Interim Results

RNS Number : 3061A

Mobile Streams plc

29 March 2012

 

29^th March 2012

Mobile Streams plc

("Mobile Streams" or "the Group")

Unaudited Interim results for the 6 months ended 31 December 2011

London (AIM: MOS) Mobile Streams is pleased to update its shareholders on its unaudited interim results for the six months ending 31 December 2011:

·      Revenue growth of 40% for the period to £7.4m (6 months ended 31 December 2010: £5.3m)

·      Revenue growth of 51% when excluding the £403k in non-recurring amounts from Zoombak from the same period in prior year

·      Mobile Internet revenues grew 96% over the period to £4.9m

·      EBITDA* Profit of £5k (6 months ended 31 December 2010: £0.3m)

·      Net loss after tax of £160k (6 months ended 31 December 2010: net profit after tax of £125k)

·      Cash reserves of £0.7m at 31 December 2011, with no debt. Cash reserves have increased since the end of the 2011 calendar year to approximately £1.25m but shareholders should note the matter discussed below in relation to repatriating funds from Argentina

Commenting, Simon Buckingham, CEO of Mobile Streams said:

"Mobile Streams delivered record revenues and revenue growth during the 6 months ended 31 December 2011. Total monthly revenues surpassed a new threshold level of £1.5m in December 2011 with Mobile Internet revenues exceeding £1m for the first time that month.

The strong revenue growth was fueled by rapid growth in the Mobile Internet segment and the continuing shift in the product mix away from our traditional text and ringtones type services towards apps and games in both of the Company's two operating segments: Mobile Operators and Mobile Internet.

Growth in the Mobile Internet segment has been rapid, primarily in Latin America. During the period ended 31 December 2011 Mobile Internet revenues increased by 96% to £4.9m. At the end of the calendar year 2011, Mobile Streams had more than 1 million active subscribers in Argentina (defined as customers who have purchased content from the Company in the prior two month period).

In regards to Appitalism and apps services, by the end of calendar year 2011, a total of 37 Business To Business (B2B) customer contracts had been fully executed for the distribution and provision of the Company's apps, games and eBooks content and services. These deals include new partnerships with several of the world's largest mobile phone operators, mobile handset manufacturers and telecoms infrastructure companies in the U.S., Europe, Latin America and Asia Pacific.

The Company's profitability is yet to see the full impact of the top line revenue growth as a result primarily of marketing investments. Due to the subscription nature of the vast majority of the Mobile Internet revenues, the Company incurs upfront marketing and subscriber acquisition costs in return for a recurring revenue stream.

Trading in the 2012 calendar year has started solidly, with revenues of just over £1.5m achieved in both January and February 2012. The Mobile Internet segment continues to perform well. For example, since the end of 2011 the Company's subscriber base has in Mexico already more than doubled to over 100,000 active subscribers currently. The Company's flagship mobile internet service Appitalism.com has just been re-launched with a new website and mobile site design and carrier billing for purchasing apps is now live in many of the Company's core operating markets including Argentina, Australia, Colombia, Mexico, the U.K. and the U.S.

Since the end of the 2011 calendar year, the Group's cash reserves have increased from £0.7m to a current level of approximately £1.25m. Shareholders should however note that £0.98m- equivalent to approximately three quarters of the Group's cash- is located in Argentina, where market wide currency control rules have been implemented in 2012 to regulate the withdrawal of funds from the country. The Group is working with its advisers to establish procedures to comply with the new Argentina specific regulations and the Board has a reasonable expectation that it will be able to continue to repatriate cash from Argentina. Additionally, the Company is working to diversify its sources of cash generation. For example, the first receipts have been collected from Mexico where revenues have grown rapidly since the beginning of the new calendar year, and Mexico is already the Company's second largest revenue generating subsidiary after Argentina. Additionally, Mobile Internet services have also just been launched in Colombia. The cash repatriation issues experienced in Argentina have not affected any of the Company's other markets, with intercompany transfers taking place as usual so far during 2012.

* Earnings before interest, tax, depreciation, amortisation and share compensation

Enquires:

Mobile Streams                                                                                                  [phone]

Simon Buckingham, Chief Executive Officer

Gabriel Margent, Chief Financial Officer

Nominated Adviser and Broker                                                                        [phone]

Singer Capital Markets Limited

Jonathan Marren

OPERATING REVIEW

Mobile Streams delivered record revenues and revenue growth during the 6 months ended 31 December 2011. Total monthly revenues surpassed a new threshold level of £1.5m in December 2011 with Mobile Internet revenues exceeding £1m for the first time that month.

The strong revenue growth was fueled by rapid growth in the Mobile Internet segment and the continuing shift in the product mix away from our traditional text and ringtones type services towards apps and games in both of the Company's two operating segments: Mobile Operators and Mobile Internet.

Growth in the Mobile Internet segment has been rapid, primarily in Latin America. During the period ended 31 December 2011 Mobile Internet revenues increased by 96% to £4.9m. At the end of the calendar year 2011, Mobile Streams had more than 1 million active subscribers in Argentina (defined as customers who have purchased content from the Company in the prior two month period).

In regards to Appitalism and apps services, by the end of calendar year 2011, a total of 37 Business To Business (B2B) customer contracts had been fully executed for the distribution and provision of the Company's apps, games and eBooks content and services. These deals include new partnerships with several of the world's largest mobile phone operators, mobile handset manufacturers and telecoms infrastructure companies in the U.S., Europe, Latin America and Asia Pacific.

The Company's profitability is yet to see the full impact of the top line revenue growth as a result primarily of marketing investments. Due to the subscription nature of the vast majority of the Mobile Internet revenues, the Company incurs upfront marketing and subscriber acquisition costs in return for a recurring revenue stream.

Trading in the 2012 calendar year has started solidly, with revenues of just over £1.5m achieved in both January and February 2012. The Mobile Internet segment continues to perform well. For example, since the end of 2011 the Company's subscriber base has in Mexico already more than doubled to over 100,000 active subscribers currently. The Company's flagship mobile internet service Appitalism.com has just been re-launched with a new website and mobile site design and carrier billing for purchasing apps is now live in many of the Company's core operating markets including Argentina, Australia, Colombia, Mexico, the U.K. and the U.S.

Since the end of the 2011 calendar year, the Group's cash reserves have increased from £0.7m to a current level of approximately £1.25m. Shareholders should however note that £0.98m- equivalent to approximately three quarters of the Group's cash- is located in Argentina, where market wide currency control rules have been implemented in 2012 to regulate the withdrawal of funds from the country. The Group is working with its advisers to establish procedures to comply with the new Argentina specific regulations and the Board has a reasonable expectation that it will be able to continue to repatriate cash from Argentina. Additionally, the Company is working to diversify its sources of cash generation. For example, the first receipts have been collected from Mexico where revenues have grown rapidly since the beginning of the new calendar year, and Mexico is already the Company's second largest revenue generating subsidiary after Argentina. Additionally, Mobile Internet services have also just been launched in Colombia. The cash repatriation issues experienced in Argentina have not affected any of the Company's other markets, with intercompany transfers taking place as usual so far during 2012.

FINANCIAL REVIEW

6 months ended 31 December 2011

Gross profits for the period ended 31 December 2011 were £3.0m, in line with the same period last year despite revenues increasing 40% to £7.4m.  Gross margin was 40.8%, down from 54.3% the same period last year.

During the period ended 31 December 2011 the Mobile Internet revenue has increased by 96%. The Cost of sales on Mobile Internet revenue is much higher than on Operator revenue resulting in lower Gross profit margin.

The Group recorded a net loss after tax of £160k 0.2m for the 6 months ended 31 December 2011, generating basic loss of 0.439 pence per share.

Adjusted loss per share (excluding depreciation, amortisation, impairments and share compensation expense) was 0.250 pence per share.

6 months ended 31 December 2010

Gross profits for the 6 months ended 31 December 2010 were £2.9m as revenues rose to £5.3m. Gross margin was 54.3%.

The Group recorded a profit after tax of £0.125km for the 6 months ended 30 December 2010, generating basic gain of 0.345 pence per share.

Adjusted earnings per share (excluding depreciation, amortisation, impairments and share compensation expense) was 0.753 pence per share.

18 months ended 30 June 2011

Group revenue for the 18 months ended 30 June 2011 was £15.5m.

Gross margin was 49.7%. The change in revenue mix, with a higher proportion of revenue coming from Operator Services, reduced the overall gross margin slightly from 50.5%.

Selling, marketing and administrative expenses were £7.6m. This included the investment in the new Appitalism business (other than capitalised development costs) as well as marketing costs incurred in acquiring Mobile Internet subscribers mainly in Latin America and market research cost associated with the Appitalism business.

The Group had net cash outflows from operations of £0.2m. The disposal of ringtones.com boosted cash and more than offset the capitalised development costs incurred in building the Appitalism.com site. During December 2010 the ringtones.com domain was sold for a net consideration of US$750,000, shown as Other Income in the income statement.

The Group recorded a loss after tax of £0.2m for the 18 months ended 30 June 2011, generating basic loss of 0.589 pence per share. Adjusted earnings per share (excluding depreciation, amortisation, impairments and share compensation expense) was 0.542 pence per share.

consolidated Income statement
						Audited
				6 months ended 31 December 2011	6 months ended 31 December 2010	18 months ended 30 June 2011
				£000's	£000's	£000's
Revenue				7,392	5,312	15,491
Other income *				-	484	484
Cost of sales				(4,377)	(2,914)	(8,272)
Gross profit				3,015	2,882	7,703
Selling and marketing costs				(1,390)	(755)	(2,238)
Administrative expenses **				(1,689)	(1,970)	(5,350)
Operating (loss)/profit				(64)	157	115
Finance income				-	2	8
(Loss)/profit before tax				(64)	159	123
Tax expense				(96)	(34)	(337)
(Loss)/profit for the period				(160)	125	(214)
Attributable to:
Equity shareholders of Mobile Streams plc				(160)	125	(214)
(Loss) /earnings per share
				Pence per share	Pence per share	Pence per share
Basic (loss)/earnings per share				(0.439)	0.345	(0.589)
Diluted (loss)/earnings per share				(0.439)	0.334	(0.572)

* Other income includes the sale of the ringtones.com domain.

** Administrative expenses include depreciation, amortisation and impairment.

consolidated STATEment of COMPREHENSIVE income

Audited  6 months ended 31 December 2011  6 months ended 31 December 2010  18 months ended 30 June 2011  £000's  £000's  £000's (Loss)/profit for the period (160) 125 (214) Exchange differences on translating foreign operations (169) 13 15 Total comprehensive (loss)/income for the period (329) 138 (199) Total comprehensive (loss)/income for the period attributable to: Equity shareholders of Mobile Streams plc (329) 138 (199)

consolidated STATEment of financial position   Audited  31 December 2011 31 December 2010 30 June 2011 £000's £000's £000's Assets Non- Current Goodwill 714 714 714 Intangible assets 299 425 348 Property, plant and equipment 41 43 37 1,054 1,182 1,099 Current Trade and other receivables 3,016 2,155 2,235 Cash and cash equivalents 746 1,281 1,100 3,762 3,436 3,335 Total assets 4,816 4,618 4,434 Equity Equity attributable to equity holders of Mobile Streams plc Called up share capital 73 73 73 Share premium 10,317 10,310 10,317 Translation reserve (387) (304) (218) Merger reserve 153 153 153 Retained earnings (9,612) (9,069) (9,452) Total equity 544 1,163 873 Liabilities Non- Current Deferred tax liabilities 13 13 13 Current Trade and other payables 3,810 3,245 3,107 Current tax liabilities 449 82 441 Provisions - 115 - 4,259 3,442 3,548 Total liabilities 4,272 3,455 3,561 Total equity and liabilities 4,816 4,618 4,434

consolidated STATEment of changes in equity

Equity attributable to equity holders of Mobile Streams Plc Called up share capital Share premium Translation reserve Retained earnings Merger reserve Total Equity £000's £000's £000's £000's £000's £000's Balance at 1 July 2010 73 10,310 (317) (9,196) 153 1,023 Employee share based compensation - - - 2 - 2 Transaction with owners - - - 2 - 2 Profit for the 6 months ended 31 December 2010 - - - 125 - 125 Exchange differences on translating foreign operations - - 13 - - 13 Total comprehensive income for the period - - 13 125 - 138 Balance At 31 December 2010 73 10,310 (304) (9,069) 153 1,163 Balance at 1 January 2011 73 10,310 (304) (9,069) 153 1,163 Employee share based compensation - 7 - - - 7 (Loss) for the 6 months ended 30 June 2011 - - - (383) - (383) Exchange differences on translating foreign operations - - 86 - - 86 Total comprehensive income/(expense) for the period - 7 86 (383) - (290) Balance at 30 June 2011 73 10,317 (218) (9,452) 153 873 Balance at 1 July 2011 73 10,317 (218) (9,452) 153 873 (Loss) for the 6 months ended 31 December 2011 - - - (160) - (160) Exchange differences on translating foreign operations - - (169) - - (169) Total comprehensive expense for the period - - (169) (160) - (329) Balance at 31 December 2011 73 10,317 (387) (9,612) 153 544

CONSOLIDATED CASH FLOW STATEMENT

Audited 6 months ended 31 December 2011 6 months ended 31 December 2010 18 months ended 30 June 2011 £000's £000's £000's Operating activities (Loss)/profit before taxation (64) 159 123 Adjustments: Share based payments - 1 19 Depreciation 10 25 83 Amortisation 59 122 309 Interest received (1) (3) (8) Changes in trade and other receivables (781) (372) (450) Changes in trade and other payables 703 188 (214) Tax paid (87) (38) (64) Total cash utilised in operating activities (161) 82 (202) Investing activities Disposals/(additions) to property, plant and equipment 5 (18) (43) Additions to other intangible assets (24) (229) (317) Interest received 1 3 8 Net cash used in investing activities (18) (244) (352) Financing activities Issue of share capital (net of expenses paid) - - 7 Net cash used in investing activities - - 7 Net change in cash and cash equivalents (179) (162) (547) Cash and cash equivalents at beginning of period 1,100 1,444 1,659 Exchange (losses) on cash and cash equivalents (175) (1) (12) Cash and cash equivalents, end of period 746 1,281 1,100

NOTES TO COMPANY FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The interim results of Mobile Streams plc are prepared in accordance with the requirements of IAS 34 Interim Financial Reporting as adopted by the EU and prepared in accordance with the accounting policies set out in the last financial statements for the 18 months ended 30 June 2011.

The interim results, which are not audited, do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

The comparative financial information for the 18 months ended 30 June 2011 has been extracted from the statutory accounts for that period. In addition, the financial information for the 6 months ended 31 December 2010 has been extracted from the Interim results. The full audited accounts of the Group for the 18 months ended 30 June 2011 were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and have been delivered to the Registrar of Companies.

The auditor's report on these financial statements was unqualified and did not contain statements under S498(2) or S498(3) of the Companies Act.

2. SEGMENT REPORTING

As at 31 December 2011, the Group is organised into 4 geographical segments: Europe, North America, Latin America, and Asia Pacific. Revenues are from external customers only and generated from three principal business activities: the sale of mobile content through MNO's (Mobile Operator Services), the sale of mobile content over the internet (Mobile Internet Services) and the provision of consulting and technical services (Other Service Fees).

All operations are continuing and all inter-segment transfers are priced and carried out at arm's length.

The segmental results for the 6 months ended 31 December 2011 were as follows:
£000's	Europe	Asia Pacific	North America	Latin America	Group
Mobile operator services	68	767	219	1,426	2,480
Mobile internet services	51	-	-	4,810	4,861
Other service fees	14	-	6	31	51
Total revenue	133	767	225	6,267	7,392
Cost of sales	(72)	(544)	9	(3,770)	(4,377)
Gross profit	61	223	234	2,497	3,015
Selling and marketing costs	(13)	-	(51)	(1,326)	(1,390)
Administration expenses	(220)	(281)	(105)	(1,014)	(1,620)
EBITDA*	(172)	(58)	78	157	5
Depreciation, amortisation and impairment	(3)	1	(60)	(7)	(69)
(Loss)/profit before tax	(175)	(57)	18	150	(64)
Taxation	(5)	-	-	(91)	(96)
(Loss)/profit after tax	(180)	(57)	18	59	(160)

* Earnings before interest, tax, depreciation, amortisation and share compensation

The segmental results for the 6 months ended 31 December 2010 were as follows:
£000's	Europe	Asia Pacific	North America	Latin America	Group
Mobile operator services	81	783	399	1,049	2,312
Mobile internet services	97	-	58	2,354	2,509
Other service fees	415	49	11	16	491
Total revenue	593	832	468	3,419	5,312
Other income	484	-	-	-	484
Cost of sales	(46)	(574)	(201)	(2,093)	(2,914)
Gross profit	1,031	258	267	1,326	2,882
Selling, marketing and administration expenses	(782)	(223)	(577)	(995)	(2,577)
EBITDA*	249	35	(310)	331	305
Depreciation, amortisation and impairment	(102)	(3)	(26)	(16)	(147)
Finance income/(expense)	1	-	-	-	1
Profit/(loss) before tax	148	32	(336)	315	159
Taxation	62	-	-	(96)	(34)
Profit/(loss) after tax	210	32	(336)	219	125

* Earnings before interest, tax, depreciation, amortisation and share compensation

The segmental results for the 18 months ended 30 June 2011 are as follows:
£000's	Europe	Asia Pacific	North America	Latin America	Group
Mobile operator services	290	2,535	1,191	3,143	7,159
Mobile internet services	279	-	175	7,016	7,470
Other service fees	668	108	44	42	862
Total revenue	1,237	2,643	1,410	10,201	15,491
Other income	484	-	-	-	484
Cost of sales	(194)	(1,775)	(236)	(6,067)	(8,272)
Gross profit	1,527	868	1,174	4,134	7,703
Selling, marketing and administration expenses	(1,467)	(664)	(1,647)	(3,399)	(7,177)
EBITDA*	60	204	(473)	735	526
Depreciation, amortisation and impairment	(275)	(5)	(73)	(39)	(392)
Share based compensation	(19)	-	-	-	(19)
Finance income/(expense)	4	4	-	-	8
(Loss)/profit before tax	(230)	203	(546)	696	123
Taxation	80	-	-	(417)	(337)
(Loss)/profit after tax	(150)	203	(546)	279	(214)

* Earnings before interest, tax, depreciation, amortisation and share compensation

3.  EARNINGS PER SHARE
Earnings/(loss) per share
Earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.
					Audited
	6 months ended 31 December 2011		6 months ended 31 December 2010		18 months ended 30 June 2011
			125
(Loss)/profit for the period (£000's)	(160)				(214)
(Loss)/earnings per share (pence):
Basic	(0.439)		0.345		(0.589)
Diluted	(0.439)		0.334		(0.572)

Adjusted earnings per share
Adjusted earnings per share is calculated to reflect the underlying profitability of the business by excluding non-cash charges for depreciation, amortisation, impairments and share compensation charges.
	6 months ended 31 December 2011	6 months ended 31 December 2010	18 months ended 30 June 2011
	£000's	£000's	£000's
(Loss)/profit for the period	(160)	125	(214)
Add back: share compensation expense/(credit)	-	1	19
Add back: depreciation and amortisation	69	147	392
Adjusted profit for the period	(91)	273	197
	Pence per share	Pence per share	Pence per share
Adjusted (loss)/earnings per share	(0.250)	0.753	0.542
Adjusted diluted (loss)/earnings per share	(0.250)	0.730	0.527

Weighted average number of shares
	6 months ended 31 December 2011	6 months ended 31 December 2010	18 months ended 30 June 2011
Basic	36,457,692	36,278,265	36,313,610
Exercisable share options	1,130,230	1,174,484	1,077,661
Diluted	37,587,922	37,452,749	37,391,271

Diluted earnings/(loss) per share is calculated adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive ordinary shares: share options.

The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options and the yet to be recognised expenses in terms of the option. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

 

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