Last checked at 24 Sep 2014 07:00
24th September 2014
Eagle Eye Solutions Group plc
("Eagle Eye", the "Group")
Preliminary Results for the year ended 30 June 2014
Eagle Eye, a leading UK provider of digital consumer engagement solutions to the retail and hospitality industries, today announces its audited preliminary results for the financial year ended 30 June 2014 (the "Period").
Highlights:
Financial
Operational and Commercial
Outlook
Phill Blundell, Chief Executive of Eagle Eye, said:
"Our business has been growing significantly over the past 12 months as we have successfully integrated a major competitor, and launched Eagle Eye AIR, our leading edge platform which will allow us to capitalise on the fast growing market for digital coupons, vouchers and loyalty. This has resulted in a doubling of both our revenues and our customer base.
Our compelling business proposition, offering our customers significant operational cost savings, an enhanced consumer experience and the opportunity to innovate ahead of their competitors, gives the board considerable confidence in Eagle Eye's growth prospects both in the immediate and the longer-term."
For further information, please contact:
Eagle Eye Phill Blundell, Chief Executive Officer Lucy Sharman-Munday, Chief Financial Officer | Tel: 01483 246 426 |
Panmure Gordon Hugh Morgan/Duncan Monteith, Corporate Finance Charles Leigh-Pemberton, Corporate Broking | Tel: 020 7886 2500 |
Hudson Sandler Nick Lyon/Alex Brennan | Tel: 020 7796 4133 |
Information on Eagle Eye
www.eagleeye.com
Eagle Eye is a leading UK provider of digital consumer engagement solutions to the retail and hospitality industries.
The Company provides a digital transaction platform for the secure multi-channel issuance, management and redemption of promotional offers, gift vouchers and loyalty-based rewards, replacing previously used paper-based methods. The coupons, gift vouchers and loyalty-based rewards markets are currently transitioning through substantial change as both retailers and consumers are moving away from paper and plastic to digital offers, rewards and loyalty. These markets, in aggregate, are estimated to be worth £54.8 billion, £4.7 billion and £210 million respectively.
The Eagle Eye platform comprises four key components: campaign creation; issuance; redemption and reporting. The Company's products supported by the Eagle Eye platform allow the Company's clients to deliver relevant offers, rewards and services to consumers in real time, in a simple and secure way, across multiple media including email, SMS messaging and loyalty apps. The offers and rewards can be redeemed securely by the consumer through any enabled point of sale channel.
The Company's current customer base comprises leading names in UK retail and hospitality including Ask, Greggs, JD Sports, Karen Millen, Ladbrokes, Marks & Spencer, Mitchells and Butlers, Pets at Home, Pizza Express and Tesco.
The Group is headquartered in Guildford, Surrey and has an office in Manchester.
Chairman's report
Having chaired the Company for a year, I stepped down temporarily earlier this year for health reasons but I am delighted to resume the responsibilities of Chairman and to be associated with such an exciting company. Eagle Eye is the UK leader in real-time secure delivery of offers, vouchers and rewards to the retail and hospitality markets. I believe we are witnessing one of the most far-reaching technological changes during the more than 40 years I have been involved in the retail industry, as promotions and loyalty shift to digital delivery. This opens up tremendous opportunities to companies that can connect consumers, brands and retailers, with Eagle Eye at the forefront.
This was a transformational year for Eagle Eye as we built excellent operational momentum within the business, bolstered our offering and team, both organically and through the acquisition of 2ergo, and floated on AIM. We have now established an exceptional foundation that will enable us to exploit our strong first-mover advantage in the fast-growing digital promotions and loyalty market and deliver long-term value to our customers and shareholders.
The aforementioned game-changing technological changes in the promotions and loyalty market provide tremendous opportunities for Eagle Eye, as the leading UK provider of digital consumer engagement solutions.
Summary of results
Eagle Eye operates a SaaS business model whereby revenues are generated by transactions over the network and by monthly connection fees that allow customers to use the network. In addition, we charge implementation fees for new customers and new services. We have delivered excellent momentum in the business as demonstrated by a 100% increase in like for like revenue.
Another one of our KPIs for the business is the number of customers using our network. I am delighted to report that we have doubled the number of retailers and brands using our network over the past 12 months to more than 90 (2013: 40). This is further reinforced by our technology platform redeeming 8 million vouchers in the Period compared to 1.5 million in the prior financial year.
Group revenue increased by 160% to £1.8m (2013: £0.7m) for the Period. Of total revenue for 2014, an incremental £0.4m was contributed by the 2ergo acquisition made in the middle of April 14. Excluding 2ergo, organic revenue increased by 101% to £1.4m.
The adjusted EBITDA loss was £0.8m. The Group's gross profit was £1.4m, representing a gross margin of 78%. The Group has a robust balance sheet with net assets of £7.8m, including cash and cash equivalents of £2.3m.
People
We have significantly strengthened our team across the business during the Period. At the Board level, we welcomed Drew Thomson and Malcolm Wall as Non-Executive Directors, who together bring a wealth of experience from the media and loyalty sectors that will be invaluable as the Group continues to grow. They join our existing Non-Executive Directors Bill Currie and Sir Terry Leahy who will continue to offer their exceptional knowledge and guidance to the executive team.
Eagle Eye's former Commercial Director Phillip Blundell was appointed Chief Executive Officer in March and led the Company through the IPO process ably assisted by the Founder and Chief Technology Officer. More recently, in July, we were delighted that Lucy Sharman-Munday joined us as Chief Financial Officer. Lucy's appointment completes a strong and dynamic executive team and gives us the breadth of skills and experience to continue to execute our demanding growth strategy.
The acquisition of 2ergo strengthened our team by bringing an additional 25 skilled people to the Group providing further knowledge and bandwidth which, coupled with our existing highly skilled and committed team, underpin the Board's confidence in future progress.
On behalf of the Board I would like to place on record our thanks to all those who made our admission to AIM possible. This includes our hardworking team, our long-standing shareholders who have supported us on our journey both financially and by freely giving their time and insight, and our new shareholders whom I am delighted have chosen to support Eagle Eye through the next exciting phase of growth.
Outlook
Our industry-leading network, the quality of our technology, our growing customer base and experienced management team mean that we have a strong foundation for future success. In FY 2015 we will continue to execute our growth strategy, innovate and develop our customer offer and bring new customers on to the Eagle Eye Air platform. The board therefore has considerable confidence in Eagle Eye's growth prospects both in the immediate and the longer-term
Chief Executive Officer's report
A transformational year
Eagle Eye's progress over the last 12 months has been rapid. We have transformed our business from a platform supporting a few customers and offering two key solutions into a strong and dynamic group focussed on organic growth. We have successfully integrated a major competitor during the Period and doubled both revenue and the number of retailers and brands using our network.
We now have the necessary ingredients for sustainable growth: a scalable proven technology platform; a strong management team; and the financial resources to allow us to exploit the increasing market opportunity.
Market overview
Eagle Eye operates in three key markets: coupons; stored value cards; and loyalty. These markets are going through dynamic change as both retailers and consumers move from paper and plastic to digital offers, rewards and loyalty. Growth is being observed both in the underlying markets in which Eagle Eye is active as well as the digitalisation of retail customers' redemption within these markets.
The coupon market has grown 100% in five years and redemption has increased 33% in the UK last year reaching a value of £1.6bn (Juniper 2013). Coupon redemption is growing at 38% per annum in the UK and is now worth more than £2 billion a year (Juniper 2013, Pepperwood Digital Coupon Market Whitepaper). In addition, the UK Gift Card and Voucher Association has indicated that the gift card market is of a similar size. Both these markets are moving from analogue platforms to digital platforms and offer significant potential annual revenues to the technology and media companies servicing these markets. We have positioned ourselves strategically to be a key player in these growing markets and have already achieved leadership in the UK digital market with in excess of one million redemptions per month by June 2014, compared to approximately 250,000 a month in June 2013.
In the coming years digital rewards and loyalty will see much faster growth than paper rewards. Digital rewards help reduce fraud and enable retailers to be paid faster. They also give brands and retailers the ability to target consumers based on their personal preferences including through the real-time tracking and reporting of consumer behaviour.
Our strategy
Our long-term goal is to be the global leader in the delivery of digital promotions. Our immediate strategic focus is on building on our leadership in the UK by dominating the retail and hospitality industries as paper vouchers are migrated to digital solutions over the coming years. This comprises four key elements:
Expanding our customer base
Our customers are leading brands and operators in the retail and hospitality sectors. In the past 12 months there has already been a step change in the roll out of our non-payment transaction network that connects consumers, brands and retailers as we have doubled the number of customers on the network, including adding three of the largest issuers of rewards in the UK. This puts us in a strong position to significantly increase volumes in the coming year.
Growing our partnership network
Another pillar of our strategy is to partner with the EPOS ("Electronic Point of Sale") providers who are the gatekeepers to real-time redemption. Progress during the Period was good with another two of the top 10 EPOS providers connecting their software to the Eagle Eye network, increasing our total to five.
Targeting the FMCG sector
We aim to build out the connections to our network by attracting the FMCG brands who control the largest marketing budgets in the world of promotions. We have conducted a small number of campaigns in the last year and now, with the network expanding, we are able to bring on board these mass market leading brands which provides the potential for exciting revenue growth.
Innovating and enhancing our offer
Innovation keeps us ahead of the curve. It is crucial that we continue to enhance the capabilities of our platform to allow consumers and retailers to transact in any method that is convenient. To this end we have extended the issuing application programming interface ("API") to include 'push' notifications into smartphone apps and the scanning of QR codes alongside our traditional methods of SMS text messaging and email. On the redemption side, our existing methods of key entry and barcode scanning have been extended to support contactless entry by mobile phone or card. The acquisition of 2ergo has extended the product set to include a powerful mobile marketing publishing suite and an app builder, both of which will allow us to offer new and a broader range of services to our customers.
Delivering our strategy: momentum in the Eagle Eye network
Over the Period we have significantly increased the scale of our network with the number of our customers using the network increasing from less than 40 in June 2013 to more than 90 today. We have grown and diversified from a predominantly hospitality customer base to one also focussed on retail and grocers.
We have strengthened the hospitality customer base by adding Prezzo, Zizzi and ASK to our major customers alongside Pizza Express and Mitchells and Butlers. As a result, we now have more than 750,000 people using our digital vouchers in restaurants every month.
Progress has been spectacular in the retail sector where our existing strength in fashion has been supplemented by contract wins with leading national retailers Greggs, JD Sports, Onestop and M&S.
These clients demonstrate the attractiveness of our technology platform to the largest of retailers who redeem the bulk of promotional vouchers through their relationships with FMCG suppliers, introducing the Company to the opportunity of brand promotions which exhibit tens of millions of redemptions every month. Our customer success to date gives us a strong platform and industry credibility to further extend the reach of our network.
Partners are also key to achieving our mission of providing the universal non-payment transaction network, connecting all consumers, brands and retailers. In particular we are targeting partnerships with EPOS providers and loyalty scheme providers because they can make adoption of our platform easier and drive increased volumes. It has been a good financial year for the development of our EPOS partnerships and new contracts were signed with Toshiba Global Commerce Systems, K3 and Comtrex Systems which will facilitate tens of new customers going forward. We have also made good progress with loyalty and issuance partners with WEVE, Nectar and VISA agreeing to link to the network and issue digital vouchers.
The Eagle Eye AIR platform that supports the network has been transformed in the Period. Led by our Founder, Steve Rothwell, our patents have been extended to the USA and the platform now supports 16 services, up from four a year ago. Our tools and dashboard have also been redeveloped to make them more attractive to larger customers and brand owners. During the Period the basic promotions and stored value products have been extended to include staff rewards, benefits and loyalty. Our loyalty product has gone live with M&S and Greggs who are now able, in real-time, to identify customers at point of sale, serve up offers and rewards based on basket data and accept payment all in under one second using one barcode. This demonstrates the strength and power of our platform and its scalability which is now proven with more than one million redemptions a month.
Other significant developments introduced throughout the Period include a new basket data module which enables the digital counting and auditing of vouchers, as well as the contactless redemption mechanic, which makes mobile transactions direct from the phone or card possible. Based on early signals, we expect this to become a fast-growing market.
I am delighted that that the integration of the 2ergo team has been a success and our new colleagues are fully embedded in the business and integral to our future success. They have brought an expertise in mobile marketing and app building that complements our existing skill sets and further broadens our market appeal. The extended development team have shown remarkable resilience and creativity during the Period by meeting all development objectives and, at the same time, ensuring that the number of live customers was doubled. Going forward our investment in product enhancements will be maintained and I thank the team for their skill and commitment.
Besides the technology and people the other key reason for acquiring 2ergo was for their customers. I am pleased to say that since the deal closed revenues from these customers have increased, providing further evidence of the success of the transaction. Maintaining this growth, coupled with investment in sales and marketing, will be the main operational focus in the future.
Now that we have the proven technology platform with credible customers, the challenge is to build a sales and marketing function that can exploit the growing market opportunity. The team has already increased by four to nine and we are in the process of recruiting a further two sales executives which should give us the strength in depth to meet our demanding growth targets.
Outlook
The market for digital promotions is growing rapidly as the technology barriers to adoption are overcome. This, coupled with the tangible benefits of digital over paper including cost savings, reduced fraud and improved consumer experience, will drive further migration to digital solutions. We are well placed to take advantage of this opportunity due to our market position, patent-protected network, excellent products and skilled people.
Over the next 12 months the strategic focus will be on extending our lead in the UK market by increasing volumes, adding more customers, forging new partnerships and building more functionality into our technology platform, Eagle Eye AIR.
We will continue to innovate and look at ways to extend our offer and meet both existing and new customers' evolving needs.
In 2014, 60% of revenues came from the SAAS model. We expect this to increase significantly in the coming year both in absolute terms and in percentage terms.
A huge amount has been achieved over the last 12 months. We have doubled revenue, acquired and integrated 2ergo, developed the Eagle Eye AIR platform and listed on AIM. Underpinned by the strength of our team, technology and strategy, I am confident that progress over the next year and beyond will be equally exciting.
Financial review
Group Results
Group revenue experienced strong growth of 160% to £1.8m (2013: £0.7m) for the Period. Of the total revenue for 2014, an incremental £0.4m was contributed by the 2ergo acquisition which completed in the middle of April 2014. During this initial period the Group has enhanced its presence in the campaign management and SMS text messaging services market. Excluding 2ergo, organic revenue increased by 101% to £1.4m as a result of the significant growth in the number of retailers and brand customers using the Eagle Eye network during the Period.
£1.2m of revenue generated by transactions over the network and by monthly connection fees represents 67% of total revenue (2013: 57%, £0.4m). This positive 10% points year-on-year growth in revenue mix is in line with our strategy to increase the volume of transactions going over our network and therefore drive the recurring operating model. The balance, £0.6m, relates to implementation fees for new customers and new services and represents 33% of total revenue (2013: 43%, £0.3m).
The increased revenue was achieved without a significant impact on gross margin. The gross margin reduced from 80% to 78% in 2014 as gross profit grew to £1.4m (2013: £0.6m). The core gross margin increased from 80% to 83%, the fall in overall margin was driven by the increased level of lower gross margin campaign manager and SMS business revenue in the Company's turnover mix as a result of the acquisition of 2ergo.
Operating Costs
Operating costs of £2.6m (2013: £1.1m) increased in line with expectations reflecting our planned strategic growth. Operating expenses include sales and marketing, product development, operational IT, general, administration and share based payment costs. Gross expenditure on product development increased 98% to £0.8m (2013: £0.4m) reflecting our investment to enhance the capabilities of our platform. Capitalised product development costs at £0.6m (2013: £0.3m) represented 72% of gross development spend whilst amortisation of capitalised development costs was £0.5m (2013: £0.1m).
One-off costs in relation to the acquisition of 2ergo which are expensed in accordance with IFRS 3 Business Combinations totalled £0.3m.
EBITDA
Group-adjusted EBITDA loss for the Period was £0.8m (2013: loss £0.4m). To provide a better guide to the underlying business performance adjusted EBITDA excludes share-based payment charges and one off acquisition costs along with depreciation, amortisation, interest and tax from the measure of profit.
Group reorganisation and share placing
The Company was incorporated on 12 February 2014 and on 18 March 2014 became the new parent company of the Eagle Eye Solutions Group. This followed a reorganisation resulting in the Company acquiring the entire share capital of Eagle Eye Solutions Limited. The shareholders of Eagle Eye Solutions Limited received shares in the Company in a 16:1 swap to their original shareholdings. The historical financial statements represent the financial statements of the Company's subsidiary, Eagle Eye Solutions Limited. On conclusion of the company's admission to AIM 3.7m placing shares were issued raising £5m of new capital (net of issue costs).
£2.5m from the initial public offering on AIM and the issue of 1.2m shares in the Company funded the acquisition of 2ergo.
The balance of cash from the initial public offering was raised to provide working capital to support the expected revenue growth and to provide headroom for strategic investment in the Group's technology.
EPS and dividend
Reported basic and diluted loss per share was 10.65p (2013: loss per share 4.18p). The Board does not feel it appropriate at this time to commence paying dividends.
Balance sheet, cash and cash flow
The Group has a robust balance sheet with net assets of £7.8m at 30 June 2014 (2013: £2.0m), including cash and cash equivalents of £2.3m (2013: £1.4m). As a result of the initial public offering and the intellectual property and other assets purchased in the 2ergo acquisition, our balance sheet has been significantly strengthened.
The main components to the gross cash increase of £0.9m for the Period (2013: £0.6m increase) were operating cash outflow of £1.3m (2013: £0.5m outflow), the cash consideration paid for 2ergo of £2.5m, capital investment in intangibles including product and development of £0.6m (2013: £0.3m) and the net receipts from the initial public offering on AIM of £5.0m.
Consolidated income statement
for the year ended 30 June 2014
2014 | 2013 | ||||
Continuing operations | Note
| £000
| £000
| ||
Revenue | 1,835 | 705 | |||
Cost of sales | (395) | (141) | |||
Gross profit | 1,440 | 564 | |||
Administrative costs | (3,183) | (1,134) | |||
Operating loss and loss before taxation | (1,743) | (570) | |||
Taxation | 143 | - | |||
Loss and total comprehensive loss attributable to the owners of the parent for the financial year | (1,600) | (570) | |||
Loss per share | |||||
From continuing operations | |||||
Basic and diluted | (10.65)p | (4.18)p |
Consolidated statement of financial position
as at 30 June 2014
2014 |
2013 | |||
Note | £000 | £000 | ||
Non-current assets | ||||
Intangible assets | 5,647 | 513 | ||
Property, plant and equipment | 78 | 20 | ||
5,725 | 533 | |||
Current assets | ||||
Trade and other receivables | 1,353 | 271 | ||
Current tax receivable | 61 | - | ||
Cash and cash equivalents | 2,275 | 1,408 | ||
3,689 | 1,679 | |||
Total assets | 9,414 | 2,212 | ||
Current liabilities Trade and other payables | (1,420) | (203) | ||
Non-current liabilities | ||||
Deferred tax liability | (192) | - | ||
Total liabilities | (1,612) | (203) | ||
Net assets | 7,802 | 2,009 | ||
Capital and reserves attributable to equity holders of the parent | ||||
Share capital | 2 | 201 | 136 | |
Share premium | 2 | 7,209 | - | |
Merger reserve | 2 | 3,278 | 3,278 | |
Share option reserve | 197 | 78 | ||
Retained losses | (3,083) | (1,483) | ||
Total equity | 7,802 | 2,009 | ||
Consolidated statement of changes in equity
for the year ended 30 June 2014
Share capital | Share premium | Merger reserve | Share option reserve | Retained losses | Total | ||
£000
| £000
| £000
| £000
| £000
| £000
| ||
Balance at 1 July 2012 | 136 | - | 3,278 | 5 | (913) | 2,506 | |
Loss for the financial year | - | - | - | - | (570) | (570) | |
Transactions with owners | |||||||
IFRS 2 share based payment charge | - | - | - | 73 | - | 73 | |
| - | - | - | 73 | - | 73 | |
Balance at 30 June 2013 | 136 | - | 3,278 | 78 | (1,483) | 2,009 | |
Loss for the financial year | - | - | - | - | (1,600) | (1,600) | |
Transactions with owners | |||||||
Issue of share capital | 65 | 8,181 | - | - | - | 8,246 | |
Issue costs | - | (972) | - | - | - | (972) | |
IFRS 2 share based payment charge | - | - | - | 119 | - | 119 | |
| 65 | 7,209 | - | 119 | - | 7,393 | |
Balance at 30 June 2014 | 201 | 7,209 | 3,278 | 197 | (3,083) | 7,802 | |
Consolidated statement of cash flows
for the year ended 30 June 2014
2014 | 2013 | ||
£000
| £000
| ||
Cash flows from operating activities | |||
Loss before taxation | (1,743) | (570) | |
Adjustments for: | |||
Depreciation | 32 | 14 | |
Amortisation | 506 | 67 | |
Share based payment charge | 119 | 73 | |
(Increase)/decrease in trade and other receivables | (520) | 29 | |
Increase/(decrease) in trade and other payables | 300 | (83) | |
Net cash flows from operating activities | (1,306) | (470) | |
Cash flows from investing activities | |||
Payments to acquire property, plant and equipment | (33) | (7) | |
Payments to acquire intangible assets | (568) | (333) | |
Purchase of business (see note 3) | (2,500) | - | |
Net cash flows from investing activities | (3,101) | (340) | |
Cash flows from financing activities | |||
Net proceeds from issue of equity | 5,274 | 1,448 | |
Net cash flows from financing activities | 5,274 | 1,448 | |
Net increase in cash and cash equivalents in the year | 867 | 638 | |
Cash and cash equivalents at beginning of year | 1,408 | 770 | |
Cash and cash equivalents at end of year | 2,275 | 1,408 | |
Notes to the consolidated preliminary financial information
1 Basis of preparation
The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the year ended 30 June 2014 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 23 September 2014 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales.
The financial information for the year ended 30 June 2013 has been extracted from the Company's admission document. The reports of the auditor on both these financial statements were unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.
While the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRSs') as adopted by the European Union, this announcement does not itself contain sufficient information to comply with those IFRSs. The preliminary financial information has been prepared in accordance with the accounting policies set out in the Group's admission document.
The financial statements included in the Company's admission document, which is publicly available, are considered to be the first consolidated financial statements prepared in accordance with IFRSs and, as such, the disclosures required by IFRS in respect of change in accounting framework from Financial Reporting Standards for Smaller Entities ('FRSSE') to IFRS are not included in this financial information.
On 18 March 2014 the Company acquired the shares of Eagle Eye Solutions Limited in exchange for its own shares. The Company issued 13,641,384 1p shares in exchange for the entire share capital of Eagle Eye Solutions Limited. The acquisition of its principal subsidiary by the Group did not meet the definition of a business combination and therefore falls outside the scope of IFRS 3. As IFRS does not provide specific guidance in relation to group reorganisations it defers to the next appropriate GAAP being UK GAAP. The acquisition of Eagle Eye Solutions Limited by the Company has therefore been accounted for in accordance with the principles of merger accounting as set out in Financial Reporting Standard 6- Acquisitions and Mergers. Accordingly the financial information for the Group has been presented as if Eagle Eye Solutions Limited has been owned by the Company throughout the current and preceding periods. The comparative figures for the previous year include the results of the merged entity, the assets and liabilities at the previous balance sheet date and the shares issued by the Company as consideration as if they had always been in issue. The difference between the capital and reserves of Eagle Eye Solutions Limited and the nominal value of shares and share premium issued by the Company to acquire the merged entity was taken to reserves.
The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.
2 Share capital
The authorised share capital of the Company is 20,131,152 ordinary shares of 1p each.
Group | Number of shares issued and fully paid | Share capital | Share premium |
£000 | £000 | ||
At 1 July 2012 | 13,641,384 | 136 | - |
Issue of share capital | - | - | - |
At 30 June 2013 | 13,641,384 | 136 | - |
Issue of share capital | 6,489,768 | 65 | 8,181 |
Issue costs | - | (972) | |
At 30 June 2014 | 20,131,152 | 201 | 7,209 |
Eagle Eye Solutions Group plc was incorporated on 12 February 2014 and 2 shares of £1 each were issued for cash consideration. On 18 March 2014, the share capital of the Company was altered by the sub-division of these shares into 200 ordinary shares of 1p each.
On 18 March 2014, the Company issued 13,641,384 1p ordinary shares as consideration for the acquisition of Eagle Eye Solutions Limited.
On 27 March 2014, the Company issued 137,776 1p ordinary shares to Sir Terry Leahy, a director of the Company to secure his ongoing support of the Company through this next stage of growth.
On 27 March 2014, the Company issued 272,832 1p ordinary shares pursuant to the exercise of outstanding share options. On 7 April 2014, the Company issued 97,920 1p ordinary shares pursuant to the exercise of outstanding share options. On 16 April 2014, the Company issued 1,102,992 1p ordinary shares pursuant to the exercise of outstanding share options.
On 16 April 2014, the Company issued 3,658,536 1p ordinary shares through a placing of its shares on its admission to AIM. In addition, on that day the Company issued 1,219,512 1p ordinary shares pursuant to the acquisition of 2ergo Limited (now Eagle Eye Solutions (North) Limited).
Merger reserve
The acquisition of its principal subsidiary by the Group does not meet the definition of a business combination and therefore falls outside the scope of IFRS 3. The acquisition has therefore been accounted for in accordance with the principles of merger accounting as set out in Financial Reporting Standard 6- Acquisitions and Mergers.
The consideration paid to the shareholders of Eagle Eye Solutions Limited was £6,991,209 (the value of the investment).
On consolidation this is eliminated so that the nominal value of the shares remains and, as there is a difference between the Company value of the investment and the nominal value of the shares purchased in Eagle Eye Solutions Limited of £3,414,407, this is also eliminated, to generate a merger reserve in the Group of £3,277,993.
3 Business Combinations
On 16 April 2014, the Group acquired the entire issued share capital of 2ergo Limited (now Eagle Eye Solutions (North) Limited) for consideration of the issue of 1,219,512 ordinary shares in Eagle Eye Solutions Group plc and £2,500,000 in cash. The fair value of the shares issued was determined with reference to the placing price. The acquisition brought valuable intellectual property to extend the capability of the Group's platform, increase the strength of the Group's research and development team and to access new customers.
The goodwill arising on the acquisition is £2,432,000 which mainly represents the benefits the Group is expecting from the increased research and development team and access to new customers. The value of goodwill is supported by its value in use and is not considered impaired. The provisional impact of the acquisition on the Group's assets and liabilities is set out below. The fair value of the assets and liabilities acquired may be adjusted for circumstances that are revealed within 12 months of the date of acquisition. Adjustments have been made primarily to align the accounting policies of 2ergo Limited with those of the Group.
Book value | Adjustments | Provisional fair value | |
£000 | £000 | £000 | |
Intangible assets | 2,646 | (6) | 2,640 |
Property, plant and equipment | 99 | (42) | 57 |
Trade and other receivables | 706 | (82) | 624 |
Trade and other payables | (784) | (134) | (918) |
Deferred tax | (87) | (248) | (335) |
Net assets acquired | 2,580 | (512) | 2,068 |
Goodwill | 2,432 | ||
Total purchase consideration | 4,500 | ||
made up as follows: | |||
satisfied by issue of ordinary shares | 2,000 | ||
cash | 2,500 | ||
4,500 | |||
During the period from acquisition to 30 June 2014, the 2ergo business generated revenue of £419,000 and incurred an operating loss of £311,000. Net assets at 30 June 2014 are £1,490,000. Had the business been part of the Group for the entire year to 30 June 2014, revenue would have increased by £2,229,000 and the operating loss would have increased by £2,375,000.
4 Report and Accounts
A copy of the Annual Report and Accounts will be sent to all shareholders with notice of the Annual General Meeting.