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The People'sOperator (TPOP)

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Tuesday 12 May, 2015

The People'sOperator

Final Results

RNS Number : 8516M
The People's Operator PLC
12 May 2015
 

 

The People's Operator plc

("TPO" or the "Company")

 

Final Results

 

The People's Operator (AIM: TPOP), the cause-based commercial mobile virtual network operator ("MVNO"), is pleased to announce its audited Final Results for the year ended 31 December 2014 and an update on current trading.

 

 

Key Highlights:

·      Subscriber numbers have more than doubled since year end and set to hit 30,000 at 12 May 2015

·      Builds on substantial increase of over 14,000 subscribers at year end, ahead of company's initial expectations (31 December 2013: 2,400; 30 June 2014: 5,800)

·      Average customer acquisition costs remain low at approx. £7, significantly below industry standards

·      Low monthly subscriber churn rate maintained, in line with the rate set out in company's AIM Admission Document

·      Revenue of £432,391 (2013: £62,277)

·      Revenues from Pay Monthly customers increased by 74 per cent. since 31 December 2014, translating to monthly run rate of approximately £105,000*

·      Cash and cash equivalents as at 31 December 2014 of £18.4m

·      Loss before tax £2,328,399 (2013: £1,478,440)

·      Community Platform launched in limited release

·      US launch on track 

·      Successful AIM listing

 

*Assuming that subscribers currently on introductory offers transition to a full rate in line with current churn rates

 

 

Jimmy Wales, Executive Chairman, commented: "I am delighted that since listing on AIM in December 2014 our progress has continued to accelerate. Subscriber numbers and revenues are growing strongly, in line with our expectations and we have successfully launched our Community Platform in limited release. We have created a strong team in the US and our launch plans are on track. We remain confident that we will achieve our growth plans in 2015 and beyond."

 

For further information

 

The People's Operator plc

Jimmy Wales, Executive Chairman

Mark Epstein, Chief Executive Officer

 

via Alma PR

finnCap Ltd

Stuart Andrews / Christopher Raggett / Simon Hicks

 

020 7220 0500

Alma PR


Josh Royston

+44 (0)7780 901979

John Coles

+44 (0)7836 273660

Hilary Buchanan

+44 (0)7515 805218

 

 

About The People's Operator

 

The Company was founded in 2012 and currently offers customers pay monthly ("PAYM") and pay-as-you-go ("PAYG") mobile contracts. These contracts are competitively priced and allow users to direct 10% of their monthly bill to a cause of their choosing at no additional cost to themselves. In addition, The TPO Foundation, a UK registered charity, will receive 25% of the UK trading profits generated by The People's Operator LLP. A similar structure is proposed to be adopted in other countries.

 

The strategy of the Group is to maintain a low fixed-cost base, small staff numbers and lower levels of advertising and marketing expenditure than its competitors. In addition, as TPO operates as an MVNO, the Group is not expected to be exposed to the high infrastructure costs and large capital investment charges that traditional mobile operators can incur. This strategy is expected to enable the Group to offer customers a highly competitive pricing model with a high quality of service, whilst generating an attractive return to shareholders after donations to causes.

 

TPO has developed partnerships with community organisations and causes who promote TPO's products to their supporters. Under the direction of Jimmy Wales, the founder of the online encyclopaedia Wikipedia, the Company is also developing an online viral community to expand the global network of mobile phone customers who share in the common belief of supporting causes.

 

The Directors believe that this strategy is scalable into new markets around the world which offer competitive wholesale mobile network bandwidth prices and where subscriber acquisition and revenue growth can be driven quickly at a low incremental cost once network agreements have been concluded with local network operators. 

 

Initially, TPO intends to launch in the United States in 2015 having signed a long term operating agreement with Sprint, the third largest wireless network operator in the USA, in September 2014. Following expansion into the USA, the Directors have identified a number of jurisdictions for future expansion of the TPO offering (Mexico, Brazil, Asia and Europe) and over the next 18 months the Group intends to negotiate a series of operating agreements with established network operators in these regions with a view to replicating the model in an increasing number of countries worldwide.

 

TPO was admitted to AIM on 4 December having successfully raised approximately £20 million, before expenses, through a placing at 130p per Ordinary Share which will primarily be used to invest in the development of its viral, on-line global community platform and to provide working capital for expansion.

 

For more information, visit: https://www.thepeoplesoperator.com.

 

 

 

 

 



 

Chairman's Statement

 

2014 was a pivotal year for The People's Operator Plc ("TPO", or "the Company").  The number of subscribers grew significantly during the year, we signed a key wholesale agreement with Sprint in the USA, and we listed on the AIM market of the London Stock Exchange in December 2014. I joined the firm early in the year, adding to the highly capable executive team to create the future success of the company.

 

TPO experienced significant growth during 2014, with subscribers rising from approximately 2,400 at 31  December 2013, to 5,800 at 30 June 2014, and to just over 14,000 at 31 December 2014 - growing by a factor of approximately 6 times during 2014, ahead of expectations. This growth has continued into the current year with subscriber numbers reaching 28,200 as at 30 April 2015.

 

The TPO proposition is underpinned by our appeal to consumers, centring on wide network coverage, competitive pricing, and the opportunity to direct 10 per cent of a customer's bill to a good cause of their choice.

 

We believe that TPO business model has the following key strengths:

·      Significant potential for growth, where we are aiming for up to 2 per cent penetration of the UK and US markets by 2021.

·      Distinctive and differentiated sales proposition.

·      First mover advantage - we have  developed, commercialised and launched a business model that we believe is markedly different to those of our competitors.

·      Robust financial model - our business model is based on low fixed costs, minimal advertising, and the development of an online viral cause based community. We therefore intend to ensure that the cost of customer acquisition is lower than its competitors and industry standards.

 

TPO was admitted to the AIM market of the London Stock Exchange on 4 December 2014, raising gross proceeds of £20m and representing a key milestone in the development of the company.

 

Our thoughts turn to Andrew Rosenfeld at this time, as well as to his family. Andrew's contribution to TPO is immeasurable, and we continue to strive for success on the lines of the strategy we developed as a team.

 

Finally, I would like to extend my gratitude to all the employees of TPO, who have worked extremely hard during this year to create the platform we have built, to deliver the Company's achievements to date, and to lay the foundations of the future for TPO.

 

 

 

 

 

J Wales

 

 

Chairman

 

 



 

Strategic Report

 

 

Principal activity

 

The principal activity of the group is that of the provision of mobile phone services. We believe that subscribers find TPO appealing due to the mixture of wide network coverage, competitive pricing, and the opportunity to direct 10 per cent of their bill to a good cause. The group believes that its customer acquisition model, through viral networking and online communities, means that customers can be acquired at a lower cost per user than the market norm and retained for longer than the market average through a strong attachment to their chosen causes, whilst achieving a market average revenue per subscriber.

 

The group has developed, marketed and operates a mobile phone business that provides consumers with an attractive alternative to traditional providers. The group is financially prudent and operates a low cost model to generate the best return on investment. The group intends to grow the business into a profitable operation.

 

TPO sells to consumers mobile services that are delivered by the EE operating infrastructure.  Marketing results for our Pay Monthly ("PAYM") and Pay As You Go ("PAYG") services are producing encouraging results for the leveraging of future sales.

 

Adjusted loss for the year was £2,328,399 (2013 - £1,478,440 loss) and loss per share was £0.02 (2013 - £5,544 loss per share).

 

Admission to AIM increased our cash balance by approximately £18m, the net amount raised after corporate finance and corollary fees on the £20m raised at IPO. Cash at 31 December 2014 was £18.4m.

 

Review of the business and key performance indicators

 

Our key performance indicators are revenue and subscribers added to our network.

 

Revenue grew from £62,277 in 2013 to £432,391 in 2014, a factor of 6 times. The revenue increase was driven by the large growth in the number of TPO subscribers. We offer two types of service plans to our subscribers, a Pay Monthly plan and a Pay As You Go plan.

 

TPO ended the year 2014 with over 14,000 subscribers, well ahead of the company's initial expectations, and a substantial increase on the 2,400 subscribers at the end of 2013, and the 5,800 subscribers at 30 June 2014.

 

The group ended the year with a strong balance sheet, holding £18,415,236 in net cash compared to £48,009 in 2013.

 

We maintain confidence in our forecast subscriber numbers over the coming years, where we are aiming for up to 2 per cent penetration of the UK and US markets by 2021.  We remain confident that the business model and platform are capable of international transposition, and thus in line with our stated strategy, we continue to investigate markets outside the UK and US for future commercial prospects.

 

Current Trading

 

We are pleased to report that strong trading has continued into the current financial year and as at 30 April 2015, subscriber numbers were 28,200, more than double that at 31 December 2014. The 30 April 2015 subscriber numbers consist of 9,680 on PAYM and 18,520 on PAYG, and we are encouraged by our ability to transition customers from PAYG to PAYM. Revenues from PAYM customers have increased by 74 per cent since 31 December 2014, translating to a monthly run rate of approximately £105,000*. We currently have an average revenue per subscriber run-rate of £11 for PAYG and £16 for PAYM customers, excluding in-teaser period customers, which is in line with our expectations.

 

*Assuming that subscribers currently on introductory offers transition to a full rate in line with current churn rates.

 

 

Overall blended average customer acquisition costs remain low at approximately £7 and in line with those set out in the Company's AIM Admission Document, and, we believe, significantly below industry standards for major UK operators.

 

We are pleased to report that customer churn rate remains low as customers move out of the introductory deal package and onto monthly contracts. We have maintained a low monthly subscriber churn rate in line with the rate set out in the company's AIM Admission Document.

 

During the period we have been delighted with our highly competitive packages and we are pleased to today launch our largest data package to date.

 

US Expansion & Community Platform

 

Our US launch is on track, accompanied by the implementation of the Community Platform, which is currently in beta public release and receiving positive initial feedback.  We are expecting a strong reception on launch and believe it will have a very positive impact on the business. In line with our strategy we have recruited a senior team in the US, including John Nakos,Senior Vice President Marketing (previously VP of Sales at ZTE USA and VP of Mobile sales at GN Netcom), Marisa Biehl, Vice President Partnerships (previously Managing Director Corporate Partnerships at UNICEF), and Felicia Hill, Digital Director (previously Senior Brand Manager of Social Engagement and Cause Marketing at Virgin Mobile USA). We are delighted to have already secured partnerships with some major causes in the US and we will be providing further details over the coming weeks.

 

Further review of the business and future developments is given in the Chairman's Statement.

 

Outlook

 

I am delighted that since listing on AIM in December 2014 our progress has continued to accelerate. Subscriber numbers and revenues are growing strongly, in line with our expectations and we have successfully launched our Community Platform in limited release. We have created a strong team in the US and our launch plans are on track. We remain confident that we will achieve our growth plans in 2015 and beyond.



 

 

Principal risks and uncertainties

 

Liquidity Risk

 

Liquidity risk is the risk that we may have difficulty in obtaining funds in order to be able to meet both our day-to-day operating requirements and our debt servicing obligations. Our successful admission to the AIM and associated funds raised, has mitigated this risk in the medium term.

 

We continue to prudently manage our liabilities. Cash and cash forecasts are reviewed by Executive Directors on a daily basis.

 

Foreign Exchange Risk

 

As we expand overseas commencing with the USA market, we need to transact in foreign currency which exposes us to the risk of financial losses associated with unfavourable movements in foreign exchange markets.

 

The Executive Directors will approve and then monitor transactions that are settled in foreign currency and will regularly assess the need to mitigate foreign exchange risk with a hedging solution.

 

Financial reporting

The company has transitioned the financial reporting from external accountants to an internal team and whilst there is a time-risk associated with placing permanent staff, good progress has been made with the appointment of a Financial Controller who has significant plc reporting experience.

 

Preparation for USA Expansion

 

As with all new ventures, time and preparation is required to ensure systems and reporting are inter-linked and accurate. This risk is mitigated using experienced US suppliers, who deal with multiple Mobile Virtual Network Operators ("MVNOs") over the course of many years, and their experienced recommendations of outsourced providers.

 

 

Approved by the board and signed on its behalf

 

 

 

M Epstein

 

Chief Executive Officer

 

 

 

 

 

Consolidated statement of comprehensive income for the year ended 31 December 2014

 






Note

2014

2013



£

£





Revenue

2

432,391

62,277





Cost of sales


(772,506)

(181,625)



_________

_________





Gross loss


(340,115)

(119,348)





Distribution costs


(526,478)

(466,551)

Administrative expenses


(1,454,585)

(901,518)



_________

__________





Operating loss

3

(2,321,178)

(1,487,417)





Finance income


-

8,977

Finance expense


(7,221)

-



_________

_________





Loss before tax


(2,328,399)

(1,478,440)





Taxation

4

-

-



_________

_________





Loss and total comprehensive income for the year


(2,328,399)

(1,478,440)



_________

_________









Loss and total comprehensive income attributable to:




Owners of the parent


(1,746,299)

(1,108,830)

Non-controlling interest


(582,100)

(369,610)



_________

_________





Loss and total comprehensive income for the year


(2,328,399)

(1,478,440)



_________

_________





Basic and diluted loss per share attributable to shareholders of the parent


(0.02)

(5,544)



_________

_________

 

Loss per share

 

The loss per share calculation is based on the group's retained loss attributable to the shareholders of the parent for the year of £1,746,299 (2013 - £1,108,830) and the weighted average number of shares for the year of 77,099,059 (2013 - 200).

 

There were no other recognised income or expenses other than those shown above.

 

 

 

 

 

Consolidated statement of financial position at 31 December 2014

 


Note

2014

2014

2013

2013



£

£

£

£

Assets






Non-current assets






Property, plant and equipment



9,983


5,994

Intangible assets



135,399


84,145




_________


_________







Total non-current assets



145,382


90,139




_________


_________

Current assets






Trade and other receivables



407,315


142,008

Cash and cash equivalents



18,415,236


48,009




_________


_________







Total current assets



18,822,551


190,017




_________


_________







Total assets



18,967,933


280,156




_________


_________

Equity and liabilities






Current liabilities






Trade and other payables



1,480,669


212,360




_________


_________







Total current liabilities



1,480,669


212,360




_________


_________

Non-current liabilities






Other payables - loans



-


2,112,267




_________


_________







Total non- current liabilities



-


2,112,267




_________


_________

Equity






Share capital

5

38,550


200


Share premium

5

21,821,784


-


Retained earnings


(3,421,360)


(1,675,061)




_________


_________


Total equity attributable to the parent



18,438,974


(1,674,861)







Non-controlling interest



(951,710)


(369,610)




_________


_________







Total equity



17,487,264


(2,044,471)




_________


_________

TOTAL EQUITY AND LIABILITIES



18,967,933


280,156




_________


_________

 

The financial statements were approved and authorised for issue by the Board of Directors on 11 May 2015 and were signed on its behalf by:

 

 

M Epstein

Director

 



 

 

Consolidated statement of cash flows for the year ended 31 December 2014

 









2014

2014

2013

2013



£

£

£

£

Cash flows from operating activities






Operating loss for the year



(2,321,178)


(1,487,417)

Adjustments for:






Depreciation of property, plant and equipment



1,300


1,883

Amortisation of intangible fixed assets



65,453


55,739




_________


_________










(2,254,425)


(1,429,795)

Decrease in trade and other receivables



(265,307)


47,038

Increase in trade and other payables



1,268,309


75,317




_________


_________







Cash used in operations



(1,251,423)


(1,307,440)







Interest paid



(7,221)


-




_________


_________

Net cash flows from operating activities



(1,258,644)


(1,307,440)







Investing activities






Purchases of property, plant and equipment


(5,289)


(1,731)


Purchase of intangibles


(116,707)


(85,217)




_________


_________


Net cash used in investing activities



(121,996)


(86,948)







Financing activities






Issue of ordinary shares


20,050,000


-


Issue costs


(1,229,805)




Loan from related party


927,672


1,217,267




_________


_________


Net cash from financing activities



19,747,867


1,217,267







Net increase/(decrease) in cash and cash equivalents



18,367,227


(177,121)







Cash and cash equivalents at beginning of year



48,009


225,130




_________


_________

Cash and cash equivalents

at end of year



18,415,236


48,009




_________


_________

 

 

 

 



 

Consolidated statement of changes in equity for the year ended 31 December 2014

 





Total







attributable to

Non-



Share

Share

Retained

equity holders

controlling

Total


capital

premium

earnings

parent

interest

equity


£

£

£

£

£

£








At 1 January 2013

200

-

(566,231)

(566,031)

-

(566,031)








Loss and total comprehensive income for the year

-

-

(1,108,830)

(1,108,830)

(369,610)

(1,478,440)


_________

_________

_________

_________

_________

_________








31 December 2013

200

-

(1,675,061)

(1,674,861)

(369,610)

(2,044,471)








Share issues














New ordinary shares issued on admission to AIM

7,692

19,992,308

-

20,000,000

-

20,000,000








Costs of issuing new ordinary shares

-

(1,630,557)

-

(1,630,557)

-

(1,630,557)








New ordinary shares issued in settlement of A Rosenfeld's loan

1,235

3,210,874

-

3,212,109

-

3,212,109








Group re-construction

500

-

-

500

-

500








Other share issues

28,923

249,159

-

278,082

-

278,082








Loss and total comprehensive income for the year

-

-

(1,746,299)

(1,746,299)

(582,100)

(2,328,399)


_________

_________

_________

_________

_________

_________








31 December 2014

38,550

21,821,784

(3,421,360)

18,438,974

(951,710)

17,487,264


_________

_________

_________

_________

_________

_________

 

 

Shares issued in the group re-construction represent the transfer during the period of the investment in the previous parent company The People's Operator Holdings Limited to the new group parent company The Peoples Operator plc.

 

Share capital and share premium is the amount subscribed for shares detailed in note 5.

 

Retained earnings represent the cumulative loss of the group.

 

 

 

 

 

Notes forming part of the financial statements for the year ended 31 December 2014

 

1

Basis of preparation

 

The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements.

 

The financial information set out in this document does not constitute the Group's statutory financial statements for years ended 31st December 31 2014 and 2013. The annual report and financial statements for the year ended 31 December 2014 were approved by the Board of Directors on 11 May 2015 along with this preliminary announcement. The financial statements for the year ended 31 December 2014 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for the year ended 31 December 2014 was unqualified, did not contain a statement under 498(2) or 498(3) of the Companies Act 2006 and did not draw attention to any matters by way of emphasis.

 

The financial information set out in these preliminary results has been prepared using International Financial Reporting Standards (IFRSs) as adopted by the EU. The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2013. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2014. New standards, amendments and interpretations to existing standards, which have been adopted by the Group, have not been listed since they have no material impact on the financial statements

 

 

2

Revenue and segmental information

 

The Group supplies communication services and products to the UK market, through a mobile virtual network. This is considered to be a single group of services and products provided by a single supplier, to one geographical area. The Group has focused on managing the services provided through this network in a unitary manner.

 

For customers who choose to nominate a charity or cause, below we break out the relevant 10% of their billings that is passed on by TPO:

 



2014

2013



£

£






Gross income

454,210

68,505


Amounts to nominated causes

(21,819)

(6,228)



_________

_________






Revenue

432,391

62,277



_________

_________

 

 

3

Operating loss



 

The following items have been included in arriving at operating loss.

 



2014

2013



£

£






Depreciation of property, plant and equipment

1,300

1,883


Amortisation of intangible assets

65,453

55,739


Auditors remuneration:




- Corporate finance services

60,055

-


- Tax compliance

7,000

2,500


- Audit of company

37,000

32,000


- Audit of subsidiaries

5,000

3,000



_________

_________

 

 

4

Taxation



 

Analysis of tax expense

 

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2014.

 

Factors affecting the tax expense



2014

2013



£

£






Loss on ordinary activities before tax

(2,328,399)

(1,478,440)



_________

_________






Loss on ordinary activities at the standard rate

of corporation tax in the UK of 20% (2013 - 20%)

(465,680)

(295,688)






Effects of:




Net disallowed expenditure

14,458

11,524


Losses available to carry forward

451,222

284,164



_________

_________






Tax expense

-

-



_________

_________

 

The group incurred tax losses of approximately £2,256,110 during the year (2013 - £1,420,820) so has a potential deferred tax asset of approximately £735,386 (2013 - £284,164). This has not been recognised as there isuncertainty as to the timing of future profits that will arise in future accounting periods against which these losses could be offset. The losses are available for use against profit from the same trade.

 

 

5

Share capital






Number of

Ordinary

Share



shares

shares

premium



Number

£

£












As at 1 January 2014

200

200

-


Group re-construction transfer

(200)

(200)

-


Ordinary shares issued

77,099,059

38,550

21,821,784



_________

_________

_________







As at 31 December 2014

77,099,059

38,550

21,821,784



_________

_________

_________

 

On the 4th of December, new shares were issued to investors as part of the company's admission to the Alternative Investments Market on the London Stock Exchange. 15,384,616 ordinary shares of £0.0005 were issued at a subscription price of £1.30.

 

The share premium on this issue was £19,992,308 and is recognised within equity after deducting transaction costs of £1,630,557.

 

As part of the group re-organisation 2,470,852 shares were issued at a price of £1.30 to Andrew Rosenfeld, the controlling director, in consideration for a loan receivable from The People's Operator Holdings Limited of £3,212,109.

 

 

6

Cautionary Statement

 

The People's Operator has made forward-looking statements in this press release, including statements about the market for and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties and business strategies. These statements about future events are subject to risks and uncertainties that could cause The People's Operator 's actual results to differ materially from those that might be inferred from the forward-looking statements, The People's Operator can make no assurance that any forward-looking statements will prove correct.


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