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Interim Results

28 Sep 2017 07:00

RNS Number : 0306S
Frontier Smart Technologies Grp Ltd
28 September 2017
 

For immediate release

28 September 2017

 

 

Frontier Smart Technologies Group Limited

 

('Frontier', the 'Group' or the 'Company')

 

Half-Year Results

 

Frontier Smart Technologies Group Limited (AIM: FST), a pioneer in technologies for Digital Audio devices, is pleased to announce its half-year results for the six months ended 30 June 2017.

 

Key Highlights

 

· H1 2017 financial highlights:

o Revenues up 44% at £19.7 million (H1 2016: £13.7 million); up 27% on a constant currency basis

o EBITDA of £1.1 million (H1 2016: loss of £0.04 million)

o R&D expenditure stable at £2.9 million (H1 2016: £2.8 million)

o As at 30 June 2017, cash and cash equivalents were up 41% at £4.8 million (31 December 2016: £3.4 million).

 

· H1 2017 operational highlights:

o Strong growth in Digital Radio and Advanced Radio1 driven by Digital Switchover in Norway and robust DAB volumes in continental Europe

o First material revenues from Smart Audio2

 

· Full year 2017 outlook

o Trading since the end of H1 2017 has continued to be strong and the Board now expects FY 2017 EBITDA3 to be significantly ahead of current market expectations4.

 

Anthony Sethill, CEO of Frontier, commented: "The Group has performed well in the first half of the year. In Digital and Advanced Radio, we have benefited from underlying growth in the sector and the impact of the Digital Switchover in Norway. In Smart Audio, we have secured the first material revenues for our Google Chromecast product.

 

"In the second half of the year, we expect trading to hold up well and our full year EBITDA performance should be significantly ahead of current market expectations."

 

Notes:

1 Advanced Radio is an established business line for Frontier, in previous reports referred to as Smart Audio. The business offers technologies for Internet radios (devices often also providing access to online music services, such as Spotify).

2 Smart Audio, as now defined, is the Group's newest business line. It encompasses technologies for Wi-Fi enabled audio devices (e.g. speakers, soundbars, AVRs), excluding Internet radios. These devices are generally based on software platforms from major technology players such as Google.

3 EBITDA is defined as earnings before interest, tax, depreciation, amortisation, and before share based payments.

4 Current market expectations prior to this announcement for the Group's EBITDA for the year ending 31 December 2017 are approx. £1.5 million.

 

Certain statements made in this release are forward-looking statements. Such statements have been made by the Directors in good faith using information available up until the date that they approved this update. Forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks.

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via a regulatory information service, this inside information is now considered to be in the public domain.

 

 

Enquiries:

Frontier Smart Technologies Group Limited

+44 (0) 20 7391 0630

Anthony Sethill, Chief Executive Officer

Jonathan Apps, Chief Financial Officer

N+1 Singer (Nominated Adviser and Broker)

+44 (0) 20 7496 3000

Shaun Dobson / James Hopton

Buchanan

+44 (0) 20 7466 5000

Henry Harrison-Topham / Steph Watson / Gemma Mostyn-Owen

FST@buchanan.com

 

About Frontier

The Frontier Smart Technologies Group is a pioneer in technologies for digital audio devices. The original company, Frontier Silicon, was incorporated in 2001. Customers include many leading consumer audio brands: Bose, Denon, Grundig, harman/kardon, Onkyo, Panasonic, Philips, Pioneer, Pure, Roberts, Sony, TechniSat, Yamaha, and many more. The Company is headquartered in London, with engineering, sales and operations teams in Cambridge, Timisoara (Romania), Hong Kong, and Shenzhen. www.frontiersmart.com

 

Introduction

In this statement, Frontier reports on three business lines: Digital Radio, Advanced Radio and Smart Audio.

 

· In Digital Radio, Frontier provides chips and modules for DAB radios (consumer and automotive aftermarket).

· In Advanced Radio, Frontier provides solutions for Internet radios (devices often also offering access to online music services). 

· The Group's Smart Audio business is focused on solutions for Wi-Fi enabled audio devices such as Wi-Fi speakers, soundbars and AVRs. Generally, these devices incorporate software platforms from major technology companies such as Google.

 

Digital and Advanced Radio are well-established business lines where Frontier has market leading technologies and strong customer relationships, with both generating positive cashflows. 

 

Smart Audio is the Group's newest business line and offers potentially attractive growth prospects. Market volumes are forecast by Strategy Analytics to rise from 14 million units in 2016 to 76 million in 2020. Whilst still in the early stages of development, growth in this sector is being driven by platforms such as Google Chromecast and voice technologies on devices such as the Amazon Echo and Google Home. Frontier's role is to work with third party brands to develop Smart Audio devices based on these proprietary technologies.

 

In 2016, Frontier returned its first positive EBITDA of £0.7 million with revenues of £32.1 million.

 

In previous reports, Advanced Radio was reported as part of the Group's Smart Audio activities. In future, starting with the Group's 2017 Full Year Results, the Group intends to report Digital and Advanced Radio as a single business line. However, to aid transparency, in this report Advanced Radio has been broken out as a separate business line.

 

Overview of H1 2017 performance

H1 2017 saw a strong financial performance for the Group, with reported revenues of £19.7 million up 44% (H1 2016: £13.7 million) and EBITDA improving to £1.1 million (H1 2016: loss of £0.04 million).

 

This growth in Group revenues was assisted by the decline in Sterling against the US Dollar. On a constant currency basis, revenues grew by 27% to US$25.0 million (H1 2016: US$19.7 million).

 

Digital Radio and Advanced Radio both saw strong growth in the period. Digital Radio dollar revenues were up 20% to US$16.1 million (H1 2016: US$13.4 million); and Advanced Radio revenues grew 11% to US$7.0 million (H1 2016: US$6.3 million). Digital Radio benefited from the start of the switch-off of FM broadcasts in Norway, a process which will continue throughout 2017, on top of robust underlying growth in DAB volumes in continental Europe. Both Radio businesses benefited from the introduction of new EU regulation (the Radio Equipment Directive), which encouraged some customers to bring forward orders into the first half of the year.

 

Smart Audio produced its first significant revenues, US$1.8 million in H1 2017 (H1 2016: zero). These sales were generated by design wins for Minuet, Frontier's Smart Audio solution incorporating Google Chromecast. Customers include Harman JBL, Urbanears, Brookstone, Jensen and SOLIS.

 

Group R&D expenditure in H1 2017 was broadly flat at £2.9 million (H1 2016: £2.8 million).

 

At 30 June 2017, the Group's cash balance was £4.8 million (31 December 2016: £3.4 million). This equates to a net cash position of £1.3 million (31 December 2016: net debt £0.7 million).

 

Prospects

The Digital Radio and Advanced Radio business lines are expected to continue generating positive cashflows for the medium term. Smart Audio is a new business sector driven by large US technology companies such as Google and Amazon. The Smart Audio market is expected to be substantially larger than that of DAB. The Group's aim over the next 18 months is to establish itself as the leading system integrator in this sector. 

 

Digital Radio

Digital Radio volumes for 2018 may remain at similar levels to 2017 following the completion of Digital Switchover ('DSO') in Norway. Thereafter prospects for Digital Radio remain favourable, with continued progress across Europe and the beginning of DSO in Switzerland in 2020.

 

Advanced Radio

Advanced Radio is expected to remain a relatively niche business concentrated in Germany and the UK. Frontier is expected to maintain its leadership of this sector, a position which should be boosted by the introduction in Q3 2017 of a new module, specifically targeting the 'entry price point' segment.

 

In Q3 2017, Frontier has also since announced that it is working on technologies which will allow its Advanced Radios and wireless speakers to be controlled via Amazon's Echo and Echo Dot devices.

 

Smart Audio

Frontier continues to be one of a small number of technology providers working with Google on its Chromecast platform. Having delivered the first design wins for the Group's Minuet platform, there are now two strands to Frontier's engineering spend; first, continuing to enhance the existing solution (e.g. by adding new features such as wireless stereo) and; second, the development of a new version of Minuet incorporating Google's Voice Assistant.

 

Subject to Google approvals, this voice-enabled solution should be ready for mass production in H1 2018. Discussions with potential customers are currently under way.

 

Financial Review

H1 2017 revenues of £19.7 million were up 44% year-on-year (H1 2016: £13.7 million).

 

Gross margin of £8.1 million was up 35% (H1 2016: £6.0 million). In percentage terms, gross margin fell from 44% to 41% of revenues. This decline reflects the lower margins attributable to the Smart Audio business (where the Group uses third party silicon; whereas in Digital and Advanced Radio the Group uses its own silicon). As Smart Audio grows, a further decline in the Group's percentage margins is expected.

 

EBITDA for H1 2017 improved to £1.1 million (H1 2016: loss of £0.04 million), driven by a combination of Digital Radio US dollar revenues, which were up 20% to US$16.1 million (H1 2016: US$13.4 million), and Advanced Radio revenues which grew 11% to US$7.0 million (H1 2016: US$6.3 million). The Group has benefited from the continued growth of DAB Digital Radio in continental Europe and the ongoing switch-off of the analogue transmission network in Norway.

 

Smart Audio now refers only to the Group's new technologies for Wi-Fi enabled audio devices (excluding Internet radios, which are based on the Group's older solutions). 

 

This change is designed to give visibility to the separate performance of each of the Group's established business lines (Digital and Advanced Radio) and its new business line (Smart Audio). Smart Audio is expected to deliver greater long term growth than Digital and Advanced Radio, but is still in the early stages of development and currently accounts for a significant proportion of Group R&D.

 

Smart Audio revenues from Minuet based products in H1 2017 were US$1.8 million (H1 2016: zero).

 

The Group has benefited during the period under review from the movement in the USD/GBP exchange rate as the majority of its revenue is booked in US Dollars. Offsetting these gains, however, are a slight decline in UK volumes (following an increase in UK retail selling prices due to the decline in Sterling) and certain overhead costs denominated in currencies other than Sterling. Gross margin in H1 2017 has increased by 35% to £8.1 million (H1 2016: £6.0 million).

 

EBITDA can be calculated as:

 

H1 2017

£'000

H1 2016

£'000

Revenue

19,727

13,659

Cost of sales

11,641

7,657

Gross margin

8,086

6,002

Research and development

2,868

2,762

Sales and administrative expenses

4,141

3,275

EBITDA

1,077

(35)

 

Certain R&D costs related to future Minuet software development were expensed as the conditions required for capitalisation under IFRS were not met. As stated previously, research and development ('R&D') expenditure has been broadly consistent year-on-year. Sales and administrative expenses increased by 26% year-on-year, reflecting a combination of exchange rate effects and an increased investment in sales and marketing to support the Group's entry into Smart Audio.

 

Frontier is now cash flow positive as evidenced by an increase in the net cash position from net debt at 31 December of £0.7 million to a net cash position of £1.3 million.

 

Group pre-tax loss was £0.8 million (2016: loss £2.0 million) with a loss per share on the continuing business of 2.88 pence (2016: loss 1.38 pence).

 

Outlook

Based on the strong performance in H1 2017 and with good visibility of the Group's H2 order book, the Board now expects FY 2017 EBITDA to be significantly ahead of current market expectations.

 

Reported revenue growth for H2 2017 is expected to be lower than H1 2017, as the decline in Sterling against the US Dollar has started to reverse.

 

Underlying Digital Radio and Advanced Radio revenue growth is expected to slow on H1 2017 as the benefits of the Norway switchover are likely to have passed their peak. Nevertheless, growth in Digital Radio volumes in continental Europe should remain robust.

 

The slowing of growth in Digital and Advanced Radio is however expected to be offset by Smart Audio. Group revenues from Smart Audio are currently on an upward trend, with H2 2017 revenues expected to be significantly higher than in H1 2017. Whilst the sector remains in the early stages of development, several new models based on Frontier solutions have recently received Google certification and initial orders for these products are encouraging.

 

The net impact of the strong performance in H1 2017 and continued growth in H2 2017 is that FY 2017 revenues (in Sterling) are expected to be significantly ahead of FY 2016.

 

Anthony Sethill

Chief Executive Officer

27 September 2017

 

 

Statement of Comprehensive Income

for the period ended 30 June 2017

 

Note

Unaudited

six months

ended

30 June 2017

Unaudited

six months

ended

30 June 2016

Restated

Audited

year ended

31 December

2016

Restated

£'000

£'000

£'000

Revenue

4

19,727

13,659

32,135

Cost of sales

(11,641)

(7,657)

(18,000)

Gross profit

8,086

6,002

14,135

Research & development

(2,868)

(2,762)

(6,588)

Sales & administrative expenses

(4,141)

(3,275)

(6,876)

EBITDA

1,077

(35)

671

Amortisation

(1,182)

(1,186)

(2,377)

Depreciation

(151)

(175)

(355)

Share based payment

(357)

(380)

(633)

Total administrative expenses

(8,699)

(7,778)

(16,829)

Loss from continuing operations

(613)

(1,776)

(2,694)

Finance income

6

5

9

Finance charges

(148)

(189)

(361)

Loss before taxation

(755)

(1,960)

(3,046)

Taxation

(475)

1,373

1,607

Loss for the period from continuing operations

(1,230)

(587)

(1,439)

Loss for the period from discontinued operations

-

(15,879)

(15,892)

Loss for the Period

(1,230)

(16,466)

(17,331)

Other comprehensive income/ (expense)

Items that will be reclassified subsequently to profit or loss

Exchange differences on translating foreign operations

65

(31)

17

Other comprehensive income/(expense) for the period

65

(31)

17

Total comprehensive loss for the period

(1,165)

(16,497)

(17,314)

Earnings per share

Basic earnings per share

- From continuing operations

5

(2.88)p

(1.38)p

(3.36)p

- From discontinued operations

5

-

(37.2)p

(37.1)p

 

 

Consolidated Statement of Financial Position at 30 June 2017

 

 

Note

Unaudited

30 June

2017

Unaudited

30 June

2016

Restated

Audited

31 December

2016

Restated

Assets

£'000

£'000

£'000

Non-current assets

Goodwill

6

8,536

8,536

8,536

Other intangible assets

7

7,348

9,701

8,510

Property, plant and equipment

339

514

401

16,223

18,751

17,447

Current assets

Inventories

4,154

3,144

2,588

Tax receivable

319

934

1,123

Trade and other receivables

8

4,688

5,621

8,209

Cash and cash equivalents

4,816

3,378

3,376

Total current assets

13,977

13,077

15,296

Assets included in disposal group classified as held for sale

 

 

 

-

 

3,592

 

-

Total assets

30,200

35,420

32,743

Liabilities

Current liabilities

Trade and other payables

9

10,957

10,013

12,112

Total current liabilities

10,957

10,013

12,112

Other liabilities > 1 year

10

2,291

3,453

2,872

Liabilities included in disposal group classified as held for sale

 

 

 

-

 

3,631

 

-

Total liabilities

13,248

17,097

14,984

Equity

Share capital

11

4,276

4,275

4,275

Share premium

115,300

115,300

115,300

Share based payment reserve

5,491

4,881

5,134

Foreign exchange reserve

47

(66)

(18)

Retained earnings

(108,162)

(106,067)

(106,932)

Total equity

16,952

18,323

17,759

Total equity and liabilities

30,200

35,420

32,743

 

 

 

Consolidated Statement of Changes in Equity at 30 June 2017

 

 

 

 

 

 

Share

capital

Share

premium

 

 

 

Share

based

payment

reserve

Retained

earnings

 

 

 

 

Foreign

exchange

reserve

Total

equity

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2017

4,275

115,300

5,134

(106,932)

(18)

17,759

Share-based payments

-

-

357

-

-

357

Issue of share capital

1

-

-

-

-

1

Transactions with owners

1

-

357

-

-

358

Loss for the period

-

-

-

(1,230)

-

(1,230)

Other comprehensive losses

Exchange differences on translating foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

65

 

 

65

Total comprehensive loss

-

-

-

(1,230)

65

(1,165)

At 30 June 2017

4,276

115,300

5,491

(108,162)

47

16,952

 

 

 

 

Consolidated Statement of Changes in Equity

for the period ended 30 June 2016

 

 

 

 

 

 

Share

capital

Share

premium

 

 

 

Share

based

payment

reserve

Retained

earnings

 

 

 

 

Foreign

exchange

reserve

Total

equity

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2016

4,262

115,300

4,501

(89,601)

(35)

34,427

Share-based payments

-

-

380

-

-

380

Issue of share capital

13

-

-

-

-

13

Transactions with owners

13

-

380

-

-

393

Loss for the period (restated)

 

-

 

-

 

-

(16,466)

 

-

(16,466)

Other comprehensive losses

Exchange differences on translating foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(31)

 

 

(31)

Total comprehensive loss

-

-

-

(16,466)

(31)

(16,497)

At 30 June 2016

4,275

115,300

4,881

(106,067)

(66)

18,323

 

 

Consolidated Statement of Changes in Equity

for the period ended 31 December 2016

 

 

 

 

 

 

Share

capital

Share

premium

 

 

 

Share

based

payment

reserve

Retained

earnings

 

 

 

 

Foreign

exchange

reserve

Total

equity

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2016

4,262

115,300

4,501

(89,601)

(35)

34,427

Share-based payments

-

-

633

-

-

633

Issue of share capital

13

-

-

-

-

13

Transactions with owners

13

-

633

-

-

646

Loss for the period (restated)

 

-

 

-

 

-

(17,331)

 

-

(17,331)

Other comprehensive losses

Exchange differences on translating foreign operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

17

 

 

17

Total comprehensive loss

-

-

-

(17,331)

17

(17,314)

At 31 December 2016

4,275

115,300

5,134

(106,932)

(18)

17,759

 

 

 

Consolidated Cash Flow Statement

for the period ended 30 June 2017

 

Unaudited

six months

ended

30 June 2017

£'000

Unaudited

six months

ended

30 June 2016

Restated

£'000

Audited

year ended

31 December

2016

Restated

£'000

Cash flows from operating activities

Loss before taxation

(755)

(1,960)

(3,046)

Amortisation

1,182

1,186

2,377

Depreciation

151

175

355

Share based payments

357

380

633

Net interest paid

142

184

352

(Increase)/ decrease in inventories

(1,566)

(478)

78

Decrease/ (increase) in trade and other receivables

3,495

662

(1,881)

(Decrease)/ increase in trade and other payables

(1,136)

(1,208)

900

Foreign exchange movements

74

(31)

(559)

Tax refund

429

1,685

1,805

Net cash inflow / (outflow) from continuing operations

2,373

595

1,014

Net cash outflow from discontinuing operations

-

(4,476)

(5,200)

Net cash flow from operating activities

2,373

(3,881)

(4,186)

Cash flow from investing activities

Purchase of property, plant and equipment

(97)

(56)

(81)

Purchase of intangible assets

(21)

(63)

(143)

Proceeds from sale of subsidiaries, net of cash sold

-

-

714

Net cash (used in) / provided by investing activities

(118)

(119)

490

Cash flow from financing activities

Loan

(600)

(300)

(900)

Proceeds from issue of share capital

1

-

-

Loan interest payable

(148)

(189)

(361)

Interest receivable

6

5

9

Net cash used in financing activities

(741)

(484)

(1,252)

Net change in cash and cash equivalents

1,514

(4,484)

(4,948)

Cash and cash equivalents at beginning of period

3,376

7,748

7,748

Exchange differences on cash and cash equivalents

(74)

114

576

Cash and cash equivalents at end of period

4,816

3,378

3,376

Notes to the Interim Report

For the period ended 30 June 2017

 

1. Nature of operations and general information

 

Frontier Smart Technologies Group Limited and subsidiaries' (the 'Group') principal activity is the development and commercial exploitation of technologies for consumer digital audio devices.

 

Frontier Smart Technologies Group Limited is the Group's ultimate parent company. It is incorporated in the Cayman Islands. The address of Frontier Smart Technologies Group Limited's registered office is Elgin House, 119 Elgin Avenue, George Town, Grand Cayman, Cayman Islands. Frontier Smart Technologies Group Limited's shares are listed on the Alternative Investment Market of the London Stock Exchange. Frontier Smart Technologies Group Limited's consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company.

 

The financial information set out in this interim report does not constitute statutory accounts. The Group's statutory financial statements for the year ended 31 December 2016 are available from the Group's website. The auditor's report on those financial statements was unqualified.

 

2. Accounting Policies

 

Basis of Preparation

 

These interim condensed consolidated financial statements are for the six months ended 30 June 2017. They have been prepared following the recognition and measurement principles of IFRS. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2016.

 

These financial statements have been prepared on the going concern basis and under the historical cost convention.

 

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2016.

 

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

 

3. Prior Period Restatement

 

Shortly after the completion of the full year accounts for 2016 the company became aware that an inter-company debtor of £1.7 million in respect of the discontinued business should have been provided for in the period to 31 December 2016. In preparing these half year statements for the period to 30 June 2017, and having regard to the materiality of the debtor in respect of the half year 2017, the Board have concluded that the item should be treated as a prior year adjustment. The discontinued loss for the year to 31 December 2016 has therefore increased to £15.9 million from the £14.2 million previously reported.

 

4. Revenue by sector

 

Unaudited

30 June 2017

£'000

Unaudited

30 June 2016

£'000

Audited

31 December

2016

£'000

Digital Radio

12,745

9,273

22.332

Advanced Radio

5,531

4,364

9,349

Smart Audio

1,451

22

454

Revenue

19,727

13,659

32,135

 

 

Segmental information

As described under Segmental Reporting in the Principal Accounting Policies, Management currently identifies four divisions as operating segments.

 

 

For the period ended 30 June 2017

Digital Radio

£'000

Advanced Radio

£'000

Smart Audio

£'000

Group

 

£'000

Total

 

£'000

Revenue

12,745

5,531

1,451

-

19,727

Cost of sales

(6,966)

(3,491)

(1,184)

-

(11,641)

Gross profit

5,779

2,040

267

-

8,086

Research & development

(310)

(540)

(2,018)

-

(2,868)

Sales & administrative expenses - other

(1,103)

(604)

(1,351)

(1,083)

(4,141)

EBITDA

4,366

896

(3,102)

(1,083)

1,077

Amortisation of intellectual property

(1,176)

(1)

(2)

(3)

(1,182)

Depreciation

(105)

(13)

(27)

(6)

(151)

Share based payment

(357)

(357)

Total administrative expenses

(2,694)

(1,158)

(3,398)

(1,449)

(8,699)

Profit/ (loss) from continuing operations

3,085

882

(3,131)

(1,449)

(613)

Net finance payable

-

-

-

(142)

(142)

Profit/ (loss) before taxation

3,085

882

(3,131)

(1,591)

(755)

 

 

 

 

 

 

 

 

For the period ended 30 June 2016

Digital Radio

£'000

Advanced Radio

£'000

Smart Audio

£'000

Group

 

£'000

Total

 

£'000

Revenue

9,273

4,364

22

-

13,659

Cost of sales

(4,934)

(2,708)

(15)

-

(7,657)

Gross profit

4,339

1,656

7

-

6,002

Research & development

(557)

(618)

(1,587)

-

(2,762)

Sales & administrative expenses - other

(670)

(342)

(761)

(1,502)

(3,275)

EBITDA

3,112

696

(2,341)

(1,502)

(35)

Amortisation of intellectual property

(1,179)

(7)

-

-

(1,186)

Depreciation

(133)

(42)

-

-

(175)

Share based payment

-

-

-

(380)

(380)

Total administrative expenses

(2,539)

(1,009)

(2,348)

(1,882)

(7,778)

Profit/ (loss) from continuing operations

1,800

647

(2,341)

(1,882)

(1,776)

Net finance payable

-

-

-

(184)

(184)

Profit/ (loss) before taxation

1,800

647

(2,341)

(2,066)

(1,960)

 

For the period ended 31 December 2016

Digital Radio

£'000

Advanced Radio

£'000

Smart Audio

£'000

Group

 

£'000

Total

 

£'000

Revenue

22,332

9,349

454

-

32,135

Cost of sales

(11,553)

(6,129)

(318)

-

(18,000)

Gross profit

10,779

3,220

136

-

14,135

Research & development

(896)

(1,444)

(4,248)

-

(6,588)

Sales & administrative expenses - other

(1,196)

(840)

(1,870)

(2,970)

(6,876)

EBITDA

8,687

936

(5,982)

(2,970)

671

Amortisation of intellectual property

(2,367)

(10)

-

-

(2,377)

Depreciation

(262)

(93)

-

-

(355)

Share based payment

-

-

-

(633)

(633)

Total administrative expenses

(4,721)

(2,387)

(6,118)

(3,603)

(16,829)

Profit/ (loss) from continuing operations

6,058

833

(5,982)

(3,603)

(2,694)

Net finance payable

-

-

-

(352)

(352)

Profit/ (loss) before taxation

6,058

833

(5,982)

(3,955)

(3,046)

 

 

5. Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The impact of the share options on the loss per share is anti-dilutive.

 

Basic loss per share

 

Unaudited

Six months ended

30 June 2017

£'000

Unaudited

Six months ended

30 June 2016

Restated

£'000

Audited

Year ended

31 December 2016

Restated

£'000

Loss for the period attributable to equity shareholders - continuing operations

£1,230

£587

£1,439

Loss for the period attributable to equity shareholders - discontinuing operations

-

£15,879

£15,892

Weighted average number of 10p ordinary shares

42,751,710

42,643,509

 

42,832,269

(Loss) per share - basic and diluted - continuing operations

(2.88)p

(1.38)p

(3.36)p

(Loss) per share - basic and diluted - discontinuing operations

-

(37.2)p

(37.1)p

 

 

 

6. Goodwill

 

Frontier

Silicon

Sensium

Healthcare

Frontier

Microsystems

Total

£'000

£'000

£'000

£'000

Cost

At 1 January 2016

8,536

10,582

5,951

25,069

Additions

-

-

-

-

At 30 June 2016

8,536

10,582

5,951

25,069

Additions

Disposals

-

(10,582)

-

(10,582)

At 31 December 2016

8,536

-

5,951

14,487

Additions

-

-

-

-

At 30 June 2017

8,536

-

5,951

14,487

Impairment

At 1 January 2016

-

-

5,951

5,951

Charge in period

-

-

-

-

At 30 June 2016

-

-

5,951

5,951

Charge in period

-

-

-

-

At 31 December 2016

-

-

5,951

5,951

Charge in period

-

-

-

-

At 30 June 2017

-

-

5,951

15,398

Net book amount at 30 June 2017

8,536

-

-

8,536

Net book amount at 30 June 2016

8,536

-

-

8,536

Net book amount at 31 December 2016

8,536

-

-

8,536

 

 

 

Marketing

intellectual

property

Customer

intellectual

property

Other

intellectual

property

Licence &

Development

fees

Total

£'000

£'000

£'000

£'000

£'000

Cost

At 1 January 2016

4,000

1,690

17,009

16,573

39,261

Foreign exchange on opening balances

-

-

-

3

3

Additions

-

-

-

80

80

Disposals

-

-

-

(14)

(14)

Assets held for disposal

-

-

-

(933)

(933)

At 30 June 2016

4,000

1,690

17,009

15,709

40,644

Additions

-

-

-

1

1

Adjustment to assets held for disposal

-

-

-

118

118

Disposals

-

-

(6,805)

-

(6,805)

At 31 December 2016

4,000

1,690

10,204

15,828

33,958

Foreign exchange on opening balances

-

-

-

(1)

(1)

Additions

-

-

-

21

21

Disposals

-

-

-

-

-

At 30 June 2017

4,000

1,690

10,204

15,848

31,742

Amortisation

At 1 January 2016

1,333

470

11,095

14,855

27,753

Charge in period

200

70

634

282

1,186

Disposals

(11)

(11)

Assets held for disposal

-

-

-

(221)

(221)

At 30 June 2016

1,533

540

11,729

14,905

28,707

Charge period

200

71

634

286

1,191

Adjustment to assets held for disposal

-

-

-

119

119

Disposals

-

-

(6,805)

-

(6,805)

At 31 December 2016

1,733

611

5,558

15,310

23,212

Charge period

200

70

634

278

1,182

Disposals

-

-

-

-

-

At 30 June 2017

1,933

681

6,192

15,588

24,394

 

 

 

 

 

Net book amount at 30 June 2017

2,067

1,009

4,012

260

7,348

Net Book amount at 30 June 2016

2,467

1,150

5,280

804

9,701

Net book amount at 31 December 2016

2,267

1,079

4,646

518

8,510

7. Other intangible assets

 

 

Intellectual property

 

Intellectual property relates to the valuation of beneficial licence agreements, trade names and customer relationships at the date of their original acquisition.

 

Licence & development fees

 

The licences relate to technology on new projects essential to the future development of the new generation digital chips. The licences will be amortised in accordance with the Group accounting policy and will be subject to an annual impairment review.

 

Marketing

 

Marketing-related intangible assets are defined as those assets that are primarily used in the marketing or promotion of products and services. The Frontier solutions are well known and preferred by a majority of the consumer electronic brands who specifically instruct their manufacturers to use Frontier modules and solutions in their audio systems.

 

Customer relationships

 

Customer-related intangible assets may consist of customer lists, order or production backlogs, customer contracts and relationships, and non-contractual customer relationships. Frontier has developed relationships with both consumer electronic brands and manufacturers. The customer relationship valuation captures the economic benefits of having these trading relationships.

 

8. Trade and other receivables

 

Unaudited

30 June

2017

Unaudited

30 June

2016

Audited

31 December

2015

£'000

£'000

£'000

Trade receivables

3,390

4,909

6,719

Other debtors

858

376

821

Prepayments and accrued income

440

336

669

Trade and other receivables

4,688

5,621

8,209

 

Trade and other receivables are usually due within 30 - 60 days and do not bear any effective interest rate.

 

The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

 

 

9. Trade and other payables

 

Unaudited

30 June

2017

Unaudited

30 June

2016

Audited

31 December

2016

£'000

£'000

£'000

Trade payables

5,475

5,283

6,740

Other payables

753

528

664

Accruals and deferred income

3,569

3,039

3,548

Loan

1,160

1,163

1,160

Trade and other payables

10,957

10,013

12,112

 

 

10. Creditors: amounts falling due after more than one year

 

Unaudited

30 June

2017

Unaudited

30 June

2016

Audited

31 December

2016

£'000

£'000

£'000

Loan

2,291

3,453

2,872

Total

2,291

3,453

2,872

 

 

Loan

 

Frontier Smart Technologies Group Limited entered into a loan facility agreement in October 2015 for a maximum of £5,000,000. The loan accrues interest monthly at 6.8% with interest repayable in 12 quarterly instalments commencing 29 December 2015. Capital repayments are payable quarterly in ten instalments commencing March 2016, made up of nine instalments of £300,000 and a final instalment of £2,300,000. The loan carries a fixed and floating charge over all the property, assets and undertakings of the Group.

 

 

11. Share capital

Unaudited

30 June 2017

Unaudited

30 June 2016

Audited

31 December 2016

£

£

£

Authorised

100,000,000 ordinary shares of 10p

10,000,000

10,000,000

10,000,000

Allotted, issued and fully paid

42,761,636

42,745,772

42,748,464

£

4,276,163

4,274,577

4,274,846

The movement in the number of shares is as follows:

Number of

ordinary shares

At 1 January 2016

1,704,779,379

Shares issued

5,051,486

At 30 June 2016

1,709,830,865

Shares issued

107,724

Share consolidation 40:1

(1,667,190,125)

At 31 December 2016

42,748,464

Shares issued

13,172

At 30 June 2017

42,761,636

 

All shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of shareholders with the exception of 2,238,462 shares held jointly by the Employee Benefit Trust and participants for the purpose of the Company's joint share ownership plan in relation to which all voting rights have been waived.

 

Allotments

 

2 May 2017 7,497 ordinary shares of 10p were issued in relation to the exercise of share options by employees.

 

5 June 2017 5,675 ordinary shares of 10p were issued in relation to the exercise of share options by employees.

 

12. Financial Instruments

 

The Group uses financial instruments comprising cash and cash equivalents, other loans and various other short-term instruments such as trade receivables and trade payables which arise from its operations. The main purpose of these financial instruments is to fund the Group's business strategy and the short-term working capital requirements of the business.

 

 

Financial assets by category

 

The IAS 39 categories of financial asset included in the balance sheet and the headings in which they are included are as follows:

 

30 June 2017

Loans

and

receivables

Non

financial

assets

Balance

sheet

total

£'000

£'000

£'000

Goodwill

-

8,536

8,536

Other intangibles assets

-

7,348

7,348

Property, plant and equipment

 

-

 

339

 

339

Inventories

-

4,154

4,154

Trade receivables

3,390

-

3,390

Other receivables

858

-

858

Prepayments and accrued income

-

440

440

Tax receivable

-

319

319

Cash and cash equivalents

4,816

-

4,816

Total

9,064

21,136

30,200

 

 

30 June 2016

Loans

and

receivables

Non

financial

assets

Balance

sheet

total

£'000

£'000

£'000

Goodwill

-

8,536

8,536

Other intangibles assets

-

9,701

9,701

Property, plant and equipment

 

-

 

514

 

514

Inventories

-

3,144

3,144

Trade receivables

4,909

-

4,909

Other receivables

376

-

376

Prepayments and accrued income

-

336

336

Assets held for sale

3,592

3,592

Tax receivable

-

934

934

Cash and cash equivalents

3,378

-

3,378

Total

12,255

23,165

35,420

 

 

 

 

31 December 2016

Loans

and

receivables

Non

financial

assets

Balance

sheet

total

£'000

£'000

£'000

Goodwill

-

8,536

8,536

Other intangibles assets

-

8,510

8,510

Property, plant and equipment

 

-

 

401

 

401

Inventories

-

2,588

2,588

Trade receivables

6,719

-

6,719

Other receivables

821

-

821

Prepayments and accrued income

-

669

669

Tax receivable

-

1,123

1,123

Cash and cash equivalents

3,376

-

3,376

Total

10,916

21,827

32,743

 

Financial liabilities by category

The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are included are as follows:

Unaudited

30 June

2017

Unaudited

30 June

2017

Unaudited

30 June

2016

Unaudited

30 June

2016

Audited

31 December

2016

Audited

31 December

2016

 

Other

financial

liabilities

at

amortised

cost

 

 

 

 

 

 

Fair Value

 

Other

financial

liabilities

at

amortised

cost

 

 

 

 

 

 

Fair Value

 

Other

financial

liabilities

at

amortised

cost

 

 

 

 

 

 

Fair Value

£'000

£'000

£'000

£'000

£'000

£'000

Trade payables

5,475

5,475

5,283

5,283

6,740

6,740

Other payables

753

753

528

528

664

664

Accruals and deferred income

3,569

3,569

3,039

3,039

3,548

3,548

Liabilities held for disposal

-

-

3,631

3,631

-

-

Loan

3,451

3,451

4,616

4,616

4,032

4,032

Total

13,248

13,248

17,097

17,097

14,984

14,984

 

All financial assets and liabilities are stated at amortised cost.

 

The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Board is responsible for co-ordinating the Group's risk management and focuses on actively securing the Group's short to medium term cash flows. Long term financial investments are managed to generate lasting returns.

 

The Group does not actively engage in the trading of financial assets and has no financial derivatives. The most significant risks to which the Group is exposed are described below:

 

Credit risk

 

The Group's credit risk is primarily attributable to its trade receivables, recoverable taxation and cash and cash equivalents. The amounts presented in the balance sheet are net of any allowance for doubtful receivables, estimated by the Directors. The Group has a concentration of credit risk due to exposure from a limited number of customers. This is managed at the highest level in the Group. Cash at bank is all held with highly rated banks, the suitability of which is periodically reviewed.

 

Liquidity risk

 

The Group seeks to manage risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. Short term flexibility is achieved by the use of money markets to deposit excess cash which is not required in the short term. The Directors prepare rolling cash flow forecasts and seek to raise additional funding whenever a shortfall in facilities is forecast. Details of the funding status of the Group are included in the going concern paragraph in the principal accounting policies.

 

Currency risks

 

The Group is exposed to translation foreign exchange risk in connection with its investment in Frontier Silicon Ltd whose subsidiaries are Frontier Silicon (Hong Kong) Ltd incorporated in Hong Kong and Frontier Silicon SRL incorporated in Romania. The Group does not hedge any transactions. As a result, the Group is subject to foreign currency risk in respect of accounting for its investment in the subsidiaries.

 

 

13. Post Balance Sheet Events

 

There have been no material events since 30 June 2017.

 

- Ends -

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR LLFVAAEIDFID
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