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Mobile Tornado Group (MBT)

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Thursday 27 September, 2018

Mobile Tornado Group

Half-year Report

RNS Number : 0821C
Mobile Tornado Group PLC
27 September 2018
 

27 September 2018

Mobile Tornado Group plc

("Mobile Tornado", the "Company" or the "Group")

Half Yearly Report

Mobile Tornado (AIM: MBT), the leading provider of instant communication mobile applications to the enterprise market, announces its unaudited results for the six-month period to 30 June 2018.

Financial Highlights

 

·           Total revenue increased by 12% to £1.23m (H1 2017: £1.11m)

Recurring revenues, as reported, decreased slightly to £1.02m (H1 2017: £1.04m) yet at a constant currency level continued to grow, increasing 6%

·          Operating expenses decreased by 15% to £1.78m (H1 2017: £2.09m)

positively impacted by the appreciation of sterling

·           Adjusted EBITDA* loss of £0.64m (H1 2017: £1.04m)

·           Group operating loss of £0.72m (H1 2017: £1.12m)

·           Loss after tax of £1.03m (H1 2017: £1.06m)

·           Basic loss per share of 0.34p (H1 2017: 0.42p)

·           Cash and cash equivalents of £0.33m (H1 2017: £0.25m)

Completed a placing to raise a total of £1.35m before expenses in January 2018

 

*excluding exchange differences and exceptional items

 

Operating highlights

 

·          Contract win with major Mobile Network Operator ("MNO") in Israel - well positioned to capitalise on significant opportunity in the Israeli market. Initial sales of bundled perpetual licenses (alongside devices and hardware) under new Capex Model illustrates growing demand for complete PTT solutions

·          Engaged in supporting our partners respond to numerous high value tenders across a number of key markets around the world

·          Technology improvements include the expansion of our handset range to cover the widest range of end customer needs and to offer choice at all price points

·          Post period end, additional working capital facility of £0.3m from Intechnology plc to fund growing sales pipeline under Capex Model and improve balance sheet efficiency

 

Jeremy Fenn, Chairman of Mobile Tornado, said: "The Directors consider that the outlook is positive and these are exciting times for the Group, as the efforts of the past 12 months begin to deliver real sales growth that should be demonstrated in the second half of the year."

 

 

 

 

 

 

Enquiries:

Mobile Tornado Group plc

www.mobiletornado.com

Jeremy Fenn, Chairman

+44 (0)7734 475 888

 

 

Allenby Capital Limited (Nominated Adviser & Broker)

 

Virginia Bull / James Reeve / Nicholas Chambers

+44 (0)20 3328 5656

 

Walbrook PR Ltd

[email protected]

Paul Cornelius / Sam Allen

+44 (0)20 7933 8780

 

Chairman's statement

 

Financial results

 

Total reported turnover in the six-month period to 30 June 2018 increased by 12% to £1.23m (H1 2017: £1.11m). Recurring revenues, a key performance indicator for the business, decreased slightly in the period to £1.02m (H1 2017: £1.04m) adversely impacted by the appreciation of Sterling comparative to the previous period. At a constant currency level however, they maintained their upward trajectory, increasing by 6%. Non-recurring revenues, comprising installation fees and professional services, increased to £0.21m (H1 2017: £0.07m). As a result, gross profit increased 9% to £1.14m (H1 2017: £1.05m).

 

The majority of our operating expenses are denominated in New Israeli Shekels and, whilst our underlying operating cost-base remained largely unchanged over the comparative period on a like-for-like basis, reported operating expenses decreased by 15% to £1.78m (H1 2017: £2.09m) due primarily to the appreciation of Sterling comparative to the previous period.

 

Due to the annual revaluation of certain financial liabilities on the balance sheet, the Group reported a translational loss of £0.04m (H1 2017: £0.07m gain) arising from the depreciation of Sterling comparative to the start of the period.

 

The Group reported an income tax credit in respect of its qualifying investment in R&D activities of £0.02m (H1 2017: £0.38m). This is a direct result of the Group amending its recognition criteria in the previous period.

 

As a result of the above, the loss after tax for the period decreased slightly to £1.03m (H1 2017: Loss £1.06m).

 

The net cash outflow from operating activities during the period remained constant at £1.42m (H1 2017: £1.42m). At 30 June 2018, the Group had £0.33m cash at bank (30 June 2017: £0.25m) and net debt of £7.80m (30 June 2017: £9.71m). Of this net debt figure, £5.62m is in respect of preference shares, held by Intechnology plc, the Company's largest shareholder. These preference shares are redeemable at par value on 31 December 2020, or, at the Company's discretion, at any earlier date.

 

Review of Operations

 

The Board is pleased to report that the Group has made good progress in the first half of 2018. Despite reported sales and revenues remaining largely constant as license numbers were similar over the reporting period, there is a lot to feel positive about. The Board is excited to see the efforts of the team translate into a significant uplift in sales and revenue momentum in recent weeks post the period end. Whilst these will impact the second half reporting period, they demonstrate that we are clearly moving in the right direction.

 

Research and Development

 

As a continuing theme from last year, the Group made further technical investment in and improvements to the platform over the period. As the Push to Talk ("PTT") addressable market opens up due to the availability of increasingly lower cost devices and the associated server infrastructure, the Group continues to look for ways to improve cost effectiveness to the end customer and to maintain our offering as the superior in-network PTT solution available in the market. Illustrations of these efforts over recent months include expanding our handset range further to provide our Mobile Network Operators ("MNO") and integration partners with a suite of devices to cover the widest range of end customer needs and to offer choice at each price point. In response to the increased engagement we are having directly with large corporate customers requiring a private system with higher security requirements for example, more features have been added to the application server to specifically support these needs whilst reducing the cost of the overall platform. In addition to this, we have made further improvements to our multi-channel dispatch console ("MDC2000").

 

The Group will continue to make further investment into the platform as well as look to hire engineering talent to support future R&D activities as we see our technological superiority as a key differentiator in all sales channels. The Board considers that one illustration of this superiority is the fact that, insofar as they are aware, Mobile Tornado currently deploys the only PTT solution that operates seamlessly across all cellular technologies 2G, 3G, 4G and Wi-Fi. The Board has no doubt that the Group's competitors will work quickly to deliver their own solutions to this technical challenge, but currently the Group's ability to solve this provides it with a significant competitive advantage. For many of our customers who have a dispersed and remote workforce where the field operative is continuously mobile and moving through different types of cellular coverage (for example, the courier, parcel delivery and taxi markets) this is a business-critical feature. Additionally, in emerging markets, where there has tended to be less investment into network infrastructure over recent years and where the Group's target users are largely operating over 2G and 3G, the Group has a significant competitive advantage due to its ability to deliver a seamless and stable solution over network infrastructure which has been superseded in many first world countries.

 

Outlook

 

The Directors consider that the outlook is positive, and these are exciting times for the Group, as the efforts of the past 12 months begin to deliver real sales growth that should be demonstrated in the second half of the year.

 

The Group is stepping up its pursuit of customers in the large PTT system solution market (systems with 1,000+ end users), historically dominated by large-cap system providers. In addition, we are engaged in supporting our partners as they respond to numerous high value tenders around the world in all of our key markets. As the Board noted earlier, as a small technology company relative to the large-cap system providers, we believe our technological superiority is a key differentiator in these discussions.

 

As the cost of devices and hardware declines, widening the affordability and availability of our products, the Board has been exploring new industry verticals where workforce efficiency is the primary demand driver (e.g. in retail, hotels and hospitality). We have been conducting significant trials with corporate users in this space which we anticipate will lead to further traction in sales. 

 

In response to customer demand, the Group has shifted emphasis to delivering a complete solution for customers, instead of the previously offered license based solution. This means we offer our customers the requisite servers, devices, and consoles alongside an embedded perpetual license as a packaged bundle. With the license effectively forming part of the upfront expense we call this our Capital Expenditure Model ("Capex Model"). The Group has now sold several bundled perpetual licenses as a complete solution under the Capex Model and we believe that this model will become increasingly popular for both our MNO clients and large direct corporate customers going forward. This should have a positive effect on the Group's cash flow as we receive margin on the license upfront, as well as a separate margin on the hardware which we procure on behalf of the customer.

 

The Group has sought an additional working capital line from Intechnology plc at this point to improve the capital efficiency of the balance sheet. This additional capital will specifically support the financing of our sales pipeline under the Capex Model where the Company is required to fund the hardware prior to placement with the end customer. The Group's improving financial position should open up wider sources of working capital from the debt markets. The Board is now engaged with traditional commercial lenders to partner with the Group in funding our increasing pipeline under the Capex Model. The Board will keep stakeholders updated on progress in this regard.

 

Given the leading technology solution the Group possesses and the market traction which is beginning to deliver meaningful sales growth, the Board look forward to the future with optimism.

 

 

 

Jeremy Fenn

Chairman

27 September 2018

Consolidated income statement                                                                                                                      

For the six months ended 30 June 2018

 

 

 

 

Six months

 

Six months

 

Year

 

ended

 

ended

 

ended

 

30 June

 

30 June

 

31 December

 

2018

 

2017

 

2017

 

Unaudited

 

Unaudited

 

Audited

 

£'000

 

£'000

 

£'000

Continuing Operations

 

 

 

 

 

Revenue

1,234

 

1,106

 

2,530

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

(95)

 

(57)

 

(106)

Gross profit

1,139

 

1,049

 

2,424

 

 

 

 

 

 

Other operating expenses

(1,775)

 

(2,085)

 

(4,148)

Group operating loss before exchange differences,

 

 

 

 

 

exceptional items, depreciation and amortisation expense

(636)

 

(1,036)

 

(1,724)

Exchange differences

(44)

 

66

 

135

Exceptional items

                -

 

(88)

 

(54)

Depreciation and amortisation expense

(37)

 

(65)

 

(112)

 

 

 

 

 

 

Total operating expenses

(1,856)

 

(2,172)

 

(4,179)

 

 

 

 

 

 

 

 

 

 

 

 

Group operating loss

(717)

 

(1,123)

 

(1,755)

 

 

 

 

 

 

Finance costs

(334)

 

(315)

 

(698)

 

 

 

 

 

 

Loss before tax

(1,051)

 

(1,438)

 

(2,453)

Income tax credit

17

 

375

 

852

Loss for the period

(1,034)

 

(1,063)

 

(1,601)

 

 

 

 

 

 

Loss per share (pence)

 

 

 

 

 

Basic and diluted

       (0.34)

 

         (0.42)

 

         (0.61)

 

 

Consolidated statement of comprehensive income                                                                                       

For the six months ended 30 June 2018

 

 

 

 

Six months

 

Six months

 

Year ended

 

 

ended

 

ended

 

ended

 

 

30 June

 

30 June

 

31 December

 

 

2018

 

2017

 

2017

 

 

Unaudited

 

Unaudited

 

Audited

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Loss for the period

 

(1,034)

 

(1,063)

 

(1,601)

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translation

 

 

 

 

 

 

of foreign operations

 

(11)

 

25

 

41

 

 

 

 

 

 

 

Total comprehensive loss for the period

 

(1,045)

 

(1,038)

 

(1,560)

 

 

 

 

Consolidated statement of changes in equity

For the six months ended 30 June 2018                   

                                                                                           

 

Share

Share

Reverse acquisition

Merger

Translation

Retained

Total

 

capital

premium

reserve

reserve

reserve

earnings

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Balance at 1 January 2017

     4,951

    12,012

      (7,620)

    10,938

       (2,254)

    (32,664)

     (14,637)

 

 

 

 

 

 

 

 

Equity settled share-based payments

            -

              -

                -

              -

                 -

              18

              18

 

 

 

 

 

 

 

 

Issue of share capital

        476

            66

                -

              -

                 -

                -

          1,136

 

 

 

 

 

 

 

 

Transactions with owners

        476

         660

               -

              -

                -

             18

         1,154

 

 

 

 

 

 

 

 

Loss for the period

            -

              -

                -

              -

                 -

        (1,063)

        (1,063)

 

 

 

 

 

 

 

 

Exchange differences on translation

 

 

 

 

 

 

 

of foreign operations

            -

              -

                -

              -

              25

                -

              25

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

for the period

            -

              -

                -

              -

              25

      (1,063)

       (1,038)

 

 

 

 

 

 

 

 

Balance at 30 June 2017

     5,427

    12,672

      (7,620)

    10,938

       (2,229)

    (33,709)

     (14,521)

 

 

 

 

 

 

 

 

 

Share

Share

Reverse acquisition

Merger

Translation

Retained

Total

 

capital

premium

reserve

reserve

reserve

earnings

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Balance at 1 July 2017

     5,427

    12,672

      (7,620)

    10,938

       (2,229)

    (33,709)

     (14,521)

 

 

 

 

 

 

 

 

Equity settled share-based payments

            -

              -

                -

              -

                 -

              27

              27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

            -

              -

               -

              -

                -

             27

              27

 

 

 

 

 

 

 

 

Loss for the period

            -

              -

                -

              -

                 -

           (538)

           (538)

 

 

 

 

 

 

 

 

Exchange differences on translation

 

 

 

 

 

 

 

of foreign operations

            -

              -

                -

              -

              16

                -

              16

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

for the period

            -

              -

               -

              -

              16

         (538)

          (523)

 

 

 

 

 

 

 

 

Balance at 31 December 2017

     5,427

    12,672

      (7,620)

    10,938

       (2,213)

    (34,220)

     (15,016)

 

 

 

 

 

 

 

 

 

Share

Share

Reverse acquisition

Merger

Translation

Retained

Total

 

capital

premium

reserve

reserve

reserve

earnings

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Balance at 1 January 2018

     5,427

    12,672

      (7,620)

    10,938

       (2,213)

    (34,220)

     (15,016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity settled share-based payments

            -

              -

                -

              -

-                 

29              

              29

 

 

 

 

 

 

 

 

Issue of share capital

      1,558

       2,252

                -

              -

                 -

                -

          3,810

 

 

 

 

 

 

 

 

Transactions with owners

     1,558

      2,252

               -

              -

                -

             29

         3,839

 

 

 

 

 

 

 

 

Loss for the period

            -

              -

                -

              -

                 -

        (1,034)

        (1,034)

 

 

 

 

 

 

 

 

Exchange differences on translation

 

 

 

 

 

 

 

of foreign operations

            -

              -

                -

              -

             (11)

                -

             (11)

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

for the period

            -

              -

                -

              -

            (11)

      (1,034)

       (1,045)

 

 

 

 

 

 

 

 

Balance at 30 June 2018

     6,985

    14,924

      (7,620)

    10,938

       (2,224)

    (35,225)

     (12,222)

 

Consolidated balance sheet

As at 30 June 2018

 

 

 

30 June

 

30 June

 

31 December

 

2018

 

2017

 

2017

 

Unaudited

 

Unaudited

 

Audited

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant & equipment

308

 

281

 

276

Intangible assets

115

 

144

 

125

 

423

 

425

 

401

 

 

 

 

 

 

Current assets

 

 

 

 

 

Trade and other receivables

1,125

 

1,338

 

1,245

Inventories

93

 

1

 

1

Tax debtor

493

 

431

 

476

Cash and cash equivalents

328

 

248

 

732

 

2,039

 

2,018

 

2,454

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

(4,364)

 

(4,526)

 

(5,085)

Borrowings

(2,510)

 

(4,402)

 

(10,545)

 

 

 

 

 

 

Net current liabilities

(4,835)

 

(6,910)

 

(13,176)

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Trade and other payables

(2,187)

 

(2,476)

 

(2,241)

Borrowings

(5,623)

 

(5,560)

 

                  -

 

(7,810)

 

(8,036)

 

(2,241)

 

 

 

 

 

 

Net liabilities

(12,222)

 

(14,521)

 

(15,016)

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

Share capital

6,985

 

5,427

 

5,427

Share premium

14,924

 

12,672

 

12,672

Reverse acquisition reserve

(7,620)

 

(7,620)

 

(7,620)

Merger reserve

10,938

 

10,938

 

10,938

Foreign currency translation reserve

(2,224)

 

(2,229)

 

(2,213)

Retained earnings

(35,225)

 

(33,709)

 

(34,220)

Total equity

(12,222)

 

(14,521)

 

(15,016)

Consolidated cash flow statement

For the six months ended 30 June 2018

 

 

 

Six months

 

Six months

 

Year

 

ended

 

ended

 

ended

 

30 June

 

30 June

 

31 December

 

2018

 

2017

 

2017

 

Unaudited

 

Unaudited

 

Audited

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Cash used in operations

    (1,421)

 

      (1,419)

 

         (1,528)

Tax credit received

               -

 

               -

 

             431

Net cash used in operating activities

    (1,421)

 

      (1,419)

 

         (1,097)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchase of property, plant & equipment

         (56)

 

           (48)

 

              (80)

Net cash used in investing activities

         (56)

 

           (48)

 

              (80)

 

 

 

 

 

 

 

 

 

 

 

 

Financing

 

 

 

 

 

Issue of ordinary share capital

      1,351

 

        1,190

 

          1,190

Share issue costs

         (81)

 

           (54)

 

              (54)

Proceeds from borrowings

       (200)

 

           420

 

             620

Net cash inflow from financing

      1,070

 

        1,556

 

          1,756

 

 

 

 

 

 

Effects of exchange rates on cash

 

 

 

 

 

and cash equivalents

              3

 

             (6)

 

              (12)

 

 

 

 

 

 

Net increase in cash and

 

 

 

 

 

cash equivalents in the period

       (404)

 

             83

 

             567

Cash and cash equivalents at beginning of period

         732

 

           165

 

             165

Cash and cash equivalents at end of period

         328

 

           248

 

             732

 

Notes to the interim report

For the six months ended 30 June 2018

 

 

1              General information

 

The financial information in the interim report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and has not been audited or reviewed. The financial information relating to the year ended 31 December 2017 is an extract from the latest published financial statements on which the auditor gave an unmodified report that did not contain statements under section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

 

 

2             Basis of preparation

 

These interim financial statements are for the six months ended 30 June 2018. They have been prepared using the recognition and measurement principles of IFRS.

 

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

 

The interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2017. The accounting policies have been applied consistently throughout the Group for the purpose of preparation of the interim financial statements.

 

 

3              Loss per share

 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £1,034,000 (30 June 2017: £1,063,000, 31 December 2017: £1,601,000) by the weighted average number of ordinary shares in issue during the period of 303,775,500 (30 June 2017: 255,311,200, 31 December 2017: 263,398,121).

 

 

 

Six months ended

 

Six months ended

 

Year ended

 

30 June 2018

 

30 June 2017

 

31 December 2017

 

Unaudited

 

Unaudited

 

Audited

 

Basic and diluted

 

Basic and diluted

 

Basic and diluted

 

Loss

Loss

 

Loss

Loss

 

Loss

Loss

 

 

per share

 

 

per share

 

 

per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

£'000

pence

 

£'000

pence

 

£'000

pence

 

 

 

 

 

 

 

 

 

Loss attributable to

 

 

 

 

 

 

 

 

ordinary shareholders

  (1,034)

    (0.34)

 

  (1,063)

      (0.42)

 

    (1,601)

     (0.61)

 

 

 

4              Share capital and share premium

 

 

Number of

Share

Share

Total

 

shares

capital

premium

 

 

'000

£'000

£'000

£'000

 

 

 

 

 

At 1 January 2017

   247,553

   4,951

  12,012

   16,963

Issue of shares

       23,800

        476

         660

      1,136

At 30 June 2017 & 31 December 2017

   271,353

   5,427

  12,672

   18,099

Issue of shares

       77,887

     1,558

      2,252

      3,810

At 30 June 2018

   349,240

   6,985

  14,924

   21,909

 

 

 

Non-voting preference shares

 

 

 

 

 

 

 

 

 

Number of

Nominal

 

 

 

shares

Value

 

 

 

'000

£'000

 

 

 

 

 

At 30 June 2017, 31 December 2017 and 30 June 2018

 

  71,277

     5,702

 

 

Liabilities and preference shares totalling £5,702k were converted into 71,277k 8p preference shares on 28 August 2013. The preference shares are non-voting, non-convertible redeemable preference shares redeemable at par value on 31 December 2020, or, at the Company's discretion, at any earlier date. The preference shares accrue interest at a fixed rate of 10% per annum.    

 

 

5              Cash used in operations

 

 

Six months

Six months

Year

 

ended

ended

ended

 

30 June

30 June

31 December

 

2018

2017

2017

 

Unaudited

Unaudited

Audited

 

£'000

£'000

£'000

 

 

 

 

Loss before taxation

      (1,051)

         (1,438)

            (2,453)

 

 

 

 

Adjustments for:

 

 

 

Depreciation

              37

               65

                112

Share based payment charge

              29

               18

                  45

Interest expense

            334

             315

                698

 

 

 

 

Changes in working capital:

 

 

 

 

 

 

 

(Increase)/Decrease in inventories

            (92)

                (1)

                   (1)

(Increase)/Decrease in trade and other receivables

            125

            (108)

                   (1)

(Decrease)/Increase in trade and other payables

         (803)

            (270)

                  72

Net cash used in operations

      (1,421)

         (1,419)

            (1,528)

 

 

 

 

6              Shareholder information

 

The interim announcement will be published on the company's website www.mobiletornado.com on 27 September 2018.

 


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