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Monitise PLC (MONI)

  Print      Mail a friend       Annual reports

Monday 11 February, 2013

Monitise PLC

Interim Results

RNS Number : 5446X
Monitise PLC
11 February 2013
 



11 February 2013                                                                                                                

 

Monitise plc

 

Interim results for the six months to 31 December 2012

 

H1 FY 2013 REVENUE OF £27.8M ($44.2M) 1, UP 63% ON H1 FY 2012 WITH STRONG GROWTH IN USER GENERATED REVENUE

 

H1 FY 2013 GROSS MARGINS RISE TO 72% FROM 64% IN H1 FY 2012 AND 69% IN H2 FY 2012

 

MONITISE PROCESSING 2BN TRANSACTIONS, A FOUR-FOLD INCREASE ON A YEAR AGO

REGISTERED CUSTOMERS 20M, COMPARED WITH 6M A YEAR AGO

MONITISE, BLACKBERRY AND PERMATABANK TO LAUNCH BLACKBERRY MESSENGER MOBILE PAYMENTS SERVICE
IN INDONESIA

MONITISE ENTERS STRATEGIC PARTNERSHIP WITH VENDA

FULL-YEAR REVENUE ON TRACK TO REACH AT LEAST £70M ($110M)

 

LONDON - Monitise plc (LSE: MONI) ("Monitise", the "Company" or the "Group")announces its unaudited interim results for the six months ended 31 December 2012.

 

Financial Highlights

 

·     H1 FY 2013 revenue of £27.8m, up 63% on H1 FY 2012; up 22% on an organic basis2.

Strong growth in user generated revenue on a reported and organic basis, up 164% and 70% respectively, rising on a reported basis to 51% of total revenues from 31% in H1 FY 2012 and 37% in H2 FY 2012.

·     Gross margins increased to 72% from 64% in H1 FY 2012, driven by a greater proportion of user generated revenue.

·     EBITDA3 in Live Operations of £5.3m (H1 FY 2012: £5.1m).

·     EBITDA loss of £14.7m (H1 FY 2012 loss: £4.2m), in line with management expectations, reflecting the acquisition of Clairmail Inc., continued investment in scaling of the Monitise Enterprise Platform and Group service delivery capabilities.

·     Group pre-tax loss of £24.4m (H1 FY 2012: profit £1.1m).

·     Free cash outflow5 was £21.6m in H1 FY 2013, compared to £22.6m in H2 FY 2012.

·     Gross cash of £106.4m as at 31 December 2012.  

 

1Foreign exchange rate for Sterling/US Dollar used in the interim results is $1.59.

2Assuming Clairmail Inc. had been owned for the full six months in H1 FY 2012.

3EBITDA is defined as operating profit/loss before exceptional items, depreciation, amortisation and share-based payment charges.

4 Live operations comprise Monitise UK, Monitise US and Global Accounts (incl Visa Inc. and Visa Europe).

5 Free cash flow comprises cash used in operating and investing activities, excluding exceptional items and net cash acquired on acquisitions of subsidiaries.

 

Outlook

 

·     Full-year revenue target of at least £70m ($110m) on track, underpinned by orderbook and strong sales pipeline.

·     Gross margin expectations of at least 70% maintained for full year.

·     More and more banks are seeing the inevitability of mobile becoming their most important customer engagement channel.

·     Group's strengthened balance sheet provides ability for Monitise to further scale its offerings and invest in its platform capabilities in line with market demand and to enable its clients' customers to bank, pay and buy through the mobile channel.

 

Business Highlights

 

·     Group

Value of payments and transfers initiated via the Monitise Enterprise Platform (MEP) is more than $31bn on an annualised basis, compared with $10bn a year ago.

Further growth in live transactions with 2bn transactions on an annualised basis, compared with 0.48bn in February 2012.

Registered customers 20m, compared with 6m in January 2012.

Acquisition of UK mobile commerce Joint Venture, the  Mobile Money Network Ltd.

§ All-share deal allows Monitise to deploy the mobile checkout and marketplace technology across the Group's global mobile commerce platform for banks and payment partners.

Acquisition of eMerit Solutions Ltd.

§ Acquisition extends mobile point of sale (mPOS) capabilities of the Monitise Enterprise Platform and enhances Monitise's international offering to SME banking customers. The Group already has a strong pipeline of mPOS opportunities in UK and Europe, with existing partners including O2 and HSBC Merchant Services LLP, a wholly-owned subsidiary of Global Payments Inc., and one of the largest independent payment processors in the UK.

Global footprint broadened to help clients enable their customers to Bank Anywhere, Pay Anyone and Buy Anything:

§ Cognizant, a leading global provider of information technology and business process services, and Monitise announced an alliance to leverage the Group's Monitise Enterprise Platform.

§ On 23 January 2013, Monitise announced an alliance with CGI Group Inc., a leading global provider of information technology and business process services.

§ Intuit Inc. and Monitise working on delivery of new mobile solutions. The relationship is intended to be worldwide, with initial focus on Europe and United States.

§ Monitise announces today that it has formed a strategic partnership with Venda, the world's largest on-demand ecommerce provider. The partnership will fast track retailer adoption of Monitise's Instant Mobile Checkout by seamlessly integrating with Venda's commerce platform. More than 100 brands of all sizes use Venda's platform to handle millions of transactions each month. These include Universal Music, Fat Face, TK Maxx, Tate, Laura Ashley, Emma Bridgewater, Jimmy Choo, Paperchase, Royal Doulton, Wickes, Clothing at Tesco and Orange.

Pipeline of more than 100 financial institutions via partners and direct sales teams looking to adopt mobile banking, payments and commerce services developed by Monitise.

 

·     UK and Europe

Strategic partner Visa Europe has a strong pipeline of banks readying to launch person-to-person and alerts services developed in collaboration with Monitise.

Android and BlackBerry Fast Balance services deployed for HSBC in the UK.

Android service deployed for The Co-operative Bank following launch of iOS and BlackBerry services for the bank earlier in 2012.

Monitise named 'Best Technology Supplier 2012' on 4 February 2013 by Royal Bank of Scotland Group.

 

·     Americas

Monitise Americas Inc. (formerly Clairmail Inc.) cemented its position as the leading independent Mobile Money company in North America.

A number of large issuers of both debit and prepaid cards are now live with Visa Inc.'s mobile Debit Processing Service (DPS) solution, which has been built and managed by Monitise. A growing number of US banks are preparing to launch services developed via Visa Inc.'s DPS, the largest issuer processor of Visa transactions in the US. 

Monitise expects to announce new initiatives, in collaboration with Visa Inc., over the coming months.

Monitise Americas Inc. operations integration now complete.

 

·     International

Via Monitise's Asia Pacific Joint Venture, BlackBerry Messenger's first mobile payments service  will be commercially launched in Indonesia later in February having recently received regulatory approval from Bank Indonesia, the country's central bank. A pilot launch went live on 1 February 2013.

In December 2012, mobile payment services in India went live via the Movida mobile payments Joint Venture between Visa Inc. and Monitise. The launch debuted with HDFC Bank, the second-largest private bank in the country. Over the coming months, Movida intends to announce further partner banks and services.

 

Alastair Lukies, Monitise Chief Executive Officer, said:

 

"Monitise's performance during the six months ended 31 December 2012 saw revenues continue to rise on the previous period with gross margins lifted by the ongoing shift towards growing user generated revenues. Monitise's overall performance during the period reflected the ongoing investment in scaling the business to meet the increasing global demand for Mobile Money and strategic moves taken to consolidate the Group's leadership position globally. Our vision is clear. As a result of  our interoperable platform and ecosystem of customers and partners, consumers globally can bank anywhere, pay anyone and buy anything via their mobile.

 

As the only independent Mobile Money business with live services across Europe, America, India and the Far East, we have big aspirations and remain resolutely focused on our strategy to enable the world's leading financial institutions to make money mobile for everyone as money becomes digitised."

 

Duncan McIntyre, Monitise Chairman, said:

 

"This has been yet another successful period in the Monitise journey. We were delighted with the strong investment community interest and support shown for our business with the capital raise carried out in December 2012. The proceeds from this are being used to rapidly scale our business as we enhance our global Mobile Money leadership position, laying deeper foundations for future growth.

 

During the period, we were delighted to welcome Mike Keyworth and Ellen Richey to our Board. I am also looking forward to welcoming Brad Petzer, whose appointment as the Group's Chief Financial Officer was announced on 4 January 2013, to the Board from 1 April 2013. Our experienced and professional management team and staff continue to work effectively to drive the Group forward."

 

About Monitise

 

Monitise plc (LSE: MONI) is a leading technology and services company that delivers mobile banking, payments, and commerce networks worldwide. Monitise enables financial institutions and other payment companies to defend and extend their market position by protecting their existing customer relationships and transactions while enabling new forms of mobile commerce revenue.

 

Monitise powers bank-grade solutions that are delivered on premise, or via cloud services. The value of payments and transfers initiated via Monitise's platform technology is more than US$31bn on an annualised basis. Monitise has a global reach and unique set of partners and clients using its completely adaptable Monitise Enterprise Platform. More information is available at www.monitise.com

 

An analyst presentation will be held on Monday 11 February 2013 at 10.30am GMT at the London Stock Exchange, London, EC4M 7LS. A live webcast of the presentation will be available to view online via investor relations on www.monitise.com. A replay facility will be accessible via www.monitise.com/investor_relations within 24 hours of the results presentation.

 

For further information

 

Monitise plc

Tel: +44(0)203 657 0900

Duncan McIntyre, Chairman


Alastair Lukies, Chief Executive Officer


Lee Cameron, Chief Commercial Officer


Mike Keyworth, Chief Operating Officer




Investor Relations


Haya Herbert-Burns

Tel: +44(0)203 657 0366

Haya.herbert-burns@monitise.com




Media Relations


Gavin Haycock

Tel: +44(0)203 657 0362

Gavin.haycock@monitise.com




Canaccord Genuity


Simon Bridges

Tel: +44(0)20 7523 8000

Cameron Duncan




FTI Consulting

Tel: +44(0)20 7831 3113

Charles Palmer


Jon Snowball


 

Forward Looking Statements

This document includes forward looking statements. Whilst these forward looking statements are made in good faith they are based upon the information available to Monitise at the date of this document and upon current expectations, projections, market conditions and assumptions about future events. These forward looking statements are subject to risks, uncertainties and assumptions about the Group and should be treated with an appropriate degree of caution.

 

Business Review

 

Monitise sells a hosted or on-premise Mobile Money software platform, called the Monitise Enterprise Platform (MEP), largely to financial institutions to enable mobile banking, mobile payments, and mobile commerce. User generated revenue is driven by per-user based annual fees, overlaid with transaction revenues based on fixed or percentage-of-transaction fees. Today, the bulk of user generated revenue is based on the per-user fee but rising payments and commerce functionality will see this mix evolve in coming years. Monitise also generates development and integration revenues from the installation and customisation of its platform.

 

Monitise has continued to build its global leadership position in deploying Mobile Money platforms for financial and other institutions. Via the MEP, the Group simplifies the complexity of delivering secure Mobile Money services to embrace any device, payment network or operator. It is a secure, configurable bank-grade platform spanning banked and unbanked markets. Monitise connects to financial institutions' core banking systems either directly, or via an ATM switch such as Vocalink in the UK or via a third-party processor company such as Visa DPS or FIS in the Americas. 

 

Our evolving MEP and associated products have been developed to deliver to consumers, services that are secure, accessible at all times and provide increasing opportunities for them to more readily control their money, pay and buy with their mobile devices. Monitise works with partner banks to deliver innovative Mobile Money services for multiple operating systems, allowing consumers to easily make instant payments and transfers, check their account balances and transaction history, find their nearest cash machine, set up alerts and top-up their mobile. The MEP is being expanded to incorporate mobile commerce features that will help banks retain customers, defend their position against non-bank competition, and generate new revenue streams. These could include targeted offers delivered to bank customers, one-touch mobile commerce shopping, and coupons and gift cards.

 

A unique feature of our platform, which we continue to focus on, is its ability to scale and deliver services in a cost-effective manner. The spend required to develop and maintain our platform is considerably less than for other banking channels and it is likely that mobile will be the dominant bank channel in a few years' time. As mobile is increasingly adopted by end consumers to bank, pay and buy, we will realise the substantial benefits arising from our platform investment.

 

The MEP is now processing 2bn transactions on an annualised basis, a four-fold increase on the 480m transactions processed a year ago. The platform is already handling 2.9m customer requests per hour at peak times. With the ongoing growth in our partner network and broadening connections to new services, Monitise has 20m registered customers, compared with 6m a year ago.

 

We were delighted with the strong interest from the investment community in our Mobile Money strategy update in December. New equity capital of £117m (net) was raised during the half year. Proceeds from the capital raised are being used to scale the Monitise business, further enhancing our platform capabilities. These  enhancements include productising the capabilities of the platform to allow for the faster roll-out of services, expanding the data and analytics capabilities of the MEP and broadening the scale of the MEP to encompass country-specific functionality and language variants to increase connections to new merchants, brands, partners, payment and affiliate networks and other aggregators.

 

Monitise, which already works with more than 300 banks and financial institutions, was pleased to announce new relationships during the first half in the UK, Europe, the Americas and Asia that included BlackBerry, Cognizant, and  Intuit Inc., among others.

 

Monitise has a pipeline of more than 100 financial institutions via its partners and direct sales teams looking to adopt mobile banking and payments applications developed by Monitise.

 

In December 2012 the Group acquired the Mobile Money Network, which sells instant mobile checkout technology to retailers and media owners in the UK. Partners now working with Monitise via its Mobile Commerce platform include Carphone Warehouse, Warner Brothers, Universal Music and Associated Newspapers.

 

Financial Review

 

In line with the Group's change in accounting policy for Joint Ventures from proportionate consolidation to equity accounting as of 30 June 2012, the comparative figures for H1 FY 2012 have been restated on the equity accounting basis, which shows the Group's share in Joint Ventures on one line.  See note 2.3 for the rationale and impact of this change. The period includes the first six months trading results for Monitise Americas Inc. (formerly Clairmail Inc.) following its acquisition on 26 June 2012.

 

Revenue

 

Revenue grew by 63% from £17.1m in H1 FY 2012 to £27.8m ($44.2m) in H1 FY 2013.  On an organic basis, assuming Clairmail had been owned for the full six months of H1 FY 2012, revenue grew by 22%. Revenue growth was driven by higher year-on-year growth in user generated revenues both on a reported and organic basis, up 164% and 70% respectively. As a significant milestone, the group reported user generated revenues of £14.2m, which represented over half (51%) of total Group revenues for the period, compared to 31% in H1 FY 2012. Development and integration revenue increased by 16% on a reported basis and declined 5% on an organic basis. We expect to see growth in development and integration revenue in the second half.

 

Gross Margins

 

Gross margin has increased to 72% (H1 FY 2012: 64%), ahead of target and driven by the improving mix in user generated revenue. Development and integration margins increased to 58% in H1 FY 2013 from 55% in H1 FY 2012. User generated margins have reached 86% from 82% in H1 FY 2012. 

 

We expect gross margin for the Group to continue to track above 70% as an increasing number of services enabled by Monitise are deployed by our clients to their customers.

 

EBITDA

 

The Live Operations segment, which includes our Monitise UK, US and Global Accounts, generated EBITDA of £5.3m in the period, compared with £5.1m in H1 FY 2012. This category includes the acquired Monitise Americas Inc. business, excluding the acquired R&D development team, which now operates as an integrated part of the central technology team, and certain central costs. Live operations profitability has been maintained with timing of investment in operational costs made this half in anticipation of the next phase of growth and roll-out of services by our customers.

 

With the integration of the Monitise Americas Inc. R&D team, and continued development of products in line with the drive through banking to payments and commerce, technology costs of £9.7m were incurred in the period against £3.3m in the comparative period. Capitalised R&D costs for the period were £4.0m against £1.8m in the comparative period. The costs of significant scaling up in service delivery and overall operations have led to a rise in investment for future operations with an EBITDA loss of £4.5m against £2.9m in the comparative period.

 

The Group has continued to invest in future operations, the Monitise Enterprise Platform, the scaling of its mobile commerce and service delivery capabilities in line with its strategy and the rapid growth being achieved in transactional volumes, resulting in a Group EBITDA loss of £14.7m compared to £4.2m in H1 FY 2012.

 

Other Movements

 

Exceptionals

 

The net exceptional gain for the period was £0.5m. This comprised a one-off net gain of £3.8m related to  the acquisition of the remaining 56% of  Mobile Money Network Limited, as announced on 3 December 2012, which reflects the fair value of Monitise's previously held 44% stake in the Mobile Money Network (see note 9).  In addition, £3.3m of exceptional costs were recorded in the year, relating to one-off acquisition, property and restructuring expenses.

 

Depreciation and Amortisation

 

Depreciation was £1.5m in the period (H1 FY 2012: £0.6m). Amortisation of £4.0m  (H1 FY 2012: £0.6m) includes amortisation of acquired intangible assets, largely relating to the Clairmail Inc. acquisition, of £2.3m.

 

Share-based Payments

 

The share-based payment charge of £2.1m in the period (H1 FY 2012: £1.0m) includes share-based remuneration components relating to the acquisition of Clairmail Inc. 

 

Loss Before Tax

 

Group loss before tax was £24.4m, including a net exceptional gain of £0.5m, compared to a profit before tax of £1.1m in H1 FY 2012, which included an exceptional gain of £10.1m on the acquisition of the remaining 51% of the Monitise Americas Joint Venture, as announced in October 2011.

 

Tax

 

The tax charge reflects the movement in deferred tax assets due to the utilisation of brought forward losses, partially offset by unwinding of deferred tax liabilities recognised on acquisitions.

 

Loss Per Share

 

The basic and diluted loss per share was 2.2p (H1 FY 2012: earnings per share 0.1p). Details can be found in note 5.

 

Cash Flow and Funds

 

The Group ended the half year with a strong balance sheet, holding £100.4m of net funds at 31 December 2012. The overall cash increase in the half year reflects an outflow of £9.8m from operating activities, excluding £4.4m exceptional expenses, an outflow of £11.0m from investing activities covering both investment in our joint ventures and ongoing spend on capex and capitalised R&D, and £112.3m inflow from financing activites.  The financing inflow was driven by two fund raises during the year, generating funds of £117.3m net of fees. A repayment of £5.4m debt acquired as part of the Clairmail acquisition was made at the start of the period, with the remaining £5.0m of debt present at 31 December 2012 repaid following the period end.

 

Cash used in operating and investing activities reflected the ongoing commitment to invest across the business, both raising capacity and continuing the development of our leading technology. Free cash outflow for the period was £21.6m, excluding exceptional expenses, cash acquired on acquisition and cash moved onto and out of short term deposits. This compares to a free cash outflow of £22.6m for the immediately preceding six month period.

 

Operational Review

 

Live operations

 

·     UK

 

In the UK, Monitise provides Mobile Money services to banks covering more than 60% of the UK retail banking population. During the period, the Group continued to deepen its relationship with existing banks and to target new opportunities across UK financial institutions.

 

RBS Technology Services and Monitise continued to drive mobile innovation during the period as consumer adoption grew for services spanning consumer and business banking applications and the 'Get Cash' service, which allows the bank's customers to get money out of ATMs without their debit cards. Monitise works with RBS to deliver secure and innovative Mobile Money services for multiple operating systems, allowing customers to easily make instant payments and transfers, check their account balances and transaction history, find their nearest cash machine, set up alerts and top-up their mobile. On 4 February 2013, Monitise was named 'Best Technology Supplier 2012' by Royal Bank of Scotland Group.

 

In July 2012 HSBC launched Fast Balance services for Android and BlackBerry devices following the rollout of services for the iPhone earlier in the year. The services across all three devices were developed by Monitise and HSBC as part of a three-year deal, announced in April 2012.

 

In November 2012 The Co-operative Bank's first mobile banking services for Android smartphones, developed by Monitise, were launched giving more of the bank's customers instant access to their bank accounts via mobile phone. Services developed for The Co-operative Bank for iOS and BlackBerry devices were launched earlier in 2012 as part of a three-year deal with Monitise.

 

·     Global Accounts

 

Global accounts represent the Group's products and services to Monitise's global cross-territory customers, including Visa Inc. and Visa Europe.

 

Visa Inc.

 

Monitise and Visa Inc. have been working together since 2009. Monitise's expertise in customising mobile applications across a broad range of phone models and operating systems enables Visa to virtualise its existing  accounts on mobile phones and offer Visa account holders globally a new array of payment types.  During the first half, Monitise continued to align itself to support Visa's mobile strategies in terms of acquiring new accounts, activating existing accounts, protecting core revenue and accelerating the move towards digital payments.

 

A number of large issuers of both debit and prepaid cards are now live with Visa's Debit Processing Service (DPS) Mobile Card Services solution, which has been built and managed by Monitise. A growing number of additional US banks are preparing to launch services developed via Visa Inc.'s DPS, the largest issuer processor of Visa transactions in the US. Monitise expects to announce new initiatives, in collaboration with Visa Inc., over coming months, both in the Americas and in hybrid Mobile Money markets.

 

Visa Europe

 

On August 24 2012, Monitise announced a strategic investment via a subscription of 45.25m shares in Monitise from Visa Europe, reflecting a further strengthening and deepening of the commercial relationship between the two companies that have been working together since February 2011. As at 1 February 2013, Visa Europe held 7.5% of  Monitise's total voting rights. The investment forms part of Visa Europe's strategy to deliver increased value for financial institutions and consumers through enabling and supporting mobile payments.

 

Monitise works in partnership with Visa Europe to deploy mobile payments services for its 3,000+ member banks and financial institutions across 36 countries. Visa Europe noted in its latest annual report that a dozen of its members had signed up to launch Visa Personal Payments by the end of September 2012. Continued development of these services will bring enhanced functions, offering dynamic and innovative ways for bank customers to manage and move their money while mobile. Visa Europe, which predicts that by 2020 more than half of its transactions will be carried out on a mobile device, has a strong pipeline of banks readying to launch new person-to-person and alerts services developed in partnership with Monitise. Following the Group's acquisition of the Mobile Money Network mobile commerce platform in December 2012, Monitise expects to announce a number of new mobile commerce initiatives in collaboration with Visa Europe shortly.

 

·     US

 

Monitise Americas Inc.

 

Monitise Americas Inc., with its 9.6m customers, is very encouraged by the pipeline of opportunities with existing and new customers following the acquisition of the US-based mobile banking and payments business Clairmail, which was completed in June 2012. Monitise's customers include five of the top 10 US banks with partnerships spanning Fifth Third Bank, U.S. Bank, Sallie Mae, PNC Bank and Frost National Bank, among others.

 

FIS

 

The Group's strategic partnership with FIS, one of the world's largest global providers dedicated to banking and payments technologies, remains as strong as ever as FIS focuses on evolving its Mobile Money capabilities towards deeper payments and commerce expertise. In December 2011, Monitise signed a five-year strategic partnership agreement with FIS to create innovative Mobile Money services for existing and new clients.

 

Investments in Future Operations

 

·     Mobile Commerce

 

In December 2012, Monitise acquired control of the Mobile Money Network, a joint venture with Best Buy Europe and Carphone Warehouse founder Charles Dunstone.  The MMN business launched in March 2011 with the vision of adding simplicity to the way people shop by putting the mobile at the heart of the shopping experience. MMN, which developed an instant mobile checkout service allowing both online and main-street goods to be bought with a one-touch application, collaborates with retailers, financial services organisations, operators and media owners to build the standard for mobile commerce. The mobile commerce platform provides consumers with a simple way to buy goods and services quickly, easily and securely anywhere, anytime via their mobile device.

 

MMN brings a new retail customer base to Monitise including publishing groups wanting to offer instant fulfilment to their shopping supplements, and retailers and brands. Partners already signed up to the network include Carphone Warehouse, Associated Newspapers, Universal Music, Thorntons, HMV, Thomas Pink, Warner Brothers and Pretty Green. Monitise is now working to integrate MMN into its existing services, allowing bank customers to instantly fulfil offers as they browse on the Monitise mobile banking app.

 

Across the Group, Monitise is in the process of connecting to new merchants, retailers and loyalty networks. These commercial initiatives reflect Monitise's strategic focus on building and hosting high-traffic mobile banking platforms onto which will increasingly layer mobile-payment and mobile-commerce functions to leverage that traffic.

 

·     mPOS

 

On 3 December 2012, Monitise announced the acquisition of mobile payments acceptance business eMerit Solutions Limited. Adding eMerit's mobile point of sale (mPOS) technology and services to Monitise's technology platform significantly enhances the Group's ability to deliver end-to-end solutions across banking, payments and commerce to commercial banks, merchant acquiring banks and mobile network operators, both in the UK and internationally. The acquisition strengthens Monitise's bank-grade and secure offering to the small and medium-sized business customers of its partner banks and supports the Group's strategic vision to make money totally mobile across the world for everyone as cash becomes digitised. eMerit, which was one of the first companies to develop an accredited, chip-and-pin mobile card acceptance solution in Europe, develops solutions that are fully EMV, PCI DSS and major card scheme compliant, as well as a wide range of value-added services. Existing partners within the mPOS business include communications company O2, the commercial brand of Telefonica UK Ltd and HSBC Merchant Services LLP, a wholly-owned subsidiary of Global Payments Inc., and one of the largest independent payment processors in the UK.

 

·     Monitise India

 

Mobile Money opportunities are increasing in India, a country where half the population do not bank and are under the age of 25. Given this, regulators and policy makers have been emphasising the importance of financial inclusion across all sections of Indian society, with the Reserve Bank of India promoting paperless payment channels such as mobile.  Monitise's strategic focus in markets such as India, the second-largest mobile market in the world with more than 900m mobile subscriptions, is underpinned by the Group's belief that the proliferation of mobile services creates a unique opportunity to provide financial services via mobile.

 

Shortly before the period-end, mobile payment services went live via the Movida mobile payments joint venture between Visa Inc. and Monitise, enabling bank customers to recharge their mobile phone airtime, pay bills and book movie tickets from any mobile phone.

 

The new service is initially exclusively available to selected debit and credit card customers of HDFC Bank, India's second-largest private bank with more than 21m customers, although anyone with a mobile phone and a debit or credit card issued by a participating bank will be able to use Movida. The service is available in multiple local languages, from any ordinary phone on all mobile networks via an Interactive Voice Response Channel. A menu-based Unstructured Supplementary Service Data (USSD) service is also available for all GSM mobile phones on selected mobile operators. After linking their HDFC Bank Visa or non-Visa payment card to their mobile phone number, cardholders can access the service to make payments over Movida's secure connection. Over the coming months, Movida expects to announce further partner banks and services.

 

·     Monitise Asia Pacific

 

Monitise Asia Pacific is a joint venture between Monitise and First Eastern formed in April 2010. First Eastern is a leading Hong Kong-based investment group, pioneering in the field of direct investments in China and across Asia Pacific. Monitise's strategy is anchored on acting as an enabler at the heart of a rapidly-growing mobile ecosystem. Through the Asia Pacific joint venture, the Group is working with strong local partners to extend its trusted and secure mobile banking, payment and commerce services in the region.

 

During the period, Monitise Asia Pacific collaborated with its Joint Venture partner in Astra Group, the largest conglomerate in Indonesia, to establish a locally hosted instance of the Monitise Enterprise Platform to provide mobile services for the country's banked and unbanked population. The first of these services has been developed for PermataBank, one of the top 10 financial institutions in Indonesia, and BlackBerry. As a result, the world's first mobile payments service for BlackBerry® Messenger (BBM™) will be launched in Indonesia later in February having recently received regulatory approval from Bank Indonesia, the country's central bank.

 

In Hong Kong, the integration of the Monitise platform to the Jetco ATM switch has been completed giving access to the bank accounts of over 30 member banks. The initial launch service developed with lead partner mobile operator, PCCW mobile, will provide a real-time air time top-up capability through the mobile and is scheduled to go live during the first half of 2013, subject to regulatory approval. Bank of China (Hong Kong) has committed to be the first bank to support the service and other Jetco member banks are expected to follow shortly.

 

In September 2012, Monitise Asia Pacific entered into a Memorandum of Understanding with Bank of China (Hong Kong) to form a partnership to provide new mobile payment services for its retail and corporate clients through leveraging the capabilities of the Monitise platform. Discussions are progressing towards the signing of a formal partnership agreement underpinned by a roadmap to develop innovative mobile payment and mobile commerce services for the Hong Kong market.  

 

Outlook

 

·     Full-year revenue target of at least £70m ($110m) on track, underpinned by orderbook and strong sales pipeline.

·     Gross margin expectations of at least 70%  maintained for full year.

·     More and more banks are seeing the inevitability of mobile becoming their most important customer engagement channel.

·     Group's strengthened balance sheet provides ability for Monitise to further scale its offerings and invest in its platform capabilities in line with market demand and to enable its clients' consumers to bank, pay and buy through the mobile channel.

 

 

Alastair Lukies

Monitise Group Chief Executive Officer

 

 

Consolidated Statement of Comprehensive Income

 


Notes

Six months

ended

31 December

2012

(unaudited)

Six months

ended

31 December

2011

(unaudited, restated)*

Year

ended

30 June

2012

(audited)



£'000

£'000

£'000






Revenue

4

27,819

17,110

36,087

Cost of sales


(7,773)

(6,224)

(12,132)

Gross profit


20,046

10,886

23,955






Operating costs before depreciation, amortisation, share-based payments and exceptional items1


(34,764)

(15,064)

(34,367)






EBITDA 2


(14,718)

(4,178)

(10,412)






Depreciation and amortisation1


(5,460)

(1,203)

(3,271)

Operating loss before share-based payments and exceptional items


(20,178)

(5,381)

(13,683)






Share-based payments1


(2,140)

(1,014)

(2,707)

Exceptional gain on acquisition of subsidiary1

9

3,785

10,095

10,095

Exceptional items1,3


(3,317)

-

(4,995)

Operating (loss) / profit


(21,850)

3,700

(11,290)






Net finance (expense) / income

Share of post-tax loss of joint ventures


(381)

(2,190)

200

(2,850)

412

(6,034)

(Loss) / profit before income tax


(24,421)

1,050

(16,912)

Income tax


(854)

38

527

(Loss) / profit for the period / year attributable to owners of the Company


(25,275)

1,088

(16,385)






Other comprehensive income that may be reclassified subsequently to profit or loss:





Currency translation differences on consolidation


(4,518)

(147)

364

Total comprehensive (loss) / income for the period / year attributable to the owners of the Company


(29,793)

941

(16,021)






(Loss) / earnings per share attributable to the equity holders of the Company during the period / year (expressed in pence per share):





- basic and diluted

5

(2.2)

0.1

(2.1)

 

* Comparatives have been restated due to a change in accounting policy. See note 2.3 for further information.

 

1 Total Operating costs after depreciation, amortisation, share-based payments and exceptional items (including one-off costs of £204,000 (31 December 2011: £135,000) included within Exceptional gain on acquisition of subsidiary) for the period ended 31 December 2012 are £45,885,000 (period ended 31 December 2011: £17,416,000; year ended 30 June 2012 £45,475,000).

 

2 EBITDA is defined as Operating loss before exceptional items, depreciation, amortisation and share-based payments charge.

 

3 Exceptional items comprise acquisition related expenses and one-off property and restructuring expenses.

 

All activities derive from continuing operations.

 

Consolidated Statement of Financial Position

 

 



31 December 2012

(unaudited)

31 December

2011

(unaudited, restated)*

30 June

2012

(audited)1


Note

£'000

£'000

£'000






ASSETS





Non-current assets





Property, plant and equipment


8,490

3,013

5,621

Intangible assets

Investments in joint ventures

Other receivables

6

 

 

191,048

764

-

29,773

786

1,085

168,663

36

1,479

Deferred tax asset


885

1,935

2,578



201,187

36,592

178,377






Current assets





Trade and other receivables


11,404

9,756

14,908

Short-term investments


-

30,500

-

Cash and cash equivalents


106,414

10,886

19,566



117,818

51,142

34,474






Total assets


319,005

87,734

212,851











LIABILITIES





Current liabilities





Trade and other payables


(35,620)

(16,070)

(31,708)

Financial liabilities


(1,380)

-

(9,690)



(37,000)

(16,070)

(41,398)

Non-current liabilities





Trade and other payables


(2,803)

(20)

(4,719)

Financial liabilities


(4,592)

-

-

Deferred tax liabilities


(13,487)

(1,285)

(13,737)



(20,882)

(1,305)

(18,456)






Total liabilities


(57,882)

(17,375)

(59,854)











Net assets


261,123

70,359

152,997
















EQUITY





Capital and reserves attributable to equity holders of the Company





Ordinary shares

Ordinary shares to be issued


15,414

8,192

8,076

-

10,170

23,460

Share premium


214,753

100,977

101,336

Foreign exchange translation reserve


(4,263)

(256)

255

Other reserves


128,753

20,707

94,309

Retained loss


(101,726)

(59,145)

(76,533)

Total equity


261,123

70,359

152,997

 

* Comparatives have been restated due to a change in accounting policy. See note 2.3 for further information.

 

1Comparatives for the year ended 30 June 2012 have been updated to include revised acquisition accounting and provisional fair values relating to the Monitise Americas Inc. acquisition.

 

 

Consolidated Statement of Changes in Equity

 


Share capital

Ordinary shares to be issued

Share premium

Merger reserve

Reverse acquisition reserve

Share-based payments reserve

Retained loss

Foreign exchange reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

Six months to 31 December 2011 (unaudited, restated)







 

Balance at 1 July 2011

7,031

-

76,687

32,952

(25,321)

2,182

(60,635)

(109)

32,787

 

Issue of shares

1,009

-

24,138

10,379

-

-

-

-

35,526

 

Recognition of  share-based payments

-

-

-

-

-

917

-

-

917

 

Profit for the 6 months ended 31 December 2011

-

-

-

-

-

-

1,088

-

1,088

 

Other comprehensive loss for the 6 months ended 31 December 2011

-

-

-

-

-

-

-

(147)

(147)

 

Exercise of share options

36

-

152

-

-

(402)

402

-

188











Balance at

31 December 2011

8,076

 

-

100,977

43,331

(25,321)

2,697

(59,145)

(256)

70,359

 

 

Twelve months to 30 June 2012 (audited) 1








 

Balance at 1 July 2011

7,031

-

76,687

32,952

(25,321)

2,182

(60,635)

(109)

32,787

Issue of shares

3,033

-

23,700

76,220

-

-

-

-

102,953

Shares to be issued

on acquisition

-

 

23,460

-

-

-

6,179

-

-

29,639

 

Recognition of share-based payments

-

 

-

-

-

-

2,584

-

-

2,584

Loss for the year

-

-

-

-

-

-

(16,385)

-

(16,385)

 

Other comprehensive income for the year

-

 

-

-

-

-

-

-

364

364

Exercise of share options

106

 

-

949

-

-

(487)

487

-

1,055











Balance at
30 June 2012

10,170

23,460

101,336

109,172

(25,321)

10,458

(76,533)

255

152,997

 

 

Six months to 31 December 2012 (unaudited)







 

Balance at 1 July 2012 1

10,170

 

23,460

101,336

109,172

(25,321)

10,458

(76,533)

255

152,997

 

Issue of shares

5,210

(15,268)

113,142

32,405

-

-

-

-

135,489

 

Recognition of  share-based payments

-

-

-

-

-

2,121

-

-

2,121

 

Loss for the 6 months ended 31 December 2012

-

-

-

-

-

-

(25,275)

-

(25,275)

 

Other comprehensive loss for the 6 months ended 31 December 2012

-

-

-

-

-

-

-

(4,518)

(4,518)

Exercise of share options

34

-

275

-

-

(82)

82

-

309











Balance at

31 December 2012

15,414

8,192

214,753

141,577

(25,321)

12,497

(101,726)

(4,263)

261,123

 

1 Comparatives for the year ended 30 June 2012 have been updated to include revised acquisition accounting and provisional fair values relating to the Monitise Americas Inc. acquisition.

 

Consolidated Cash Flow Statement

 








Six months ended

31 December 2012

(unaudited)

Six months ended

31 December 2011

(unaudited, restated)

Year ended

30 June 2012

(audited)


Note

£'000

£'000

£'000






Cash flows used in operating activities





Cash (used in) / generated from operations

7

(9,628)

1,247

(10,391)

Exceptional expenses


(4,371)

-

(1,214)

Net income tax paid


(193)

-

-

Net cash (used in) / generated from operating activities


(14,192)

1,247

(11,605)






Cash flows used in investing activities





Cash acquired on acquisition of subsidiary net of cash consideration paid

9,10

749

-

1,556

Investments in joint ventures


(1,533)

(2,033)

(2,654)

Loan to joint venture party


(1,400)

(2,267)

(4,267)

Payment of deferred consideration


-

-

(500)

Interest paid


(299)

(7)

(10)

Interest received


33

166

385

Purchases of property, plant and equipment


(3,748)

(752)

(3,155)

Purchases and capitalisation of intangible assets


(4,807)

(1,980)

(7,647)

Investment in short-term investments


-

(20,500)

10,000

Net cash used in investing activities


(11,005)

(27,373)

(6,292)






Cash flows from financing activities





Proceeds from issuance of ordinary shares (net of expenses)


117,286

24,335

24,335

Share options exercised


309

654

1,055

Proceeds from long-term borrowings


139

-

-

Repayments of long-term borrowings and finance leases


(5,443)

-

-

Net cash generated from financing activities


112,291

24,989

25,390






Net increase / (decrease) in cash and cash equivalents


87,094

(1,137)

7,493






Cash and cash equivalents at beginning of the period / year


19,566

12,167

12,167

 

Effect of exchange rate fluctuations on cash held

 


(246)

(144)

(94)

Cash and cash equivalents at end of the period / year *


106,414

10,886

19,566

 

 

* The Group's total cash balance is £106.4 million (31 December 2011: £41.4 million including short term deposits; 30 June 2012:
£19.6 million).  The Group's net funds balance is £100.4 million (31 December 2011: £41.4 million including short term deposits; 30 June 2012: £9.9 million).

 

 

Notes to the Consolidated Financial Statements for the six months ended 31 December 2012

 

 

1              General information

 

Monitise plc 'the Company' is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange. The address of the registered office is provided at the end of this document.  Monitise plc and its subsidiaries are together referred to as 'the Group' throughout this financial information.

 

The condensed consolidated interim financial information was approved for issue by the Board on 8 February 2013.

 

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2012 were approved by the Board on 3 September 2012 and delivered to the Registrar of Companies. The Auditors' report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

 

The condensed consolidated interim financial information is neither audited nor reviewed and the results of operations for the six months ended 31 December 2012 are not necessarily indicative of the operating results for future operating periods.

 

 

2              Summary of significant accounting policies

 

2.1           Basis of preparation

 

The financial statements have been prepared under the measurement principles of IFRS, using accounting policies and methods of computation consistent, except as noted below, with those set out in the Company's 2012 Annual Report and Accounts. The financial statements have been prepared under the historical cost convention. As permitted by AIM rules, the Group has not applied IAS 34 'Interim Reporting' in preparing this interim report.

 

Based on projections prepared of the Group's anticipated future results, the Directors have reasonable expectations that the Group will have adequate resources to continue in existence for the foreseeable future. Therefore the Directors continue to adopt the going concern basis in preparing this financial information.

 

The comparatives for the year ended 30 June 2012 have been updated to include revised provisional valuations of intangible assets and goodwill arising on the Monitise Americas Inc. (formerly Clairmail Inc.) acquisition.

 

2.2           Accounting policies

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2012, as described in those annual financial statements. 

 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2012, but are not currently relevant for the Group, or have had no impact:

 

Amendment to IAS 12 'Income Taxes'                                      

Amendments IAS 1 'Presentation of financial statements'

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2012 and have not been early adopted:

 


Effective date (subject to EU endorsement)

Annual improvements 2011

1 January 2013

IFRS 10, 'Consolidated financial statements'

1 January 2014

IFRS 11 'Joint arrangements'

1 January 2014

IFRS 12 'Disclosure of interests in other entities'

1 January 2014

IFRS 13 'Fair value measurements'

1 January 2013

IAS 19 'Employee benefits' (revised 2011)

1 January 2013

IAS 27 'Separate financial statements' (revised 2011)

1 January 2014

IAS 28 'Investments in associates and joint ventures' (revised 2011)

1 January 2014

IFRS 1 'First-time adoption of IFRS' (amendments 2012)

1 January 2013

IFRS 7 'Financial instruments: Disclosures' (amendments 2011)

1 January 2013

IAS 32 'Financial instruments: Presentation' (amendments 2011)

1 January 2014

IFRS 9 'Financial instruments'

1 January 2015

Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)

1 January 2013

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

1 January 2014

 

 

The Directors do not believe that the adoption of IFRS 11, 'Joint arrangements' will have a material impact on the presentation of the Group's results due to the change in accounting policy in the prior year (note 2.3). The Group is currently assessing the impact on its results, financial position and cash flows of the other standards listed above.

 

The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed by the European Union and require adoption by the Group in future accounting periods.

 

2.3           Change of method: equity accounting of jointly controlled entities

To improve its financial information and to better reflect the current relationship with the joint venture entities, the Group elected to apply, from the year ended 30 June 2012, the option offered by IAS 31 'Interests in joint ventures', which enables jointly controlled entities to be consolidated using the equity method. This is a presentational change and has no effect on the profit and loss of the Group.

 

Under proportionate consolidation, the Group combined its share of the joint ventures' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group's financial statements.

 

Under equity accounting, the Group initially recognises an investment in a joint venture at cost, including any goodwill arising. The carrying amount is then increased or decreased to recognise the Group's share of the joint venture's profits or losses after the date of acquisition.   The Group's profit or loss includes the Group's share of the profit or loss of the joint ventures.

 

Equity accounting provides a better reflection of the Group's business model and distinction between its subsidiaries and its joint ventures, given the growing maturity of the joint ventures. This accounting policy election is consistent with IFRS 11 'Joint arrangements' which will apply for the Group for the year ended 30 June 2015.

 

The Group's share of the joint ventures' assets, liabilities and results have been removed from each line of the statement of financial position and statement of comprehensive income as described above.

 

In addition, the consolidated results show the revenue and costs of sales from transactions with joint ventures without consolidation adjustments.

 

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in the joint ventures.

 

In accordance with IAS 8, the change in accounting policy was applied retrospectively from 1 July 2010. Equity at the beginning of the period as well as the comparative data presented has been restated.

 

The change in accounting policy resulted in an increase in reported revenue of £2,533,000 in the comparative year ended 30 June 2012 (31 December 2011: increase of £1,331,000), and an increase in reported EBITDA of £5,606,000 in the comparative year ended 30 June 2012 (31 December 2011: increase of £2,755,000). There has been no change to reported (loss) / profit after tax or reported net assets in either prior period. The change in accounting policy resulted in a decrease in reported cash of £1,180,000 at 30 June 2012 (31 December 2011: £1,760,000).

 

 

3              Critical accounting estimates and judgements

 

The preparation of the financial statements requires the Group to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Directors base their estimates on historical experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

In the process of applying the Group's accounting policies, management has made a number of judgements and estimations, which have been consistent with those set out in the Company's 2012 Annual Report and Accounts.

 

a)     Revenue recognition

 

Revenue for development and integration services is recognised when the right to consideration is earned as each project progresses. Provisions against accrued income are made as and when management become aware of objective evidence that the amount of time worked will not be recoverable in full. 

 

b)    Share-based payments

 

Judgement and estimation is required in determining the fair value of shares at the date of award. The fair value is estimated using valuation techniques which take into account the awards' term, the risk-free interest rate and the expected volatility of the market price of the Company's shares.

 

c)     Going concern

 

The Directors have prepared projections of the Group's anticipated future results based on their best estimate of likely future developments within the business and therefore believe that the assumption that the Group is a going concern is valid. The financial information has therefore been prepared on the 'going concern' basis.

 

d)    Development costs

 

The Group has capitalised internally generated intangible assets as required in accordance with IAS 38. Management has assessed expected contribution to be generated from these assets and deemed that no adjustment is required to the carrying value of the assets. The recoverable amount of the assets has been determined based on value in use calculations which require the use of estimates and judgements. Management has also reviewed the assets for impairment and deemed that no impairment is required.

 

e)    Provisional acquisition accounting and goodwill

 

When the Group makes an acquisition, management reviews the business and assets acquired to determine whether any intangible assets should be recognised separately from goodwill. If such an asset is identified, then it is valued by discounting the probable future cash flows expected to be generated by the asset, over the estimated life of the asset. Where there is uncertainty over the amount of economic benefit and the useful life, this is factored into the calculation.  Impairment reviews are performed annually at year end.

 

f)     Impairment of assets

 

IFRS requires management to undertake an annual test for impairment of indefinite lived assets, including goodwill, and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of growth and discount rates.  Changing the assumptions selected by management could significantly affect the Group's impairment evaluation and hence results.  The Group's review includes the key assumptions related to sensitivity in the cash flow projections.

 

g)    Deferred tax

 

Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration given to the timing and level of future taxable income.

 

 

4              Segmental information

 

Monitise's operating segments are being reported based on how the Group is structured and the financial information provided to the chief operating decision maker. The Board of Directors is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board of Directors for the purposes of allocating resources and assessing performance. The Board of Directors assesses the performance of the operating segments based on a measure of revenue and adjusted EBITDA. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly share-based payment charges, cash, corporate expenses and assets, and tax (as described as 'Corporate' below).

 

 

Operating segments are as follows:

 

 

Live operations, including both territory deployments and development contracts, consist of:

 

Monitise UK which provides the Group's products and services to the UK.

 

Monitise US which represents the Group's products and services to its US clients, including FIS but excluding Visa Inc. which is disclosed within Global accounts. From 26 June 2012, it also includes the results of Monitise Americas Inc.

 

Global accounts which represents the Group's products and services to Monitise's global cross-territory clients, including Visa Inc. and Visa Europe.

 

Investment in future operations segment represents the Group's operations which are not yet live operations covering both the pre-sales and start-up period.  The segment includes both revenues (e.g. initial licences and development and integration services prior to deployment) and costs. The segment includes investment to host new operational platforms, and new business development activity.

 

Investment in technology platform segment comprises the ongoing development, enhancement and maintenance costs of the core Monitise technology platform.  The division is responsible for the continued availability and improvement of the product across all other segments.

 

 

6 months ended 31 December 2012 (unaudited)





Statement of comprehensive income

 

 

Revenue

£'000

Gross profit

£'000

Operating cost

£'000

EBITDA

£'000

Live operations:





Monitise UK

7,510

5,018

(2,544)

2,474

Monitise US

9,430

7,620

(6,432)

1,188

Global accounts

8,738

5,970

(4,367)

1,603

Total Live operations

25,678

18,608

(13,343)

5,265

Investment in future operations

2,141

1,438

(5,955)

(4,517)

Investment in technology platform

-

-

(9,685)

(9,685)

Total

27,819

20,046

(28,983)

(8,937)

Corporate costs




(5,781)

EBITDA




(14,718)

 

  

 

6 months ended 31 December 2011 (unaudited, restated)





Statement of comprehensive income

 

 

Revenue

£'000

Gross profit

£'000

Operating cost

£'000

EBITDA

£'000

Live operations:





Monitise UK

6,673

4,482

(1,949)

2,533

Monitise US

588

429

(142)

287

Global accounts

6,557

4,364

(2,076)

2,288

Total Live operations

13,818

9,275

(4,167)

5,108

Investment in future operations

3,292

1,611

(4,528)

(2,917)

Investment in technology platform

-

-

(3,296)

(3,296)

Total

17,110

10,886

(11,991)

(1,105)

Corporate costs




(3,073)

EBITDA




  (4,178)

 

 

Year ended 30 June 2012 (audited)





Statement of comprehensive income

 

 

Revenue

£'000

Gross profit

£'000

Operating cost

£'000

EBITDA

£'000

Live operations:





Monitise UK

14,113

9,580

(4,217)

5,363

Monitise US

1,198

1,032

(516)

516

Global accounts

14,127

9,362

(4,659)

4,703

Total Live operations

29,438

19,974

(9,392)

10,582

Investment in future operations

6,649

3,981

(9,140)

(5,159)

Investment in technology platform

-

-

(8,779)

(8,779)

Total

36,087

23,955

(27,311)

(3,356)

Corporate costs




(7,056)

EBITDA




(10,412)

 

 

 

The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.

 

 

Entity-wide disclosures

 

Products and services: Revenues





 

6 months to

31 December 2012

(unaudited)

£'000

6 months to

31 December 2011

(unaudited, restated)

£'000

 

Year ended

30 June 2012

(audited)

£'000





Development and integration services

13,603

11,725

23,592

User generated revenues

14,216

5,385

12,495

Total

27,819

17,110

36,087

 

 

5              (Loss) / earnings per share

 

Basic & Diluted

 

Basic (loss) / earnings per share is calculated by dividing the (loss) / profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.  Reconciliations of the (loss) / profit and weighted average number of shares used in the calculation are set out below.

 


Six months ended 31 December

2012

Six months ended

31 December

2011

Year ended

30 June

2012


(unaudited)

(unaudited, restated)

(audited)





(Loss) / profit for the period / year (£'000)

(25,275)

1,088

(16,385)





Weighted average number of ordinary shares in issue ('000)

1,152,882

738,969

775,823

Potential dilutive share options ('000)

-

58,158

-

Diluted weighted average number of ordinary shares in issue ('000)

1,152,882

797,127

775,823





Basic (loss) / earnings per share (pence)

(2.2)

0.1

(2.1)

Options

-

-

-

Diluted (loss) / earnings per share (pence)

(2.2)

0.1

(2.1)

 

 

 

6              Intangible assets

 

As at 31 December 2012 (unaudited)


Goodwill

Customer contracts

Intellectual property rights

Acquired technology

Purchased and acquired software licences

Capitalised development costs

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Cost








As at 1 July 2012 (including revised provisional fair values) 1

119,957

29,628

222

6,543

3,993

12,263

172,606

Additions

-

-

-

-

1,528

4,038

5,566

Acquisitions (notes 9,10)

21,089

-

-

4,860

264

-

26,213

Exchange differences

(4,262)

(934)

-

(239)

(5)

(1)

(5,441)









As at 31 December 2012

136,784

28,694

222

11,164

5,780

16,300

198,944

















Accumulated amortisation








As at 1 July 2012

-

737

183

-

1,184

1,839

3,943

Charge

-

1,855

16

452

517

1,139

3,979

Exchange differences

-

(18)

-

(8)

-

-

(26)









As at 31 December 2012

-

2,574

199

444

1,701

2,978

7,896

















Net book value








As at 31 December 2012

136,784

26,120

23

10,720

4,079

13,322

191,048

 

1Comparatives for the year ended 30 June 2012 have been updated to include revised provisional valuations relating to the Monitise Americas Inc. acquisition.

 

 

As at 31 December 2011 (unaudited, restated)


Goodwill

Customer contracts

Intellectual property rights

Acquired technology

Purchased and acquired software licences

Capitalised development costs

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Cost








As at 1 July 2011

495

1,194

222

-

1,744

5,078

8,733

Additions

-

-

-

-

162

1,818

1,980

Acquisitions

18,265

3,530

-

-

-

-

21,795









As at 31 December 2011

18,760

4,724

222

-

1,906

6,896

32,508

















Accumulated amortisation








As at 1 July 2011

-

314

151

-

801

831

2,097

Charge

-

85

16

-

143

394

638









As at 31 December 2011

-

399

167

-

944

1,225

2,735

















Net book value








As at 31 December 2011

18,760

4,325

55

-

962

5,671

29,773

 

 

As at 30 June 2012 (audited) 1


Goodwill

Customer contracts

Intellectual property rights

Acquired technology

Purchased and acquired software licences

Capitalised development costs

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Cost








As at 1 July 2011

495

1,194

222

-

1,744

5,078

8,733

Additions

-

-

-

-

2,145

7,185

9,330

Acquisitions (including revised provisional fair values)

119,070

28,434

-

6,543

104

-

154,151

Exchange differences

392

-

-

-

-

-

392









As at 30 June 2012

119,957

29,628

222

6,543

3,993

12,263

172,606

















Accumulated amortisation








As at 1 July 2011

-

314

151

-

801

831

2,097

Charge

-

423

32

-

383

1,008

1,846









As at 30 June 2012

-

737

183

-

1,184

1,839

3,943

















Net book value








As at 30 June 2012

119,957

28,891

39

6,543

2,809

10,424

168,663

 

1Comparatives for the year ended 30 June 2012 have been updated to include revised provisional valuations relating to the Monitise Americas Inc. acquisition.

 

 

7              Reconciliation of net (loss) / profit to net cash (used in) / generated from operating activities

 

 


For the six months ended

31 December 2012

(unaudited)

For the six months ended

31 December 2011

(unaudited, restated)

For the year

ended

30 June 2012

(audited)


£'000

£'000

£'000





(Loss) / profit before income tax

(24,421)

1,050

(16,912)





Adjustments for:




Depreciation

1,481

566

1,425

Amortisation

3,979

637

1,846

Exceptional items

(468)

(10,095)

(5,100)

Share-based payments

2,140

1,014

2,707

Finance expense / (income) - net

381

(200)

(412)

Share of post-tax loss of joint ventures

2,190

2,850

6,034





Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):








Trade and other receivables

3,174

(2,436)

(5,779)

Trade and other payables

1,916

7,861

5,800





Cash (used in) / generated from operations

(9,628)

1,247

(10,391)

 

 

£22.5m (net of expenses) was raised from the issue of 81 million shares in August 2012, and £94.8m (net of expenses) was raised from the issue of 333 million shares in December 2012.  The Group has a net funds balance at 31 December 2012 of £100.4m.

 

 

 

8              Contingencies

 

Legal Contingencies

 

Except as set out below, no member of the Group is or has been involved in any governmental, legal or arbitration proceedings and the Directors are not aware of any such proceedings pending or threatened by or against the Group during the 6 months preceding the date of these financial statements which may have or have had, in the recent past, a significant effect on the financial position or profitability of the Group.

 

Mobile VPT Limited has issued a UK patent infringement claim against Monitise International Limited (formerly known as Monitise Limited) ("MIL") and other related parties. Following advice from leading counsel, the Directors believe that Monitise's business activities in the UK do not infringe any valid claim of Mobile VPT's Patent and that the Mobile VPT Patent may be invalid. Monitise continues to monitor the status of the proceedings since they were stayed in October 2007 but to date, and in light of the advice received from leading counsel, no provision has been reflected in the financial statements.

 

Monitise is currently defending five of its customers in the U.S. against claims for patent infringement arising out of its customers' use of Monitise's technology. Monitise has instructed leading U.S. counsel to defend Monitise's interests.  On the basis of advice received from its U.S. counsel, the Directors believe that Monitise's business activities in the U.S. do not infringe any valid claim of any of the various patents which have been asserted against its customers and that each of these patents may be invalid. As a result, no provision in respect of any of these five cases has been reflected in the financial statements.

 

 

 

9              Acquisition of subsidiary - Mobile Money Network Limited

 

On 10 December 2012, the Group acquired the remaining 56% of the issued share capital in its joint venture, Mobile Money Network Limited (MMN), from its joint venture partners for a consideration of £16,831,000 paid by the issuance of 55,678,699 shares in Monitise plc.  £4,155,000 of this consideration was deemed to be settlement of a pre-existing relationship and has not been included in the calculation of goodwill.  The total consideration paid for 56% of MMN was therefore £12,676,000.

 

If the acquisition had occurred on 1 July 2012, combined Group revenue and loss for the period would have been £26,925,000 and £27,341,000.

 

The Group has made this acquisition in order to integrate MMN's technology and fully take advantage of the Mobile Commerce opportunity.  This opportunity does not wholly translate into separately identifiable intangible assets, but represents much of the assessed value within Mobile Money Network and the opportunity in the Mobile Commerce market, supporting the recognised goodwill.

 

The amount of the equity interest held by the Group in Mobile Money Network Limited immediately before the acquisition had a  provisional fair value of £10,091,000.  The gain on such provisional fair valuation, net of the settlement of the pre-exising relationship, recognised in the Consolidated statement of comprehensive income as an 'exceptional gain' was £3,989,000.  Offset against this was £204,000 of one-off costs.

 

The acquisition had the following effect on the Group's assets and liabilities:



Book value £'000

Provisional
fair value adjustment £'000

Provisional fair value
 £'000

Property, plant and equipment


71

-

71

Intangible assets


3,122

1,218

4,340

Cash


757

-

757

Trade and other receivables


438

-

438

Trade and other payables


(1,444)

-

(1,444)

Deferred tax liability


-

(938)

(938)



2,944

280

3,224






Provisional fair value of 44% interest previously held



10,091

Provisional consideration




12,676

Provisional fair value of net assets acquired



(3,224)

Provisional goodwill recognised




19,543

Provisional consideration satisfied by:





Issuance of shares




12,548

Fair value of contingent consideration




128





12,676

 

No adjustments for accounting policy alignments were required.

 

A deferred tax liability of £938,000 on the capitalisation of the intangible assets has been created on acquisition.

 

The intangible assets capitalised as part of the acquisition of Mobile Money Network will be amortised over a period of six years and can be analysed as follows:

 





£'000

Technology intangibles




4,080





4,080

 

 

 

The calculation of the provisional fair values of assets and liabilities such as goodwill and intangible assets as well as the assessment of any impairment to fair values generally, involve estimations of likely future cash flows deriving from or accruing to those assets and liabilities. Judgement is also involved in selecting appropriate discount rates for determining the present value of those future cash flows. Final fair values may differ materially from those provisional values stated.

 

 

 

10            Acquisition of subsidiary - eMerit Solutions Limited

 

On 11 December 2012, the Group acquired the entire issued share capital of eMerit Solutions Limited (eMerit) for a consideration of £1,992,000, paid by cash (£10,000) and the issuance of 4,724,409 shares in Monitise plc.

 

If the acquisition had occurred on 1 July 2012, combined Group revenue and loss for the period would not have been materially different.

 

The Group has made this acquisition in order to extend the capability of the Monitise Enterprise Platform by utilising eMerit's unique and secure point of sale technology. This opportunity does not wholly translate into separately identifiable intangible assets, but represents synergies expected from integrating eMerit's technology within the Monitise offering.

 

The acquisition had the following effect on the Group's assets and liabilities:



Book value £'000

Provisional
fair value adjustment £'000

Provisional fair value
 £'000

Intangible assets


4

780

784

Cash


2

-

2

Other acquired net liabilities


(161)

-

(161)

Deferred tax liability


-

(179)

(179)



(155)

601

446






Provisional consideration




1,992

Provisional fair value of net liabilities acquired



(446)

Provisional goodwill recognised




1,546

Provisional consideration satisfied by:





Issuance of shares




1,500

Fair value of contingent consideration




482

Cash consideration



10





1,992

 

No adjustments for accounting policy alignments were required.

 

A deferred tax liability of £179,000 on the capitalisation of the intangible assets has been created on acquisition.

 

The intangible assets capitalised as part of the acquisition of eMerit will be amortised over a period of four years and can be analysed as follows:

 

 





£'000

Technology intangibles




780





780

 

 

 

The calculation of the provisional fair values of assets and liabilities such as goodwill and intangible assets as well as the assessment of any impairment to fair values generally, involve estimations of likely future cash flows deriving from or accruing to those assets and liabilities. Judgement is also involved in selecting appropriate discount rates for determining the present value of those future cash flows.  Final fair values may differ materially from those provisional values stated.

 

 

Company Information

 

 

 

Registered office

 

95 Gresham Street

London

EC2V 7NA

 

Broker & Nominated advisor

 

Canaccord Genuity Limited

88 Wood Street

London

EC2V 7QR

 

Independent auditors

 

PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

1 Embankment Place

London

WC2N 6RH

 

Registrars

 

Equiniti

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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