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Monitise PLC (MONI)

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Wednesday 19 February, 2014

Monitise PLC

Interim Results

RNS Number : 3825A
Monitise PLC
19 February 2014
 



 

19 February 2014

 

MONITISE plc

Interim results for the six months to 31 December 2013

 

 H1 FY 2014 REVENUE UP 67% ON H1 FY 2013

GROSS MARGIN MOMENTUM MAINTAINED: MARGINS AT 73% VERSUS 72% A YEAR AGO

VALUE OF TRANSFERS AND PAYMENTS ACROSS MONITISE PLATFORM RISES 133% TO $71BN

 REGISTERED CUSTOMERS 28M, COMPARED WITH 20M A YEAR AGO

GROUP ON TRACK FOR REVENUE GROWTH OF APPROXIMATELY 50% IN FY 2014

 

LONDON - Monitise plc (LSE: MONI)("Monitise", the "Company" or the "Group"), a global leader in Mobile Money solutions, announces its unaudited interim results for the six months ended 31 December 2013.

 

Financial Highlights

 

·    H1 FY 2014 revenue £46.5m, up 67% on H1 FY 2013.

 

·    Gross margin increased to 73% from 72% in H1 FY 2013, with user generated margin particularly strong, owing to a number of product licence deals following recent customer wins and renewals.

 

·    EBITDA (1) loss of £10.2m (H1 FY 2013 loss: £14.7m).

 

·    Adjusted loss after tax (2) of £16.4m (H1 FY 2013 loss: £21.0m) and adjusted loss per share of 1.0p (H1 FY 2013 loss: 1.8p). Statutory loss after tax of £22.0m (H1 FY 2013 loss: £30.3m) with loss per share of 1.4p (H1 FY 2013 loss: 2.6p).

 

·    Group net cash of £66.2m as at 31 December 2013. Free cash outflow (3)of £20.3m compared to £21.6m in H1 FY 2013.

 

 

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

(2) Adjustments comprise share-based payments, exceptional items, impairments and acquisition-related amortisation.

(3) Free cash flow comprises cash used in operating and investing activities including capital expenditure and JV funding. It excludes exceptional items and net cash acquired on acquisitions.

 

 

Outlook

 

·    We continue to see increasing demand for our services and positive momentum across the Group and therefore see the need for continued investment as we look to maximise the growth opportunities for Monitise. We reiterate our full-year guidance.

 

·    Expected revenue growth of approximately 50% in FY 2014.

 

·    FY 2014 gross margin to be maintained above 70%.

 

·    The Group sees multiple opportunities in all geographies both from direct sales channels and our growing partner network.

 

·    A move to the London Stock Exchange's main market in calendar 2014 continues to be considered.

 

Operational Highlights

 

·    Rising demand for Monitise-enabled Mobile Money services

 

Processed payments and transfers now worth $71bn on an annualised basis, compared with $31bn a year ago.

Further growth in live transactions, with more than 3.4bn transactions on an annualised basis, compared with 2bn a year ago.

Registered end-user customers at 28m, compared with 20m a year ago.

 

·    Global footprint strengthened

 

IBM publicly announced working with Monitise in September 2013, calling out the development of new solutions to extend the adoption of Mobile Money services across the two businesses' client and partner networks.

Monitise recognised with a 2014 IBM Choice Award for High Performing New Business Partner at IBM's PartnerWorld Leadership conference in Las Vegas on 11 February 2014.

Following Monitise's appointment as the preferred mobile payments and commerce technology partner for Telefónica Digital in FY 2013, preparation is underway for a series of service roll-outs in geographies around the world.

Industry recognition with CEB Tower Group and Javelin Research and Strategy "best in class" vendor awards.

 

·    Growing global network of brands focused on new Monitise-developed solutions

 

Europe

§ More than 30 Visa Europe member banks are now signed up to person-to-person payment solutions developed by Monitise that allow Visa cardholders to send money to each other using their mobile phones.

§ Monitise entered into a Mobile Money partnership with a leading UK bank and financial services company.

§ A major mobile banking and payments contract was renewed with a leading bank for a new minimum five-year term.

§ Grapple Mobile Ltd ("Grapple") was acquired by Monitise in September 2013 and integrated into Monitise Create. The business has a broad pipeline of new commercial opportunities across financial services and other sectors such as sport, travel and entertainment in the UK, Europe and internationally. Monitise Create is working with FIFA and Samsung and has won its first contract with a leading US bank.

§ Mobile banking services for Clydesdale Bank and Yorkshire Bank launched, generating strong customer adoption rates across iPhone, Android and BlackBerry devices.

 

US

§ Vantage 5.1, the hybrid version of Monitise's technology platform in the Americas, was released with positive customer feedback.

§ U.S. Bank began a pilot programme with Monitise to directly connect consumers' offline and online shopping experiences via smartphones and tablets.

§ Monitise-developed NFC mobile payment capabilities launched by Desjardins Group, Canada's leading cooperative financial group.

§ With Visa Inc., Monitise is working on a number of initiatives to support its mobile strategies, including enhancements to the Visa DPS mobile platform, Visa PayWave for contactless payments and a new mPOS platform.

§ Partnership began with credit union CSCU that sees the Group's technology being offered to more than 2,600 credit unions across North America.

 

India

 

§ Movida, which is Monitise's 50/50 Joint Venture (JV) with Visa in India contracted ICICI, India's largest private bank, to make the Movida mobile payments functionalities available to its customers. This follows Movida's previously announced partnership with HDFC Bank, India- second-largest private bank.

 

Asia Pacific

 

§ Monitise secured full control of Monitise Asia Pacific Ltd, its former 50:50 JV with First Eastern Mobile Investments Ltd.

§ Monitise's first Chinese language Mobile Money solution was launched with the rollout of 'Easy TopUp' for Bank of China (Hong Kong). Using technology developed by Monitise, Bank of China became the first bank in Hong Kong to provide such a service to its customers in cooperation with Joint Electronic Teller Service Limited (JETCO), the ATM network provider in Hong Kong.

 

·     Board appointments - New Chairman and Non-Executive Director

 

Appointment of Peter Ayliffe as Non-Executive Chairman.

Steve Chambers and Victor Dahir appointed Non-Executive Directors.

 

·     Post period-end highlights

 

Acquisition of Pozitron Yazilim A.Ş., ("Pozitron") in February 2014 to accelerate Monitise's Mobile Money capabilities in Turkey and the Middle East.

Further to entering a three-year deal for multi-language mobile Point of Sale services with OP-Pohjola Group, Finland's leading banking group, for its business customers, new mPOS customer deals are under negotiation. Further announcements expected in coming months regarding business wins in the UK and Europe, including Germany, Italy, and internationally.  

Monitise CEO Alastair Lukies said:

 

"Mobile Money is growing and evolving as fast as ever and we have made solid progress in the first half of 2014. The world has gone mobile and industries are moving to catch up with consumer demand. As a trusted and non-threatening enabler, we are very pleased to be playing our role in helping to reconnect brands to their customers and bringing together an ecosystem of industries for the benefit of all.

 

During the half, we entered new relationships and deepened existing collaborations with leading players across financial services, payment processing, mobile network operators, technology businesses and retail. This helped to lift our revenue 67% to £46.5m and saw the value of payments and transfers running across our platforms hit $71bn, more than double what they were a year ago. But there is a lot further to travel. Large deals signed in 2013 are still in build phase, and our work with channel partners are also yet to materially impact our top line.

 

This is now a very dynamic market and fast evolving industry and we have positioned ourselves extremely well to cement a long-term and sustainable role in the way that society banks, pays and buys for generations to come."

 

Monitise Chairman Peter Ayliffe commented:

 

"In my first statement as Chairman, I am pleased to report that Monitise has delivered another impressive performance in the first half of 2014. Banking, payments and commerce are being transformed by digital and mobile technology. While the sectors that Monitise operates in are large and some relatively complex, it is essentially about partnerships, robust infrastructure and collaborations that create compelling benefits for all participants in the ecosystem. This is an exciting time for the Group as it evolves to the next level in executing against its Mobile Money growth strategy.

 

The Board continues to assess scope for further investment to capitalise on the significant opportunity in our space and deliver value to our partners, clients and shareholders. Monitise has made a positive start to the second half and we look to the future with confidence."

 

An analyst presentation will be held on 19 February, 2014 at 2.30pm 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.

 

An interview with Monitise CEO Alastair Lukies regarding the interim results is available to view via www.monitise.com/investor_relations.

 

About Monitise

 

Monitise (LSE: MONI) is a world leader in Mobile Money - banking, paying and buying with a mobile device. Leading banks, payments companies, retailers and mobile networks utilise Monitise's technology platforms and services to securely connect people with their money. 

 

Already 28 million consumers benefit from Monitise's patented technology to 'bank anywhere', 'pay anyone' and 'buy anything', accounting for $71bn of payments, purchases and transfers annually. More information is available at www.monitise.com.

 

For further information

 

Monitise plc                                                                                     

Alastair Lukies, Chief Executive Officer

Lee Cameron, Chief Commercial Officer

Brad Petzer, Chief Financial Officer

Mike Keyworth, Chief Information Officer

 

Investor Relations

Andrew Griffin, Haya Herbert-Burns

[email protected]

 

Media Relations

Gavin Haycock                                          

[email protected]

 

Canaccord Genuity                                                                                       

Simon Bridges, Cameron Duncan        

                                                                                                        

FTI Consulting                                                                         

Charles Palmer, Sophie McMillan

 

 


Tel:  +44(0)20 3657 0900

 

 

 

 

 

Tel:  +44(0)20 3657 0366

 

 

 

Tel:  +44(0)20 3657 0362

 

 

 

Tel:  +44(0)20 7523 8000

 

 

Tel:  +44(0)20 7831 3113

 

 

 

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

 

The first half of our 2014 financial year was a period of strategic progress and strong financial results. Our performance again underscores the merits of the Group's ongoing focus on creating a best-in-class growing ecosystem of partners and clients using Monitise's bank-grade platform technology around the world. Our capabilities have been designed to enable financial institutions working with us to leverage the high engagement realities of mobile banking solutions and services into new, commerce-related revenue opportunities.

 

The 67% increase in first-half revenue to £46.5m was driven by user generated revenue continuing to grow as a proportion of total revenue year on year.

 

The  corporate and commercial benefits of our platform technology are reflected in the increasing interest and engagement we are seeing around the world among both the clients we serve and their customer audiences. Monitise is now processing 3.5bn transactions on an annualised basis, compared with 2bn a year ago. Amid the growth in our partner network over the period and broadening connections to new services, Monitise now has 28m registered customers, compared with 20m a year ago. The scale of consumer engagement with the solutions we enable for the businesses we work with is underscored by strong growth in the value of payments and transfers initiated via our Mobile Money platform technology rising to $71bn. This compares with $31bn a year ago and $50bn at the time of the Group's full-year results in September 2013.

 

During the period the Group continued to invest strategically in technology and talent to help further scale our business and meet the growing mobile commerce opportunities the industry faces. 

 

In September 2013, the Group announced the acquisition of European mobile innovation and design agency Grapple, which has been integrated into Monitise Create. Bringing the business into Monitise supported the growth of our creative capabilities and further reinforced our leading position as a technology enabler at the heart of the Mobile Money ecosystem.

 

Towards the end of FY 2013, Monitise entered into a five-year agreement to become the preferred mobile payments and commerce technology partner for Telefónica Digital. Since the appointment, work has commenced on the forthcoming roll-out of a series of mobile payments and commerce services in geographies around the world. More updates about the services will follow at launch.

 

Earlier this month, Yankee Group predicted that the mobile economy is evolving at an even faster rate than expected and that by 2017 it will be valued at $3.1 trillion, $200bn more than the $2.9 trillion Yankee Group forecasted in October 2012. Such trends help explain why banks are becoming more interested in unlocking the commercial benefits that mobile technology can deliver. Amid this, U.S. Bank is working with Monitise to build and trial new product discovery and shopping services via smartphones and tablets. U.S. Bank is the fifth-largest retail bank in the US. Other highlights during the period include our collaboration with IBM to extend the adoption of Mobile Money capabilities across the two businesses' client and partner networks. IBM is providing a broad range of software, technology services and consulting, including IBM MobileFirst solutions, to help power Monitise mobile services for Visa Europe.

 

As an enabler at the heart of the Mobile Money ecosystem, our priorities are centred on embracing new partners and developing new technology to make our network the network of choice. We have a clear strategy to deliver growth through investment and innovation and have laid deep and broad foundations upon which the Group will grow further. Together with our partners, we are making payments smarter, faster and more convenient than ever before.

 

·     Industry Recognition

 

Monitise continues to set the pace in global innovation with respect to bringing to market world-class solutions and capabilities. This is evidenced by the recognition the Group received across the industry confirming our best-in-class approach to Mobile Money solutions.

 

In a CEB TowerGroup 'Mobile Banking Technology Analysis' report in December 2013, Monitise's technology platform was given the highest available ranking across all categories - for Customer Experience, Interface Development, Integration and Management, and Enterprise Support. In a Javelin Strategy & Research survey of the global mobile banking industry, Monitise secured top-three positions in each of the survey's three categories - Top Mobile Banking, Top Standard Solution and Top Customised Solution. Monitise technology also scored top marks in security. Significantly, Monitise was the only vendor to score 100% in this area, and in any category, including alerting, a key differentiator in advanced mobile engagement strategies. Collectively, this reinforces why Monitise is considered a best-in-class Mobile Money provider, as security remains the number one issue that consumers care about with respect to mobile banking.  In addition, high engagement, driven by the opportunity alerting affords financial institutions as they seek to reconnect with their customers, opens up the opportunity to move from banking to higher value payments and commerce services.

 

Person-to-person (P2P) payment services Monitise developed for Royal Bank of Scotland Group won the Best Innovation category at the Best Business Awards and Monitise was recognised prominently in the latest Deloitte Technology Fast 50, a ranking of the 50 fastest-growing technology companies in the UK. This marked the third year running that Monitise has maintained a top 15 ranking, having been named third and 12th in 2012 and 2011 respectively.

 

In October 2013, the Group won the Best Peer-to-Peer Programme category at the Emerging Payments awards for its Indonesian BlackBerry Messenger payments service, BBM Money. The category recognised the best live P2P payment programmes and innovations around the world and was open to any type of solution - whether based on an open loop or closed network, and across cards, mobile, or online.

 

We were also extremely honoured to have been recognised earlier this month as the winner of an IBM Choice Award for High Performing New Business Partner.

 

Taken together, these results reinforce the confidence we have in our business and underscore our drive to focus further on delivering value to our partners and clients.

 

Financial Review

 

The Group continued to deliver a strong performance in the period.

 

Revenue

 

Revenue was up by 67% to £46.5m in H1 FY 2014 from £27.8m in H1 FY 2013. User generated revenue continued to grow as a proportion of total revenue, representing 59% of the total in H1 FY 2014, compared to 51% in H1 FY 2013. Total user generated revenue in the period was £27.3m and included a strong contribution of £11.1m from product licence revenue attributable to recent customer wins and renewals. Product licence based deals include subsequent subscription and/or transaction based revenue, as well as development and integration revenue. 

 

Subscription revenue excluding licenses grew 14% to £16.3m in the period driven largely by rising existing customer end-user count. The very large contracts signed in calendar 2013 have not yet been converted to material new user growth and are still in development and integration phases. Monitise is very focused on raising end-user count through new wins and raising penetration at existing customers, in all geographies. We expect subscription revenue growth to accelerate in the medium term.

 

Development and integration revenue increased by 41%, reflecting, in part, the first phases of work on recent large contract wins including Telefónica Digital and Visa Europe.

 

Gross Margins

 

Gross margin increased to 73% (H1 FY 2013: 72%), driven by user generated revenue increasing from 51% to 59% of total revenue. User generated margin reached 91% from 86% in H1 FY 2013 owing in part to strong product licence revenue. Development and integration gross margin was 46% in the period, compared to 58% in H1 FY 2013. The decline in development and integration margin is largely due to the impact of certain large contracts, where bulk price commitments were made on development work for the benefit of greater transaction revenue share. More generally, there is a broad range of gross margin Monitise can generate depending on the customer and type of work, therefore we expect development and integration margin to continue to fluctuate around the 50% level depending on the mix and type of work undertaken in any given period.

 

EBITDA

 

The Group EBITDA loss was £10.2m in H1 FY 2014 compared to £14.7m in H1 FY 2013. In line with our strategy, we continue to invest to create value from the growing opportunities in the Mobile Money market. The growth in operating costs to £44.0m in the period (H1 FY 2013: £34.8m) reflects a front-loaded increase in headcount and senior hires, as well as increased IT and corporate costs, as we continue to scale the business to meet customer demand.

 

Other Movements

 

Depreciation & Amortisation

 

Depreciation was £1.9m in the period (H1 FY 2013: £1.5m). Amortisation of £7.4m (H1 FY 2013: £4.6m) includes amortisation of acquired intangible assets of £3.7m and capitalised development costs of £2.4m.

 

Share-based Payments

 

The share-based payment charge of £3.1m in the period (H1 FY 2013: £2.1m) includes share-based remuneration components relating to employee share option grants.

 

Exceptionals

 

£1.0m of exceptional costs were recorded in the period largely reflecting acquisition related items and litigation costs. A non-cash exceptional gain of £2.3m was recorded relating to the acquisition of Monitise Asia Pacific Limited, which was the Joint Venture previously held with First Eastern Investments Mobile Limited.

 

Loss Before Tax

 

Group loss before tax was £23.3m, compared to a loss in H1 FY 2013 of £29.7m.

 

Tax

 

A non-cash tax credit of £1.3m was recorded in the period (H1 FY 2013: £0.6m charge) relating to unwinding of deferred tax recognised on acquired intangible assets.

 

Attributable Loss

 

The reported loss after tax for H1 FY 2014 was £22.0m (H1 FY 2013: £30.3m). On an adjusted basis excluding share-based payments, exceptional items, impairments and acquisition-related amortisation, attributable loss after tax was £16.4m (H1 FY 2013: £21.0m).

 

Loss Per Share

 

The basic and diluted loss per share was 1.4p (H1 FY 2013: 2.6p). On an adjusted basis excluding share based payments, exceptional items, impairments and acquisition-related amortisation, basic and diluted loss per share was 1.0p compared to 1.8p in H1 FY 2013.

 

Cash Flow and Funds

 

The Group ended the half year with a strong balance sheet, holding £66.2m of net cash at 31 December 2013 compared to £100.4m at 31 December 2012 and £85.6m at 30 June 2013. Free cash outflow excluding exceptional items, funding and acquired cash was £20.3m, compared to £21.6m in H1 FY 2013.

 

Joint Venture funding, comprising investments and loans, totalled £1.2m in the year, down from £2.9m in H1 FY 2013. The reduction is driven by the buyout of two JVs (Mobile Money Network in December 2012 and Monitise Asia Pacific in October 2013). Capital spending increased from £8.6m to £9.1m as the Group continued investing to take advantage of the mobile payment and mobile commerce markets.

 

Capital spending included £1.0m (H1 FY 2013: £3.7m) of tangible asset purchases, and £8.1m (H1 FY 2013: £4.8m) of intangible asset purchases and capitalisation.

 

Post Balance Sheet Events

 

On 3 February 2014, the Group announced the acquisition of 100% of the issued share capital of Turkey-based Pozitron, an internationally-recognised company delivering Mobile Money solutions. Initial consideration was satisfied by the issue of 35,925,589 ordinary shares valued at £24m based on the closing share price of 66.5p on 31 January 2014. In addition, contingent consideration of up to £36m may be payable in shares or cash, at Monitise's discretion, based upon the achievement of aggressive earn out targets over three years.

 

Operational Review

 

·     UK and Europe

 

Monitise provides enabling technology behind Visa Europe Mobile Money programmes including the payment processor's Personal Payments service. More than 30 banks, including RBS, NatWest and Ulster Bank, as well as Allied Irish Bank which launched digital peer-to-peer services in January 2014, have signed up to the service that the Group has developed for Visa Europe member banks. We are also seeing strong growth in our RBS implementation of Visa Europe's Personal Payments and more launches are expected during the second half. In January, Visa Europe reported that more than £1 in every £3 spent in the UK was now spent using a Visa account and the drive to enable payments to be available through mobile devices continues at pace.

 

On 31 December 2013, Monitise announced it had extended its commercial contract with a leading financial institution and entered into a five-year Mobile Money partnership with a leading UK bank and financial services company. As part of this, Monitise will design, build, and manage new banking, payments and shopping services. The partnership has a contract value of several million pounds. In line with Monitise's strategic focus on moving further towards a user-generated business model, the new partnership includes provisions for revenue sharing arising from retail offers generated via the Group's growing mobile commerce network. More details about the new partnership will follow in due course.

 

Monitise's mobile banking services for Clydesdale Bank and Yorkshire Bank went live during the first half. The banks, which entered a partnership with Monitise earlier in 2013, have seen strong customer adoption rates for the apps across iPhone, Android and BlackBerry devices since launch.

 

Post period-end, Monitise entered into a three-year deal with OP-Pohjola Group, Finland's leading banking group, for multi-language mPOS services for its business customers. Further announcements are expected in coming months regarding business wins in the UK and Europe, including Germany, Italy, and internationally.  

 

·     Monitise Create

 

The Grapple business, which was acquired in September 2013, has been integrated into Monitise Create, a mobile innovation division within the Group that is working with leading businesses and brands such as Whitbread and B&Q. Shortly after the acquisition, Monitise Create announced it had helped to develop Samsung 'My Galaxy', an application designed to help users get the most from their smartphones, including content and ticket offers. In December 2013, Monitise Create moved into the football sector and helped to create the Official FIFA App for the forthcoming 2014 FIFA World Cup Brazil. The FIFA app is expected to be the most downloaded sports application ever. Monitise Create has also developed applications for Whitbread's Premier Inn business to make it simpler and quicker for guests to book and manage hotel stays, significantly increasing app conversion rates.

 

In December, market research business eConsultancy described Monitise Create's work for DIY giant B&Q as one of the 10 most inspiring uses of mobile in retail, given how the app gives customers a reason to go in-store to take advantage of exclusive discounts.

 

Monitise Create expects to announce a number of new business wins during the second half in the finance, sport, travel and entertainment sectors in the UK, Europe and internationally and has secured its first contract with a leading US bank.

 

·     US

 

During the period, Monitise enhanced its platform technology capabilities designed to deliver the group's Bank Anywhere, Buy Anything and Pay Anyone products to US financial institutions. Leading clients working with Monitise in the Americas include one third of the top 50 banks in North America. The Group's growing business in the Americas has more than 12m registered direct users from a variety of customers including First Interstate Bank, American Savings Bank, Webster Bank, BMO Bank of Montreal, Fifth Third Bank, U.S. Bank, Frost Bank, UMB and First Citizens, among others.

 

Monitise delivers mobile services to financial institutions in the Americas via its industry-leading Vantage platform, which gives clients the option of having core mobile banking services run on premise and the ability to layer on payments and commerce solutions via the cloud from a growing network of premium content providers. The rollout of Vantage 5.1 during the first half involved the release of technology based on an innovative modular architecture. This was specifically designed to give financial institutions maximum flexibility in updating their mobile offerings in a cost effective way that supports rapidly-changing business needs - a hallmark of the intensely competitive US marketplace.

 

This innovation platform has been coupled with a roadmap that provides a rapid release capability designed to take advantage of new technological innovations that can help financial institutions retain and attract new customers, and grow market share.

 

U.S. Bank is currently working on a pilot with Monitise to directly connect consumers' offline and online shopping experiences via smartphones and tablets.  The 'see it, click it, buy it' initiative is expected to launch in the coming months, and supports the growing notion that consumers are interested in shopping experiences and mobile commerce, and mobilising the process of product discovery is becoming more important than the actual payment.

 

During the period, Monitise also announced a partnership with CSCU that sees the Group's technology being offered to more than 2,600 credit unions across North America, and a deal with Desjardins, the largest financial cooperative in Canada, to develop NFC-enabled payment capabilities. 

 

With Visa Inc., Monitise is working on a number of initiatives to support its mobile strategies. These include functionality enhancements to the Visa DPS Mobile Card Management Services designed to enable Visa's bank partners to use Monitise's mobile technology in a cost and time-effective way. These enhancements will support iPhone and Android native apps, as well as deployment of mobile remote deposit capture services later this year. During the period, Monitise further enhanced the platform to support Canadian issuers looking to capitalise on the growing mobile opportunity in the prepaid market.

 

Monitise is also working on Visa PayWave, Visa's contactless payments application including development support for the Android Kitkat OS with the ability to support Host Card Emulation. Additionally, development work supporting the Visa V.me platform extends mobile wallet services for smartphones enabling commerce acceptance to mobile devices. In payments, Monitise advanced the development of a comprehensive mPOS white label solution that can be delivered as a branded app across multiple iOS and Android devices, a solution Visa plans to offer to select merchants later in the year.

 

Monitise is seeing strong demand from banks across the Americas to leverage the banking, payments and commerce capabilities of the Group with a strong pipeline of further services planned during the second half.

 

·     India

 

On 22 July 2013, Movida, Monitise's mobile payments joint venture in India with Visa Inc., announced a deal with ICICI Bank, India's largest private sector bank, to deploy Movida's mobile payments service. The service will enable ICICI Bank payment card holders to pay bills, recharge prepaid airtime and buy cinema tickets from their mobile phone. Soon to be implemented by ICICI Bank for its payment card holders, the service is designed to operate across all mobile networks using any payment card - both Visa and non-Visa.

 

·     Asia Pacific

 

Monitise operates in Asia Pacific from a regional base in Hong Kong.

 

Shortly before the end of the first half, Monitise launched a Chinese language version of its Mobile Money platform following the granting of regulatory approval by the Hong Kong Monetary Authority. 'Easy TopUp' offers a simple, secure and convenient real-time mobile service to top up PCCW-HKT pre-paid SIM cards with payment taken direct from their bank account, as opposed to purchasing vouchers from convenience stores. Bank of China (Hong Kong) is the first bank in Hong Kong to provide such service to its customers in cooperation with Joint Electronic Teller Service Limited (JETCO), the ATM network provider in Hong Kong. This was the first joint initiative to be launched following the signing of a Memorandum of Understanding with Bank of China (Hong Kong) in September 2012 and other banks among the 30 within the JETCO network are expected to follow.

 

During the period, additional features for the BBM Money service developed by AGIT Monitise in partnership with PermataBank for BlackBerry in Indonesia were rolled out. Updates included bill pay and cardless cash withdrawals. Since the service upgrade there has been ongoing growth in the use of value added services such as mobile phone top up and re-charging prepaid electricity accounts. 

 

On 21 October 2013, Monitise took full control of its Asia Pacific joint venture, Monitise Asia Pacific Limited, which was a 50:50 joint venture with First Eastern Mobile Investments Limited, a leading Hong Kong-based investment group controlled by Victor Chu.

 

With the live deployments in Indonesia and Hong Kong, the Group's focus is on driving usage and working closely with partners on exploring opportunities to expand the new services into other growth markets across the Asia Pacific region. 

 

·     Board appointments

 

During the first half we further strengthened the Board of Directors with the appointments of Peter Ayliffe as Non-Executive Chairman and Steve Chambers and Victor Dahir as Non-Executive Directors.

 

Peter led Visa Europe as President and Chief Executive for seven and a half years and had served as a Non-Executive Director on the Board of Monitise since November 2011 before assuming his new duties on 1 October 2013, following his retirement from Visa Europe. He succeeded Duncan McIntyre, who stepped down as Chairman, but continues as a special advisor to the company.

 

Steve Chambers and Victor Dahir both joined the Group as Non-Executive Directors.

 

Outlook

 

·     We continue to see increasing demand for our services and positive momentum across the Group and therefore see the need for continued investment as we look to maximise the growth opportunities for Monitise. We reiterate our full-year guidance.

 

·     Expected revenue growth of approximately 50% in FY 2014.

 

·     FY 2014 gross margin to be maintained above 70%.

 

·     The Group sees multiple opportunities in all geographies both from direct sales channels and our growing partner network.

 

·     A move to the London Stock Exchange's main market in calendar 2014 continues to be considered.

 

 

Alastair Lukies

Monitise Chief Executive Officer

 

 

Condensed Consolidated Statement of Comprehensive Income












Six months

Six months

ended

ended

Year ended

31 December

31 December

30 June

2013

2012

2013

(unaudited)

(unaudited)*

(audited)

Note

£'000

£'000

£'000

Revenue

4

 46,541


 27,819


 72,796

Cost of sales


 (12,685)


 (7,773)


 (17,588)








Gross profit


 33,856


 20,046


 55,208








Operating costs before depreciation, amortisation, impairments and share-based payments


 (44,048)


 (34,764)


 (74,513)








EBITDA

13

 (10,192)


 (14,718)


 (19,305)








Depreciation, amortisation and impairments


 (9,285)


 (6,078)


 (16,147)








Operating loss before share-based payments and exceptional items


 (19,477)


 (20,796)


 (35,452)








Share-based payments


 (3,130)


 (2,140)


 (5,333)

Exceptional gain/(loss) on acquisition of subsidiary

10, 11

 2,307


 (1,444)


 (1,444)

Other exceptional items

13

 (984)


 (2,767)


 (4,210)








Operating loss


 (21,284)


 (27,147)


 (46,439)








Finance income


 149


 163


 390

Finance expense


 (1,028)


 (544)


 (563)

Share of post-tax loss of joint ventures


 (1,104)


 (2,190)


 (4,440)








Loss before income tax


 (23,267)


 (29,718)


 (51,052)








Income tax


 1,290


 (614)


 (251)








Loss for the period/year attributable to the owners of the parent


 (21,977)


 (30,332)


 (51,303)








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





Currency translation differences on consolidation


 (9,394)


 (4,231)


 2,468








Total comprehensive expense for the period/year attributable to owners of the parent

 (31,371)


 (34,563)


 (48,835)








Loss per share attributable to owners of the parent during the period/year (expressed in pence per share):







- basic and diluted

5

(1.4)


(2.6)


(3.8)








* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

  

Condensed Consolidated Statement of Financial Position













31 December

31 December

30 June

2013

2012

2013

(unaudited)

(unaudited)*

(audited)

Note

£'000

£'000

£'000

ASSETS







Non-current assets







Property, plant and equipment


 7,370


 8,490


 8,049

Intangible assets

6

 218,187


 188,439


 192,648

Investments in joint ventures


 1,896


 764


Deferred tax assets



 885


 44










 227,453


 198,578


 200,741








Current assets







Trade and other receivables


 21,644


 11,437


 17,363

Cash and cash equivalents


 67,248


 106,414


 86,770










 88,892


 117,851


 104,133








Total assets


 316,345


 316,429


 304,874








LIABILITIES







Current liabilities







Trade and other payables


 (40,679)


 (34,899)


 (36,942)

Provisions


 (1,087)


 (445)


 (1,858)

Financial liabilities

7

 (6,353)


 (1,988)


 (936)










 (48,119)


 (37,332)


 (39,736)








Non-current liabilities







Investments in joint ventures




 (498)

Other payables


 (3,911)


 (2,803)


 (2,333)

Provisions


 (5,985)


 (6,574)


 (6,308)

Financial liabilities

7

 (7,449)


 (4,592)


 (880)

Deferred tax liabilities


 (12,282)


 (14,655)


 (14,170)








Total liabilities


 (77,746)


 (65,956)


 (63,925)








Net assets


 238,599


 250,473


 240,949








EQUITY







Capital and reserves attributable to owners of the parent








 16,427


 15,414


 15,630

Ordinary shares to be issued



 347


Share premium


 217,323


 214,753


 216,594

Foreign exchange translation reserve


 (6,671)


 (3,976)


 2,723

Other reserves


 155,148


 128,753


 130,747

Accumulated losses


 (143,628)


 (104,818)


 (124,745)








Total equity


 238,599


 250,473


 240,949








* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

 

Condensed Consolidated Statement of Changes in Equity










Share-


Foreign





Ordinary



Reverse

based


exchange




Ordinary

shares to be

Share

Merger

acquisition

payment

Accumulated

translation




shares

issued

premium

reserve

reserve

reserve

losses

reserve

Total



£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Six months to 31 December 2012 (unaudited)*











Balance at 1 July 2012*


 10,170

 15,615

 101,336

 109,172

 (25,321)

 10,458

 (76,533)

 255

 145,152

Loss for the year


 (30,332)

 (30,332)

Other comprehensive loss


 (4,231)

 (4,231)












Total comprehensive loss


 (30,332)

 (4,231)

 (34,563)

Issue of ordinary shares (net of expenses)


 5,210

 (15,268)

 113,142

 32,405

 135,489

Recognition of warrants


 1,965

 1,965

Recognition of share-based payments


 2,121

 2,121

Exercise of share options


 34

 275

 (82)

 82

 309












Balance at 31 December 2012*


 15,414

 347

 214,753

 141,577

 (25,321)

 12,497

 (104,818)

 (3,976)

 250,473












Twelve months to 30 June 2013 (audited)











Balance at 1 July 2012


 10,170

 15,615

 101,336

 109,172

 (25,321)

 10,458

 (76,533)

 255

 145,152

Loss for the year


 (51,303)

 (51,303)

Other comprehensive income


 2,468

 2,468












Total comprehensive loss


 (51,303)

 2,468

 (48,835)

Issue of ordinary shares (net of expenses)


 5,227

 (15,615)

 113,323

 32,742

 135,677

Recognition of warrants


 1,965

 1,965

Recognition of share-based payments


 4,822

 4,822

Exercise of share options


 233

 1,935

 (1,126)

 1,126

 2,168












Balance at 30 June 2013


 15,630

 216,594

 141,914

 (25,321)

 14,154

 (124,745)

 2,723

 240,949












Six months to 31 December 2013 (unaudited)











Balance at 1 July 2013


 15,630

 216,594

 141,914

 (25,321)

 14,154

 (124,745)

 2,723

 240,949

Loss for the year


 (21,977)

 (21,977)

Other comprehensive loss


 (9,394)

 (9,394)












Total comprehensive loss


 (21,977)

 (9,394)

 (31,371)

Issue of ordinary shares


 492

 195

 24,538

 25,225

Recognition of share-based payments


 2,896

 2,896

Exercise of warrants


 62

 65

 61

 188

Exercise of share options


 243

 469

 (3,033)

 3,033

 712












Balance at 31 December 2013


 16,427

 217,323

 166,452

 (25,321)

 14,017

 (143,628)

 (6,671)

 238,599












* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

 

Condensed Consolidated Cash Flow Statement









Six months ended


Six months ended



31 December

31 December

Year ended

2013

2012

30 June 2013

(unaudited)

(unaudited)*

(audited)

Note

£'000

£'000

£'000

Cash flows used in operating activities







Cash used in operations

8

 (9,972)


 (9,628)


 (17,063)

Exceptional expenses


 (1,172)


 (4,371)


 (6,733)

Net income tax paid


 (7)


 (193)


 (462)








Net cash used in operating activities


 (11,151)


 (14,192)


 (24,258)








Cash flows used in investing activities







Cash acquired on acquisition of subsidiaries net of cash consideration paid

 1,554


 749


 749

Investments in joint ventures


 (1,238)


 (1,533)


 (2,590)

Loan to joint venture parties



 (1,400)


 (1,400)

Interest paid


 (151)


 (299)


 (339)

Interest received


 170


 33


 237

Purchase of property, plant and equipment


 (973)


 (3,748)


 (5,071)

Purchase and capitalisation of intangible assets


 (8,123)


 (4,807)


 (9,087)








Net cash used in investing activities


 (8,761)


 (11,005)


 (17,501)








Cash flows from financing activities







Proceeds from issuance of ordinary shares (net of expenses)


 60


 117,286


 117,267

Share options exercised


 712


 309


 2,168

Proceeds from long-term borrowings



 139


 139

Repayments of long-term borrowings



 (5,379)


 (10,376)

Repayments of finance lease liabilities


 (123)


 (64)


 (191)








Net cash generated from financing activities


 649


 112,291


 109,007








Net (decrease)/increase in cash and cash equivalents


 (19,263)


 87,094


 67,248








Cash and cash equivalents at beginning of the period/year


 86,770


 19,566


 19,566

Effect of exchange rate fluctuations on cash held


 (259)


 (246)


 (44)








Cash and cash equivalents at end of the period/year


 67,248


 106,414


 86,770








* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

 

Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2013

 

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 18 February 2014.

 

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 2013 were approved by the Board on 4 September 2013 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 by the auditors and the results of operations for the six months ended 31 December 2013 are not necessarily indicative of the operating results for future operating periods.

 

2. Summary of Significant Accounting Policies

 

2.1. Basis of preparation

 

The condensed consolidated interim financial information has 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 2013 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 six months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values of intangible assets, other balance sheet items and goodwill arising on the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

2.2. Accounting policies

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2013, 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 2013, but are not currently relevant for the Group, or have had no material impact:

 

·      IAS 19 'Employee benefits' (revised 2011)

·      Amendment to IAS 12 'Income taxes'

·      IFRS 13 'Fair value measurements'

·      Annual improvements 2011

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

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

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2013 and have not been early adopted:

                                                                                                                                                                        Effective date (subject to EU endorsement)

·      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

·      Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)                                               1 January 2014

·      IFRIC 21 'Levies'                                                                                                                                                                    1 January 2014

·      IAS 27 'Separate financial statements' (revised 2011)                                                                              1 January 2014

·      IAS 28 'Investments in associates and joint ventures (revised 2011)                                              1 January 2014

·      IAS 32 'Financial Instruments: Presentation' (amendments 2011)                                                    1 January 2014

·      IAS 36 'Impairment of assets' (amendments 2013)                                                                                      1 January 2014

·      IAS 39 'Financial instruments: Recognition and measurement (amendments 2013)           1 January 2014

·      IFRS 9 'Financial instruments'                                                                                                                                      1 January 2015

·      Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)                                                     1 January 2014

·      Annual improvements 2012 and 2013                                                                                                                  1 July 2014

·      Amendment to IAS 19 'Employee benefits'                                                                                                          1 July 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 a change in accounting policy in 2011/12. 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.

 

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 2013 Annual Report and Accounts.

 

a)        Revenue recognition

 

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services provided within the Group's ordinary activities, net of discounts and sales taxes. It comprises user generated revenues, product licences and development and integration services.

 

User generated revenue relates to revenue generated from all types of end-user activity and may take various forms including per user fees, click fees, commissions and revenue share, and includes associated managed services. This revenue is recognised as the services are performed.

 

Product licences are sales where the customer has the ability to exploit the licenced functionality upon delivery and include both certain term-based and perpetual licences. These licence revenues are recognised as a sale of a good once all of the below recognition criteria have been met:

·     the Group has transferred to the buyer the significant risks and rewards of ownership of the licence;

·     the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·     the amount of revenue can be measured reliably;

·     it is probable that the economic benefits associated with the transaction will flow to the Group; and

·     the costs incurred or to be incurred in respect of the transaction can be measured reliably.

 

Revenue relating to development and integration services contracted on a time and materials basis is recognised as the services are performed. Revenue relating to development and integration services identified as a service contract is recognised on a straight-line basis. Development and integration service revenue delivered under a fixed price contract is recognised on a percentage-of-completion basis, based on the extent of work completed as a percentage of overall estimated project cost, when the outcome of a contract can be estimated reliably. Determining whether a contract's outcome can be estimated reliably requires management to exercise judgement and estimates are continually reviewed as determined by events or circumstances. Provision is made as soon as a loss is foreseen.

 

Typically, a number of the above elements may be sold together as a bundled contract. Revenue is recognised separately for each component if it is considered to represent a separable good or service and a fair value can be reliably established. The Group may derive fair value for its services based on a reliable cost estimate plus an appropriate market-based margin. Where a product licence is included within a bundled arrangement, the residual value of the contract is ascribed to the product licence after a fair value has been allocated to all other components.

Amounts which meet the Group revenue recognition policy which have not yet been invoiced are accounted for as accrued income whereas amounts invoiced which have not met the Group's revenue recognition criteria are deferred and are accounted for as deferred income until such time as the revenue can be recognised.  Management makes an assessment of the certainty of any accrued revenue amounts in determining how much revenue to recognise.

 

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

 

Where the Group undertakes business combinations, the cost of acquisition is allocated to identifiable net assets and contingent liabilities acquired and assumed by reference to their estimated fair values at the time of acquisition. The remaining amount is recorded as goodwill. Identifiable net assets are valued using external valuation providers and involve an element of judgement related to projected results. Fair values that are stated as provisional are not finalised at the reporting date. Final fair values may be determined that are materially different from the provisional values stated.

 

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.

 

h)          Provisions

 

Management uses judgement to estimate the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

 

i)           Fair value estimation for financial instruments

 

The fair value of financial instruments that are not traded in an active market, for example over-the-counter derivatives and contingent consideration liabilities, is estimated using valuation techniques. Management uses judgement to select a variety of methods and make assumptions that are based on market conditions existing at the end of the reporting period as well as internal information regarding a variety of probable outcomes.

 

4. Segmental Information

 

Reportable segment

Monitise's operating segment is 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 segment based on the information reviewed by the Board of Directors for the purposes of allocating resources and assessing performance.

 

Since the acquisition of Monitise Americas Inc. in June 2012, the Group has transitioned to operating as a single operating segment worldwide.  The Monitise plc Board of Directors considers revenue, cost of sales, operating costs, exceptional costs and a measure of adjusted EBITDA of the Group as a whole when assessing the performance of the business and making decisions about the allocation of resources.  In addition, the Board reviews revenue split by products and geographies to assist with the allocation of resources.  Accordingly, the Group had one reportable operating segment for the six months ended 31 December 2013.  The operating segment derives revenues from delivering mobile banking, payments and commerce networks worldwide.  The results from continuing operations, in the format as provided to the Board, have not been reproduced and can be found in the Condensed Consolidated Statement of Comprehensive Income. 

 

Entity-wide disclosures

 


Six months ended


Six months ended




31 December


31 December


Year ended


2013


2012


30 June 2013


(unaudited)


(unaudited)


(audited)


£'000


£'000


£'000

Product licences

 11,072



 13,744

Subscription and transaction revenue

 16,264


 14,216


 29,649







User generated revenue

 27,336


 14,216


 43,393







Development and integration services

 19,205


 13,603


 29,403







Total

 46,541


 27,819


 72,796

 

Products and services are sales where the customer has the ability to exploit the licensed functionality upon delivery and include both certain term-based and perpetual licences.

  

5. Loss per Share












Basic and diluted






Basic loss per share is calculated by dividing the loss attributable to owners of the parent by the weighted average number of Ordinary shares in issue during the year. As the Group is loss-making, any share options in issue are considered to be 'anti-dilutive'. As such, there is no separate calculation for diluted loss per share. Reconciliations of the loss and weighted average number of shares used in the calculation are set out below:








Six months ended


Six months ended


Year ended


31 December


31 December


30 June


2013


2012


2013


(unaudited)


(unaudited)*


(audited)


£'000


£'000


£'000

Loss for the period / year

 (21,977)


 (30,332)


 (51,303)

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

 1,608,562


 1,152,882


 1,350,300







Basic and diluted loss per share (pence)

(1.4)


(2.6)


(3.8)







* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

 

6. Intangible Assets





Purchased






Intellectual


and acquired

Capitalised




Customer

property

Acquired

software

development



Goodwill

contracts

rights

technology

licences

costs

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

As at 31 December 2013 (unaudited)







Cost:








As at 1 July 2013

 137,663

 27,666

 222

 18,625

 6,189

 18,882

 209,247

Additions

 2,821

 4,263

 7,084

Acquisitions  (notes 10, 11)

 35,315

 2,579

 37,894

Exchange differences

 (9,589)

 (2,072)

 (947)

 (16)

 (84)

 (12,708)

Disposals

 (193)

 (193)

As at 31 December 2013

 163,389

 28,173

 222

 17,678

 8,801

 23,061

 241,324









Accumulated amortisation:








As at 1 July 2013

 4,290

 215

 3,080

 2,303

 6,711

 16,599

Charge

 1,954

 7

 1,731

 1,249

 2,449

 7,390

Exchange differences

 (417)

 (227)

 (8)

 (7)

 (659)

Disposals

 (193)

 (193)

As at 31 December 2013

 5,827

 222

 4,584

 3,351

 9,153

 23,137









Net book value








As at 31 December 2013

 163,389

 22,346

 13,094

 5,450

 13,908

 218,187









As at 30 June 2013 (audited)








Cost:








As at 1 July 2012

 118,168

 26,965

 222

 11,920

 3,993

 12,263

 173,531

Additions

 2,288

 6,586

 8,874

Acquisitions

 16,638

 6,422

 264

 23,324

Exchange differences

 2,857

 701

 283

 33

 3,874

Disposals

 (356)

 (356)

As at 30 June 2013

 137,663

 27,666

 222

 18,625

 6,189

 18,882

 209,247









Accumulated amortisation:








As at 1 July 2012

 737

 183

 1,184

 1,839

 3,943

Charge

 3,441

 32

 3,004

 1,475

 3,896

 11,848

Exchange differences

 112

 76

 3

 191

Impairment

 973

 973

Disposals

 (356)

 (356)

As at 30 June 2013

 4,290

 215

 3,080

 2,303

 6,711

 16,599









Net book value








As at 30 June 2013

 137,663

 23,376

 7

 15,545

 3,886

 12,171

 192,648

 

6. Intangible Assets (continued)





Purchased






Intellectual


and acquired

Capitalised




Customer

property

Acquired

software

development



Goodwill

contracts

rights

technology

licences

costs

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

As at 31 December 2012 (unaudited)*







Cost:








As at 1 July 2012

 118,168

 26,965

 222

 11,920

 3,993

 12,263

 173,531

Additions

 1,528

 4,038

 5,566

Acquisitions

 16,638

 6,422

 264

 23,324

Exchange differences

 (4,197)

 (839)

 (433)

 (5)

 (1)

 (5,475)

As at 31 December 2012*

 130,609

 26,126

 222

 17,909

 5,780

 16,300

 196,946









Accumulated amortisation:








As at 1 July 2012

 737

 183

 1,184

 1,839

 3,943

Charge

 1,693

 16

 1,232

 517

 1,139

 4,597

Exchange differences

 (16)

 (17)

 (33)

As at 31 December 2012*

 2,414

 199

 1,215

 1,701

 2,978

 8,507









Net book value








As at 31 December 2012*

 130,609

 23,712

 23

 16,694

 4,079

 13,322

 188,439

















* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

  

7. Financial Liabilities













31 December


31 December


30 June


2013


2012


2013


(unaudited)


(unaudited)*


(audited)


£'000


£'000


£'000

Due within one year






Short-term loans


 1,111


Contingent consideration and other financial liabilities at fair value through profit or loss

 6,119


 608


 682

Finance leases

 234


 269


 254







Financial liabilities due within one year

 6,353


 1,988


 936







Due after one year






Long-term loans


 3,889


Contingent consideration

 6,675



Finance leases

 774


 703


 880







Financial liabilities due after one year

 7,449


 4,592


 880







Total financial liabilities

 13,802


 6,580


 1,816







* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

  

8. Reconciliation of Net Loss to Net Cash Used in Operating Activities













Six months ended


Six months ended




31 December


31 December


Year ended


2013


2012


30 June 2013


(unaudited)


(unaudited)*


(audited)


£'000


£'000


£'000

Loss before income tax

 (23,267)


 (29,718)


 (51,052)

Adjustments for:






Depreciation

 1,895


 1,481


 3,326

Amortisation and impairments

 7,390


 4,597


 12,821

Share-based payments

 3,130


 2,140


 5,333

Finance expense - net

 879


 381


 173

Exceptional costs

 984


 2,767


 4,210

(Profit)/loss on acquisition of subsidiaries

 (2,307)


 1,444


 1,444

Share of post-tax loss of joint ventures

 1,104


 2,190


 4,440

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






- trade and other receivables

 (6,527)


 3,174


 (2,517)

- trade and other payables

 6,747


 1,916


 4,759







Cash used in operations

 (9,972)


 (9,628)


 (17,063)







* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.







The Group has a net funds balance at 31 December 2013 of £66.2m.






  

9. 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 six months preceding the date of the Condensed Consolidated Statement of Financial Position 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 results.

 

The Group is currently defending a number of its customers in the US against claims for patent infringements arising out of its customers' use of Monitise's technology.  In each of these cases, Monitise has instructed leading U.S. counsel to defend Monitise's interests.  The Directors believe that each of the claims of the patents which are being asserted may be invalid and/or that Monitise's business activities in the U.S. do not infringe any valid claim of any of these patents.

 

Notwithstanding this, and given that the rules on recovery of legal costs in the U.S. generally limit the ability of a defendant to recover anything more than de minimis costs incurred in successfully defending a case, the Directors have made provision for costs, which it is believed will be incurred before these cases can be resolved. 

 

The Group is also defending a customer of MIL's in the US against claims for patent infringements arising out of its customers' use of Monitise's technology.  The Directors believe that each of the claims which are being asserted may be invalid and/or that Monitise's business activities in the US do not infringe any valid claim of any of these patents.  To date, no provision has been reflected for non-recoverable legal fees as this amount cannot currently be reliably estimated.

 

10. Acquisition of Subsidiary - Grapple Mobile Limited

 

On 4 September 2013, the Group acquired the entire issued share capital of Grapple Mobile Limited for a total consideration of £26,440,000 comprising cash, the issuance of 28,640,748 shares in Monitise plc and the fair value of contingent consideration payable.  Grapple Mobile Limited changed its trading name to Monitise Create on acquisition.  Monitise Create is a full service solution company that designs and builds mobile apps.

 

The contingent consideration relates to potential amounts payable in Monitise plc shares or cash at Monitise's option. The value of contingent consideration is dependent on Monitise Create achieving revenue and margin targets following the acquisition.

 

Amounts are also payable to former owners of Monitise Create, who are employees, under the same conditions.  In accordance with IFRS 3, these amounts have been excluded from the calculation of goodwill and are expensed as share-based payments over the period of service.

 

If the acquisition had occurred on 1 July 2013, combined Group revenue and loss after tax for the period would have been £47,480,000 and £21,945,000.

 

The Group made this acquisition in order to benefit from the front-end design talent and capabilities of the Monitise Create team. This opportunity does not wholly translate into separately identifiable intangible assets, but represents synergies expected from integrating Monitise Create's offering and expertise within the Monitise offering.

 

One-off costs relating to the acquisition of £454,000 have been recognised in the Condensed Consolidated Statement of Comprehensive Income within 'Other exceptional items'.

 

The Directors have made a provisional assessment of the fair values of the assets and liabilities, pending finalisation of external valuation of intangible assets. The final amounts may be materially different from the provisional amounts stated. The fair values will be finalised during the year following acquisition.

 

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




Provisional fair




Book value


value adjustment


Provisional fair value


£'000


£'000


£'000

Property, plant and equipment

 96



 96

Intangible assets


 1,674


 1,674

Cash

 2,203



 2,203

Other acquired net liabilities

 (539)



 (539)

Deferred tax liability


 (385)


 (385)







Total

 1,760


 1,289


 3,049







Provisional consideration





 26,440

Provisional fair value of net assets acquired





 (3,049)







Provisional goodwill recognised





 23,391







Provisional consideration satisfied by:






Issuance of shares





 13,175

Cash consideration





 1,079

Fair value of contingent consideration





 12,186












 26,440

 

No adjustments for accounting policy alignments were required.

 

£1,674,000 of customer related intangible assets were capitalised as part of the acquisition of Monitise Create and will be amortised over one to five years.  A deferred tax liability of £385,000 on the capitalisation of the intangible assets has been created on acquisition.

 

The calculation of provisional fair values of consideration, 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 delivering 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.

 

11. Acquisition of Subsidiary - Monitise Asia Pacific Limited

 

On 21 October 2013, the Group acquired the remaining 50% of the issued share capital in its joint venture, Monitise Asia Pacific Limited (MAP), from its joint venture partner for a consideration of £11,850,000 paid by the issuance of 20,000,000 shares in Monitise plc.  MAP provides mobile banking, payments and commerce networks in the Asia-Pacific region.

 

£4,957,000 of the total consideration payable was deemed to be settlement of a pre-existing relationship and has not been included in the calculation of goodwill.  The settlement of the pre-existing relationship is included within 'Exceptional profit on acquisition' in the Condensed Consolidated Statement of Comprehensive Income.  The settlement amount was valued using a royalty-based method.  The total consideration paid for 50% of MAP was therefore £6,893,000.

 

If the acquisition had occurred on 1 July 2013, combined Group revenue and loss after tax for the period would have been £46,483,000 and £22,403,000.

 

The Group made this acquisition in order to gain full control of MAP, and consequently, have greater flexibility in entering the Asia-Pacific market. This opportunity does not wholly translate into separately identifiable intangible assets, but represents much of the assessed value within MAP and the opportunity within the Asia-Pacific market, supporting the recognised goodwill.

 

The amount of the equity interest held by the Group in MAP immediately before the acquisition had a provisional fair value of £6,893,000 and resulted in a gain on provisional fair valuation of £7,308,000. The gain on acquisition, net of the settlement of the pre-existing relationship, was therefore £2,351,000. Offset against this was £44,000 of one-off costs.  The total amount has been recognised in the Condensed Consolidated Statement of Comprehensive Income as 'Exceptional gain on acquisition'.

 

The Directors have made a provisional assessment of the fair values of the assets and liabilities, pending finalisation of external valuation of intangible assets. The final amounts may be materially different from the provisional amounts stated. The fair values will be finalised in the year following acquisition.

 

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

  




Provisional fair




Book value


value adjustment


Provisional fair value


£'000


£'000


£'000

Property, plant and equipment

 4



 4

Intangible assets


 905


 905

Investment in joint venture

 438


 1,522


 1,960

Cash

 430



 430

Other acquired net liabilities

 (1,288)



 (1,288)

Deferred tax liability


 (149)


 (149)







Total

 (416)


 2,278


 1,862







Provisional fair value of 50% interest previously held





 6,893

Provisional consideration





 6,893

Provisional fair value of net assets acquired





 (1,862)







Provisional goodwill recognised





 11,924







Provisional consideration satisfied by:






Issuance of shares





 11,850

Less settlement of pre-existing relationship





 (4,957)












 6,893

 

No adjustments for accounting policy alignments were required.

 

£905,000 of customer related intangible assets were capitalised as part of the acquisition of MAP and will be amortised over five years.  A deferred tax liability of £149,000 on the capitalisation of the intangible assets has been created on acquisition.

 

The calculation of provisional fair values of consideration, assets and liabilities such as goodwill and intangible assets as well the assessment of any impairment to fair values generally, involve estimations of likely future cash flows delivering 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.

 

12. Reconciliation of GAAP to Non-GAAP Items







Six months ended


Six months ended


Year ended


31 December 2013


31 December 2012


30 June 2013


(unaudited)


(unaudited)*


(audited)


£'000


£'000


£'000

Loss after income tax

 (21,977)


 (30,332)


 (51,303)

Share-based payments

 3,130


 2,140


 5,333

Exceptional (gain)/loss on acquisition of subsidiary

 (2,307)


 1,444


 1,444

Other exceptional items

 984


 2,767


 4,210

Impairments



 973

Acquisition-related amortisation

 3,740


 2,980


 6,555







Adjusted loss for the period

 (16,430)


 (21,001)


 (32,788)







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

 1,608,562


 1,152,882


 1,350,300







Adjusted loss per share (pence)

(1.0)


(1.8)


(2.4)







* Comparatives for the 6 months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values relating to the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

 

13. Notes to the Condensed Consolidated Statement of Comprehensive Income







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







Other exceptional expenses mainly comprise acquisition related items and litigation costs.

 

14. Post Balance Sheet Events

 

The Group acquired 100% of the issued share capital of Pozitron Yazilim A.Ş., an internationally recognised company based in Turkey delivering mobile money solutions, on 31 January 2014. Initial consideration is satisfied by the issue of 35,925,589 Ordinary shares valued at £24m based on the closing share price of 66.5p on 31 January 2014. In addition, contingent consideration of up to £36m may be payable in shares or cash, at Monitise's discretion, based upon the achievement of earn out targets.

Due to the timing of the transaction, the accounting for this acquisition has not yet been finalised. As such, information on goodwill and the fair value of assets and liabilities acquired is not available at the date of this report.

 

 

Company Information

 

Registered office                                 95 Gresham Street

                                                                        London

                                                                        EC2V 7NA

 

Broker                                                         Canaccord Genuity Limited

                                                                        88 Wood Street

                                                                        London

                                                                        EC2V 7QR

 

Independent auditors                      PricewaterhouseCoopers LLP

                                                                        Chartered Accountants and Statutory Auditors

                                                                        1 Embankment Place

                                                                        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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