Final Results

Artilium plc

('Artilium' or the 'Company' or the 'Group')

Artilium PLC reports full year results for the year ended 30 June 2015

Artilium PLC ("Artilium" or the "Company") (AIM: ARTA), the AIM quoted telecom software and solutions provider, reports full year results for the year ended 30 June 2015.

Highlights

· Transitional year which prepares the Group for new momentum and growth

· Adjusted positive EBITDA of €35k (2014: adjusted EBITDA €1.1m)

· Successful acquisition of Speak Up Belgium BVBA

Post Period End

· Successful acquisitions of Talking Sense Networks, *bliep and Comsys

· Growth of customer base in (Mobile) Virtual Operator Services

· Outlook is positive with strong growth of revenues and operational income

Commenting on the Company's results, Bart Weijermars, CEO:

"Last year was a transitional year in which we improved the underlying fundamentals of our business operations. Overall we were able to reduce the administrative costs of the business, invest in new product development, and secure a number of new MVNO contracts that will start generating business in the period ahead. The investment in improving the fundamentals of the Group performance, and the recent acquisitions, form the basis of our next phase in which we expect to grow our customer base and revenues from our software products as well as growing our own customer base by expanding the (Mobile) Virtual Operator Services. The investments in commercial activities as well as new product initiatives are starting to materialise. The Group is also integrating the newly acquired businesses in order to capture the synergies available and realize the full growth opportunities."

The annual report can be viewed on the Artilium website: www.artilium.com

For further information please contact:

Chief Executive's Statement

Overview

Artilium plc ("the Group") presents a transitional year in which it improved the underlying fundamentals of its existing business. In our own retail business we reduced prices in order to stay competitive and in our software business we have focussed on building new opportunities together with our existing customers. Overall we were able to reduce the administrative costs of the business, invest in new product development, and secured a number of new MVNO contracts that will start generating business in the period ahead. The trust of our existing customers has enabled the Artilium business unit ("Artilium") to deliver a number of successful projects for its main customers. Customer satisfaction further improved thanks to additional focus on delivery for our main customers.

New business development remained difficult and lead times are significant. Additional resources and attention will be put in this area going forward. Artilium's solutions show strong and stable performance and are available on a flexible basis for our customers to grow their business. Artilium's up-to-date platform supporting voice-over-ip and mobile-over-ip services, location based services and extension towards M2M services are all important growth areas and we are ready to start harvesting that.

The performance of United Telecom reflects the difficulties faced in the Belgian retail market as a result of fierce price competition. We have chosen to reduce our revenues in the short term to enable our MVNO customers to start investing in their business and customers. This will create more sustainable revenues for United Telecom going forward. The significant effort undertaken in the last year to improve the commercial performance of United Telecom is starting to pay off. We are now returning to growth in our retail business again. Additional cost reductions through new supplier contracts are enabling this profitably in the coming period.

Operations

The "ARTA" platform has again delivered a secure, predictable and stable performance. At the same time the ARTA platform in the Cloud allows for flexibility and scalability, both locally and internationally. With the move of offices in the last year we have also significantly upgraded our own IT infrastructure as well as a completely new test environment which enables us to deliver an even higher quality of new software releases. New functionalities have been delivered to our customers in line with the newest developments in the market. The improvement of the efficiency of the ARTA software helps our customers in decreasing the total cost of ownership without sacrificing on any of the functionalities or innovations that come with the platform.

The next phase: reaping the benefits of past investments and the recent acquisitions to create significant growth

The investment in improving the fundamentals of the Group performance, and the recent acquisitions, form the basis of our next phase in which a strong focus is placed on growing the customer base and revenues for the Artilium software products as well as growing our own customer base by expanding the (Mobile) Virtual Operator Services. The investments in the commercial organization as well as new initiatives are starting to re-ignite growth. Careful expansion in the range of services offered to customers is part of the strategy to deliver a total solution to our customers who are increasingly focussed on maximizing marketing and sales. The Group is also integrating the recently acquired businesses in order to capture the synergies available and maximise the growth opportunity.

Market Dynamics

The Belgian market has become increasingly aggressive with the three main operators reducing prices and aggressively pushing 4G. In addition Telenet is pushing for the acquisition of BASE. The effects this will have on the wholesale market are unclear at this point as the regulator is looking into this. We still see significant interest of new parties to enter the market as long as current conditions prevail.

Outlook

The recent acquisitions of Talking Sense Networks, *bliep and Comsys will aid the further growth of the Company. New products and customers will enable cross- and upselling to existing customers and expedite the internationalization of the Group. In addition we see positive developments in our own retail business which will add to further growth. The outlook for the rest of the year to June 2016 is positive with strong growth in revenue and income expected. We will continue to build our business through integration, selective acquisitions and continued investment in the organic growth of our businesses.

Financial Results

For reconciliation between operating profit, net result and Adjusted EBITDA, we refer to note 9.

Revenue

Consolidated revenue for the year ended 30 June 2015 amounted to € 7,7 million (2014: € 10,2 million). Within Artilium NV revenues came from professional services relating to project management and implementation services and revenue from maintenance and support contracts, including monthly license & subscriber fees. Artilium NV revenue amounted to € 4,3 million (2014: € 6,1 million)

United Telecom revenues came from call charges for fixed line and mobile. The contribution of United Telecom to the consolidated revenue amounted to € 3,4 million (2014: € 4,1 million).

 Gross profit

The Company generated a gross profit of € 5,8 million or 75,4% of revenues (2014: € 7,9 million or 77,4% of revenues).

The contribution of Artilium business to the consolidated gross profit amounted to € 4,1 million (2014: €5,9 million). The contribution of United Telecom to the consolidated gross profit amounted to € 1,7 million (2014: € 2,0 million).

Adjusted EBITDA and adjusted EBITDA margin

The adjusted EBITDA margin of the Group was 0,5% (2014: 11%). We refer to note 9 for a reconciling table between adjusted EBITDA and operating result.

Bart WeijermarsChief Executive

1. General information

Artilium plc is a Company incorporated in the United Kingdom. The address of the registered office is given on page 1 of the Annual Report and Financial Statements. The nature of the Group's operations and its principal activities are set out in the Strategic Report and Directors' report on pages 7 to 10 of the Annual Report and Financial Statements. The Group's principal place of business is Belgium. The ultimate parent Company of the Group is Artilium plc.

The consolidated financial statements were authorized for issue by the Board of Directors on 29 October 2015.

Standards adopted early by the Group

The Group has not adopted any standards or interpretations early in either the current or the preceding financial year.

New and amended standards and interpretations

Standards and interpretations effective in the current period but with no significant impact

Standards that became effective during the year are listed below:

- IFRS 10, IFRS 12 and IAS 27 Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27

- IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

- IAS 36 Recoverable Amount Disclosures for Non - Financial Assets - Amendments to IAS 36

- IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39

- IFRIC 21 Levies

This standards and interpretations listed above did not have a material impact when applied to the disclosures, financial position or performance of the Group as per the financial statements of the Group.

There were no other new standards, amendments of standards and interpretations that became mandatorily effective in the current year which have an effect on the Group. 

Functional and presentation currency

The individual financial statements of each Group Company within the group are presented in the currency of the primary economic environment in which it operates (its functional currency). The consolidated financial statements are presented in EUR in order to reflect the economic substance the Group operates in (see also accounting policies - Note 2). These financial statements are presented in round thousand Euro's.

2. Significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with IFRSs adopted by the European Union (EU) and the Companies Act 2006 that applies to companies reporting under IFRS as adopted by the EU and IFRIC interpretations.

The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The results of the subsidiaries acquired are included in the consolidated income statement from the effective date of acquisition.

Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used into line with those used by the Group.

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The consideration of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3R Business Combinations are recognised at their fair value at the acquisition date

Goodwill arising from a business combination is determined as the difference between (I) the consideration transferred plus the amount of any non-controlling interest plus the fair value of any previously held equity interest in the acquiree, and (II) the net of the acquisition-date fair values identifiable assets acquired and liabilities assumed. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. Expenses incurred as part of a business combination are immediately expensed to the income statement.

Goodwill

Goodwill that arises from the acquisition of subsidiaries is presented as part of the non-current assets on the statement of financial position. Goodwill is initially recognised as an asset measured at cost. We refer to the accounting policies about business combinations for further guidance.

Goodwill is not amortized but tested for impairment. For the purpose of this impairment testing, goodwill is allocated to the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Revenue from platform services comes from the sale of proprietary software, professional services, the re-sale of third party hardware and software, and after sale maintenance contracts.

Where the outcome of a contract can be estimated reliably, revenue and costs related to the sale of proprietary software and professional services are recognised by reference to the stage of completion on the contract activity at the balance sheet date. This is measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Sale of third party hardware and software is recognised when the goods are delivered and title has passed.

Maintenance revenue is recognised proportionally over the support term included in the platform contract.

Revenue from the sale of software licences is recognised when the following criteria are met:

· persuasive evidence of an arrangement exists;

· delivery has occurred;

· the vendor's fee is fixed or determinable; and

· collectability is probable.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.

Foreign currencies

The individual financial statements of each Group Company are presented in Euro, being the currency of the primary economic environment in which it operates (its functional currency), except for the parent Company and Artilium Limited whose functional currency is sterling. The consolidated financial statements are presented in Euro.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income and recognised in the 'Translation Reserve' in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in Other Comprehensive Income and transferred to the Group's translation reserve. Such translation differences are recognised as income or as an expense in the period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

Taxation

The tax expense represents the sum of the current and deferred tax.

The current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised on all taxable temporary differences with certain specific exceptions and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. However deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly in other comprehensive income or equity, in which case the deferred tax is also dealt with in other comprehensive income or equity, respectively.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following bases:

Leasehold improvements 10%Fixtures and equipment 20%-33%

Motor vehicles 20%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

The Directors consider the reasonableness of the useful economic life and residual value estimates on an annual basis.

Assets under construction

Assets under construction are recognized for all property, plant and equipment or intangible assets which are in process of construction. Assets under construction are measured at the amount of cash or cash equivalents paid or the fair value of any consideration given during the time of construction. No depreciation is recognized during period of commissioning. Assets under construction are impaired whenever there are indications that an impairment loss may have occurred. When the asset is available for use it will be transferred to its appropriate classification, depending on the nature of asset.

Intangible assets

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and install the specific software. Customer portfolio's acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values.

All intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing. The following useful lives are applied:

Software: 3 years

Customer portfolio's: 5 years

Amortisation has been included within depreciation and amortisation under the heading administrative expenses. Subsequent expenditures on the maintenance of computer software are expensed as incurred. When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within other income or other expenses.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the smallest cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. No reversal of impairment losses took place in the year.

Software Development Costs

Development costs are capitalised as an intangible asset included within other intangible assets, provided that the following criteria are demonstrated:

· the technical feasibility of completing the intangible asset so it will be available for use or sale;

· the intention to complete the intangible asset for use or sale;

· the ability to use or sell the intangible asset;

· how the intangible asset will generate future economic benefits;

· the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

· the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The costs are capitalised from the date that the above criteria are satisfied and are amortised once the intangible asset has been completed and either brought into use or released for sale. The costs will be amortised over the expected economic life of the intangible asset being four years, and included within administrative expenses. If the above criteria are not demonstrated the development costs are expensed as they are incurred. In most cases these recognition criteria are not met.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised from the balance sheet when the Group's contractual rights to the cash flows expire or the Group transfers substantially all the risks and rewards of the financial asset. Financial liabilities are derecognised from the Group's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.

Financial assets

All financial assets (loans and receivables, trade and other receivables and cash and cash equivalents) are recognised and derecognised on trade date. The purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned. The purchase or sale of a financial asset are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Trade and other receivables

Trade and other receivables are measured on initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. A provision for impairment is made where there is objective evidence (including customers with financial difficulties or in default on payments) that amounts will not be recovered in accordance with original terms of the agreement. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the income statement.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Financial liabilities and equity

Financial liabilities (trade and other payables and bank loans) and equity instruments are classified according to the substance of the contractual arrangements entered into. The Group's financial liabilities include borrowings, trade and other payables and derivative financial instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Borrowings

Interest-bearing loans and overdrafts are recorded initially at their fair value, net of direct transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable on settlement or redemption, are recognised in the income statement over the term of the instrument using an effective rate of interest.

Trade and other payables

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating the interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Operating loss

Operating loss is stated after charging restructuring costs but before investment revenues and finance costs.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Share-based payments

Share-based payments are measured at their fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Fair value is measured by use of the Black-Scholes model. The expected life of the model has been adjusted based on management's best estimate, for the effects of non-transfer ability, exercise restrictions, and behavioural considerations.

Equity

Equity reserves comprise:

Share capital

Share capital represents the nominal value of shares that have been issued.

Share premium account

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Merger relief reserve

The merger relief reserve includes any premium on issue of share capital as part or all of the consideration in a business combination, where more than 90% of the issued share capital of the acquiree is obtained.

Capital redemption reserve

On 22 December 2005 the Company bought back all of its issued deferred share capital comprising 900,447 shares with a nominal value of £4,99 each for a total consideration of 1 pence. The effect of this transaction was to reduce issued share capital by €6,503,000 and create a capital redemption reserve of the same amount.

Share-based payment reserve

The share-based payment transaction reserve is used to recognise the value of equity-settled share-based payment transactions provided to the Directors, including key management personnel, as part of their remuneration. Refer to Note 6 for further details.

Translation reserve

The foreign-currency translation reserve is used to record exchange differences arising from the translation of Sterling £ for Artilium plc and Artilium Limited to the presentation currency of Euro.

Own shares

The own share reserve represents the cost of shares in Artilium plc purchased and held by the Artilium plc Employee Benefit Trust to satisfy options and share awards under the Group's Employee Share Schemes.

3. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, which are described in Note 2, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Recognition of deferred tax assets

The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group's future taxable income against which the deferred tax assets can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.

Going concern

The directors have adopted the going concern basis in preparing the consolidated financial statements, having carried out a going concern review. Given the nature of the Group and the way in which business is managed, cash flow forecasts have been prepared for both of the Group's two trading companies, Artilium NV and United Telecom NV. These forecasts are considered in conjunction for the directors to satisfy themselves that the going concern assumption is appropriate. We refer to note 13 goodwill.

United Telecom NV

The directors have prepared and reviewed cash flow forecasts from the date of the accounts approval to end of December 2016. Due to the nature of the Company's customer base, contracted income and cost base the directors do not consider there to be a material uncertainty in relation to the amount of revenue that the company will generate, or costs that it will incur. This is supported by the historic experience of forecasting within the United Telecom NV business.

Artilium NV

A worst-case scenario cash flow forecast (which represents a significant downgrade compared to internal budgets and targets) has been prepared from the date of the accounts approval to end of December 2016. In carrying out the review the Directors have had to make significant assumptions about the revenue that will be generated to end of December 2016.

The Group has now secured 64% (€3,2m) of its expected revenue per the worst case scenario forecast, the remaining revenue for the forecast period is a combination of expected recurring revenue included within concluded contracts and proposals to existing and new customers based on the directors' assessment of the likelihood of winning these on a project by project basis, revenue has only been included in the forecasts where the directors are at least 80% certain that the revenue will be secured. Therefore the directors would like to highlight that 36% (€1,8m) of forecast revenue per the worst case scenario is not committed or contracted.

However the directors consider that the assumptions made are appropriate and are satisfied that the Group is a going concern. The directors monitor the cash position of the business on a regular basis and consider the various sources of finance available to the Group, the directors would seek to access these sources of finance as necessary.

Functional currency of parent Company

Management consider that the parent Company operates its own distinct management function, rather than being an extension of the operation of Artilium NV. The parent Company incurs expenses principally in Sterling, and funding raised by the Company to fund the Group's operations is primarily generated in Sterling. Management therefore consider the functional currency of the parent Company to be Sterling.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Carrying value of long-term assets

The Directors have carried out impairment tests on the carrying value of the Group's intangible assets and goodwill and concluded that these assets are not impaired. In arriving at this conclusion the Directors have used value-in-use calculations and made assumptions about revenue in the near and longer term.

Allowance for doubtful debts

The Directors have carried out an assessment on the recoverability of trade receivables and concluded on a value of the provision required. In arriving at this conclusion the Directors have used their knowledge of their customer base, the market condition and the age of the outstanding receivables.

4. Segmental information

An analysis of the Group's result is as follows:

We refer to note 9 for reconciliation of the operating result and net result to the adjusted EBITDA and to note 35 for the definition of the adjusted EBITDA.

We refer to paragraph 'Principal activities' within the strategic report for the revenue by type.

An analysis of the Group's assets and liabilities is as follows:

Segment reporting

The Group identifies two reportable segments with different economic characteristics. The two reportable segments reflect the level at which the Group's Chief Operating Decision Maker ("CODM") reviews the financial performance of the business and makes decisions about the allocation of resources and other operational matters. The reportable segments are equal to the operating segments.

The two reportable segments "Artilium" and "United Telecom" correspond with the two trading activities of the Group.

Artilium provides advanced mobile telecommunications software to network operators and enablers (managed services providers, systems integrators etc). Its core product is its ARTA Mobile Applications Platform which enables network operators to open networks to third party developers and launch new services which feature elements from the telecoms and web environments.

The business of United Telecom consists of rendering telecom services to the Belgium corporate and consumer market as well as the development and sale of advanced "carrier grade" shared services for telecom service providers (including fixed, mobile and VOIP).

In line with Group's internal reporting framework and management structure, the key strategic and operating decisions are made by the Board of Directors which is considered to be the CODM. The CODM reviews on a regular basis following financial key data of the segment:

Revenue;

Recurring adjusted EBITDA = Operating result before depreciation, amortization, impairment of assets and non-recurring expenses;

Recurring EBIT = Operating result before interests and taxes less non-recurring expenses;

Non-recurring items;

Segment profit/loss.

The accounting principles of the operating segments are the same as those described in note 2.

All assets and liabilities of the Group are allocated to the operating segments. Segment assets and liabilities are presented before intersegment balances. Intersegment sales and transfers are registered at arm's length as if the sales and transfers were executed with third parties.

There are no other material non-cash items in the current or prior year than those disclosure within the table above.

Geographical information

The Group revenue and location of non-current assets on a geographical segment is derived primarily in mainland Europe and analysis by geographical destination is as follows:

Information about major customers

25% of the consolidated revenue is generated by sales to an external customer within the segment "Artilium" (32% at 30 June 2014). There are no other sales to single external customers exceeding 10% of the consolidated revenue.

5. Profit for the year

(Loss) Profit for the year has been arrived at after charging/(crediting):

Reconciliation of operating (loss) / profit before redundancy costs and compensation for loss of office is provided below:

A detailed analysis of auditors' remuneration on a worldwide basis is provided below:

(*) Other services are comprised of the auditor's review of the half-yearly annual report.

6. Staff costs

The average monthly number of employees (including Executive Directors) was:

6. Staff costs (continued)

Remuneration of directors and key management personnel

The remuneration of directors and key management personnel is €0,3 million (2014: € 1,0 million). We refer to page 13 of the Annual Report and Financial Statements. The only key management personnel are the directors.

7. Finance costs

8. Redundancy costs/Compensation for loss of office

The redundancy costs for the year ended 30 June 2015 relates to severance packages for personnel and contractors that were made redundant, or have had the terms of their redundancy communicated to them, during the course of the year ended 30 June 2015. Last year's balance related to the severance packages for directors.

9. Reconciling table net result, operating result-adjusted EBITDA

10. Other operating income

The other operating income relates mainly to the write off of old balances in accordance with Belgian law, held within the accounts receivable and accounts payable ledger United Telecom NV from before 2013.

11. Tax

The credit for the year can be reconciled to the loss per the income statement as follows:

The tax rates used for 2015 and 2014 calculations are the product of the accounting profit of each entity multiplied by their respective corporate tax rates.

11. Tax (continued)

Future

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and to 20 % (effective from 1 April 2015) were substantively enacted on 2 July 2014. The change in UK's corporate tax rate has no effect on any recognized deferred tax asset or liability.

12. Earnings per share

The share options in issue do not have a dilutive effect due to the result for the year being a loss, and as a result diluted loss per share is the same as basic earnings per share.

The weighted average number of ordinary shares is calculated as follows:

Basic and diluted earnings per share is calculated as follows:

13. Goodwill

The goodwill can be split up into United Telecom goodwill (€ 3,1 million) and Artilium goodwill (€ 10,6 million)

The Directors have carried out impairment tests on the carrying value of the Group's intangible assets and goodwill and concluded that these assets are not impaired. In arriving at this conclusion the Directors have used value-in-use calculations and made assumptions about revenue in the near and longer term.

Allocation of goodwill to cash-generating units

For the purpose of impairment testing the Group as a whole is considered as two cash-generating units because of the way it is structured, managed and measured by management. The Group tests goodwill and other intangible assets annually for impairment or more frequently if there are indications that it might be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill. The cash generating units are Artilium NV and United Telecom NV.

Artilium NV

Cash flows for the impairment tests have been forecast for five years and a terminal value has been calculated for the years beyond that. The terminal value is based on the average over the five year net cash flow forecast to perpetuity using a pre-tax discount rate of 18,57 % (2014: 18,57%), which is appropriate for the Company. The discount rate would need to increase to more than 22,2% for the goodwill to be impaired. The growth rate factor used in perpetuity in the discounted cash flow model is estimated to be 2.5% (2014:2,5%) in line with long-term forecasts for economic growth expected in Belgium as this is the company's principal market. The sales growth rate used during the five year forecast is estimated to be 3%-5% (2014:3%-5%) based on management's best estimate of the market opportunities and there existing pipeline opportunities. Based on these assumptions the recoverable amount exceeds the carrying amount by €2,7 million (2014: 3,6 million). If the net present value of forecast future cash flows decreased by 21% the recoverable amount will be less than the carrying amount.

The Group's cost base is forecasted to increase at the rate of 2% (2014:3%) per year for the five year forecast period. This is based on management's historic experience of cost increases, and the forecasted increases in revenue.

The Directors consider that the assumptions made are appropriate and are satisfied that the Group's non-current assets are not impaired.

United Telecom NV

The goodwill arising on acquisition of United Telecom on 27 June 2012 amounts € 3,155 million and was also tested for impairment. Cash flows for the acquired business, for the purpose of impairment test, have been forecasted for five years and a terminal value has been calculated for the years beyond that. The terminal value is based on the average over the five year net cash-flow forecast for perpetuity using a pre-tax discount rate of 22,67% which is appropriate for the company. The discount rate would need to increase to more than 30,9% for the goodwill to be impaired. The growth rate factor used in perpetuity in the discounted cash flow model is estimated to be 2,5% in line with long-term forecasts for economic growth expected in Belgium as this is the company's principal market. The sales growth rate used during the five year forecast is estimated to be 3% - 11% based on management's best estimate of the market opportunities. Based on these assumptions the recoverable amount exceeds the carrying amount of the goodwill and identified intangible assets by € 1,6 million. If the net present value of forecast future cash flows decreased by 34% the recoverable amount will be less than the carrying amount.

14. Other intangible assets

Business Combinations

On 2 June 2015 Artilium PLC acquired 100% of the share capital of Speak Up BVBA and thereby obtained 100% of the voting power. Speak Up BVBA is a Belgian voice over internet protocol ("VoIP") telecom operator.

The following summarizes the details about the acquisition.

Consideration transferred

The acquisition of Speak Up BVBA, was settled as follows: €0,04 million was settled in cash while € 0,287 million was settled with the issuance of 3,416,666 new ordinary shares. The fair value of these new shares was based on the published share price of 2 June 2015 (at 6,0 pence).

Valuation of customer base

On acquisition of Speak Up BVBA customer lists with a fair value of €0,5 million were identified and subsequently recognised. The fair value of the customer lists was calculated using a value in use calculation based on cash flows directly associated with the customer base as at the date of acquisition. Cash flows from the customer lists were forecast for a period of five years with a 10% reduction in the customer base each year, which has been determined to be consistent with other similar entities. A pre-tax discount rate of 18 % has then been applied to determine the fair value of the customer list acquired.

Assets acquired and liabilities recognized at date of acquisition

Goodwill arising on acquisition

15. Property, Plant and Equipment

There were no impairment charges for the 2015 and 2014 financial years.

16. Subsidiaries

Details of the Company's subsidiaries at 30 June 2015 are as follows:

Unless otherwise stated all ownership relates to ordinary share capital.

17. Inventories

Inventories consist of mobile simcards for resale to clients. The value of the inventories of € 38,000(2014: € 43,000) is based on the cost of purchase excluding VAT.

18. Trade and other receivables

Amounts receivable for the sale of goods are all denominated in Euros.

The Directors consider that the carrying amount of trade and other receivables above approximates to their fair value. The average credit period taken on sales of goods is 65 days (2014: 68 days). No interest is charged on the receivables.

Included within trade and other receivables is an amount of €279,000 (2014: €245,000) in respect of amounts that were past due at 30 June, but not impaired. The Group believes that the balances are ultimately recoverable based on a review of past payment history and the credit quality of those customers.

The ageing analysis of past due but not impaired receivables are shown below:

The Group holds no collateral against these receivables at the balance sheet date.

As at 30 June 2015, €1,128,000 of trade receivables were impaired (2014: €1,182,000). This allowance is specific and has been determined by reference to the age of the debt or where amounts are in dispute on a customer by customer basis. To the extent they have not been specifically provided against, the trade receivables are considered to be of sound credit rating. The ageing analysis of the allowance for doubtful debts is as follows:

Movement in the Group's allowance for doubtful debt is as follows:

The Group holds no collateral against these receivables at the balance sheet date.

19. Deferred tax

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.

At the balance sheet date, the Group has UK unused tax losses of €17,918,000 (2014: €18,810,675). No deferred tax asset has been recognised in respect of these items due to insufficient evidence of future appropriate profits in the immediate future in the UK. The value of the deferred tax asset not recognized on the tax losses is €3,763,000 (2014: €3, 950,000).

At the balance sheet date, the Group has Belgium tax losses carried forward of €10,336,017 (2014: €8,869,000). No deferred tax asset (except for the United Telecom tax losses carried forward at acquisition date) has been recognised in respect of this due to insufficient evidence of future appropriate profits in the immediate future. The value of the deferred tax asset not recognized on the tax losses is €3,513,000 (2014: €3,014,000).

The deferred tax asset on available tax losses of United Telecom NV of €270,000 remained unchanged.

Deferred tax liabilities of €495,000 (2013: €497,000) relate to intangible assets (customer portfolio) through a business combination in 2012 (United Telecom) for a net amount of €333,000 at the end of June 2015 and to the deferred tax liability of €162,000 recognized on the customer portfolio from the SpeakUp acquisition in June 2015.

20. Trade and other payables

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 105 days (2014: 112 days).

The Directors consider that the carrying amount of trade payables approximates to their fair value.

21. Bank Loans

The different bank loans are mainly secured on the trade receivables of the Group. Two unsecured loans with an outstanding amount of €80,000 and €150,000 are repayable in 12 months on a monthly basis. Interest rates are fixed at 2,59 % and 2,37% respectively and are market conforming. The carrying amount approximates fair values because of the short maturity of these loans. The third bank loan with a principal of €85,000 is repayable in 48 months on a monthly basis. Interest rate is fixed at 2,43%.

22. Provisions

The provision for early termination €16,000 (2014: €0) related to the remaining outstanding severance payment regarding employees of Artilium NV dismissed in the course of year ended 30 June 2013.

23. Share capital

Fully paid ordinary shares carry one vote per share and carry the rights to dividends.

The Company has issued the following shares during the financial year:

· 9,090,904 ordinary shares at 5,5p via a placing by existing shareholders and directors on 1 September 2014.

· 4,682,986 ordinary shares in payment to directors and key personnel, of which 2,493,950 shares at 6,2p, 685,000 shares at 7,0p and 1,504,036 shares at 6p.

· 3,416,666 ordinary shares to acquire SpeakUp. These shares were granted to the vendors of SpeakUp as part of the purchase consideration. The fair value of the shares amounted to € 287,000 and was determined by the share price published on 1 July 2015 (6p).

24. Own Shares

The own shares reserve represents the cost of shares in Artilium plc purchased and held by the Artilium plc Employee Benefit Trust to satisfy options and share awards under the Group's Employee Share Schemes (see Note 26). 3,000,000 Series 2 warrants were purchased by the Trust at a price of 10p per warrant in December 2006. These warrants were then exercised at a price of 75p and converted into ordinary 5p shares by the Trust.

25. Notes to the cash flow statement

26. Contingent liabilities

At 30 June 2015 the Group had a dispute with a former director of the Company relating to his exit-conditions. The Company considers that it has a strong defence and does not consider the liability to be of a material nature.

27. Operating lease arrangements

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Operating lease payments represent rentals payable by the Group for certain of its office properties and cars. Leases are negotiated for an average term of 3 years and rentals are fixed for an average of 3 years. The Group does not have an option to acquire the leased properties at expiry of the lease term.

28. Retirement benefit schemes

The Group operates defined contribution retirement benefit schemes for all qualifying employees of Artilium NV. As for all Belgian defined contribution pension plans, minimum guaranteed rates of return apply on the employee and employer contributions as from 1 January 2004. Since the guarantee is primarily provided for by the insurance Company, the pension plan is accounted for as a defined contribution plan.

The total cost charged to income of €95,000 (2014: € 83,000) represents contributions payable to these schemes by the Group at rates specified in the rules of the plans. As at 30 June 2015, all contributions due in respect of the current reporting period had been paid over to the scheme.

29. Events after the balance sheet date

On 1 July 2015 Artilium plc acquired through its subsidiary United Telecom NV the entire issued share capital of Talking Sense BVBA, a Belgian voice over internet protocol ("VoIP") telecom operator.

The maximum total consideration for the Acquisition is €750,000, comprising an initial consideration of €80,000, which was being satisfied through the issue of 939,243 new ordinary shares. The additional deferred consideration ("Deferred Consideration"), split over two years, of up to €670,000 is based on certain specific financial performance targets being achieved by Talking Sense BVBA in 2016 and 2017 respectively as well as the continued employment of the Talking Sense BVBA management team and senior engineering team up until the end of 2017. The Deferred Consideration will be satisfied through the further issue of new ordinary shares by the Company.

On 6 July 2015 Artilium plc acquired all the assets of *bliep (www.bliep.nl), through its subsidiary United Telecom NV. Total consideration for the assets was €190,000, which was being satisfied through a cash payment of €140,000, and the balance of €50,000 was being satisfied by the issue of 585,000 new ordinary shares to the vendors, at a price of 6.1 pence per share.

Furthermore The Company has issued a convertible loan note to an existing shareholder for a cash amount of €200,000. The convertible loan note is repayable in full in January 2016 at a rate of eight per cent or convertible into new ordinary shares in the Company at a price of 6 pence per share.

On 25 September 2015 Artilium plc acquired the entire issued share capital of Comsys Telecom & Media B.V., ComsysConnect B.V., Portalis B.V., ComsysConnect GmbH and ComsysConnect AG (together "Comsys") Artilium paid an initial consideration of £3.41 million for Comsys, satisfied by the immediate issue of 59,332,460 new ordinary shares of 5 pence each at a price 5.75 pence per share (the "Consideration Shares") and up to a maximum of a further 41,896,673 Ordinary Shares dependent on Comsys achieving certain revenue and gross margin targets over the next 3 financial years.

As part of the Acquisition Mr. Gerard Dorenbos will join the board of Artilium as a non-executive director with immediate effect. Mr. Dorenbos has been Managing Director and owner of Comsys Holdings BV since he completed a management buyout of Nefkens Management Systems BV in 1983.

30. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Company and its subsidiaries and other related parties are disclosed in the Company's separate financial statements.

31. Trading transactions

At 10 August 2015 the Company has issued a convertible loan note to an existing shareholder for a cash amount of €200,000. The convertible loan note is repayable in full in January 2016 at a rate of eight per cent or convertible into new ordinary shares in the Company at a price of 6 pence per share.

Remuneration of key management personnel

The Group has a related party relationship with key management. Key management compensation is disclosed on page 13 of the Annual Report and Financial Statements.

Transactions with Directors and key management

We refer to section Remuneration of directors on page 13 of the Annual Report and Financial Statements.

32. Financial instruments

Categories of financial instruments

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in the accounting policies. The book value of the Group's financial instruments at the year -end is shown below:

Financial risk management

The Group has exposure to the risks from its use of financial instruments. These risks include credit risk, liquidity and cash flow risk, interest rate risk and foreign currency risk.

Credit risk

The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

The Group monitors trade receivables on a regular basis to ensure that appropriate action is taken with slow paying customers. Many of the customers are large multinational companies which limits the extent of the credit risk.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

Of the trade receivables balance at the end of the year, €3,7million is due from KPN Group Belgium, the Group's largest customer.There are no other customers who represent more than 10 per cent of the total balance of trade receivables.

The Group's maximum exposure to credit risk, gross of any collateral held, relating to its financial assets is equivalent to their carrying value. All financial assets have a fair value which is equal to their carrying value.

There are no significant credit risks arising from financial assets that are neither past due nor impaired.

Liquidity and cash flow risk

The Group is principally funded by reserves and bank loans. The Group maintains its cash funds in bank accounts. The Group's policy is to minimise the risk by placing funds in risk free cash deposits.

The Group closely monitors its access to bank and other credit facilities and available cash in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet the obligations of the Group as they fall due. The Board receives regular cash flow forecasts so that management can ensure that its obligations can be satisfied or financing is put in place when required.

As at 30 June 2015, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

This compares to the maturity of the Group's non-derivative financial liabilities in the previous reporting period as follows:

Interest rate risk

At 30 June 2015, the Group had bank loans and other borrowings of € 315,000 (2014: €150,000). The Group's borrowings are at fixed rates of interest and there is, therefore, no exposure to movements in interest rates.

Any surplus funds are deposited in interest bearing accounts at variable rates and are therefore exposed to movements in interest rates. Funds are deposited on a short term basis and interest rates are monitored by the Head of Finance. The movement in interest rates would have an immaterial impact on the finances of the Company.

Foreign currency risk

The Group's centre of operations is in Belgium and it is therefore exposed to currency movements of the Euro against the Pound Sterling. This is naturally hedged to some extent by the expenses incurred in Belgium. The Group does not enter into any forward exchange contracts to cover the remaining foreign exchange risk.

Sensitivity analysis

The Group faces currency exposures on the translation of the trading results and the net assets of the British subsidiaries. The year end and average exchange rates used when translating the results for the year from Pound Sterling to Euro are 1,4067 (2014: 1,2484 ) and 1,3120 (2014: 1,1983) respectively.

The following table details the sensitivity analysis of the movements of the Pound Sterling to the Euro for the Group's results.