Final Results for the year ended 31 December 2014

28 April 2015

EU Supply plc

("EU Supply", the "Company" or the "Group")

Final Results for the year ended 31 December 2014

EU Supply plc (LSE AIM: EUSP), the e-procurement software provider, is pleased to announce its audited final results for the year ended 31 December 2014.

Financial highlights:

· Revenue grew by 41% to £2.5m (£1.8m)

· Loss before tax reduced by 38% to £2.1m (£3.4m)

· Net cash balance of £1.119m

Operational highlights:

· Recruitment of sales team in the UK, Denmark and Sweden

· Extension and/or renewal of all long-term revenue generating contracts otherwise due to expire

· Doffin and Blue Light platforms went live as planned in January and June 2014 respectively

· Lithuanian framework contract signed in June 2014, and two subsequent significant contracts delivered 2014

· Successfully entered into private sector, with several wins (ISOS, Ingeniörerna A/S, and Genesis and Arcus 2015)

· Launched Tender Lite and pre-paid Business Alerts in Norway

· Full-time FD appointed

David Cutler, Chairman of EU Supply, commented:

"The investments made in our sales team during 2014 has generated an encouraging pipeline of opportunities for 2015 and beyond as well as contributing to the 41% revenue growth to £2.5m delivered in 2014.

The Group is well-positioned to take advantage of the ratified EU directives. These require all public bodies or authorities which are governed by public law to ensure that all tender notifications and documents are made available online and tender responses are managed electronically.

The year has started well. An encouraging pipeline coupled with the successful launch of new service offerings gives the Board confidence that further strong growth will be delivered in the current year and beyond."

FURTHER ENQUIRIES

A copy of this announcement is available at www.eu-supply.com.

Notes to Editors

EU Supply is the UK holding company of the EU Supply Group, a Sweden-based e-commerce business, which has an established, market-leading, multilingual e-procurement platform for e-sourcing, e-tendering and contract management, tailored for the highly regulated European public sector market.

Since 2006, the Group has invested heavily in employing specialist programmers to add functionality, legal compliance as required and security features to its Complete Tender Management™ ("CTM™") platform to ensure that the Group is ideally placed to secure new contracts with EU Member States and their Contracting Authorities. The platform is available in 16 different languages.

The Directors believe that the Group's CTM™ platform is one of the easiest to use and most functionally advanced solutions available in the market. The CTM™ platform is used by over 7,000 European public sector bodies in 10 EU/EEC Member States and has National Procurement System status in four Member States (the UK, Ireland, Norway and Lithuania).

The Company's shares were admitted to trading on AIM in November 2013 when the Company raised £5.0 million before expenses. In July 2014, the Company raised a further £1.35 million by way of a placing of new ordinary shares, the proceeds of which were mainly used to strengthen the Company's balance sheet, provide working capital to support the growth of the business as it expands and aims to gain market share and to provide additional funds for sales and marketing.

Chairman's Statement

Overview

EU Supply Plc (LSE AIM: EUSP) the e-procurement software provider presents its final result for the year ended 31 December 2014 being the first full year of trading following the admission to AIM on 13th November 2013.

EU Supply Plc is the UK holding company of the EU Supply Group ("Group"), a Sweden-based e-commerce business that has an established, market-leading, multilingual e-procurement platform for e-sourcing, e-tendering and contract management, tailored for the highly regulated European public sector market.

With over US$30 million invested in developing the Group's Complete Tender Management ("CTM™") platform, the Directors believe the platform is one of the easiest to use and functionally advanced solutions available in the market. The platform is provided under a SaaS contract model, and is developed and maintained as a single product. The platform has been designed to be configurable online and can be quickly, easily and cheaply configured to a customer's specific needs, delivering a bespoke solution for each customer without any additional programming. The Directors believe that this combination provides the Group with a significant advantage over its competitors.

While its customers include both private and public organisations, the Group has identified the European public sector market as the most attractive short-term target.

In January 2014, the European Parliament ratified the proposed EU directives requiring all public bodies or authorities that are governed by public law to ensure all tender notifications and tender documents are made available online and that tender responses are managed electronically. They also govern the introduction of e-CERTIS, a mandatory electronic clearing-house, which lists exhaustively the certificates and other proofs which Contracting Authorities may request from suppliers.

During 2014 the Group recruited a sales team in the UK, Denmark and Sweden. This team has generated an encouraging pipeline of opportunities for 2015 and beyond as well as contributing to the 41% revenue growth to £2.5m (2013: £1.8m) delivered in 2014.

In July 2014 a placing of new shares raised £1.35m to fund working capital, and the Group ended the year with £1.12m in cash and cash equivalents.

In November 2014, the Board was strengthened by the appointment of its first full time Financial Director and I welcome Mattias Strom who is already contributing strongly. I would also like to thank Mark Elliott who provided a valuable contribution to the Board especially during the flotation process and for the initial financial reporting process. In addition I thank the staff of the Group who contributed to the rapid development of the business through their professionalism and dedication.

Outlook

As EU Member States seek means to reduce costs and better control and transparency of procurement processes, the market opportunity thus provided gives us confidence that we are addressing a growing market.

With a team of dedicated and professional staff with clear and strong leadership, the Board anticipates strong recurring revenue growth in the current year and beyond which will provide the foundation for sustained revenue growth and profitability in the future.

David Cutler

Chairman

Strategic Report

Introduction

I am pleased to report that during 2014, the Group has successfully extended or renewed all of its longer term revenue generating contracts, including the largest contracts, such as Trafikverket (national rail and road of Sweden), which were otherwise due to expire during the year.

The Group has also continued to build on the foundation established during prior years in order to win new customers and support existing ones. The Group also successfully delivered Doffin in Norway in the first half of 2014, larger enhancement and upgrade projects as well as a three year support agreement with the Lithuanian Public Procurement Office, and a large number of smaller delivery projects, all possible only thanks to our strengthened organisation and the strong support of our employees.

Since the IPO, we have recruited and trained a sales team. This team has been complemented with telesales staff during early 2015 to address both the business alert service and other service opportunities.

The Group has also won a number of small and mid-sized orders from new customers during 2014 and early 2015, for example, Blue Light in the UK, four of the five regions in Denmark, Statens Vegvesen in Norway, Coor Service Management AB in the Nordics, ISOS Housing Limited and Genesis Housing Association Limited in the UK, Agder Energi AS and recently also Arcus Gruppen AS in Norway. This has contributed to the Group's significant growth during 2014, exceeding 40%, and anticipated growth in 2015.

Several revenue share agreements were also implemented, further details of which are set out in the Outlook section below, and prepaid business alert services have been launched in 2015, thus providing a strong basis for further growth in 2015 and beyond.

The sales team has continued to generate a pipeline of leads from a diversified portfolio of primarily small- and mid-sized contracts and opportunities in both the public and private sectors. This provides a strong basis for future revenue growth, underpinned by the implementation of the new EU directives.

Growth of the e-Procurement market

The new EU Directives were ratified in the EU Parliament in January 2014 and EU Member States are obliged to implement these in their respective legislations. The Directors believe demand for e-procurement solutions in the EU public sector will grow as authorities seek to comply with the mandatory provisions, and in order to reduce costs and seek better control and transparency of their procurement processes. The Directors believe that private sector growth will be driven by companies recognising that cost savings can be achieved relatively easily through better procurement and efficient selection of outsourcing partners on a project-by-project basis.

The Group's own forecasts of the market opportunity indicate that the European public sector market for e-tendering solution licences and support alone could grow from €75 million in 2014 to €350 million in 2017. In addition to licences and support, the Directors estimate that the value of associated implementation services (training, configuration, paid-for enhancements and integrations) could add approximately €100 million per annum in 2017. The Directors estimate that the private sector markets will be at least as large in 2017.

Business alert services in Europe are estimated by the Directors to be worth an additional €350 million in 2017. The Directors also consider that there are significant additional opportunities to capture revenue from associated services such as the provision of credit rating reports (as required for many tender submissions).

Evolving marketplace

At present, there are still a number of rival providers in each of the Group's key markets. The European market is very fragmented, with an average of between five and eight different competitors in each of the largest Member States.

The Directors believe that consolidation will occur as customers seek more advanced functionality and stricter information security. This is being driven both by the customers becoming more sophisticated in their requirements and by central government bodies seeking to establish minimum standards and security accreditations, for example ISO 27001 as generally required in the UK and expected soon also to be required also in other Member States, as recommended by the Commission's expert group on eTendering, eTEG.

The Group is one of the few suppliers to have built a more advanced platform that has the flexibility to operate in all European markets (plus many more) without the need to develop and maintain multiple versions of the software. In addition to this, the Group is also marketing a "lite" base level configuration of its CTMTM platform to cater for customers that seek an easy entry level solution. Value added modules and features can then be licensed and enabled on the same platform without any incremental development or hosting costs.

Financial Performance

In the year ended 31 December 2014, the Group made a loss before tax of £2.1m (2013: loss of £3.4m) on turnover up 41% to £2.5m (2013: £1.8m) reflecting the significant investment in its software and operations through the increase in staff and administrative expenses made during the previous couple of years.

In order to support continuing growth, a placing of new shares raised £1.35m for working capital in July 2014.

People, certificationsand appointments

We have continued to invest in hiring talented people to take advantage of the growth opportunities in both the public and private sectors. In addition to the sales people recruited in several countries during the year, telesales people have been added in early 2015 to refine the approach to certain service offerings and markets.

The development teams have continued to show their strength, on an individual and organisational level, for example achieving Microsoft Gold Certified Partner accreditation, and additional employees are now certified by Microsoft up to Most Valued Professional (MVP) level. The Group has also achieved continued ISO 27001 certification of all business processes, now under the ISO 27001:2013 standard.

In November 2014, Mattias Strom was appointed as the Group's Financial Director, in a full time role, replacing Mark Elliott.

In March 2015, the Group appointed SI Capital as joint broker and also contracted with an independent technology analyst in order to reach a wider investment audience. The Board of EU Supply expects the additional appointments will add liquidity to the Company's shares and broaden its shareholding base.

Dividend

The Board is not recommending the payment of a dividend.

Outlook 

The Group remains focused on the markets it currently addresses, including the public sector and selected private sectors, and the bulk of revenues are expected to continue to be annual recurring revenues, but some of our future revenue growth is expected to come from the revenue share agreements already entered into. For example, the wider geographic implementation of CTMTM in the Norwegian Refugee Council ("NRC") has started and both this and the implementation of the previously announced framework agreements in the Danish housing sector under Almenindkøb are progressing in line with management's expectations. Manpower Netherlands' adoption of CTMTM under its agreement with CTM Solution BV in Holland is also expected to contribute to revenue growth in 2015. The Group will also increase its focus on sub-sectors that are expected to generate further revenue share agreements and rewards for EU Supply, which are better aligned with value creation for our customers.

The new prepaid business alerts services launched in 2015 have also been well received, with revenue contribution from this service during the first quarter exceeding management expectations, and this is expected to provide a scalable platform for additional growth. The Tender Lite service has also been successfully launched in selected markets. Prepaid business alert services and Tender Lite services are planned to be rolled out in additional markets during the remainder of 2015 and in 2016.

The Group is also in early stage discussions with well-established IT services organisations regarding business development in another European market to position the Group ahead of wider market adoption expected in this market underpinned by the new EU Directives. EU Supply may also seek to expand in existing and selected new markets by carefully considered acquisitions.

The year has started well with continued strong growth in Q1. An encouraging pipeline coupled with the successful launch of the new service offerings referred to above gives the Board confidence that further strong growth will be delivered in the current year and beyond.

Thomas Beergrehn

Chief Executive Officer

Consolidated Statement of Total Comprehensive Income

 The results reflected above relate to continuing activities. 

The notes below form part of these financial statements.

Consolidated Statement of Financial Position

Company Statement of Financial Position

Consolidated & Company Statements of Changes in Equity

Consolidated Statement of Cash Flows

Company Statement of Cash Flows

Notes to the consolidated financial information

 General information

EU Supply plc is a public limited company incorporated in the United Kingdom under the Companies Act. The address of its registered office is 26 Red Lion Square, London, WC1R 4AG. The principal activities of the Company and its subsidiaries (the Group) are described in note 4.

1. Accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

 Basis of preparation

These company and consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 as applicable to companies reporting under IFRS. These accounts have been prepared under the historical cost convention.

The Company has taken advantage of the exemption available under section 408 of the Companies Act 2006 and has not presented its own income statement in the financial statements. The loss for the period ended 31 December 2014 amounted to £1,779,258 (2013: £156,683).

The Group financial statements consolidate the financial statements of the Company and its subsidiaries (together referred to as 'the Group'). The parent Company financial statements present information about the Company as a separate entity and not about its Group.

Going concern

The directors believe that the Group has demonstrated further progress in achieving its objective of positioning itself as market-leading, multilingual e-procurement platform for e-sourcing, e-tendering and contract management, tailored for the highly regulated European public sector market. The group raised £1.3m during the year through the issue of equity in a private placement taking place in July 2014. The directors have prepared a cash flow forecast covering a period extending beyond 12 months from the date of these financial statements. After taking account of anticipated overhead costs and revenue, the directors are confident that sufficient funds are in place to support the going concern status of the Group.

Therefore the directors consider that it is appropriate to prepare the Group's financial statements on a going concern basis, which assumes that the Group is to continue in operational existence for the foreseeable future. When assessing the foreseeable future, the directors have looked at a period of at least 12 months from the date of approval of the financial statements.

New and Revised Standards

Standards in effect in 2014 adopted by the Group

The following new and amended standards, and interpretations are mandatory for the first time for the financial year beginning 1 January 2013 but are not currently relevant to the group (although they may affect the accounting for future transactions and events):

· IFRS 10, 'Consolidated financial statements'

· IAS 27 (revised 2011), 'Separate financial statements'

· Amendments to IAS 32 'Offsetting Financial Assets and Financial Liabilities'

IFRS in issue but not applied in the current financial statements

The following IFRS and IFRIC Interpretations have been issued but have not been applied by the Group in preparing these financial statements as they are not as yet effective. The Group intends to adopt these Standards and Interpretations when they become effective, rather than adopt them early.

· IFRS 9, 'Financial instruments', effective date 1 January 2015

· IFRS 15 'Revenue from Contracts with Customers', effective date 1 January 2017

The directors of the Company anticipate that the application of these accounting standards in the future may have a material impact on the amounts reported and disclosures made in the group's consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until the Group performs a detailed review.

A number of IFRS and IFRIC interpretations are also currently in issue which are not relevant for the Group's activities and which have not therefore been adopted in preparing these financial statements.

Basis of consolidation

Where the Group has power, either directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities, it is classified as a subsidiary. 

Merger accounting 

The accounting treatment in relation applied to introduction of EU Supply PLC as a new UK holding Company of the Group was considered be outside the scope of the IFRS3 'Business Combinations'. The share scheme arrangement constituted a combination of entities under common control as EU Supply PLC was not a business as defined by IFRS 3 at the time that the Share Scheme became effective. The relative rights of the shareholders remained unaltered post transaction and was facilitated entirely by a share for share exchange. 

Paragraph 10 of IAS8 'Accounting Policies, Changes in Accounting Estimates and Errors' requires management to use its judgement in developing and applying a policy that is relevant, reliable, represents faithfully the transaction, reflects the economic substance of the transaction, is neutral, is prudent, and is complete in all material respects when selecting the appropriate methodology for consolidation accounting. The directors have therefore applied treated the insertion of EU Supply PLC as the ultimate parent entity as a Group reconstruction and have applied the merger accounting principles to prepare the consolidated financial statements and treated the reconstructed Group as if it had always been in existence. The difference between the nominal value of shares issued in the share exchange and the book value of the shares obtained is recognised in a merger reserve. 

The Group has taken advantage of merger relief available under Companies Act 2006 in respect of the share for share exchange as the issuing company has secured more than 90% equity in the other entity. The carrying value of the investment is carried at the nominal value of the shares issued less provision for impairment.

Segment reporting

In accordance with IFRS 8, segmental information is presented based on the way in which financial information is reported internally to the chief operating decision maker. The group's internal financial reporting is organised along service lines and therefore segmental information has been presented about business segments. A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns which are different from those of other business segments.

The operation of the group are reported to and monitored by the board as one segment, and as such the Directors consider that there is only one reportable segment under IFRS 8.

Information regarding geographical revenues and non-current assets is disclosed in note 4 to the financial statements.

Revenue Recognition

Revenue represents the gross amounts billed to clients in respect of revenue earned and other client recharges, net of discounts, sales taxes, accrued, and deferred amounts.

Each type of revenue is recognised on the following basis: 

a) Licence fees are recognised over the period of the relevant contracts or agreements, in line with the terms of the contract;

b) Ongoing support and maintenance fees are spread over the period of the contract on a straight line basis.

Gross revenue is recognised as the Group acts as principal and not agent in its dealings with customers. The Group is also responsible for the quality of the service delivery. 

 Taxation

Income tax expense represents the sum of the current tax and deferred tax charge for the year.

The charge in respect of current taxation is based on the estimated taxable profit for the year. Taxable profit for the year is based on the profit as shown in the income statement, as adjusted for items of income or expenditure which are not deductible or chargeable for tax purposes. The current tax liability for the year is calculated using tax rates which have either been enacted or substantively enacted at the balance sheet date.

Deferred tax is provided in full, using the liability method on temporary differences arising between the tax base of assets and liabilities and their carrying values in the financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates which have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Untaxed reserves in the group's subsidiaries are presented within deferred tax liabilities and equity within other reserves.

Share-based payment 

In accordance with IFRS 2 'Share-based payments', the Group reflects the economic cost of awarding shares and share options to employees and directors by recording an expense in the statement of comprehensive income equal to the fair value of the benefit awarded. The expense is recognised in the statement of comprehensive income over the vesting period of the award.

Fair value is measured by the use of a Black-Scholes option pricing model, which takes into account the expected life of the awards, the expected volatility of the return on the underlying share price, the market value of the shares, the strike price of the awards and the risk-free rate of return. The charge to the income statement is adjusted for the effect of service conditions and non-market performance conditions such that it is based on the number of awards expected to vest. Where vesting is dependent on market-based performance conditions, the likelihood of the conditions being achieved is adjusted for in the initial valuation and the charge to the income statement is not therefore adjusted so long as all other conditions are met.

Where an award is granted with no vesting conditions, the full value of the award is recognised immediately in the income statement.

Foreign currency

Items included in the financial statements of each group company are measured using their functional currency, being the currency of the primary economic environment in which each company operates. The functional currency of EU Supply PLC and EUS Holdings Ltd. is Pound Sterling, whereas of EU Supply Holdings AB is Swedish Krona. 

The consolidated financial statements are presented in Sterling, which is the company's functional and presentational currency.

Foreign currency transactions are translated using the rate of exchange applicable at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-translation at the year-end of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

The results and financial position of group companies whose functional currency is not Sterling are translated as follows:

· Assets and liabilities at each balance sheet date presented are translated using the closing exchange rate at that balance sheet date;

· Income and expenses for each income statement are translated using average exchange rates which reasonably approximate the effect of the rates prevailing on the transaction dates.

All resulting exchange differences are recognised on the group balance sheet in a separate component of equity, the foreign exchange reserve.

Property, plant and equipment

Items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:

Office equipment - 20% -33% per annum straight line

Intangible Assets

Intangible assets consists of development costs relating to the CTM platform. Development activities involve a planned investment in the building and enhancement of the trading platform. Development expenditure is only capitalised if the development costs can be measured reliably and the platform being built will be completed and will generate future economic benefits in the form of cash flows to the Group. Expenditure being capitalised includes internal staff time and cost spent directly on developing the CTM platform.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment costs. The amortisation period was 5 years. All previously capitalised costs for the development of the CTM platform had been amortised by end of December 2014.

During the period the Group has chosen to take a prudent approach and directly expense all incurred development expenditures. Therefore no additional development expenditures have been capitalised during the period.

Impairment of assets

Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A review for indicators of impairment is performed annually. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any impairment charge is recognised in the income statement in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.

Investments in subsidiaries

The Company's investments in its subsidiaries is carried at cost less provision for any impairment.

Financial assets

The Group classifies its financial assets into one of the categories disclosed below, depending on the purpose for which the asset was acquired.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents.

 Cash and cash equivalents

Cash and cash equivalents deposits held at call with banks, other short-term highly liquid investments with original maturities of 3 months or less, and - for the purpose of the statement of cash flows - bank overdrafts or outstanding credit card balances. Bank overdrafts and credit card advances are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each period end. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Interest-bearing borrowings are recognised initially at fair value, net of any transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method with any difference between the proceeds (net of transaction costs) and the redemption value being recognised over the period of the borrowings.

Convertible loan notes issued by the Company's subsidiary which converted in the previous year were recognised at fair value and converted in exchange for the issue of ordinary shares in the Company as disclosed in Note 16a.

Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. As the payment period of trade payables is short future cash payments are not discounted as the effect is not material.

The Group derecognises financial liabilities when and only when the Group's obligations are discharged, cancelled or they expire.

Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

The Group only has one class of ordinary shares, denominated as £0.001 (2013: £0.001) ordinary shares, as set out in note 17. The Company's ordinary shares are classified as equity instruments.

On inception of a lease of an item of property, plant and equipment, the terms and conditions of the lease are reviewed to determine the appropriate classification for the lease.

Leases where the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on a straight line basis over the term of the lease.

Provisions

Provisions are recognised in the balance sheet where there is a legal or constructive obligation to transfer economic benefits as a result of a past event. Provisions are discounted using a rate which reflects the effect of the time value of money and the risks specific to the obligation, where the effect of discounting is material.

Pensions

The group operates a defined contribution pension scheme under which fixed contributions are payable. Pension costs charged to the income statement represent amounts payable to the scheme during the year.

2. Critical accounting estimates and judgements

The preparation of financial statements in compliance with generally accepted accounting practice, in the case of the Group and Company being International Financial Reporting Standards as adopted by the European Union, requires the Group to make estimates and judgements that affect the reported amount of assets, liabilities, income and expenditure and the disclosures made in the financial statements. Such estimates and judgements must be continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The significant judgements made by management in applying the Group's accounting policies as set out above, and the key sources of estimation, were:

(a) Revenue recognition

Revenue from the services provided is measured at the fair value of the consideration received or to be received, net of returns, trade discounts and volume rebates.

Revenue is either recognised in the statement of comprehensive income or deferred based on a review of all live contracts at the period end. Based on the judgement of management and with reference to the stage of completion the licence fees and maintenance contracts, a determination of the appropriate revenue to recognise is made. Following this assessment, an appropriate adjustment to deferred income is made. In the current year the value of the deferred revenue is £326,445 (2013 - £316,669).

(b) Share based payments

Share options are measured at their fair value utilising a Black-Scholes valuation model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 

3. Financial instruments - Risk management

General objectives, policies and processes

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below.

The Board receives monthly reports from the Financial Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The Group reports in Pound Sterling. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of directors. The Group does not use derivative financial instruments such as forward currency contracts, interest rate swaps or similar instruments. The Group does not issue or use financial instruments of a speculative nature.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

· Trade receivables;

· Cash and cash equivalents;

· Trade and other payables; and

· Borrowings and convertible loan notes.

Trade and other receivables are initially measured at face value and subsequently at amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period. Trade and other payables are measured at book value. The book value of financial assets and liabilities equates to their fair value.

A summary of the financial instruments held by category is provided below:

Trade receivables principally comprise amounts outstanding for sales to customers and are payable within 3 months. The average debtor days to settle invoices are 30-60 days (2013: 30-60 days). An impairment review of outstanding trade receivables is carried out at the period end and a specific amount provided for. The Group invoices the total value of licence fees once a binding contract is established between the customer and the Group and defers any revenue according to the revenue recognition policy stated earlier.

Financial Liabilities

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs and are payable within 3 months. The average credit period taken for trade purchases is 30-50 days (2013: 30-60 days).

Cash and cash equivalents

Cash and cash equivalents comprise balances on bank accounts, cash in transit and cash floats held in the business.

Finance charges are accounted for on an accruals basis and charged to the statement of comprehensive income when payable.

Cash and cash equivalents are held in sterling, SEK, NOK, DKK and EUR and placed on deposits in UK, Swedish, Norwegian and Danish banks.

'The Group is exposed to the following financial risks:

· Credit risk;

· Foreign exchange risk;

· Other market price risk; and

· Liquidity risk.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. At 31 December 2014 the Group has net trade receivables of £325,455 (2013: £190,596).

The Group is exposed to credit risk in respect of these balances such that, if one or more customers encounter financial difficulties, this could materially and adversely affect the Group's financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers prior to entering into contracts and by entering contracts with customers with agreed credit terms. The Group holds bank accounts at Nordea Bank in Pound Sterling, Swedish Krona, Danish Krona, Norwegian Krona and Euros.

The analysis below shows the ageing of trade and other receivables and the movement in bad debt provision in the year.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, the Group has the ambition to maintain cash balances to meet expected requirements for a period of at least 45 days.

The table below analyses the Group's financial liabilities by contractual maturities. All amounts disclosed in the table are the contractual undiscounted cash flows.

Capital management

The Group's capital is made up of share capital, share premium, merger reserve, foreign currency reserve, other reserve and retained losses totalling £705,177 at 31 December 2014, (2013: £884,451)

The Group's objectives when maintaining capital are:

· To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

· To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The capital structure of the Group consists of shareholders equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources.

Market risk

The Group's activities expose it to the financial risk of changes in foreign currency exchange rates as it undertakes certain transactions denominated in foreign currencies. There has been no change to the Group's exposure to market risks. The Group and the Company had no material foreign exchange transactional exposure at 31 December 2014.

Foreign exchange risk

Foreign exchange risk arises when Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow customers to settle liabilities denominated in the customer's functional currency, being primarily Swedish Krona, Euros, Norwegian Krona, Danish Krona or Pound Sterling.

The Group is predominantly exposed to currency risk on sales and purchases made from customers and suppliers based in the Eurozone, Sweden, Denmark and Norway. Sales and purchases from customers and suppliers are made on a central basis and the risk is monitored centrally, but not hedged utilising any forward exchange contracts. Apart from these particular cash flows the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which revenue is generated and expenses are incurred.

As at 31 December 2014, the Group's net exposure to foreign exchange risk was as follows for those entities with Pound Sterling functional currencies.

The impact of 10% movement in foreign exchange rate of £ will result in increase/decrease of net assets by £69,642 and £56,981 respectively for 2014.

4. Segmental analysis

The Group's principal activity is the provision of an e-procurement platform for e-sourcing, e-tendering and contract management. The Group currently has one reportable segment, provision of services and categorises all revenue from operations to this segment.

The 2014 revenue includes £291,148 relating to one customer. This compares to £204,928 of revenue generated from the largest customer in 2013.

The Group operates in three main geographic areas: UK, European Union and Rest of the World. Revenue and non-current assets by origin of geographical segment for all entities in the group is as follows:

5. Loss from operations

The operating loss as at 31 December 2014 is stated after charging:

 Non-audit professional fees were £14,100 (2013: £92,088). 

Exceptional costs of £74,796 (2013: £607,623) relate to costs incurred in relation to the Company's listing on the AIM exchange, fund raising and costs related to employee share options and advisor warrants.

6. Staff Costs

Staff costs (including directors' emoluments) incurred in the year were as follows;

*Of which pension cost is £205,749 (2013: £133,520).

The average monthly number of permanent employees during the period was as follows:

8. Finance income and expenses

9. Income tax

Analysis of the tax charge

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2014 nor for the year ended 31 December 2013. The tax charge for both 2014 and 2013 arose in respect of operations in Sweden. However, the company recorded a tax credit of in total £434,110 (2013: £0), for the years 2012, 2013 and 2014 in the fiscal year of 2014.

Factors affecting the tax charge

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows:

Deferred tax

The Group has estimated carried forward losses amounting to £6.87million as of 31 December 2014 (2013: £6.28million). As the timing and extent of taxable profits are uncertain, the potential deferred tax asset of £1.37million arising on these losses has not been recognised in the financial statements.

10. Loss per share

Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The basis for calculating the basic loss per share is as follows:

Due to the loss in the period, the effect of the share options were considered anti-dilutive and hence no diluted loss per share information has been provided.

11. Property, plant and equipment

12. Intangible assets

13. Investments in subsidiaries

The Company owns 100% of the issued share capital of the following subsidiary undertakings, which have been included in the consolidated financial statements:

* is owned 100% via EUS Holdings Limited.

14. Trade and other receivables

As at 31 December 2014 trade receivables of £38,992 (2013: £2,880) were past due over 3 months but not impaired.

All amounts shown under receivables are due within 1 year.

15. Cash and cash equivalents

Cash and cash equivalents comprise balances on bank accounts, cash in transit and cash floats held in the business. Finance charges are accounted for on an accruals basis and charged to the statement of comprehensive income when payable.

Cash and cash equivalents are held in sterling, Euro, Danish Krona, Norwegian Krona and Swedish Krona and placed on deposits in UK, Swedish, Norwegian and Danish banks.

16. Trade and other payables

The convertible debt as of Dec 2012 was stated at fair value at initial recognition and at amortised cost subsequently. No convertible debt existed as of Dec 31 2013 and Dec 31 2014.

Principal terms and the debt repayment schedule of the Group's loan and borrowings were as follows during 2013:

EUS Holdings Ltd, the company's subsidiary ("EUS Holdings") had created convertible loan note instruments during 2012 and 2013.

Prior to the IPO in 2013 the loan note holders of the convertible loans passed special resolutions amending the loan notes such that upon the undertaking of a share-for-share exchange involving a new holding company, EU Supply Plc, that, each loan note shall be converted into such a number of holding company shares as each loan note would have represented had it been converted prior to the share for share exchange.

Following the share-for-share exchange undertaken on 31 October 2013, 12,919,602 shares of £0.01 each in EU Supply Plc were issued to loan note holders in satisfaction of the total liability of £1,814,400, as outlined in the table below.

17. Share capital

Share capital allotted and fully paid up

Ordinary shares of £0.001 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Pounds Sterling.

On 31 October 2013, EUS Holdings Limited successfully implemented the share for share exchange whereby EU Supply PLC became the holding Company of the Group. Under the Scheme of Arrangement, EUS Holdings Limited's shares on issue as at 31 October 2014 were exchanged on a one for one basis to EU Supply PLC shares. All disclosures of shares in the report reflect this change as though the one for one exchange had always been in place.

A placing of new shares raised £1.3m for working capital in July 2014 and 810,000 warrants were exercised during August and September 2014.

The table below shows the movements in share capital for the year:

On the IPO in November 2013 22,123,894 new ordinary shares of £0.001 each at par were allotted.

The Company has not issued any partly paid shares nor any convertible securities, exchangeable securities or securities with warrants. The Company does not hold any treasury shares.

18. Share based payments

Employee Share Option Scheme

The Company has since 2013 a share option scheme for selected employees and Directors of the Group and a total of 1,043,895 options were granted to employees during 2013.

Under the terms of the scheme, employees paid an option premium, valued at arm's length using the Black & Scholes formula for option pricing, in return for an option over a number of shares. The options are exercisable at a multiple of the quoted market price of the Company's shares on the date of grant dependent on the option premium paid. The options vest from the 29 February 2016 and are exercisable for a period of 15 days. In the event that an employee ceases to be employed by any company within the Group they must offer their options up for sale to the Company.

The Group uses historical data to estimate option exercise and employee retention within the valuation model. Expected volatilities are based upon implied volatilities as determined by a simple average of a sample of listed companies based in similar sectors. The risk free rate for the period within the contractual life of the option is based on the UK gilt yield curve at the time of the grant.

The following reconciles the share options outstanding at the beginning and end of year:

The fair values were calculated using a Black Scholes pricing model. The inputs into the model in respect of options granted were as follows:

The group has recognised a charge of £3,428 (2013: £11,109) relating to equity-settled share-based charges during the year on the employee share option scheme.

Adviser warrants

In part settlement of advisers' fees in 2013 the following warrants were granted:

(a) a warrant to subscribe for up to 144,164 shares of £0.01 each at a price of 13.56p per share. Such right may be exercised at any time during the period starting on 13 November 2013 and ending on the fifth anniversary of that date.

(b) a warrant to subscribe for up to 432,491 shares of £0.01 each at 22.6p per share. Such right may be exercised at any time during the period starting on 13 November 2013 and ending on the fifth anniversary of that date.

The fair value of both tranches of adviser warrants were calculated using a Black Scholes pricing model. The inputs of the model in respect of expected volatility and the risk free rate were consistent with that adopted for the employee and Directors share option scheme.

No additional warrants were granted in 2014 and no Advisor warrants were exercised.

Other warrants

In 2013 a warrant was been granted for the right to subscribe at 20.31p for 810,000 Ordinary Shares to Fastighets AB Granen, Bo Beergrehn, Adrian Friend and Jonas Ljungstrom. These warrants were exercised during 2014.

In 2013 Internet Startups Holding BV was granted a warrant to subscribe for up to 2,883,275 ordinary shares of £0.01 each at a price of 22.6p at any time during the period starting on 13 November 2013 and ending on the fifth anniversary of that date. None of these warrants were exercised during 2014.

These warrants are considered to share based payment arrangements with holders of equity instruments in their capacity as holders of equity instruments and therefore chargespreviously calculated on the value of these warrants have been credited in the year.

The group has recognised a charge of £71,368 (2013: £8,736) relating to equity-settled share-based charges during the year in respect of warrants.

19. Related party transactions

Ice Partners GmbH was a director of EUS Holdings Limited resigning on 7 November 2013. During the year to that date consultancy fees of £nil (2013: £35,655) were paid.

Compensation or other related payments to key management personnel (including directors):

 * The consultancy fees 2014 were paid to Ice Strategies LLP, an entity in which Mark Elliott, a director of the company up to 17 November 2014, has an interest.

The consultancy fees 2013 were paid to Trillibo AB, Internet Startups Holdings BV and Ice Strategies LLP, entities in which Steffen Karlsson, Thomas Beergrehn and Mark Elliott respectively has an interest.

Remuneration paid directly to all directors has been disclosed in note 6.

Company related party balances

EU Supply PLC debt due to EUS Holdings Ltd of £872 as of 31 December 2014 (2013: £872)

EU Supply PLC debt due to EU-Supply Holding AB of £6,956 as of 31 December 2014 (2013: £7,881)

EU Supply PLC claim on EUS Holdings Ltd of £4,334,896 as of 31 December 2014 (2013: £3,394,471)

EU Supply PLC claim on EU-Supply Holding AB of £0 as of 31 December 2014 (2013: £5,190)

20. Control

The board consider that there is no ultimate controlling party.