1Spatial Holdings Regulatory News (SPA)

22 May 2018

1Spatial plc (AIM: SPA)

("1Spatial", the "Company" or the "Group")

Final results for the year ended 31 January 2018

Good progress on turnaround plan, aligned for growth

The Board of directors of 1Spatial (the "Board"), 1Spatial, the global geospatial software and solutions company, is pleased to announce the Company and consolidated group's (the "Group") audited final results for the year ended 31 January 2018.

Highlights

The Group's Board of Directors decided during the year to focus on the valuable Geospatial business and dispose of its controlling interest in the non-core Enables IT business; this disposal was completed in March 2018. The Group's results for the year therefore reflect separately the results of continuing and discontinued activities.

Group financial highlights

The discontinued operations in the table above include Avisen UK Limited, Storage Fusion Limited, Enables IT Inc., Enables IT Limited and Enables IT Group Limited. The operations of Enables IT Limited and Enables IT Group Limited were discontinued in the year ended 31 January 2018, so the figures for the year ended 31 January 2017 above have been restated to include these two entities in discontinued operations so that the continuing operations reflect a like for like comparison.

*Adjusted for strategic, integration, other irregular items and share-based payment charge

Continuing operations

· Revenues from continuing operations of £16.9m (2017: £15.1m), up £1.8m (12%)

· Revenues increased across all territories and across all revenue streams:

· licence revenues increased 73% to £2.5m

· service revenues increased 9% to £7.2m

· support & maintenance revenues increased 2% to £7.2m

· Gross profit improvement from £8.3m to £8.9m

· Increase in adjusted* EBITDA on prior year, up £1.3m to £0.4m profit (2017: £0.9m loss)

· £13.9m improvement in operating losses, from £15.7m to £1.8m

· Market-focussed development spend of £1m (2017: £3.5m)

· Increase of £1.9m in operating cash flows from £1.2m outflow to £0.7m inflow

Discontinued operations

· Loss from discontinued operations of £1.3m (2017: £3.4m loss)

All operations

· Improvement in free cash flows ** of £4.6m, from a £4.9m cash outflow in 2017 to a £0.3m cash outflow in 2018

· Loss after tax of £2.5m (2017: £18.3m)

· Impairments of continuing operations totalling £0.4m (2017: £9.4m): no impairment of goodwill (2017: £5.1m), £0.2m of acquired intangibles (software) (2017: £1.5m of customer lists and software) and £0.2m (2017: £2.8m) of capitalised development costs, net of impairment reversals of capitalised development costs of £0.5m (2017: £nil)

· Impairments of discontinued operations totalling £1.2m (2017: £1.8m): £0.5m (2017: £0.9m) of goodwill, £0.6m of acquired intangibles (customer lists and contracts) (2017: £nil), no impairment of capitalised development costs (2017: £0.9m) and £0.1m of impairments of assets held for sale (2017: £nil)

· Net funds of £0.3m (2017: £0.6m)

** free cash flows: net cash generated from/(used in) operating activities less purchase of property, plant and equipment and less expenditure on product development and intellectual property capitalised

Group operational highlights

· Significant financial benefits being driven from the strong financial and operational platform, including:

- New management structure with clear profit and loss accountability

- Key management roles aligned to our strategy as a solutions provider

- Customer-centric approach which is enabling the 'land and expand' approach

- Leveraging our existing intellectual property and working collaboratively with key partners

· Focussed approach to sales in three key sectors of Government, Utilities and Transportation, giving rise to increased sales across all territories and key customer wins as follows:

- UK - Northern Gas Networks framework contract with the value of the contract now four times that at the time of signing in September 2017

- US - Two US Federal Government contracts with the Federal Highways Administration (FHWA) and National Oceanic and Atmospheric Administration (NOAA)

- US - Five State contracts with Michigan, Nebraska, New Jersey and Arkansas, for software and services

- US - Four Department of Transport contracts with Kansas, Arizona, District of Columbia and Arkansas, for software and services

- France/Belgium - European Satellite Centre in Madrid, for software and services

· Market-led innovation with returns on investment coming through in the last part of the year ended 31 January 2018 and significant returns anticipated in coming years, including:

- Increased data types added to the core 1Integrate product which will allow increased addressable sales in our existing sectors, as well as new sectors

- Re-purposing and enhancing existing technology to address customer-specific needs

- Developing the new Data Gateway product which is an additional module for our existing core 1Integrate product which was released to the market after the year-end

Post year-end highlights

· Disposal of the Group's significant share of loss-making business Enables IT Group in March 2018 for £1. Exercise of the Enables IT Inc. buyers' option to purchase the remaining minority interest in Enables IT Inc. in March 2018.

· £0.5m reduction to £2.5m in the banking overdraft facility with Natwest Bank plc, renewed in May 2018, which provides sufficient working capital for the business for the foreseeable future.

· Customer contract win after the year-end:

- Land and Property Services, Northern Ireland, in April 2018

Commenting on the results, 1Spatial CEO, Claire Milverton said:

"We have achieved significant progress on our turnaround strategy which is clearly evidenced by increased revenues, improved profitability and cash generation. Not only have we turned the business around, but we have also identified significant opportunities for future growth, from both our existing and new clients. We have had a record number of new customer wins and our customer-focussed approach is leading to new innovation insights which we can replicate and deliver to current and tangential markets.

Next year will be about maintaining the strong financial and operating disciplines that we adopted this year, but also about forging ahead with customer and market-led innovation, where we believe we can significantly enhance the value of the Group into the future."

For further information, please contact:

1Spatial plc 01223 420 414

Andrew Roberts / Claire Milverton

FTI Consulting 020 3727 1000

Dwight Burden / Alex Le May

N+1 Singer 020 7496 3000

Shaun Dobson / Lauren Kettle

LEI Code: 213800VG7OZYQES6PN67

1Spatial

1Spatial is a software solutions provider and global leader in managing geospatial data. We work with our clients to deliver real value by making data current, complete and consistent through the use of automated processes - ensuring that decisions are always based on the highest quality information available.

Our unique, rules-based approach delivers enterprise-scale, cross-platform, automation to all stages of the data lifecycle. It builds confidence in the data while reducing the time and cost of stewardship. Our global clients include national mapping and land management agencies, utilities, transportation organisations, government departments, emergency services, defence and census bureaus.

A leader in our field, we have a wealth of experience and a record of continual innovation and development. We partner with some of the leading technology vendors including, Esri and Oracle.

For more information visit www.1spatial.com

Chairman's report

I am pleased to present my second report for 1Spatial plc, for the year ended 31 January 2018. During this period, I was Executive Chairman until 31 January 2018 and transitioned to Non-Executive Chairman with effect from 1 February 2018.

The Group's Board of Directors decided during the year to focus on the valuable Geospatial business and dispose of its controlling interest in the non-core Enables IT business, which completed in March 2018. The Group's results for the year therefore reflect separately the results of continuing and discontinued activities.

Results

Our key objectives for the year to 31 January 2018 were to ensure that we generated cash and were profitable at adjusted EBITDA level, as well as follow through on key strategic initiatives which will drive revenue growth for both the year ending 31 January 2019 and future financial years.

The results for the year ended 31 January 2018 reflect the successful execution of the plan; for example, the Group generated a total adjusted EBITDA* profit from all operations of £0.8m (as shown in the Group highlights section), ahead of management's expectations. The operating loss from continuing operations (after strategic, integration, other irregular items and share-based payment charge) has improved by £13.9m, from £15.7m to £1.8m. The Group closed the financial year within its banking facilities with net funds of £0.3m at 31 January 2018.

The actual results for the year from continuing operations were revenues of £16.9m (2017: £15.1m), adjusted EBITDA profit of £0.4m (2017: adjusted EBITDA loss of £0.9m), an operating loss of £1.8m (2017: £15.7m), a loss from discontinued operations of £1.3m (2017: loss of £3.4m) and a loss for the year of £2.5m (2017: £18.3m). The Group generated operating cash inflows of £0.8m (2017: operating cash outflows of £0.8m).

The Board

In my previous report, I stated that we would look to strengthen the Board and we executed on this with the appointment of Francis Small as a Non-Executive Director on 1 August 2017. Francis brings significant experience from his financial services background. He was with Ernst & Young from 1979 to 2015 where he held several key positions, including as London head of corporate finance and then UK head of corporate finance, global vice chair and then managing partner of UK & Europe transaction advisory services, global leader of sovereign wealth funds (based in the Middle East) and ultimately senior partner for international clients.

Following a successful period in the role of Acting CEO, Claire Milverton was appointed CEO on 9 October 2017. On the same date, Nicole Payne was appointed CFO. 

I continued in the role of Executive Chairman until 31 January 2018 before returning to Non-Executive Chairman following the good progress made on the turnaround strategy, led by Claire Milverton and her team.

On 14 March 2018, Nick Habgood left the Board. Nick made a valuable contribution to the Board and, because of his renewed confidence in the Company's progress, together with his other portfolio commitments, he felt it was the appropriate time to step down. Azini Capital remain a supportive shareholder of 1Spatial.

We are looking to strengthen the Board with another Non-Executive Director. We have made good progress on this and have met with some excellent candidates; an update will be provided in due course.

Corporate governance

Corporate Governance is taken very seriously at 1Spatial and is continually assessed. We have a great team of experienced individuals on our Board, including Francis Small. He has been working closely with our Company Secretary to ensure that our current Corporate Governance processes and procedures are fit for purpose and where necessary update and improve our controls. We have provided more information on this on page 24 of the Annual Report.

Francis is now Chairman of the Remuneration Committee and Audit Committee. I am Chairman of the Nomination Committee.

Looking forward

1Spatial is well positioned in the Geospatial market. We have a clear strategy and have developed cutting edge, patented technology that has given us market-leading IP. Our longer-term ambition is not just to extend our technology in the Geospatial market, but also to establish a leading position in Location Master Data Management in our target sectors of government, utilities and transportation.

Early trading in Q1 2019 has been strong, and our teams are well positioned, motivated and energised. The objectives for the financial year to January 2019 are a laser focus on sustained growth and capitalising on the platform that was established during the last financial year, leveraging our technology and key partnerships. 

1Spatial people are approachable, smart, innovative and agile. As we look forward to future growth, I would like to take this opportunity to welcome those who have joined 1Spatial plc during the year and to thank everyone for their continuing hard work and dedication. I am confident that we are well placed to grow 1Spatial into a substantial, profitable and cash-generative business for years to come.

*Adjusted for strategic, integration, other irregular items and share-based payment charge 

Andy Roberts

Non-Executive Chairman

Strategic report

CEO review

Overview of Group and key objectives

The year ended 31 January 2018 was a successful period of executing on the objectives of our three-year turnaround plan, announced in January 2017. We set out to establish a strong financial and operational platform for the business, which would be evidenced through cash, growing profits and sustainable growth. The financial performance set out in this this report, including profitability at an adjusted EBITDA level; being ahead of market expectations, provides clear evidence that the turnaround plan is working and we are confident about our prospects for the year ahead.

We disposed of the non-core Enables IT business in March 2018, which now allows a clearer focus on the valuable 1Spatial geospatial business, which we believe is at an inflection point. We enter FY2019 with a business that is transformed, refocussed and with a fixed overhead; we have automated our processes; we have put a platform in place for significant growth; we continue to win further contracts, and remain committed to our principles of providing great solutions to our customers. This combination of refocussed strategy and a strong execution team should see our adjusted EBITDA multiply.

1Spatial has a great team, customers and software, which automates the validation, correction and integration of large data sets. Our heritage is in spatial data in the geospatial sector and we have customers in sectors ranging from national mapping to utilities, but we believe much of our future growth could come from other sectors where companies want to integrate spatial and non-spatial data in an automated and consistent way.

The turnaround that took place during the year was focussed on leveraging the Company's assets of software, customers and people and setting a clear strategic path for execution. There is still some work to do on refining processes and procedures but there is now a clear strategy that is working and there is a clearly defined, significant opportunity for 1Spatial in both our existing and new geographic markets such as the US as well as new industry markets such as facilities management. We also continue to work with key partners such as the most significant player in the Geospatial market, Esri, and we are engaging regularly with the teams in each of the countries of our operational territories to identify points of collaboration to achieve a win position for both companies.

We have a refreshed innovation process that commenced in the second half of the year. We launched our new Data Gateway product on 9 May 2018, an additional module for 1Integrate and we also added some new data types to our core 1Integrate technology e.g. CAD data, that has allowed us to get into the potential new markets of facilities management and location master data management. We have also identified several market-led solutions where we can embed our core 1Integrate software including hosted SaaS solutions. There should be exciting developments and revenue generating opportunities in relation to these solutions during the coming financial year.

In my 2017 review I set out several key objectives, as part of this report I have re-visited these to demonstrate that significant progress has been made. These objectives are set out below:

Focus on the core business

As a result of the Board's primary focus on the core high-margin Geospatial division and an increasing level of risk associated with the recurring revenues of Enables IT, the Board resolved to dispose of its controlling stake in the Enables IT business that took place in March 2018. The Enables IT business is included as discontinued activities in the consolidated statement of comprehensive income.

With the disposal of Enables IT, there is now laser focus on the Group's core Geospatial business.  The core Geospatial business has performed better than management's expectations, ending the year with higher revenues and adjusted EBITDA than expected. The results are a significant improvement on the prior year and are testament to the quality of the strategy, solutions and the high-class team at 1Spatial.

Clear strategy and go-to-market plan

Provide Innovative Software Solutions to the Geospatial Sector with a focus on the automation of data cleansing and integration

Our current strategy and go-to-market plan continues to be that of an Innovative Software Solutions provider primarily to the Geospatial Sector with a focus on the automation of cleansing, processing and integrating large amounts of spatial data using our key software tool, 1Integrate. Spatial data is data or information that identifies the geographic location of features and boundaries on Earth, usually stored as coordinates and topology, and is data that can be mapped. The volumes of spatial data that are being captured by companies which needs to be cleansed, processed and integrated with other data is increasing at dramatic rates and this increase in volumes works to the strengths of the 1Integrate product.

Our patented spatial data rules engine, 1Integrate, that can be bought stand-alone (vendor agnostic), or integrated within our partner's platform, Esri, is proving to be a great success with our existing and new clients, particularly in the US where we are having major successes as evidenced by our wins with new customers in the year with Michigan State (US$766k contract) and Federal Highways Administration (an initial value of US$339k, or US$540k if the option to extend is exercised).

Focus on key sectors and significant new potential sector in facilities management

We have stayed focussed on three key sectors during the year to maintain deep domain expertise and manage resources efficiently. During the year, we have identified that selling our software as part of a solution to address an industry or customer's business needs is having more success than selling a rules engine to cleanse spatial data. Our key sectors are Government (National mapping/Data providers), Utilities and Transportation agencies.

Transportation was a new sector for this financial year and we had particular success in the US, working with four State Departments of Transport. We also had success with a proof of concept for a major rail infrastructure company in the UK, which, once contracts are finalised, is likely to be a significant revenue stream for the UK business during the coming financial year. The US operation has not focussed on the utilities sector yet but this is a definite opportunity for growth in the future.

During the year, we performed a strategically important proof of concept for US$80k with a significant US technology vendor to help them clean and integrate their CAD data (computer-aided design) data into their Geographic Information System (GIS). Using 1Integrate, we were able to identify and correct the issues and integrate the data into the GIS system. Two previous companies had been engaged to do this and had failed. We are now in the process of engaging with this client on a more formal basis to perform work on a number of their campuses worldwide. Given this success and another two opportunities that have now arisen in this sector we will consider adding Facilities Management as a fourth go-to-market sector for the next financial year, which we believe has the potential to gain traction globally.

Broad geographic reach

We have offices and direct sales operations in UK, Ireland, USA, France, Belgium and Australia. Our overall strategy is to provide the software solutions as noted above but there are slight differences in the go-to-market approach in each market given competition, market needs and scale.

An example of this is within the US, where there are significant opportunities for our software in the government sector, at the Federal level as well as in the states, cities and counties where the specific spatial data issues are concentrated. Given the volumes of data collected and need for automation within the processes, it is the environment where our software and current business model work best. Within our US business, we had three clients in 2015 and 20 clients at 31 January 2018. We have won three new clients during the first quarter of 2019 with an average sales value of $120,000. Invariably the significant benefits that we are providing to customers in each government department spreads by word of mouth to other departments and it is providing a platform for growth.

Organisational structure aligned to strategy

In my last report, I stated that ensuring the alignment of organisation structure and strategy would be key to future success and I believe that the structure we now have in place is optimal. During the year, roles and responsibilities with clear accountabilities have been set out. There are now country-focussed structures with top level direction and sharing of information being provided by myself and my top team including my CFO, CTO, COO and the new role of CSO (Chief Solutions Officer) that I put in place this year to support our solutions strategy.

Drive revenue growth

Focus on new and existing customers

Our key focus for this financial year was to drive revenue growth from both existing and new customers, which we achieved. Our enhanced sales team and market focussed customer centric solutions approach saw revenues increasing by 13% from £15.1m to £17m. There were no losses to our recurring support and maintenance base during the year.

Key wins in the year, demonstrating progress with new customers include:

- UK - Northern Gas Networks: a key utility framework contract for 1Spatial which has grown in value by four times since the time of signing

- US - Two US Federal Government contracts with FHWA and NOAA, for software and services

- US - Five State contracts with Michigan, Nebraska, New Jersey and Arkansas, for software and services

- US - Four Department of Transport contracts with Kansas, Arizona, District of Columbia and Arkansas, for software and services

- France/Belgium - European Satellite Centre, for software and services

We see further significant opportunities to work with our customers to provide additional benefits beyond the initial scope of work.

Business model

Our solutions are based on technology (our own technology or partner technology) plus services, which are generally for implementation/configuration. The US business has a larger proportion of software sales in its revenue compared with services, whereas in Europe, the solutions contain a larger proportion of services. Since May 2018, we have made some changes to our business model and pricing to stop perpetual licencing and move to subscription and term licencing. This change is aligned to the rest of the industry and but also protects our core 1Integrate asset which we have, in past, not always monetised appropriately given the value that our clients and customers receive.

Focussed innovation 

To continue our growth plans we must continue to innovate our technology and solutions. All innovation in the business is now focussed, customer-led and our strategy of being close to our customers enables us to work with them on these innovation ideas that can then be replicated across the industry sectors.

The innovation does not just mean being innovative with our own technology but also how we can integrate and be innovative with our partners such as Esri. Under the leadership of my CTO and CSO, we now have a very exciting roadmap and opportunities for innovation during the next financial year.

Innovations during the year to January 2018 included the release of our Data Gateway product, which is an extension of our 1Integrate product and is a simple web interface, which provides easy access for users to upload and validate spatial data files and download the results. We also added a number of new data types to our core 1Integrate technology e.g. CAD data that has allowed us to get into the potential new market of facilities management.

Through innovation, we have also identified several market-led solutions where we can embed our core 1Integrate software including some hosted SaaS solutions. There should be exciting developments and revenue generating opportunities in relation to these solutions during the next financial year when we release them to the market.  If we put the customer at the heart of the business and work to address their business need and provide them with the most appropriate solution then this should be a winning formula.

Outlook

We have continued to build on our success in FY2018 into Q1 of the current year. We deepened our existing customer relationship with Land & Property Services (the Northern Irish Mapping Agency) in April 2018 with a new contract to provide software and services for up to another 10 years. We have also continued to drive forward in the US business with another three new customer wins. 

We are committed to investing in innovation and working with our partners to provide the best solution for our customers and are excited about the new opportunities that are emerging through the partnership approach with our clients such as facilities management and location master data management.

Our backlog of orders and pipeline is continuing to grow and we look forward to an exciting year of continued profitable growth as well as focussing on new innovations which we believe could significantly enhance shareholder value in the longer term.

 Claire Milverton

Chief Executive Officer

CFO review

The financial year to 31 January 2018 bears out the focussed execution on the turnaround programme, with improvements in continuing operations' revenues and adjusted EBITDA, and operating cash inflows where these were outflows last year.

Results

The Board focusses on adjusted EBITDA as a key KPI as it reflects the underlying performance of the business. It is also a measure used by its broker and the rest of the financial markets including other brokers and analysts. A summary of the continuing operations compared to the previous year are set out below.

*Adjusted for strategic, integration, other irregular items and share-based payment charge

Geospatial revenue includes the provision of software and services for the management of geospatial data, as well as a number of recurring revenue contracts from large customers with well-established relationships.

The revenue split is as follows:

Licence revenues have grown significantly on the previous year, across all territories, with our own licence revenues doubling to £1.2m and third-party licence revenues up by close to 50% on the previous year at £1.3m. Our own higher-margin licence revenues are a greater proportion of total licence revenues, growing from 40% last year to 48% this year.

Service revenues have grown 9% in the year and make up the significant proportion of our revenue at 42% of the total, with substantial revenues in the year coming from the Rural Payments Agency and the US Census Bureau (contributing just over 20% to total service revenues).

Our own support and maintenance revenues remain strong and third-party support and maintenance revenues have shown a 25% improvement - we have approximately 380 customers on support and maintenance.

The gross profit percentage for the year was down slightly on the prior year, from 55% to 53%. The Group's accounting policy is to capitalise development costs to the statement of financial position, based on qualifying criteria, but had these development costs (£1m in the current year, £3.5m in the previous year), been expensed, the gross profit percentage would have improved from 32% to 47% year on year (the capitalised development costs relate to staff that work on both commercial and development projects).

Admin expenses in the Geospatial segment have increased 1% on the previous year.

Overall, the adjusted EBITDA trading results for the Geospatial division have improved by £0.5m (33%) to £2m, being a testament to our people, our products and the execution of our strategy.

Central costs have been pared back to £1.6m, a decrease of 33% on the previous year due mainly to the restructuring of the Board of Directors. The resulting overall loss before tax from continuing operations has improved by £13.9m to a £1.8m loss and adjusted EBITDA from continuing operations is £0.4m - a significant improvement on the previous year of £1.3m.

As noted in the CEO review, the Board resolved to dispose of its controlling stake in the Enables IT UK operations (the decision was made by the year-end, albeit the sale wasn't completed until March 2018) for two reasons; due to an increasing level of risk associated with the recurring revenues of Enables IT, and to allow management to focus on the higher-margin Geospatial business.

Enables IT met the definition as being held for sale at the year-end, so its results are presented as a single line in the statement of comprehensive income, as 'Loss for the year from discontinued operations', together with the tail-end of the Storage Fusion operations at the start of the financial year, after it was closed down in December 2016, and Enables IT Inc. just before the Group's controlling interest was sold to US management in March 2017.

Overall result for the year

* Adjusted EBITDA is stated net of certain strategic, integration, other irregular costs and share option credit/charge. See note 3 to the Accounts for further information.

Amortisation and impairment of intangible assets

The most significant line item in the classifications below adjusted EBITDA is the amortisation and impairment of intangible assets. £1.6m relates to amortisation (2017: £1.9m), £0.4m relates to impairment (2017: £9.4m), and £0.5m relates to impairment reversals (2017: £nil). £0.2m of the impairment relates to acquired intangibles of Sitemap Ltd, being software that was impaired due to the Group's strategy not currently prioritising resources on this product. The remaining £0.2m impairment relates to the capitalised development costs of 1Spatial Group due to there being limited sales and pipeline to support their carrying value. The £0.5m impairment reversal relates to capitalised development costs of 1Spatial Belgium, based on the improvement in the company's expected future cashflows.

Share-based payment credit/(charge)

The share option charge represents the 'non-cash' charge under IFRS 2 attributable to issuing share options this financial year. The credit is due to the effect of leavers in the year.

Strategic, integration and other irregular items

Given the Group's involvement in corporate transactions, it incurs irregular costs that affect the overall underlying results of the business. Where possible the Group seeks to separate these out along with any other irregular items that the Board believe should be shown separately in this category.

A summary of key transactions within this category, are set out above with further details provided in note 3. The overall figure has decreased compared to the previous year with the majority of the decrease stemming from the £1.3m provision in the previous year for amounts receivable from its associate company, Sitemap Ltd, that were of a funding nature.

Tax

The tax credit for the Group is £0.8m (2017: £1.0m). This is largely a result of the deferred tax impact on the impairments in the year.

Loss for the year from discontinued operations

The losses for the year from discontinued operations relate to the closure of Storage Fusion, the sale of the controlling interest in Enables IT Inc. (US business) in March 2017, and the sale of the controlling interest in the Enables IT UK business that occurred in March 2018. The controlling interest in Enables IT was sold after the year-end but was classified as discontinued given that the Board had made a decision to sell this prior to the year-end.

Statement of financial position

Non-current assets

Intangible assets including goodwill

Goodwill and intangible assets decreased by £1.4m in the year. The impact of discontinued operations that are not included in the current year balances is £1.2m. The remaining decrease in the year of £0.2m relates to £1m additions to development costs, £0.2m software arising on the acquisition of Sitemap Ltd, net of amortisation charges of £1.6m, impairment charges of £0.4m and impairment reversals of £0.5m.

Property, plant and equipment

Property, plant and equipment decreased by £0.7m in the year. The impact of discontinued operations that are not included in the current year balances is £0.3m; after these are taken into account, the remaining £0.4m decrease is due to £0.4m of depreciation charges (£0.2m of which relate to continuing operations).

Current assets

Trade and other receivables

Trade and other receivables balances are £5.5m at the year-end, a decrease of £3.4m on the prior year balance of £8.9m. The impact of discontinued operations that are not included in the current year balances is £1.6m. The remaining £1.8m decrease relates to a £1.1m decreases in trade receivables, together with a £0.7m decrease in accrued income.

Cash balance

Net funds reduced from £0.6m in the prior year to £0.3m. The analysis of this is discussed in the cash flow section below.

Assets and liabilities of disposal group classified as held for sale

In accordance with IFRS 5, the assets and liabilities of Enables IT Group Limited and Enables IT Limited (which was identified as a disposal group held for sale) were written down to their fair value less costs to sell of £1.

Current liabilities

Trade and other payables balances are £9m, a decrease of £3.1m on the prior year balance of £12.1m. The impact of discontinued operations that are not included in the current year balances is £2.7m. The remaining £0.4m decrease is a £0.6m decrease in deferred income net of increases of £0.1m each in trade payables and other taxation and social security balances.

Non-current liabilities

The decrease of £0.2m in the deferred tax liability is mainly attributable to the impact of the impairments in the year referred to in the Tax section above.

Share capital and reserves

Share capital increased by £0.3m in the year as a result of the shares issued to acquire the remaining 27% of 1Spatial Inc. and controlling interest of Sitemap Ltd in April 2017. Accumulated losses increased £2.5m with the loss for the year as noted above.

Cash flow

The year-end cash and cash equivalents position was £1.3m (2017: £1.3m). The Group had net funds of £0.3m (2017: £0.6m).

A cash flow bridge is presented below which reconciles the adjusted* EBITDA to the year-end cash balance. This is a different format to the presentation shown in the Accounts.

* Adjusted EBITDA is stated net of certain strategic, integration, other irregular costs and share option charge. See note 3 to the Accounts for further information

The net cash outflow in the year of £0.1m is significantly reduced on the net cash outflow in the previous year (£4.8m). This is mainly due to improved Adjusted * EBITDA, less expenditure on product development and less net purchases of property, plant and equipment.

1Spatial Inc. (previously LSI)

In February 2016, the Group exercised its option to acquire a further 26% of 1Spatial Inc. for the sum of US$1.3m (£0.9m). The Group funded this acquisition through a small fund raise of £0.9m. This brought 1Spatial plc's total holding in 1Spatial Inc. to 73%. During the year, in April 2017, the Group exercised its final option to acquire the remaining 27% for US$0.9m (£0.7m) through the issue of shares, taking its ownership to 100%. This acquisition positions us to achieve our strategic goals across the Group. The US is an area of focus for growth and we continue to work alongside key customers and partners such as US Census and ESRI to achieve progress in this region.

Sitemap

In April 2017, 1Spatial acquired the 51% of Sitemap Ltd that it did not already own for £0.2m through the issue of shares. The Company's investment in Sitemap to date has funded the development of a solution that locates and visualises sites that best fit commercial and residential property developer needs. The offering is still under development with market analysis, research and business development opportunities being reviewed.

With the final increase in our interests of 1Spatial Inc. and Sitemap Ltd to 100%, we now have full control of the strategic direction of all companies across the Group and a clear roadmap to drive profitable growth.

Consolidated statement of comprehensive income

For the year ended 31 January 2018

Registered company number (England): 5429800

Consolidated statement of financial position

As at 31 January 2018

Consolidated statement of changes in equity

Consolidated statement of cash flows

For the year ended 31 January 2018

Cash flows of discontinued operations included above

Notes to the consolidated statement of cash flows

(a) Cash generated from/(used in) operations

 (b) Reconciliation of net cash flow to movement in net funds

Notes to the accounts

For the year ended 31 January 2018

1. Basis of preparation

The preliminary information of 1Spatial plc is prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS ,and comply with Article 4 of the EU IAS Regulation.

The preliminary information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

The accounting policies adopted in the preparation of the preliminary information are consistent with those followed in the preparation of the financial statements for the year ended 31 January 2017.

The results shown for the year ended 31 January 2018 and 31 January 2017 are audited. The consolidated financial information contained in this announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts of the Company in respect of the financial year ended 31 January 2018 were approved by the Board of directors on 21 May 2018 and will be delivered to the Registrar of Companies in due course. The report of the auditors on those accounts was unqualified and did not contain an emphasis of matter paragraph nor any statement under Section 498 of the Companies Act 2006.

2. Segmental information

Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions.

The United Kingdom is the home country of the Group. For management purposes during the year, the Group was organised into the following operating divisions - Central costs, Geospatial (1Spatial Group including France and Belgium and 1Spatial Inc.) and Cloud (Enables IT and Storage Fusion, which are both included within discontinued operations, and Sitemap). These divisions are the basis on which the Group reports its segmental information. The Geospatial business represents the core 1Spatial business which has offices in the UK (Cambridge), Ireland, France, Belgium, Australia and the USA (Washington DC). The Cloud Services division represents the Enables IT business plus the two smaller businesses operated by the Group, of Storage Fusion and Sitemap. Enables IT and Storage Fusion have been treated as discontinued operations in these financial statements, within the Cloud segment. The Central costs mainly represent costs associated with 1Spatial plc including costs of the Board of Directors and other costs which are not specific to any of the other segments. Examples of cost include the Group accounting function and marketing. It also includes costs associated with being an AIM listed company and other statutory costs including audit fees.

The Board assesses the performance of the operating segments based on a measure of adjusted EBITDA. This measurement basis excludes the effects of strategic, integration and other one-off items from the operating segments. 

The segment information provided to the Board for the reportable segments for the year ended 31 January 2018 is as follows:

The revenue from external parties reported to the Board is measured in a manner consistent with that in the statement of comprehensive income.

The amounts provided to the Board in the year ended 31 January 2018 with respect to total assets and total liabilities are measured in a manner consistent with that of the financial statements. Assets are allocated based on the operations of the segment and the physical location of the asset. Liabilities are allocated based on the operations of the segment.

The following table provides an analysis of the Group's non-current assets located in all countries in which the entity holds assets.

The Group's operations are located in the United Kingdom, Europe (Ireland, France and Belgium) the United States and Australia. The following table provides an analysis of the Group's revenue by geographical destination.

The following table provides an analysis of the Group's revenue by country of domicile.

The following table provides an analysis of the Group's revenue by category.

3. Strategic, integration and other irregular items

In accordance with the Group's policy for strategic, integration and other irregular items, the following charges were included in this category for the year:

Corporate transactions and other strategic costs comprise broker costs, due diligence and other advisory fees. In addition, and in line with our stated strategy, the Company assessed other potential acquisitions during the year and used various advisers to assist with this process and the overall strategic direction of the Company.

Integration costs incurred in the prior year on the acquisition of Enables IT and 1Spatial Inc. include rebranding costs and other costs of aligning operating strategies and sales and marketing strategies.

Substantial cost was incurred over the current and prior year to restructure the Group and the Board of Directors and is included within restructuring and redundancy costs.

Write-off of accrued revenue comprises revenue which was accrued in prior years, but due to a contract dispute which arose towards the end of the current year, was not ultimately recoverable as part of the settlement agreement reached with the customer. Disputes of this nature, and particularly this magnitude, occur very infrequently.

The gain on bargain purchase arose on acquisition of the controlling interest in Sitemap Ltd.

In advance of the Group's purchase of the remaining 51% interest in Sitemap Ltd, the Group received a waiver of £44,000 in respect of an amount owed by the Group to Sitemap Ltd.

4. Income tax charge/(credit)

Factors affecting the tax credit for the year:

The tax credit for the year is higher (2017: lower) than the standard rate of corporation tax in the UK. The differences are explained below:

The adjustment in respect of prior years arose due to the group electing to receive an R&D tax credit in relation to the periods 31 January 2016 and 2017 in the form of cash during the year.

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016). These changes included amongst other things, the reduction in the main rate of UK corporation tax to 19% with effect from 1 April 2017 and to 17% with effect from 1 April 2020, so the relevant deferred tax balances have been re-measured at 17% for the current year end.

5. Intangible assets including goodwill