Interim Results
Velti PLC
11 September 2006
Velti 2006 maiden interim results
Financial Highlights
• Revenues grew 117% to €4.04m (2005: €1.87m)
• Gross profit grew 130% to €2.13m (2005: €0.93m)
• EBITDA grew 144% to €1.35m (2005: €0.55m)
• Operating profit grew 159% to €0.84m (2005: €0.32m)
• Profit before tax grew 182% to €0.71m (2005: €0.25m)
• Earnings per share (EPS) were €0.0216 (€0.0005 in 2005)
• Significant customer pipeline and momentum in Velti's traditionally
stronger second-half
Operational Highlights
• Signed a major contract with CosmOTE for mobile content management and
operation (operator with presence in 7 countries in South Eastern Europe
and around 10m subscribers)
• Launched an exclusive value-added services relationship with Q-Telecom
(operator with almost 1m consumers)
• Won key new contracts in Vodafone and Telecom Italia Mobile Hellas
• Growing footprint in South Eastern Europe
Product Development
• Release of version 3.5 of Messaging, Content Aggregation and Syndication
Platforms
• Introduction of new version of Mobile Marketing Platform for Advertising
Agency ASP customers
Successful IPO in May 2006
• Raised €12.5m to support company growth
• Improved company profile has had positive effect on sales cycle
David Mann said: 'I am delighted that in our first results announcement as a
public company we have exceeded the market expectations set at the time of the
IPO, in spite of the significant amount of management time necessarily devoted
to that process.'
Alexandros Moukas added 'We have made considerable progress in the first half of
the year. As we come to the end of the third quarter we see good prospects for
achieving our goals for the year. There are a growing number of opportunities
with new clients and we are putting emphasis on expansion outside Greece.'
Chairman's and Chief Executive's Statement
During the first half of 2006, Velti made substantial progress towards achieving
its strategic goals as well as continuing to deliver a strong financial
performance.
Velti is a one-stop-shop software and service provider that enables mobile
content, advertising and marketing. Velti's portfolio includes solutions for
Mobile Operators, Media & Content Providers and Advertising Agencies, primarily
in South Eastern Europe and the Balkan region. Velti's business model focuses on
providing solutions to such organisations rather than marketing services
directly to consumers.
In May, the company successfully floated on AIM, raising approximately €12.5
million, net of expenses, to pay off debt and fund expansion. As a consequence,
Velti is one of the best capitalised companies in its field operating in South
Eastern Europe and the Balkan region.
Overall financial performance for the six month period ended 30 June 2006 was at
the top end of management's expectations, reflecting strong demand for our
products and services. The company achieved revenue growth of 117% to €4.04
million whilst profit before tax grew by 182% to €0.71 million and the net cash
balance at the end of the period was €7.63 million.
Since the beginning of the year Velti has expanded its business with existing
mobile operator customers including Vodafone and TIM Hellas. It has won key new
customers such CosmOTE, which has a presence in 7 countries, and Q-Telecom. It
has secured a new contract for providing cross-operator traffic location-based
services. In cooperation with advertising agency partners like BBDO and Liberis
Group it has run more than 20 mobile content and marketing campaigns since the
beginning of the year. Velti's activities outside Greece grew stronger with
established customers in Turkey, Cyprus, Bulgaria, Romania, Armenia and Bosnia.
A major emphasis in product development was on expanding Velti's Mobile
Marketing platform. This software allows Velti to serve as a one-stop shop for
advertising agencies whose clients are pushing promotion and advertising budgets
to the mobile channel.
Velti has a combination of a strong financial position, a highly qualified work
force and, through the bulk of operations being carried out in Greece, a low
cost structure. This has played a significant part in its success and should
enable Velti to continue to compete effectively in its chosen markets.
Velti's revenues have traditionally been much stronger in the second half and
the directors see good prospects for this seasonality to continue and for the
company to meet its financials targets for the year. The longer-term prospects
remain very exciting.
Non-Executive Chairman Chief Executive
David Mann Alexandros Moukas
Operational Overview
Mobile Operators & Banks
Velti strives to be the primary on-portal managed platform and service provider
for their value-added services offerings. This is an area where Velti has seen
strong growth and is currently managing five portals for operators in the
region. Under these agreements Velti provides exclusively all value added
services, leveraging content from third party providers in exchange for revenue
share fees.
In addition, there is strong growth potential in the field of providing mobile
marketing and promotion solutions for own operator needs. Velti has already run
very successful campaigns for operators in Greece and we plan to expand this
activity across the country.
During the first half of 2006, we won contracts with Q-Telecom and CosmOTE,
making Velti the preferred supplier of value added services platforms and
managed services for all four mobile operators in Greece. CosmOTE is the biggest
mobile operator in the region with a presence in seven countries and almost 10
million customers. Velti won the strategically important bid for CosmOTE's new
Content Management System.
The contract with Q-Telecom, which we won just before flotation, allows Velti to
be the exclusive provider of Value-Added Services for Q Telecom's almost one
million subscribers. Velti launched the services in early July and has been
supported by a significant advertising spend by Q-Telecom since the end of
August.
Vodafone continued to be the company's most significant client and Velti has won
new managed services and platform contracts. In addition, a key new project was
won by Velti to develop the Vodafone Online Sales and Services Portal. This is a
Vodafone initiative which is attracting a lot of interest with regards to
Vodafone's future value added services strategy.
The relationship with TIM Hellas that began less than a year ago is expanding
rapidly in new areas like mobile TV, ring-back tones and business intelligence
systems for targeting mobile content and advertising.
Velti won a very significant mobile transportation contract for building and
managing a system that provides location-based traffic information in Athens and
other large Greek cities through all mobile networks. Velti is also deploying a
system for optimising mobile content and downloads for Intralot (the world's
third largest gaming and lottery systems provider).
Our non-telecom business in Greece is increasing steadily with new contracts and
extensions with two of the biggest banks in Greece, National Bank of Greece
(which recently bought the Turkish Bank, FinansBank) and ATE Bank.
Advertising agencies & media groups
Velti is a one-stop shop providing a full worldwide solution enabling
advertising agencies to plan, manage and monitor hundreds of simultaneous
campaigns through the mobile channel and to integrate with non-mobile campaigns.
As an applications services provider, Velti is able to handle all the complexity
required for launching such campaigns across hundreds of devices and operators
with different standards and guidelines in a way that is consistent with best
business practices.
For media groups, Velti provides services to major brand names for monetising
the mobile channel. Velti offers a multitude of services such as on-deck mobile
operator placement, or on off-deck portals promoted by the media players and
advertised across all operators. These services are offered on a managed
services or revenue share basis with Velti not incurring any advertising costs.
Building upon its partnership with the BBDO advertising agency and two of the
biggest media companies in Greece (publishing more than 30 magazines) Velti has
delivered more than 22 mobile content and marketing campaigns to its advertising
agency and media customers.
Geographical Expansion
Mobile penetration in the region continues to grow rapidly and Velti is
exploiting its unique relationships with existing customers and partners to
expand its business. In Cyprus, the cooperation with CYTA continues strongly,
with managed services being offered for the introduction and operation of
Vodafone Live in Cyprus. In Turkey, Velti successfully completed its first
contract for Turkcell in the area of mobile content rendering. Velti is
leveraging this success by establishing a sales office in Turkey and
strengthening its relationships with Turkcell and the other two mobile
operators, Telsim (recently acquired by Vodafone) and Avea.
In Armenia, our exclusive deal with Armentel is bringing in significant revenue,
where our value-added services content offering is complemented by competitions
and other mobile marketing activities. In Bulgaria, our efforts for establishing
partnerships with the two largest operators Globul (a CosmOTE subsidiary) and
M-Telecom are progressing well. In Romania, we started bidding for mobile
operator business. In Bosnia, Velti has implemented a project with the BH
Telecom group, the country's largest network operator. Finally, in the US, sales
efforts have been generating new contracts that are being serviced out of our
common data centre in Greece.
Product Development
Velti has extensive experience gained from implementing a wide variety of
projects with deep customer relationships established over many years. As a
result, Velti is able to ensure that its product development activities are
based on the latest standards and market needs.
Mobile operators
Velti is continuously upgrading its Media Content Delivery and Messaging
Services platforms to enable efficient handling of new types of content such as
Mobile TV, Video on Demand, Ringback Tones, and Full Track Music Downloads.
Personalisation software based on business intelligence infrastructure
constitutes one of the key elements of Velti's product offering. Such software
enables operators both to target content accurately and to facilitate the
advertising on operator driven portals. The company is also investing in new
services focusing primarily on user-generated content applications as well as
location based services that operators will launch in the next years.
Media Companies
Velti's work as a platform and managed services provider for Operators provides
the company with a solid infrastructure ahead of the competition for providing a
one-stop shop for enabling the mobile channel to media companies. After one year
in this market Velti is already providing managed services for five Operator
Portals and in all cases any content provider or service provider that wants to
provide new or existing services is going through Velti's platforms installed at
Operators.
Advertising Agencies
Velti's major product development emphasis following the IPO in May has focused
on expanding its Mobile Marketing platform, the software centerpiece that will
allow Velti to serve as a one-stop shop for Advertising Agencies that want to
push promotion and advertising budgets of their clients to the mobile channel.
While this platform has been available and expanded for four years and is
enabling the creation of new campaigns in minutes, Velti's new efforts are aimed
towards providing a business intelligence, planning and monitoring layer for ad
agencies. This layer, an extranet from which advertising agencies can run
efficiently many campaigns at the same time, is the essential infrastructure for
providing the confidence and transactional visibility necessary to advertising
agencies if they were to commit significant budgets in mobile advertising. In
addition to the above Velti is incorporating in all its products the features
necessary to hide complexity so that its partners are enabled in hours rather
than months. The company is continuously upgrading its infrastructure to handle
more than 900 devices (and the more than 100 devices added every year),
different standards and compliance with the mobile operators and mobile
marketing association best practices.
Financial Review
In the six month period ended 30 June 2006 sales reached an amount of €4.04
million posting an increase of 117 per cent compared to the respective period in
2005 (€1.87million). The increase in sales resulted from organic growth in both
telco and non-telco segments which in turn was fuelled by repeat business with
existing clients and addition of new key clients. Repeat business arose from
revenues-shared, managed services and support contracts with existing clients,
and migration to new versions of our platforms. During the period telco sales
increased by 121 per cent to €3.35 million (€1.52 million in 2005) and non-telco
sales increased by 96 per cent to €0.69 million (€0.35 million in 2005).
Gross profit increased by 130 per cent to €2.13 million (€0.93 million in first
half of 2005) delivering a margin of 53 per cent. The improved margin in gross
profit reflects the scaleability of Velti's business model.
Operating profit increased by 159 per cent to €0.84 million (€0.32 million in
2005) delivering a margin of 21 per cent (17 per cent in 2005). The increase in
operating margin reflects the positive impact of increased trading activity in
both telco and non-telco segments. During the period operating profit from telco
sales increased by 45 per cent to €0.81 million (€0.56 million in 2005) while
operating profit from non-telco sales was €0.03 million (€0.24 million operating
loss in 2005).
Profit before tax reached €0.71 million an increase of 182 per cent over 2005
(€0.25 million). Basic earnings per share were €0.0216 (€0.0005 in 2005).
The accelerated growth in sales created increased working capital requirements
which, despite significant profitability during the period, resulted in an
operating cash outflow of €0.85 million.
Velti's balance sheet was substantially strengthened as a result of raising
€12.50 million net when we floated on AIM. At the end of the first half of 2006
part of these funds were used to repay €2.71 million of high coupon debt and to
finance increased working capital requirements. At 30 June 2006 the net cash
position stood at €7.63m compared to a net debt position of €1.91m as at 31
December 2005. The company is gradually repaying its debt: at 30 June 2006 total
debt stands at €1.67 million compared to €4.38 million at 31 December 2005.
Velti fully consolidates its wholly-owned subsidiaries VNA and VCI. Two of VCI's
companies, Amplus and N-squared are consolidated into VCI as subsidiaries on the
basis of majority board of directors control. The third VCI company, Evorad, is
treated as an associate.
During this period, Velti has been in the process of strengthening its financial
management team and reporting systems in keeping with the Company's status as a
listed Company. Baker Tilly, the reporting accountants for the IPO, have been
appointed as auditors to the Group for this year.
CONSOLIDATED INCOME STATEMENTS
Six months ended Six months ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Sales 4,041 1,866 4,884
Cost of sales (1,910) (940) (1,892)
Gross profit 2,131 926 2,992
Other operating income 36 - -
Selling expenses (562) (286) (537)
Administrative expenses (719) (267) (1,077)
Other operating expenses (48) (50) (7)
Operating profit 838 323 1,371
Finance expense (127) (65) (282)
Share of loss of associates - (6) (6)
Profit before tax 711 252 1,083
Tax (277) (244) (356)
Profit after tax 434 8 727
Minority Interest 46 - -
Profit after minority interest 480 8 727
Basic Earnings per share ( in 0.0216 0.0005 0.0421
Euro):
CONSOLIDATED BALANCE SHEETS
30 June 2006 30 June 2005 31 Dec 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €' 000
ASSETS
Non -current assets
Property, plant and equipment 592 176 307
Intangible assets 3,197 939 1,773
Investments 180 6 -
Goodwill 963 - -
Restricted available-for-sale - - 229
investment
Deferred tax assets 121 287 -
5,053 1,408 2,309
Current assets
Receivables and prepayments 4,797 3,274 3,231
Available for sale investment 26 47 26
Cash and cash equivalents 9,301 4 2,467
14,124 3,325 5,724
Total assets 19,177 4,733 8,033
SHAREHOLDERS' EQUITY
Share capital 2,125 2,224 2,446
Share premium account 11,772 - -
Fair value and other reserves - 39 -
Minority interest 726 - -
Merger reserve 1,071 - -
Accumulated losses (1,002) (2,108) (1,482)
Total shareholders' equity 14,692 155 964
LIABILITIES
Non-current liabilities
Borrowings 750 918 2,431
Retirement benefit obligations 88 59 65
838 977 2,496
Current liabilities
Trade and other payables 2,559 1,981 1,921
Deferred Income - - 666
Current income tax liabilities 170 63 40
Borrowings 918 1,557 1,946
3,647 3,601 4,573
Total liabilities 4,485 4,578 7,069
Total equity and liabilities 19,177 4,733 8,033
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Fair Value &
Share Share Other Minority Merger Accumulated
Capital Premium Reserves Interests Reserve Losses Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000
Balance at 2,224 - 39 - - (2,122) 141
1 January 2005 (audited)
Deferred tax adjustment - - - - - 6 6
Profit for the period - - - - - 8 8
Balance at 2,224 - 39 - - (2,108) 155
30 June 2005 (unaudited)
Share options exercised 222 - - - - - 222
Transfer to - - (39) - - 39 -
retained earnings
Deferred tax adjustment - - - - - 11 11
Share issue expenses - - - - - (143) (143)
net of deferred taxes
Profit for - - - - - 719 719
the period
Balance at 2,446 - - - - (1,482) 964
31 December 2005
(audited)
Acquisition of Velti SA (2,446) - - - 1,071 - (1,375)
Share capital issued 2,125 11,772 - - - - 13,897
Minority interests on - - - 772 - - 772
acquisition of
subsidiaries
Profit for the period - - - (46) - 480 434
Balance at 2,125 11,772 - 726 1,071 (1,002) 14,692
30 June 2006 (unaudited)
CONSOLIDATED CASH FLOW STATEMENTS
Six month ended Six month ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
unaudited) (unaudited) (audited)
€'000 €'000 €'000
Cash flows from operating activities
Cash generated from operations (850) 709 899
Interest paid (127) (65) (243)
Tax paid (159) (8) (255)
Net cash (used in)/generated from operating (1,136) 636 401
activities
Cash flows from investing activities
Purchase of property, plant and equipment (339) (61) (230)
Purchase of Intangible Assets (1,304) (882) (1,987)
Purchase of available-for sale investments (199) (57) -
Disposal of available-for sale investments - 57 31
Interest received - - 6
Government grants received - - 1,250
Net cash used in investing activities (1,842) (943) (930)
Cash flows from financing activities
Long-term borrowings (1,681) 20 -
Net proceeds from issue of ordinary shares 12,521 - 222
Borrowings (1,028) 177 2,675
Finance lease payments - - (15)
Net cash from financing activities 9,812 197 2,882
Increase/(decrease) in cash and cash 6,834 (110) 2,353
equivalents
Movement in cash and cash equivalents
At beginning of year 2,467 114 114
Increase/(decrease) 6,834 (110) 2,353
At end of year 9,301 4 2,467
Notes
1. Accounting policies and basis of preparation
The interim consolidated financial statements of Velti plc (the Company) have
been prepared in accordance with International Accounting Standard 34 Interim
financial reporting, under the historical cost convention and in accordance with
the accounting policies set out in the financial statements of Velti SA for the
year ended 31 December 2005. The interim consolidated financial statements do
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
The consolidated financial statements include the results of Velti plc and
entities controlled by Velti plc (its subsidiaries) forming the Group (see note
6.).
2. Segment information
The Group's main sources of revenue are:
•Development of platforms/applications and managed services serving
customers in the telecommunications industry (telco) and other sectors such
as banking and e-government (non-telco)
•Joint venture or partner driven revenue share deals with mobile carriers
and media companies
As of 1 January 2006, the Group assumed a more active part in the mobile content
value chain as a mobile aggregator that uses its platforms and services to offer
solutions to customers and partners. The revenue from this activity is included
in the 'Telco' segment. Segment information of these businesses is presented
below:
Revenue by business segment:
Six months ended Six months ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Telco 3,354 1,515 3,460
Non - Telco 687 351 1,424
Total 4,041 1,866 4,884
Operating profit / (loss) before financial expenses by business segment:
Six months ended Six months ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Telco 806 557 1,297
Non - Telco 32 (254) 74
Total 838 303 1,371
3. Borrowings
30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Current
Current portion of long-term
debt (within 1 year) 80 - 427
Short-term loans 838 1,557 1,519
918 1,557 1,946
Non - current
Long-term portion of long-term
debt 750 - 1,286
Long-term loans - 918 1,145
750 918 2,431
Total borrowings 1,668 2,475 4,377
During the six months period 30 June 2006 the Company repaid: a) the long-term
loan agreement with EFG-Eurobank for an amount of €1,145,000 which was obtained
in 2005 to finance the investment in the VCI project (see note 6.), b) the
mezzanine loans amounting to €804,000, plus accrued interest, which were
obtained in December 2005 from shareholders to finance operations and c) various
short term credit facilities amounting to approximately €760,000.
4. Earnings per share
30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Profit attributable to
equity holders of the
Company 480 8 727
Weighted average number
of ordinary shares in
issue 22,241,557 17,290,318 17,290,318
Basic earnings per share
(€ per share) 0.0216 0.0005 0.0421
There are no dilutive or potentially dilutive instruments in issue.
5. Share Capital
On 13 April 2006, each issued and unissued ordinary share of £1 (€1.45) was
subdivided into 20 ordinary shares of 5 pence (€0.07) each and the authorised
share capital of the Company was increased from £50,000 to £2,500,000.
On 20 April 2006 Velti plc acquired the whole of the issued share capital of
Velti SA by way of a Share Purchase Deed and Subscription Agreement. 19,019,335
ordinary shares were issued to various parties pursuant to the terms of this
Share Purchase Deed and Subscription Agreement. The acquisition of Velti SA by
Velti plc has been accounted for using merger accounting principles. As such,
the comparative figures are those of Velti SA and its subsidiary companies.
On 3 May 2006 10,000,000 ordinary shares of 5p were allotted at a premium of 95p
per share.
6. Subsidiaries
Velti SA, a 100% and the sole direct subsidiary of Velti plc, owns: a) 78% of
the share capital of Velti North America Inc (previously Retaine Inc), a company
whose primary focus is the provision of Mobile Value Added Services and b)
99.99% of the share capital of Velti Center for Innovation S.A. ('VCI') which
was incorporated in 2005. In turn VCI has a 46% holding in Amplus SA and a 45%
holding in N Squared SA which are consolidated on the basis of majority control
of the Board of Directors of that company. During the six months period ended 30
June 2006 Velti SA and VCI paid an amount of €1,317,010 for acquisitions. The
post-acquisition loss of the subsidiaries acquired during the period was
€228,531.
Subsidiaries are consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
7. Cash (Used in) / Generated From Operations
Six months ended Six months ended Year ended
30 June 2006 30 June 2005 31 Dec 2005
(unaudited) (unaudited) (audited)
€'000 €'000 €'000
Net profit before tax 711 252 1,083
Adjustments for:
Tax expense/(income) - (8) -
Interest income - - (6)
Interest expense 127 65 290
Depreciation 59 26 69
Amortisation of intangible assets 449 203 473
Amortisation of grants - - (584)
Post-retirement benefits - - 28
Foreign exchange gain 3 - -
Share of loss of associates - 6 6
Fair value gain on
available-for-sale investment - - (2)
1,349 544 1,357
Changes in working capital:
Receivables and prepayments (2,214) (125) (648)
Trade and other payables (3) 279 195
Pensions and other post-retirement
obligations 18 11 (5)
(2,199) 165 (458)
Cash (used in) / generated from
operations (850) 709 899
This information is provided by RNS
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