Half Yearly Report

RNS Number : 9312O

Mobile Tornado Group PLC

26 September 2013

 



Mobile Tornado Group plc

("Mobile Tornado" or the "Company")

Half Yearly Report

Mobile Tornado (AIM: MBT), the Instant Communications services provider for mobile devices, announces its unaudited results for the six month period to 30 June 2013. Trading remains in line with the Board's expectations for the full year.

Financial highlights

·     Revenue up 40% to £1.41m (H1 2012: £1.00m)

-      Recurring license fees up 30% to £0.38m (H1 2012: £0.30m)

·     Adjusted EBITDA* loss of £0.79m (H1 2012: £0.51m loss)

·     Adjusted operating loss* of £0.85m (H1 2012: £0.56m loss)

·     Loss after tax of £1.26m (H1 2012: £0.58m)

·     Basic loss per share of 0.68p (H1 2012: 0.31p)

·     Cash at bank of £52,000 (H1 2012: £21,000) with net debt of £3.63m (H1 2012: £2.43m)

·     Post period end Placing raised £4.0m gross alongside capital reorganisation

*excluding exchange differences

Operating highlights

·     Increase in sales momentum with installation and set-up of new and potential customers

·     Platform installation for a North American Mobile Network Operator

·     Set-up of two homeland security trials in Asia

·     30,000 licenses at the end of June (H1 2012: 19,000)

·     Commercial launch with first America Movil Group companies anticipated in H2

·     France based Tier 1 Mobile Network Operator anticipated to launch in H2

·     Further negotiations with Mobile Network Operators and additional trials underway

Jeremy Fenn, Chief Executive Officer of Mobile Tornado, said:

"The strong revenue growth in the first half demonstrates the increasing traction our instant communication platform has with mobile operators around the world, as well as the potential for our secure product for the homeland security market. We expect our recurring subscription revenues to continue to grow and the second half and beyond will see a number of key contracts move to commercial launch."

Mobile Tornado Group plc		www.mobiletornado.com
Jeremy Fenn, Chief Executive		[phone]
Investec Bank plc (Nominated Adviser & Broker)		[phone]
Andrew Pinder, Dominic Emery, Carlton Nelson, Sebastian Lawrence
Walbrook PR Ltd	[phone] or [e-mail]
Paul McManus		[phone]
Helen Cresswell		[phone]

About Mobile Tornado Group Plc (www.mobiletornado.com)

Mobile Tornado Group PLC (AIM: MBT) specialises in the provision of Instant Communications services for mobile devices, with a focus on enterprise workforce management. The Company's main applications comprise Instant Talk, Instant Locate, Instant Alert & Instant Message and are geared towards improving a business's productivity and performance by enabling organisations and workers to connect one-to-one or one-to-many at the touch of a button.

By equipping their workforce with conventional mobile handsets and Mobile Tornado's Instant Communication services, a company can communicate with one or many employees simultaneously, monitor employee locations, and immediately be alerted of major issues. At the touch of a button, they can communicate with employees more efficiently and cost-effectively than would be possible with traditional mobile services or other Private Mobile Radio (PMR) solutions.

Mobile Tornado's patented Internet Protocol Radio Service (IPRS™) technology has been successfully deployed on networks around the world. The suite of IP-based, OMA standards-compliant services provide instantaneous, 'always-on', bandwidth-efficient communications across a range of mobile networks and devices, including compatibility with forthcoming LTE (Long Term Evolution) 4G mobile networks. Both technical and cost performance is superior to many competing services and technologies, with proven success in the current marketplace.

Chairman's Statement

The first half has seen strong revenue growth as Mobile Network Operators (MNOs) continue to look to create new revenue streams around additional services and applications. There is an increasing recognition among MNOs that Mobile Tornado's Push to Talk (PTT) application suite is the leading communication tool for remote workforces. Having increased our installed base during the period and made good progress on a number of trials, we are confident that we will continue to build sustainable recurring licence fee revenues.

Financial Results

Turnover in the six month period to 30 June 2013 increased 40% to £1.41m (H1 2012: £1.00m). Recurring licence fee revenues were up by 30% to £0.38m (H1 2012: £0.30m) and monthly recurring licence fees as at 30 June 2013 were £71,000, a 34% improvement on the previous year end (as at 31 December 2012: £53,000).

Gross profit decreased to £0.61m (H1 2012: £0.77m), reflecting a higher level of hardware revenue within the revenue mix for the period. We expect gross margins to improve as licence revenues from new larger deals with MNOs and homeland security customers as they move out of installation and trial phases.

Operating expenses increased by £0.13m reflecting the increase in headcount within the technical and operations team in anticipation of the increasing requirements from our global customer base. As a result, Group operating losses before exchange differences, depreciation and amortisation expense showed an increased loss of £0.79m (H1 2012: £0.51m loss). Reported Group operating losses were £1.14m (H1 2012: £0.46m). The loss before tax for the period was £1.40m (H1 2012: £0.68m).

The net cash outflow from operating activities reduced to £0.27m (H1 2012: £0.47m). The Company saw a net decrease in cash and cash equivalents in the period of £48,000 (H1 2012: £56,000 decrease). As at 30 June 2013, the Company had net debt of £3.63m (30 June 2012: £2.43m). Cash at bank as at 30 June 2013 increased to £52,000 compared to £21,000 at 30 June 2012.

Following the period end, the Company strengthened its balance sheet by raising gross proceeds of £4.00m from a placing of 20,000,000 new ordinary shares at 20 pence per share. We also announced a capital reorganisation which saw £4.0m of debt capitalised into shares and £2.7m of debt capitalised into non-convertible preference shares. As a result, the Company currently has approximately £3.20m cash at bank and net debt of approximately £2.50m.

Review of Operations

I am very pleased to report that the first half has seen a considerable increase in our sales momentum and the installation and set-up of new and potential customers which should lead to an uplift in licence fee revenues in the second half and beyond.

Mobile Network Operators

The major installation activity in the first half focused around the platform installation for a North American MNO and the set-up of two homeland security trials in Asia. This has seen installation and set-up revenues increase to £1.02m (H1 2012: £0.71m) and should drive an increase in recurring revenues.

The number of billing licenses at 30 June 2013 increased 58% to 30,000, against 19,000 at 31 December 2012. We expect this to rise further in the second half as a number of MNO installations move into commercial launch in the second half.

The installation of our platform with America Movil continued to progress well during the first half and, whilst this has taken longer than we initially expected, full commercial launch of our Push to Talk (PTT) service to both consumer and enterprise customers with Telcel (Mexico) and Claro (Brazil) is anticipated in the second half. These will be the first MNOs within the American Movil network to launch the service to their subscribers. Following further installation work during the first half, our Tier 1 MNO customer based in France is also expected to move to full commercial launch of services in the second half of 2013. We have also advanced negotiations with a number of other Tier 1 MNOs and will update shareholders as these progress. Additional trials are currently underway with MNOs in Africa, Australia and Turkey.

Homeland security

We are also very pleased with the interest that has been created during the half in our Secure PTT over Cellular (SPOC) platform which provides an attractive lower cost solution to existing communication platforms used in homeland security. We have been engaged with a number of opportunities within Asia, Africa and South America in the period under review and we have installed our platform in two Asian countries to set up SPOC services to provide encrypted communications for homeland security agencies. Testing in these two geographies is currently underway and we hope that this will progress to full commercial arrangements in due course.  We hope to make further announcements in the coming months.

The development of our own handset, the T930 with enhanced encryption, has progressed well and is close to its initial commercial deployment. The T930 meets the required security standards for homeland security use and has opened up multiple opportunities which we are currently exploring.

Summary

Our progress in the first half reflects the attraction of our Instant Communications platform which can be installed and integrated at a relatively low cost. Increasingly MNOs are embracing Push to Talk applications as a route to both revenue generation and protection.  Our managed service model suits the requirements of MNOs as demonstrated by the large scale contracts already signed with Tier 1 MNOs.

We have a good pipeline of installed platforms that should move towards commercial launch in the second half, and we are encouraged by the increasing opportunities with new Tier 1 MNOs, as well as Government agencies that are attracted to our Secure PTT over Cellular platform for homeland security. Our recurring licence fee revenues increased by 30% and we expect this rate of growth to accelerate as MNOs roll-out the applications to their own customers.

The Company continues to trade in line with the Board's expectation for the full year and we believe that a number of opportunities that will come to fruition in the second half and beyond will deliver significant shareholder value.

Peter Wilkinson

Chairman

26 September 2013

Consolidated income statement
for the six months ended 30 June 2013
			Six months		Six months		Year
			ended		ended		ended
			30 June		30 June		31 December
			2013		2012		2012
			Unaudited		Unaudited		Audited
	Note		£'000		£'000		£'000
Continuing Operations
Revenue			1,406		1,004		1,453
Cost of sales			(792)		(233)		(308)
Gross profit			614		771		1,145
Other operating expenses			(1,407)		(1,280)		(2,506)
Group operating loss before exchange differences,
depreciation and amortisation expense			(793)		(509)		(1,361)
Exchange differences			(288)		97		132
Depreciation and amortisation expense			(60)		(46)		(100)
Total operating expenses			(1,755)		(1,229)		(2,474)
Group operating loss			(1,141)		(458)		(1,329)
Finance costs			(255)		(221)		(460)
Loss before tax			(1,396)		(679)		(1,789)
Income tax credit			132		101		101
Loss for the period			(1,264)		(578)		(1,688)
Attributable to:
Equity holders of the parent			(1,264)		(578)		(1,688)
Loss per share (pence)
Basic and diluted		3	(0.68)		(0.31)		(0.91)

Consolidated statement of comprehensive income
for the six months ended 30 June 2013
		Six months		Six months			Year ended
		ended		ended			ended
		30 June		30 June			31 December
		2013		2012			2012
		Unaudited		Unaudited			Audited
		£'000		£'000			£'000
Loss for the period		(1,264)		(578)			(1,688)
Other comprehensive income
Exchange differences on translation
of foreign operations		(18)		4			12
Total comprehensive income for the period		(1,282)		(574)			(1,676)

Consolidated statement of changes in equity

for the six months ended 30 June 2013

	Share	Share	Reverse acquisition	Merger	Preference	Translation	Retained	Total
	capital	premium	reserve	reserve	Shares	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2012	3,699	4,449	(7,620)	10,938	2,390	(2,163)	(20,661)	(8,968)
Equity settled share-based payments	-	-	-	-	-	-	12	12
Transactions with owners	-	-	-	-	-	-	12	12
Loss for the period	-	-	-	-	-	-	(578)	(578)
Exchange differences on translation
of foreign operations	-	-	-	-	-	4	-	4
Total comprehensive income
for the period	-	-	-	-	-	4	(578)	(574)
Balance at 30 June 2012	3,699	4,449	(7,620)	10,938	2,390	(2,159)	(21,227)	(9,530)
	Share	Share	Reverse acquisition	Merger	Preference	Translation	Retained	Total
	capital	premium	reserve	reserve	Shares	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2012	3,699	4,449	(7,620)	10,938	2,390	(2,159)	(21,227)	(9,530)
Equity settled share-based payments	-	-	-	-	-	-	13	13
Transactions with owners	-	-	-	-	-	-	13	13
Loss for the period	-	-	-	-	-	-	(1,110)	(1,110)
Exchange differences on translation
of foreign operations	-	-	-	-	-	8	-	8
Total comprehensive income
for the period	-	-	-	-	-	8	(1,110)	(1,102)
Preference Shares	-	-	-	-	-	-	-	-
Balance at 31 December 2012	3,699	4,449	(7,620)	10,938	2,390	(2,151)	(22,324)	(10,619)
	Share	Share	Reverse acquisition	Merger	Preference	Translation	Retained	Total
	capital	premium	reserve	reserve	Shares	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2013	3,699	4,449	(7,620)	10,938	2,390	(2,151)	(22,324)	(10,619)
Equity settled share-based payments	-	-	-	-	-	-	12	12
Transactions with owners	-	-	-	-	-	-	12	12
Loss for the period	-	-	-	-	-	-	(1,264)	(1,264)
Exchange differences on translation
of foreign operations	-	-	-	-	-	(18)	-	(18)
Total comprehensive income
for the period	-	-	-	-	-	(18)	(1,264)	(1,282)
Balance at 30 June 2013	3,699	4,449	(7,620)	10,938	2,390	(2,169)	(23,576)	(11,889)

Consolidated balance sheet
As at 30 June 2013
		30 June		30 June		31 December
		2013		2012		2012
		Unaudited		Unaudited		Audited
	Note	£'000		£'000		£'000
Assets
Non-current assets
Property, plant & equipment		262		269		221
		262		269		221
Current assets
Inventories		32		108		68
Trade and other receivables		1,396		1,371		2,179
Tax debtor		132		101		-
Cash and cash equivalents		52		21		100
		1,612		1,601		2,347
Liabilities
Current liabilities
Trade and other payables		(7,263)		(6,206)		(7,223)
Borrowings		(267)		(267)		(267)
Net current liabilities		(5,918)		(4,872)		(5,143)
Non-current liabilities
Trade and other payables		(2,823)		(2,745)		(2,612)
Borrowings		(3,410)		(2,182)		(3,085)
Net liabilities		(11,889)		(9,530)		(10,619)
Shareholders' equity
Share capital	4	3,699		3,699		3,699
Share premium	4	4,449		4,449		4,449
Reverse acquisition reserve		(7,620)		(7,620)		(7,620)
Merger reserve		10,938		10,938		10,938
Preference shares		2,390		2,390		2,390
Share option reserve		87		62		75
Foreign currency translation reserve		(2,169)		(2,159)		(2,151)
Retained earnings		(23,663)		(21,289)		(22,399)
Total equity		(11,889)		(9,530)		(10,619)

Consolidated cash flow statement
for the 6 months ended 30 June 2013
		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2013		2012		2012
		Unaudited		Unaudited		Audited
	Note	£'000		£'000		£'000
Operating activities
Cash used in operations	5	(269)		(469)		(1,043)
Tax credit received		-		-		101
Net cash used in operating activities		(269)		(469)		(942)
Investing activities
Purchase of property, plant & equipment		(107)		(254)		(261)
Net cash used in investing activities		(107)		(254)		(261)
Financing
Issue of loans		325		667		1,227
Net cash inflow from financing		325		667		1,227
Effects of exchange rates on cash
and cash equivalents		3		-		(1)
Net (decrease)/increase  in cash and
cash equivalents in the period		(48)		(56)		23
Cash and cash equivalents at beginning of period		100		77		77
Cash and cash equivalents at end of period		52		21		100

1          General information

The financial information set out on pages 4 to 10 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The comparative numbers for the year ended 31 December 2012 have been extracted from the audited accounts which have been filed at Companies House and which carried an unqualified audit report with no statement under section 498 (2) or (3) of the Companies Act 2006.

2          Basis of preparation

These interim financial statements are for the six months ended 30 June 2013. They have been prepared using the recognition and measurement principles of IFRS.

The interim financial statements have been prepared under the historical cost convention.

The interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2012. The accounting policies have been applied consistently throughout the Group for the purpose of preparation of the interim financial statements.

3          Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £1,264,000 (30 June 2012: £578,000, 31 December 2012: £1,688,000) by the weighted average number of ordinary shares in issue during the period of 184,953,708 (30 June 2012: 184,953,708, 31 December 2012: 184,953,708).

The adjusted basic loss per share has been calculated to provide a better understanding of the underlying performance of the Group as follows:

	Six months ended			Six months ended			Year ended
	30 June 2013			30 June 2012			31 December 2011
	Unaudited			Unaudited			Audited
	Basic and diluted			Basic and diluted			Basic and diluted
	Loss	Loss		Loss	Loss		Loss	Loss
		per share			per share			per share
	£'000	pence		£'000	pence		£'000	pence
Basic and adjusted
loss per share	(1,264)	(0.68)		(578)	(0.31)		(1,688)	(0.91)

The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share.  This is because the exercise of share options are anti-dilutive under the terms of IAS 33.

4	Share capital and share premium
		Number of			Share	Share			Total
		shares			capital	premium
		'000			£'000	£'000			£'000
	At 30 June 2012, 31 December 2012 and 30 June 2013	184,953			3,699	4,449			8,148
	Non-voting preference shares
						Number of			Value
						shares
						'000			£'000
	At 30 June 2012, 31 December 2012 and 30 June 2013						37,500		3,000

Following the change of rights attaching to the preference shares on 31 December 2010, the shares are deemed to be compound financial instruments, with the debt component calculated to be £610,000 (£343,000 due after more than one year) and the £2,390,000 balance reclassified as equity. The 10% annual preference share dividend of £300,000 (2012: £300,000) has been accrued within current liabilities.

5	Cash used in operations
		Six months	Six months	Year
		ended	ended	ended
		30 June	30 June	31 December
		2013	2012	2012
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
	Loss before taxation	(1,396)	(679)	(1,789)
	Adjustments for:
	Depreciation	60	46	100
	Share based payment charge	12	12	25
	Net finance costs	255	221	460
	Changes in working capital
	Increase in inventories	57	(108)	(68)
	Decrease/(Increase) in trade and other receivables	789	64	(744)
	(Decrease)/Increase in trade and other payables	(46)	(25)	973
	Net cash used in operations	(269)	(469)	(1,043)

6          Post balance sheet event

On 28 August 2013, following approval at a General Meeting of Shareholders, the Company announced the placing of 20,000,000 new ordinary shares at 20 pence per ordinary share to raise gross proceeds of £4.0million. Also announced on that date was a reorganisation of certain of its capital under which, in aggregate, £4.0million of funds payable to InTechnology Plc were capitalised into 20,000,000 new ordinary shares and a further amount of approximately £2.7million of funds payable to InTechnology Plc were capitalised into capital reorganisation preference shares. In addition, the existing preference shares had their rights amended in line with these capital reorganisation preference shares.

Further details of this transaction are contained within the Circular announcement which can be found on the company's website www.mobiletornado.com

7          Shareholder information

The interim announcement will be published on the company's website www.mobiletornado.com on 26 September 2013.

 

END

 

 

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