4
Financial Statements
64
* Other adjustments as follows:
• Basic adjusted EPS and diluted adjusted EPS includes profit attributable to non-controlling interests not included in the calculation of statutory basic and diluted EPS.
• Diluted adjusted EPS includes the dilutive effect of share options not included in statutory diluted EPS when they have an anti-dilutive effect.
10. Goodwill
Goodwill is monitored by management at the CGU level by delivery model. The following is a summary of goodwill allocation for each CGU:
The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The long-term growth rates are management’s estimates. The discount rates used are pre-tax and reflect specific risks relating to the relevant CGU.
CGUs serve a common group of customers such that the key assumptions used for value-in-use calculations for all CGUs are as follows:
Opening Additions Impairment
Foreign Exchange
Movement Closing31 March 2015 £000 £000 £000 £000 £000
Managed solutions 4,716 - - - 4,716
Cloud based services / SaaS 3,145 - - - 3,145
Textlocal - 10,073 - - 10,073
Total 7,861 10,073 - - 17,934
31 March 2016
Managed solutions 4,716 - - - 4,716
Cloud based services / SaaS 3,145 - - - 3,145
Textlocal 10,073 - - - 10,073
Archer - 1,900 - (64) 1,836
Total 17,934 1,900 - (64) 19,770
Statutory results
Share-based
payment charge
IPO and acquisition
related costs
Impairment of AFS
financial asset
Amortisation of acquired intangibles Other*
Adjusted Results
Year ended 31 March 2015
£000 £000 £000 £000 £000 £000 £000
Revenue 48,876 - - - - - 48,876
Gross profit 30,028 - - - - - 30,028
Operating (loss) / profit (2,300) 7,294 1,575 145 - - 6,714
(Loss) / profit before tax (2,287) 7,294 1,575 145 - - 6,727
Tax (1,076) (588) - - 537 - (1,127)
(Loss) / profit after tax (3,363) 6,706 1,575 145 537 - 5,600
EBITDA 142 7,294 1,575 145 - - 9,156
Basic EPS (pence) (13.5) 15.1 3.6 0.3 1.2 5.9 12.6
Diluted EPS (pence) (13.5) 11.0 2.6 0.2 0.9 8.0 9.2
Notes to the Consolidated Financial Statements
65IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Value in use is calculated for the various CGUs based on approved business plans and forecasts taking into account certain variables for each CGU. Below is a description of the principal variables that have been considered for each CGU with significant goodwill.
Long-term growth rate
In all cases, impairment tests are performed using the projected cash flows based on Board approved forecasts and strategic plans over a five year period. Cash flow projections from the sixth year are calculated using an expected constant growth rate.
Discount rate
The pre-tax discount rates used are disclosed above and take into account the market risk rate associated with the company. A discount factor is calculated using the discount rate and applied to future projected cash flows.
11. Other intangible assets
Trade nameCustomer
relationships
Capitalised development
costs Software
Trademarks and
licences TotalCost £000 £000 £000 £000 £000 £000
At 31 March 2014 - - - 452 481 933
Additions - - - - 521 521
Capitalised development costs - - 151 - - 151
On acquisition - - - 700 - 700
Exchange differences - - - 32 69 101
At 31 March 2015 - - 151 1,184 1,071 2,406
Additions - - - 213 345 558
Capitalised development costs - - 975 - - 975
On acquisition 62 1,725 - 275 - 2,062
Disposal - - - (23) - (23)
Exchange differences - - - (23) (97) (120)
At 31 March 2016 62 1,725 1,126 1,626 1,319 5,858
Trade nameCustomer
relationships
Capitalised development
costs Software
Trademarks and
licences TotalAccumulated amortisation and impairment
£000 £000 £000 £000
At 31 March 2014 - - - 197 261 458
Amortisation charge - - - 55 168 223
Exchange differences - - - 18 29 47
At 31 March 2015 - - - 270 458 728
Amortisation charge 6 173 109 320 174 782
Exchange differences - - - (4) (3) (7)
At 31 March 2016 6 173 109 586 629 1,503
Carrying value at 31 March 2015 - - 151 914 613 1,678
Carrying value at 31 March 2016 56 1,552 1,017 1,040 690 4,355
1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial five years for all cash-generating units of the plans used for impairment testing.
Managed solutions
Cloud based services/SaaS Textlocal Archer
Budgeted EBITDA1 growth rate 38% 28% 24% 28%
Long-term growth rate: 3% 3% 3% 3%Discount rate: 11% 11% 11% 11%
Financial Statements
66
12. Available-for-sale financial assets
All available-for-sale financial assets are unlisted UK equity securities denominated in UK Pounds Sterling.
13. Property, plant and equipment
31 March 2016 31 March 2015
Cost: £000 £000
At start of period 424 424
Additions 99 -
At end of period 523 424
Impairment:
At start of period 145 -
Impairment charge 176 145
At end of period 321 145
Fair value at end of period 202 279
Leaseholdimprovements
Furniture & Fixtures
OfficeEquipment Vehicles
Computers & Servers Total
Cost or valuation: £000 £000 £000 £000 £000 £000
At 1 April 2014 1,914 533 439 68 11,543 14,497
Additions 125 1 17 - 824 967
On acquisition - 5 - - 22 27
Disposal - - (5) (12) (116) (133)
Exchange differences 145 45 26 4 952 1,172
At 31 March 2015 2,184 584 477 60 13,225 16,530
Additions 94 35 6 72 1,799 2,006
On acquisition 22 2 5 - 182 211
Disposal (12) (32) - - (27) (71)
Exchange differences (52) 8 (31) 2 (508) (581)
At 31 March 2016 2,236 597 457 134 14,671 18,095
Leaseholdimprovements
Furniture & Fixtures
OfficeEquipment Vehicles
Computers & Servers Total
Accumulated depreciation: £000 £000 £000 £000 £000 £000
At 1 April 2014 874 213 175 17 8,084 9,363
Charge for the year 302 77 83 7 1,750 2,219
Disposal - - (1) (12) (105) (118)
Exchange differences 81 27 10 1 662 781
At 31 March 2015 1,257 317 267 13 10,391 12,245
Charge for the year 198 90 37 11 1,574 1,910
Disposal (12) (27) - - (27) (66)
Exchange differences (23) 5 92 1 (727) (652)
At 31 March 2016 1,420 385 396 25 11,211 13,437
Net book value:
At 31 March 2015 927 267 210 47 2,834 4,285
At 31 March 2016 816 212 61 109 3,460 4,658
Notes to the Consolidated Financial Statements
67IMImobile PLCAnnual Report & Financial Statements 31st March 2016
14. Cash and cash equivalents
Restricted short-term bank deposits represent cash balances deposited in bank accounts attracting a preferential interest rate and are typically deposited for a period of 90 to 180 days. Preferential interest rates are agreed in advance of the deposit being transferred and depend on the prevailing local rates and market conditions at the time.
15. Trade and other receivables
The fair value receivables approximate their carrying values as at 31 March 2016 and 31 March 2015.
16. Trade receivables
The historical level of customer default is low and, as a result, the credit quality of period end trade receivables is considered to be high. Trade receivables are considered past due once they have passed their contracted due date. The Group review trade receivables past due but not impaired on a regular basis and in determining the recoverability of the trade receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.
Included in the Group’s trade receivables balance are debtors with a carrying amount of £3,889,455 (2015: £3,317,612) which are past due at the reporting date, for which the Group has not provided as there has not been a significant change in credit quality and the Group believes that the amounts are still recoverable. Of the total bal-ance, £1,675,864 (2015: £1,197,962) is past due by fewer than 30 days. The average age of trade receivables and amounts billable not yet invoiced, excluding pass through revenues, is 100 days (2015: 92 days).
As at31 March 2016
As at31 March 2015
Unrestricted £000 £000
Cash on hand and at bank 14,980 14,570
Restricted
Short-term bank deposits 59 47
Cash and cash equivalents 15,039 14,617
As at31 March 2016
As at31 March 2015
Trade receivables (note 16) £000 £000
– revenue to be collected on behalf of the Group 10,754 7,817
– pass through revenues to be collected on behalf of billing customers 678 848
Other receivables 160 21
Refundable deposits 456 185
Prepayments 1,196 1,746
Amounts billable not yet invoiced
– revenue to be collected on behalf of the Group 6,072 4,561
– pass through revenues collected on behalf of billing customers 2,410 2,327
Withholding tax debtor 2,579 2,187
Due from related parties (note 17) 31 53
24,336 19,745
As at31 March 2016
As at31 March 2015
Amounts falling due within one year: £000 £000
Trade receivables 13,200 10,675
Less: Provision for receivables (1,768) (2,010)
Trade receivables – net 11,432 8,665
Financial Statements
68
The movement in bad debt provision has been analysed below:
The creation and release of provision for uncollectable receivables have been included in operating costs in the consolidated income statement.
17. Related party transactions
The Group has entered into various transactions with related parties in the normal course of its business concerning financing and other related services. Prices and terms of payment are approved by the Group’s management. Significant related party transactions and balances are as follows:
IAS24 allows disclosure exemption of transactions between wholly owned subsidiaries that are eliminated on consolidation.
a) On 11 October 2012 Mr T Newmarch, a current Director of IMImobile Europe Limited, was loaned an interest free amount totalling £52,671 by IMImobile Europe Limited. Subsequent loan repayments and exchange rate movements reduced the balance to £31,151 and this amount was outstanding at 31 March 2016.
All loans made to Directors of the Group were approved by the shareholders in accordance with the Companies Act 2006.
b) During the year ended 31 March 2016 £17,269 (2015: £60,748) was received from Spark Venture Management Limited, the investment manager of a major shareholder in the Group until 6 August 2015, in respect of IT and administrative costs. At 31 March 2016 Spark Venture Management Limited had prepaid £nil (2015: £1,966).
c) The compensation of the Directors of the Group, considered to be key management personnel, was as follows:
Details of Directors’ remuneration are disclosed within the Directors’ Report.
Year ended31 March 2016
Year ended31 March 2015
£000 £000
Short term employee benefits 612 608
Post-employment benefits 13 13
Exceptional IPO related benefits - 907
625 1,528
As at31 March 2016
As at31 March 2015
Movement in bad debt provision £000 £000
As at 1 April 2,010 1,720
Charged to the Income Statement 435 680
Credited to the income statement (245) (40)
Debts written off (406) (426)
Foreign exchange (26) 76
As at 31 March 1,768 2,010
Notes As at31 March 2016
As at31 March 2015
Balances included in the consolidated Statement of Financial Position
£000 £000
Due from related parties a) 31 53
Notes As at31 March 2016
As at31 March 2015
Balances included in the consolidated income statement £000 £000
Amounts received from Spark Venture Management Limited b) (17) (61)
Amounts paid to key management personnel c) 625 1,528
Total 608 1,467
Notes to the Consolidated Financial Statements
69IMImobile PLCAnnual Report & Financial Statements 31st March 2016
18. Trade and other payables
Trade payables balances are non-interest bearing and are settled within 30-60 days.
The fair value of accounts payable and other credit balances approximate their carrying values as at each respective reporting date.
19. Employees’ post-retirement benefits
The Group has a defined gratuity plan in place for all Indian employees. The benefit has a qualifying period requiring the employee to complete five years of service. The defined gratuity plan for the Group is accounted for as an unfunded defined benefit scheme and represents a cash bonus payable to an employee who has completed five years of service. On the basis of an actuarial valuation, the Group makes a provision of such gratuity in the consolidated financial statements.
The movement in the defined gratuity obligation over the year is as follows:
The significant actuarial assumptions were as follows:
As at31 March 2016
As at31 March 2015
Trade payables £000 £000
– cost of sales to be paid on behalf of the Group 5,261 2,964
– pass through revenues to be paid to billing customers 3,700 2,833
Other payables 589 855
Accrued expenses
– cost of sales to be paid on behalf of the Group 9,063 8,296
– pass through revenues to be paid to billing customers 2,611 2,319
Deferred income 1,856 1,734
VAT payable 1,256 617
Tax payable 140 486
24,476 20,104
Year ended31 March 2016
Year ended31 March 2015
Net benefit expenses £000 £000
Current service cost 19 122
Interest cost on benefit obligation 23 20
Net actuarial losses recognised 38 32
80 174
Year ended31 March 2016
Year ended31 March 2015
£000 £000
Opening defined benefit obligation 406 245
Interest cost 23 20
Current service cost 19 122
Benefits paid (45) (32)
Net actuarial loss recognised in the year 38 32
Exchange differences 22 19
Closing defined benefit obligation 463 406
Year ended31 March 2016
Year ended31 March 2015
Discount rate 8% 8%
Salary growth rate 1st Year – 10%Thereafter – 6%
1st year - 10%Thereafter - 6%
Mortality tables LIC (2004-08) LIC (1194-96)
Financial Statements
70
The estimates of future salary increases considered in the actuarial valuation take into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
20. Deferred tax
The Group’s deferred tax assets and liabilities are measured at the end of each period in accordance with IAS 12. The recognition of deferred tax assets is determined by reference to the Group’s estimate of recoverability, using models where appropriate to forecast future taxable profits. Deferred tax assets have only been recognised for territories where the Group considers that it is probable there would be sufficient taxable profits for the future deductions to be utilised. If it is probable that some portion of these assets will not be realised, then no asset is recognised in relation to that portion.
If market conditions improve and future results of operations exceed our current expectations, our existing recog-nised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions deterio-rate further or future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realisable. As a result, all or a portion of the deferred tax assets may need to be reversed.
Certain deferred tax assets and liabilities have been offset as they relate to the same tax group or entity. The following is the analysis of the deferred tax balances for financial reporting purposes:
The gross movement on the deferred income tax account is as follows:
Other short-term temporary differences comprise a number of items, none of which is individually significant to the Group’s Statement of Financial Position. At 31 March 2016 the balance related to temporary differences in relation to long-term employee benefits including retirement benefits, and the provision of bad debts and tax losses in India to the extent they are offset by deferred tax on property, plant and equipment in India.
At the balance sheet date, the Group has unrecognised deferred tax assets of £2,960,936 (2015: £3,257,099). No deferred tax asset has been recognised in respect of these temporary differences as the Group considers that there will not be enough taxable profits in the entities concerned such that any additional asset could be considered recoverable, these losses may be carried forward indefinitely.
Year ended31 March 2016
Year ended31 March 2015
£000 £000
At 1 April 911 871
Income Statement credit / (charge) (347) 125
On acquisition (412) (140)
Share-based payment recognised in equity 22 -
Effect of change in UK deferred tax rate (46) -
Exchange differences - 55
At 31 March 128 911
Gross Offset As reported
31 March 2016 £000 £000 £000
Deferred tax assets 720 (221) 499
Deferred tax liabilities (592) 221 (371)
Total 128 - 128
31 March 2015
Deferred tax assets 1,329 (418) 911
Deferred tax liabilities (418) 418 -
Total 911 - 911
Notes to the Consolidated Financial Statements
71IMImobile PLCAnnual Report & Financial Statements 31st March 2016
No deferred tax liability is recognised on gross temporary differences of £249,502 (2015: £1,135,302) relating to the unremitted earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The temporary differenc-es at 31 March 2016 represent only the unremitted earnings of those overseas subsidiaries where remittance to the UK of those earnings may still result in a tax liability, principally as a result of a dividend withholding taxes levied by the overseas tax jurisdictions in which these subsidiaries operate.
The following are the deferred tax liabilities and assets recognised by the Group and movements thereon during the respective period:
21. Share Capital, Share Premium and Restructuring Reserve
During the year 77,470 share options were exercised for a consideration of £30,764. The exercise of 1,050,000 flowering share options for nil consideration has been accounted for as a reduction in the share-based payment reserve.
The Group’s capital consists of two classes of equity share.
Property Plant and
EquipmentShare-based
paymentsIntangible
assets
Other short-term temporary
differences TotalDeferred tax assets: £000 £000 £000 £000 £000
At 1 April 2015 574 588 - 167 1,329
Charge to the Income Statement (232) (353) - - (585)
Share-based payments - 22 - - 22
Effect of change in UK deferred tax rate (43) - - (3) (46)
At 31 March 2016 299 257 - 164 720
Property Plant and
EquipmentShare-based
paymentsIntangible
assets
Other short-term temporary
differences Total
Deferred tax liabilities: £000 £000 £000 £000 £000
At 1 April 2015 (278) - (140) - (418)
Credit to the income statement 155 - 83 - 238
On acquisition - - (412) - (412)
At 31 March 2016 (123) - (469) - (592)
Share Capital
Share Premium Total
Allotted, called up and fully paid £000 £000 £000
At 1 April 2015 4,805 50,896 55,701
Share options exercised 113 1,488 1,601
At 31 March 2016 4,918 52,384 57,302
As at31 March 2016
Number
Ordinary shares as at 1 April 2015 48,038,862
Share options exercised 1,127,470
Ordinary shares as at 31 March 2016 49,166,332
Ordinary B shares as at 1 April 2015 and 31 March 2016 2
49,166,334
Financial Statements
72
Ordinary shares
The amount classified as equity share capital represents the nominal value of allotted, called up and fully paid ordinary shares at a par value of £0.10. Each holder of ordinary shares is entitled to one vote per share.
Ordinary B shares
The founders of the Group, and current directors Vish Alluri and Shyam Bhat hold their investment in the Company via Ordinary B Shares which give them the right to exchange their holdings in IMI Mobile Private Limited, a subsidiary of the Company (which they have held since the Group was founded) for a direct holding in the Company. This structure was established on listing and was necessary because of tax and foreign holding considerations in India, the structure is detailed in the Company’s Admission document.
The amount classified as equity share capital represents the nominal value of allotted, called up and fully paid ordinary shares at a par value of £0.10. Each holder of ordinary B shares is able to exercise voting rights in respect of such shares equal to the number of Ordinary Shares each of its nominees would receive if they exchanged their holding in IMI Mobile Private Limited for three ordinary shares in the Company.
In addition, each holder of ordinary B shares has the right (but not the obligation) to swap all of their shares in IMI Mobile Private Limited for ordinary shares in the Company on the basis of one IMI Mobile Private Limited share for three ordinary shares in the Company (subject to adjustment for any consolidation, sub division or any other alteration of the share capital of either the Company or IMI Mobile Private Limited). Such a share swap is subject to all legal and regulatory consents and approvals being obtained. If such a share swap occurred in full the holders of ordinary B shares would be entitled to acquire 11,299,599 ordinary shares. The holders of the ordinary B shares form the non-controlling interest in the Group.
Restructuring Reserve
The restructuring reserve was created as part of the capital restructuring of the Group following admission to AIM. The share capital and share premium were restated based on the 3:1 conversion of ordinary shares, with a corresponding entry in the restructuring reserve. The restructuring reserve also reflects the conversion of preference shares to ordinary shares and the creation of a non-controlling interest in the Group as outlined above.
There were no movements in the restructuring reserve in the current year.
22. Share-based payments
The fair value of options granted is recognised as an employee expense in the income statement with a corresponding increase in equity. The fair value is measured at the grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options is measured using the Black-Scholes option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised in the income statement is adjusted at each balance sheet date to reflect the number of share options that are expected to vest revised for expected leavers and estimated achievement for non-market based vesting conditions.
Prior to admission to AIM, options were issued to the Directors and key employees. The Group operated the following schemes during the year.
Flowering Share Plan
The plan was established on 16 May 2014. The options granted vest over a period of 0-4 years and are dependent upon continued employment, and meeting an objective Company hurdle and performance targets for the Group’s adjusted EPS. The options may be forfeited if the employee leaves the Group and the rights of the participants lapse if the award has not been exercised after a period of 10 years from the grant date.
Notes to the Consolidated Financial Statements
73IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Details of the share awards outstanding during the year are as follows:
The fair value at grant date has been determined using the Black-Scholes valuation model. The significant inputs into the model were a risk-free interest rate of 0.31% to 1.55%, exercise price shown above, an expected option life of five years, volatility of 22% to 70% depending on the vesting date of the options and a dividend yield of nil.
2014 Unapproved Option Plan
The plan was established on 26 June 2014. The options granted vest over a period of 0-4 years and are dependent upon continued employment and meeting performance targets for the Group’s adjusted EPS. The options may be forfeited if the employee leaves the Group and the rights of the participants lapse if the award has not been exercised after a period of 10 years from the grant date.
Details of the share awards outstanding during the year are as follows:
The fair value at grant date has been determined using the Black-Scholes valuation model. The significant inputs into the model were a risk-free interest rate of 0.42% to 1.72%, exercise price shown above, an expected option life of five years, volatility of 7% to 70% depending on the vesting date of the options and a dividend yield of nil.
CSOP
The plan was established on 26 June 2014. The options granted vest over a period of 0-4 years and are dependent upon continued employment. The options may be forfeited if the employee leaves the Group and the rights of the participants lapse if the award has not been exercised after a period of 10 years from the grant date.
As at 31 March 2016 As at 31 March 2015Weighted
average exercise
price
Number of share options
Weighted averageexercise
price
Number of share options
£ Number £ Number
At 1 April - 3,000,000 - -
Granted - - 0.03 3,000,000
Exercised 0.03 (1,050,000) - -
Forfeited 0.03 (149,062) - -
At 31 March 1,800,938 3,000,000
As at 31 March 2016 As at 31 March 2015Weighted
average exercise
price
Number of share options
Weighted average exercise
price
Number of share options
£ Number £ Number
At 1 April - 6,370,018 - -
Granted 1.08 549,984 0.33 6,387,373
Forfeited 0.93 (265,308) 1.20 (17,355)
At 31 March 6,654,694 6,370,018
Financial Statements
74
Details of the share awards outstanding during the year are as follows:
The fair value at grant date has been determined using the Black-Scholes valuation model. The significant inputs into the model were a risk-free interest rate of 0.42% to 1.72%, exercise price shown above, an expected option life of five years, volatility of 7% to 70% depending on the vesting date of the options and a dividend yield of nil.
Rollover scheme
The plan was established on 27 June 2014. The options granted vest over a period of 0-4 years and are dependent upon continued employment. The options may be forfeited if the employee leaves the Group and the rights of the participants lapse if the award has not been exercised after a period of 10 years from the grant date.
Details of the share awards outstanding during the year are as follows:
* options converted from a share scheme closed in the year ended 31 March 2015.
The fair value at grant date has been determined using the Black-Scholes valuation model. The significant inputs into the model were a risk-free interest rate of 0.44% to 1.34%, exercise price shown above, an expected option life of five years, volatility of 9% to 41% depending on the vesting date of the options and a dividend yield of nil.
Textlocal deferred consideration
The deferred consideration arising from the acquisition of Textlocal is treated as remuneration rather than consideration as one of the conditions of payment is continued employment of the shareholders of the company post acquisition. As the Group has the option to settle the deferred consideration in shares in the Company or cash, it is included as a share-based payment. The charge is taken to the consolidated income statement evenly over the period from acquisition to the settlement date.
Archer put option
Archer management team’s shareholding in Archer Digital Limited includes a put option which enables them to sell their holding to the Group after 5 years. The Group has valued this option and accounted for the obligation to purchase the shares as a cash settled share-based payment vesting over the 5 year period, with a charge of £208,000 recorded in the year ended 31 March 2016.
As at 31 March 2016 As at 31 March 2015Weighted
average exercise
price
Number of share options
Weighted averageexercise
price
Number of share options
£ Number £ Number
At 1 April - 993,938 - -
Granted 1.51 73,666 1.24 1,051,580
Exercised 1.33 (8,970) - -
Forfeited 1.20 (70,703) 1.20 (57,642)
At 31 March 987,931 993,938
As at 31 March 2016 As at 31 March 2015Weighted
average exercise
price
Number of share options
Weighted averageexercise
price
Number of share options
£ Number £ Number
At 1 April - 820,000 - -
Converted * - - 0.30 951,000
Exercised 0.29 (68,500) 0.29 (47,000)
Forfeited 0.32 (1,500) 0.31 (84,000)
At 31 March 750,000 820,000
Notes to the Consolidated Financial Statements
75IMImobile PLCAnnual Report & Financial Statements 31st March 2016
The fair value at grant date has been determined using the Black-Scholes valuation model. The significant inputs into the model were a risk-free interest rate of 0.44% to 1.10%, an expected option life of five years, volatility of 9% to 35% depending on the vesting date of the options and a dividend yield of nil.
Share based payment charge
The Group recognised the following expense related to share-based payments:
See note 9 for the dilutive impact of the share options in issue during the year.
23. Notes to the Consolidated Cash Flow Statement
24. Dividends per share
No dividends were paid in the year ended 31 March 2016 or 31 March 2015.
25. Contingent liabilities
There were no contingent liabilities at 31 March 2016 or 31 March 2015.
26. Financial risk management
The Group’s financial instruments comprise cash and cash equivalents, available-for-sale financial assets and items such as trade payables and trade receivables which arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group’s operations.
The Group’s operations expose it to a variety of financial risks including credit risk, liquidity risk, interest rate risk, equity price risk and foreign currency exchange rate risk. It is the objective of the Group to minimise these risks where possible by maintaining and operating a robust control environment. Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Group’s finance department.
31 March 2016 31 March 2015
£000 £000
Accelerated charge in lieu of cancelled scheme - 35
Equity-settled share-based payment plans 3,362 7,259
At 31 March 3,362 7,294
Year ended31 March 2016
Year ended31 March 2015
Cash flows from operating activities: £000 £000
Profit / (loss) before taxation 4,164 (2,287)
Adjustments:
Interest income (81) (13)
Share-based payments 3,362 7,294
Exceptional costs – IPO preparation costs 376 1,575
Depreciation of property, plant and equipment 1,910 2,219
Amortisation of intangible assets 782 223
Impairment of available-for-sale financial assets 176 145
Operating cash flow before movements in working capital: 10,689 9,156
(Increase) / decrease in receivables (3,863) 2,461
Increase / (decrease) in payables 3,789 (3,460)
Increase in provision for defined benefit gratuity plan 60 161
Foreign exchange (gain) / loss on working capital (42) 498
Cash generated from operations 10,633 8,816
Financial Statements
76
The Group currently does not use derivative financial instruments to manage its exposure to these risks.
Liquidity risk
As regards liquidity, the Group’s policy throughout the period has been to ensure continuity of funding. The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows. The Group has not entered into any derivative transactions in any year.
All trade payables (note 18) are due to be paid within twelve months of the balance sheet date. The average trade creditor days for the Group, expressed as a number of days, were 152 (2015: 152).
Interest rate risks
Historically the Group has financed its operations through a mix of equity and debt to help minimise its exposure. The Group minimises its risk to interest fluctuations by negotiating a fixed rate of interest on all external debt. Changes in the market interest rates in respect of these liabilities do not affect profit or equity and therefore no sensitivity analysis is required under IFRS 7.
Currency risk
The Group’s policy is to conduct the majority of its sales in the local currency of each entity (see note 2). Within each statutory entity, there is an amount of trading with overseas customers which are settled in foreign currencies. The Group monitors its exposure to currency by regularly reviewing its cash balances and matching these with future and forecast requirements.
The Group at the year-end held cash at bank amounts as follows:
Foreign currency exchange rate risk
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. As well as naturally mitigating this risk by offsetting its cost base in the same currencies where possible, currency exposure arising from the net assets of the Group’s foreign operations is managed through cash balances denominated in the relevant foreign currencies.
The Group is mainly exposed to the Nigerian Naira, South African Rand, US Dollar and Indian Rupee currencies.
The following table details the Group’s sensitivity to a 10% increase or decrease in Sterling against the relevant foreign currencies. 10% is the sensitivity rate which represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit where Sterling strengthens 10% against the relevant currency. For a 10% weakening of Sterling against the relevant currency, there would be an equal and opposite impact on the profit and other equity, and the balances below would be negative or positive.
As at31 March 2016
As at31 March 2015
£000 £000
United Arab Emirates Dirham 120 131
Australian Dollar - -
Bangladeshi Taka 327 320
Euro 1,286 673
UK Pounds Sterling 6,919 8,113
Indian Rupee 478 899
Nigerian Naira 3,315 1,124
Sri-Lankan Rupee 50 55
US Dollar 2,326 3,302
South African Rand 218 -
15,039 14,617
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
77IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. It is the Group’s policy to minimise its credit risk exposure by reviewing the recoverability of trade receivables at the balance sheet date and considers any change in the credit quality of the receivables on an individual basis from the date the receivable was created to the date the balance is settled.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date can be found within notes 15 and 16. The table below summaries the Group’s credit exposure to its key customers at the balance sheet date.
There are no other customers that represent more than 5% of the total balance of trade receivables.
27. Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. For the purpose of capital risk management, the total capital resources consist of the following components:
28. Operating leases arrangements
The Group’s significant lease arrangements are in respect of operating leases for premises (residential and office). These lease arrangements which are non-cancellable, ranging between 6 months and 2 years, are generally renewable by mutual consent on mutually agreeable terms.
As at the balance sheet date, the Group has outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:
As at31 March 2016
As at31 March 2015
Currency impact of: £000 £000
Nigerian Naira (238) (125)
South African Rand (19) -
US Dollar (54) (413)
Indian Rupee 58 299
As at31 March 2016
As at31 March 2015
£000 £000
Customer A 1,904 1,233
Customer B 764 2,241
Customer C 929 852
Customer D 970 831
Customer E 718 828
Customer F 935 528
As at31 March 2016
As at31 March 2015
£000 £000
Cash and cash equivalents 15,039 14,617
Total equity 43,549 38,939
Financial Statements
78
29. Acquisition of Archer Digital Limited
On 16 September 2015 the Group acquired 89% of the share capital of Archer Digital Limited (“Archer”) for a maximum total consideration of $5.6 million (£3.7 million) comprising an initial consideration of $5.2 million (£3.4 million) payable in cash with an additional deferred payment of up to a maximum of $0.4 million (£0.3 million). The primary reasons for acquiring the business were to leverage the Group’s African mobile operator and operational footprint to expand into the wider African market. The remaining 11% of Archer is owned by the Archer management team, who will be able to earn up to 20% of the equity in Archer following the acquisition.
The results of the acquired entity which have been consolidated in the income statement from 16 September 2015 contributed £3.51 million of revenues and a profit of £0.21 million to the profit attributable to equity shareholders of the Group during the year. Had Archer been acquired at the start of the year the contribution would have been £6.87 million of revenue and a profit of £0.42 million.
The provisional purchase price allocation is set out in the table below:
Land and buildings
31 March 2016 £000
Within one year 486
In the second to fifth year inclusive 19
In more than five years -
31 March 2015
Within one year 617
In the second to fifth year inclusive 148
In more than five years -
Fair value
Net assets acquired: £000
Identifiable intangible assets:
Customer relationships 1,725
Trade name 62
Technology 275
Deferred tax recognised on identifiable intangible assets:
Customer relationships (345)
Trade name (12)
Technology (55)
Property, plant and equipment 211
Trade and other receivables 1,719
Cash and cash equivalents 42
Current taxation liabilities (86)
Trade and other payables (1,782)
Net identifiable assets acquired 1,754
Goodwill 1,900
Total consideration 3,654
Cash consideration 3,654
Cash acquired (42)
Consideration net of cash acquired 3,612
Notes to the Consolidated Financial Statements
79IMImobile PLCAnnual Report & Financial Statements 31st March 2016
As at 31 March 2016
The accompanying notes are an integral part of the Company financial statements.
The financial statements of IMImobile PLC (Company number: 08802718) were approved by the Board and authorised for issue on 4th July 2016.
Signed on behalf of the Board
Mike JefferiesGroup Finance Director
NotesAs at
31 March 2016£000
As at31 March 2015
£000
Non-current assets
Investments 32 80,574 76,920
Total non-current assets 80,574 76,920
Current assets
Cash and cash equivalents 24 11
Trade and other receivables 33 3,705 2,601
Total current assets 3,729 2,612
Current liabilities
Trade and other payables (59) (98)
Total current liabilities (59) (98)
Net current liabilities 3,670 2,514
Non-current liabilities
Due to subsidiaries 34 (24,062) (24,578)
Total non-current liabilities (24,062) (24,578)
Net assets 60,182 54,856
Equity attributable to the owners of the parent
Share capital 21 4,918 4,805
Share premium 21 52,384 50,896
Retained earnings 31 2,880 (845)
Total equity 60,182 54,856
Company Balance Sheet
Financial Statements
80
30. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101) and in accordance with applicable accounting standards. As permitted by FRS 101, the company has taken advantage of the disclosure exemptions available under that standard in relation to presentation of a cash flow statement, standards not yet effective and related party transactions as disclosed in the group accounts.
The financial statements have been prepared under the historical cost convention. Further details of the Directors’ considerations in relation to going concern are included in the Strategic Report, the Directors’ Report and note 1.
On 27 June 2014 the Company was successfully admitted to AIM and issued new shares and used part of the proceeds from the initial placing to pay the consideration for the acquisition of 76% of the issued share capital of IMI Mobile Private Limited. The Company and its NOMAD have entered into a relationship agreement with the two founding shareholders of IMI Mobile Private Limited who own 24% of the issued share capital of IMI Mobile Private Limited. The relationship agreement gives the Founders the right (but not the obligation) to exchange all of their IMI Mobile Private Limited shares for ordinary shares in the Company on the basis of one IMI Mobile Private Limited share for three ordinary shares in the Company.
The principal accounting policies applied in preparation of the Company Statement of Financial Position are set out below.
Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
Foreign currencies
The Company financial statements are presented in UK Pounds Sterling (“the presentational currency” and “the functional currency”).
Foreign currency transactions are translated into the presentational currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Cash and cash equivalents
Cash and short–term deposits in the balance sheet comprise cash at bank and in hand and short–term deposits with an original maturity of three months or less, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Company Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Going Concern
The Company’s business activities, together with factors likely to affect its future development, performance and position are set out in the Strategic review and Director’s Report and note 1.
Notes to the Company Financial Statements
81IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Financial Statements
Cash flow statement
A cash flow statement has not been prepared as the consolidated financial statements includes a consolidated Cash Flow statement.
31. Profit for the year
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the year. IMImobile PLC reported a loss for the financial year ended 31 March 2016 of £327,000 (2015: £845,000) and received dividends totalling £4,052,000 from its subsidiaries. There were no other movements in Retained earnings in the year.
The auditor’s remuneration for audit and other services is disclosed within note 4 to the consolidated financial statements. The only employees of the Company are the Non-executive Directors whose emoluments are disclosed in the Directors’ Report.
32. Investments
The Company has investments in the following subsidiaries:
33. Trade and other receivables
34. Due to subsidiaries
35. Transitioning from old UK GAAP to FRS101
The Company meets the definition of a qualifying entity under FRS 101 (Financial Reporting Standard 101) issued by the Financial Reporting Council. Accordingly, in the year ended 31 March 2016 the Company has changed its accounting framework from pre-2015 UK GAAP to FRS 101 as issued by the Financial Reporting Council and has, in doing so, applied the requirements of IFRS 1.6-33 and related appendices. These financial statements were prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
As a consequence of adopting FRS 101, no transitional adjustments are required.
As at31 March 2016
As at31 March 2015
£000 £000
IMI Mobile Private Limited 43,920 43,920
IMImobile Europe Limited 22,000 22,000
TxtLocal Limited 11,000 11,000
Archer Digital Limited 3,654 -
80,574 76,920
As at31 March 2016
As at31 March 2015
£000 £000
Due from subsidiary - IMI Mobile Private Limited 2,605 2,600
Due from subsidiary - IMImobile Limited FZE 1,100 -
Other receivables - 1
3,705 2,601
As at31 March 2016
As at31 March 2015
£000 £000
IMImobile VAS Limited FZE 23,319 22,000
IMImobile Europe Limited 743 2,578
24,062 24,578
82
Nominated AdviserInvestec Bank30 Gresham StreetLondonEC2V 7QN
Joint BrokersInvestec Bank30 Gresham StreetLondonEC2V 7QN
Whitman Howard1st Floor Connaught House1-3 Mount StreetLondonW1K 3NB
BankersBarclays Bank PlcBarclays Corporate180 Oxford StreetLondonW1D 1EA
LawyersBracher Rawlins LLP77 KingswayLondonWC2B 6SR
AuditorDeloitte LLPChartered Accountants and Statutory AuditorLondon, United Kingdom
Professional Advisers
83IMImobile PLCAnnual Report & Financial Statements 31st March 2016
Notes
84IMImobile PLCAnnual Report & Financial Statements 31st March 2016
LondonIMImobile Europe Ltd.5 St John’s LaneLondonEC1M 4BHUnited Kingdom
Offices
HyderabadIMI Mobile Pvt. LtdPlot No. 770Road No. 44Jubilee HillsHyderabad – 500 033
DubaiIMImobile VAS Ltd. FZEP.O. Box 293593Office # 624, Building 5EADubai Airport Free Zone, Dubai, U.A.E
AtlantaIMImobile Inc.Tower Place 2003348 Peachtree Rd. NE.Atlanta, GA. USA.30326
JohannesburgArcher DigitalClearwater Office Park,Building no. 3, First Floor.Corner Christiaan De Wet and Millennium Boulevard,Strubensvalley,Roodepoort, Gauteng,South Africa