21st Aug 2007 07:01
Monitise PLC21 August 2007 Embargoed for 7.00am, Tuesday 21 August 2007 MONITISE PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2007 Strong progress with UK business and international expansion strategy Monitise plc ("Monitise"; LSE: MONI.L), the mobile banking and paymentstechnology specialist which listed on AIM at the end of June 2007, todayannounces its maiden results as a listed company for year to 30 June 2007. Highlights • Strong progress in UK business - Three major UK banking groups and seven UK mobile operators now using Monitise platform including HSBC, first direct, Alliance & Leicester, Royal Bank of Scotland, NatWest, Vodafone, Orange, O2, T-Mobile and Hutchison 3G - MONILINK services will be accessible by Autumn 2007 by 35% of all current account card holders in the UK - Confident of further UK bank signings in coming months • International roll out gaining traction - Joint venture with the banking and payment specialists Metavante in the US, giving access to a potential market of over 8,600 financial services firms - Agreement in place with T-Systems, providing exclusivity to negotiate the rights to the Monitise platform in Germany - New agreement with BT Global Services, providing exclusivity to negotiate the rights to Monitise platform for selected Gulf States - New agreement with Global Financial Consultants Pty Ltd providing exclusivity to negotiate the rights to the Monitise platform in Australia • Demerged from Morse plc and raised £20.2m (net) via placing in June 2007 to meet working capital requirements • Investment phase continues - Developing opportunities in key territories - Signing new banks and the roll out of existing mobile banking and payments services including balance enquiries, mini-statements and mobile top-ups - Implementation of new services to include inter-account transfers, second factor authentication and remittances to be added • Revenue stream beginning to build • Board confident Monitise has established an excellent competitive position and has compelling prospects Duncan McIntyre, chairman, said: "We have made strong progress both with our UK business and our internationalexpansion strategy this year and are well positioned to become one of theleading mobile banking and payment platforms worldwide. After three-and-a-half years of intensive development, Monitise has reached akey stage in its evolution. Today we are the leading player in the UK mobilebanking and payments market, we have a strong foothold in strategicallyimportant overseas territories and substantial interest from potential partnersand customers. In addition, the demerger and placing has brought the necessaryfocus to the business as well as the working capital required to further developour operations and intellectual property. The Group is still in its investment phase and as such, we are focused in thenear term on rolling out our platform and developing related services to furtherexploit the value of our technology and intellectual property. We already havefuture income streams integrated into the product roadmap and are experiencingencouraging early signs of revenue generation." Alastair Lukies, CEO, added: "Monitise has had an extremely successful year, and we believe Monitise willbecome one of the leading mobile banking and payments providers in the world.The successful demerger from Morse plc and the fundraising allows us to continueto develop our business as an independent company and pursue our strategy forgrowth. We have a well established position in the UK and, through the agreements withthe major banks and operators we have signed, our MONILINK service will beaccessible to 35% of all current account card holders of UK banks by Autumn2007. We are confident that we will reach agreement to provide our services toother UK banking groups over the coming months. With a joint venture established in the US with Metavante Inc and a presence inGermany through T-Systems, as well as new agreements covering certain of theGulf States and Australia. The mobile banking and payments market is rapidly gaining momentum, notdissimilar to the growth of internet banking in its early stages and ourtechnology has the mass-market characteristics required for mobile banking tobecome a ubiquitous and valuable banking channel. Monitise has strong momentum, an excellent competitive position and compellingprospects and we believe the current year will show substantial progress." Contacts: Monitise Group Tel: 020 7868 5200Duncan McIntyre, ChairmanAlastair Lukies, CEOBen Evetts, Head of Communications Financial Dynamics Tel: 020 7831 3113Harriet KeenHaya Chelhot About Monitise Monitise plc (MONI.L) is a specialist in mobile banking and payments technology.It has developed the world's first mobile banking ecosystem, which allowsconsumers to perform banking and payment transactions using a single consistentinterface regardless of their choice of mobile operator or bank. With live services in the UK, where it has delivered the MONILINK network inpartnership with VocaLink, the company is currently working with internationalpartners to deliver similar safe, secure mobile banking services in territoriesworldwide. Current key partners include VocaLink Interchange Network, Metavante,BT Global Services, T-Systems, HSBC, first direct, Alliance & Leicester, RoyalBank of Scotland, NatWest, Vodafone, Orange, O2, T-Mobile and Hutchison 3G. Monitise was recognised as a "Technology Pioneer" by the World Economic Forum in2006; 'Mobile Innovation of the Year' by The Banker Magazine in 2007 and;awarded the Innovation in Messaging award 2007 by the Mobile MessagingAssociation. For further information, please visit www.monitise.com. Chairman's statement Overview I am pleased to report the first results for Monitise since its demerger fromMorse plc and admission to AIM on 28 June 2007. In the last year we have madestrong progress both with our UK business and our international expansionstrategy and we are extremely well-positioned to become one of the leadingmobile banking and payment platforms. This was our first full year of trading since Monitise commenced operations as aseparate operating company within Morse plc in October 2005. The Group is stillin its investment phase and, consistent with this and in line with the Board'sexpectations, we reported an operating loss after £0.6 million of exceptionalcharges of £8.7 million, (nine months ended 30 June 2006: £3.3 million) and adoubling of turnover to £0.5 million (nine months ended 30 June 2006: £0.2million). This year has seen the Group establish the foundations for its next phase ofgrowth. We have now created the first mobile banking and payments ecosystem inthe UK market. Importantly, our secure, robust method of delivering bank-gradetransactions via an intuitive interface on mobile devices is not tied toproprietary bank or operator technologies which gives us the ability to provideour service to all of the major banks and mobile operators. Moreover, byleveraging and replicating the existing ATM technical infrastructure, alreadyused by all of the major retail banks, we have ensured simplicity ofimplementation for banks and switches. The international mobile banking and payments markets is growing very rapidlyand we have entered this market with a strong foundation of proven, trustedtechnology and established relationships with high-profile banks, mobileoperators and switch providers. Based on the success of the MONILINK services in the UK, and our recently agreedjoint venture in the United States, we are confident that our ecosystem modelprovides the most sustainable route to market for banks looking to providemobile banking and payment services in other geographies, providing them withrapid returns and helping them introduce new added-value services for end users. Our vision is to deliver low-cost mobile banking for the mass market and we aimto become one of the leaders in mobile banking services worldwide. Havingestablished our platform in the UK and built strong relationships with thesignificant number of banks and mobile operators signed to our services,including global brands such as HSBC, RBS, Vodafone, O2 (part of Telephonica)and Orange (part of France Telecom), we are seeing our customers acting asadvocates for the adoption of Monitise services in the other geographies inwhich they operate. Our market and model Although the mobile banking and payments market is still in its infancy, theevidence suggests that it should rapidly become one of the main channels tomarket for the banks. Banks around the world have progressively expanded bankingservices from branch networks to self-service channels such as ATMs, to internetbanking and telephone banking. Mobile banking is now the logical continuationof this trend, leveraging automation, reduced costs and improved customerconvenience. In addition to delivering new income streams and providingcross-selling opportunities for banks, mobile banking has the potential toreduce the incidence of fraud, protect the banks against disintermediation oftransaction business and provide a response to the increasing regulatorypressure for transparency. The customer's ability to interact with his or her bank is only part of themobile banking and payments revolution and there are major developments withinthe industry that will lead to the mobile handset becoming the initiator ofpayments on a broader scale. Mobile banking will, in due course, allowconsumers to initiate peer-to-peer and remittance payments, manage accounts fromwhich payments are made and access their sources of funds to reload whateverelectronic payment method is being used. There is already a fledgling market forcashless transactions using stored value cards, such as the 'Oyster' systemsuccessfully deployed by Transport for London which requires access to fundsdirectly from users accounts. Through our mobile top-up mechanism, we havealready demonstrated our ability to meet the demand for a payment mechanism forthese services. Furthermore, as stored value cards develop, primarily inresponse to the industry requirement to reduce the cost involved in low valuetransactions currently serviced by cash, a mobile interface and top-up mechanismwill be essential to their success. Monitise is well placed to meet thisrequirement, both in the early stages and in the future as Near FieldCommunications (NFC) technologies within mobile handsets continue to develop. Strategy and outlook Monitise has established a clear footprint in this market, with a unique,defendable and sustainable model capable of addressing the huge opportunitiespresented by mass-market global mobile banking, as well as related applicationsfor our technology and intellectual property. Our strategy for growth in its simplest form rests on three key areas: continueto sign up the world's leading banks and switches to the Monitise platform;continue to attract the appropriate partners to deliver sustainable, localecosystems; and continue to develop a compelling and consumer-centric productroadmap ahead of the market. We are pleased with the progress of the business at this stage in meeting thoseobjectives. We are confident that we will reach agreement to provide ourservices to other UK banking groups over the coming months; we are alreadyseeing our customers acting as advocates for the adoption of Monitise servicesin the other geographies in which they operate and will continue to add partnersin the UK and overseas; and we anticipate that the number of customers to whomour services are accessible will continue to build in line with the fast growthmobile banking and payments market. The individuals who have worked on bringing Monitise to market demonstratedexemplary tenacity, commercial acumen and technical flair and they should bejustly proud of their achievements so far. I would like to thank them all fortheir hard work and dedication and I look forward to continuing to work withthem as we enter this exciting phase of the Group's development. Although we will remain in an investment phase for the near future, we areseeing encouraging early signs of revenue generation and, as we establish apresence in more overseas markets, this revenue opportunity will continue togrow. Monitise has strong momentum, an excellent competitive position, and compellingprospects. We believe the current year will be a period of substantialprogress. Duncan McIntyreChairman Chief Executive's Report After three-and-a-half years of intensive development, Monitise has reached akey stage in its evolution. Today we are a leading player in the UK mobilebanking and payments market and we have a strong foothold in overseasterritories, substantial interest from potential partners and customers and theworking capital to further develop our operations and intellectual property. UK Operations MONILINK, our 50:50 joint venture with VocaLink has been successfully rolled outin the UK and by Autumn 2007, will be accessible by 35% of all UK Bank currentaccount card holders. Contracts to implement MONILINK have been signed with a number of major UKretail banks, of which HSBC, first direct and Alliance & Leicester have liveservices with customers while The Royal Bank of Scotland Group, which includesRoyal Bank of Scotland, NatWest, and Ulster Bank, is the latest to announce thatit will make MONILINK's mobile banking services available to its customers.Initial services include balance enquiries, mini-statements and mobile top-ups,but many other services such as inter-account transfers, second factorauthentication and remittances will be added in due course. Operators Vodafone,O2, Orange, T-Mobile, Hutchison 3G, Tesco Mobile and Virgin Mobile are nowconnected and providing services to their customers, whilst also benefiting froma lower cost of mobile 'top-up' for their pre-pay user base. We are confidentthat we will reach agreement to provide our services to other UK banking groupsover the coming months. MONILINK has also participated in, and strongly welcomes an initiative by thebanks and mobile operators in the UK to help promote consumer take-up of mobilebanking services by providing customers with access to their bank accountinformation from their mobile phone handset free of charge, for the period fromAugust to December 2007. Consumer registrations are now in the tens of thousands and we are starting tosee levels of activity from the MONILINK service build. International Operations Monitise operates two models for its international operations. In territoriesin which we believe there is a long term strategic opportunity that meritsfinancial and headcount investment, a joint venture approach with an establishedmarket player is preferred. In other territories, where a company has anestablished foothold and Monitise is confident that they have the necessaryresources to develop the market to its full potential, a licensing model isapplied, effectively delivering the license partner with a 'business in a box',fully supported by Monitise's technical and development teams. In the United States, we signed a joint venture agreement in June 2007 withMetavante Inc (one of America's leading banking and payments providers, withcommercial relationships with over 8,600 financial services firms and owners ofthe NYCE ATM switch) to form Monitise Americas. Furthermore, significant steps have been taken towards securing licensing fromour overseas service providers. A preferred supplier agreement was signed withT-Systems for Germany with a payment to Monitise for a period of exclusivity. Wehave also recently signed preferred supplier agreements with BT Global Servicesfor selected Gulf States and Global Financial Consultants Pty Ltd for Australiawith payments for periods of exclusivity for each. Platform and position A number of third parties have undertaken due diligence on Monitise and itstechnology. These include independent experts and those major UK retail banksand mobile network operators that have signed agreements with Monitise. Inaddition, Monitise complies with ISO8583, the international standard for paymentprocessing, and is subject to ongoing independent reviews. The combined level ofdue diligence undertaken by these parties has been extensive and has included,inter alia, detailed reviews of security, cryptography, development standards,service level agreements, business continuity plans, penetration testing andexternal risk assessments. This confirms that we have a scaleable and robustplatform capable of sustaining rapid customer growth. We believe our current position creates significant barriers to competitors. Ourplatform is the most successful service of its kind brought to market in thedeveloped world, being delivered and conducted as a managed service to multiplebanks and operators from the outset. We believe this has a number of advantagesover competing offerings that use SMS, mobile internet or software solutions,since they do not offer the mass-market characteristics required for mobilebanking to become a ubiquitous banking channel. Furthermore, since we launchedin the UK initially, we have proven that our security model has passed therigorous scrutiny required to be accepted in one of the world's mostconservative, security conscious and heavily-regulated financial markets. This track record has placed us in an extremely strong position as we expand ourbusiness internationally, since, unlike many of our competitors, we have liveoperations and reference points in a major international market. Furthermore,our model uniquely provides our customers with a clear 'line of sight' to futurebanking and payment innovations, instilling confidence that our service offersmore than an extension to current customer service channels. For us, this alsomeans that future income streams are integrated fully into our product roadmap. Moving forward, we will continue to expand our range of services in the UK witha revenue model based around a variety of pricing and payment structures,ranging from a licensing model to revenue-per-customer andrevenue-per-service-usage. Internationally, we will launch a live service inthe United States, support our license partners in the launch of their own 'ecosystems' overseas and continue to identify new markets that would benefitfrom the introduction of mobile banking and payment services. Additional commercial opportunities In order to apply its technology to additional commercial markets, Monitiseestablished a separate division called Monitise Business Solutions. Two initialproducts and services for these markets have been developed: (1) ACCODE, a mobile security-based authentication solution, which offers asecure, reliable, cost-effective and convenient verification solution to solvesecurity issues surrounding desktop access, remote access and portal security.ACCODE eliminates the initial cost of hardware tokens and the ongoing cost ofreplacement. It is a purely software-based product that integrates easily withexisting IT infrastructures, resulting in a total cost of ownership expected tobe 60-80% lower than competing systems. To date, Morse plc, Attenda and Pipexhave been appointed as resellers of this service. (2) Mobile Card Manager Service, which provides mobile-based top-up andbalance and mini-statement enquiries. This is particularly suitable for creditcard or loyalty schemes where the owner wants to implement a closed ecosystem,as well as for stored value accounts such as transit cards, road pricing,parking meters, gaming and lottery payments. We are currently working directlywith card schemes internationally to develop this service further. We are also exploring market opportunities and examining other means ofleveraging our intellectual property. Awards Monitise was recognised as a Technology Pioneer by the World Economic Forum in2006, 'Mobile Innovation of the Year' by The Banker Magazine in 2007 andreceived the Innovation in Messaging award 2007 from the Mobile MessagingAssociation. People Monitise's board consists of two executive directors and three non-executivedirectors. Monitise benefits from a strong, stable and proven entrepreneurialmanagement team, complemented by non-executive directors and an advisory boardwith substantial banking, telecommunications, technology and public marketsexperience. At 30 June 2007 Monitise employed 72 people (30 June 2006: 36 people), over 90%of whom hold a tertiary qualification. Prior to Monitise's demerger from Morseplc, staff were seconded to the business and following the demerger becameemployees of Monitise. We have been careful to match human resources to business requirements, and willexpand headcount cautiously to manage growth in the business. Our initialrecruitment focus was on technical development, followed by business developmentand account management as we began to engage with potential partners andcustomers. Alastair LukiesChief Executive Officer Financial Review Background - demerger and admission to AIM On 28 June 2007, Monitise Group Limited (MGL) demerged from its former parentcompany Morse plc. This demerger was effected by firstly, the capitalisation ofdebt payable to Morse plc, and secondly, the reorganisation of the Monitisegroup of companies by the incorporation of a new holding company, Monitise plc(the Company). The Company acquired the existing trading group via the issue ofshares in Monitise plc to the shareholders of Morse plc. Monitise plc was admitted to AIM on 28 June 2007 and a placing took place toraise additional funds on 29 June 2007. The consolidated financial statements have been prepared using the principles ofreverse acquisition accounting, and therefore present the results of the Groupas a continuation of the old trading group. Accordingly, full year 2007 resultsare shown together with a 2006 comparative for the Group. Financial performance The retained loss for the year has increased to £5.9m (nine months ended 30 June2006: £2.4m) representing a full year's trading and reflecting the investment inthe ongoing growth and development of the Group. 2007 revenues have doubled to£0.5m (nine months ended 30 June 2006: £0.2m) and represent UK consultancyactivity, the initial flow of business in overseas markets and early stagerevenues in the UK joint venture. Taxation Income tax credits recognised in 2007 amounted to £2.8m (nine months ended 30June 2006: £0.9m). All accumulated tax credits were surrendered to Morse plc,the Group's former parent as part of the demerger agreement. The Group alsoholds unrecognised deferred tax assets of £0.1m (2006: £nil) arising from timingdifferences. Loss per share The basic and diluted loss per share was 3.75p (2006: 1.55p). Cash flow and funds During the year, as in the prior period, funding was provided from Morse plc,which was subsequently capitalised as part of the demerger process. Funding in2007 amounted to £8.8m (nine months ended 30 June 2006: £4.0m). New funds were generated in June 2007 from the placing of shares immediatelyfollowing the Company's admission to AIM. This raised £20.2m of funds (afterexpenses of the issue). Share capital and reserves During the year the Company issued 254,002,848 shares. The initial issue of 100shares was made on incorporation, followed by an issue of 156,914,267 madethrough a dividend in specie as part of the demerger agreement with Morse plc.A further 97,088,481 shares were issued subsequent to the Company's admission toAIM pursuant to the placing. As a result of the demerger and capital reorganisation of the Group, a mergerreserve of £33.0 million and a reverse acquisition reserve of £(25.3) millionhave been created. Financial instruments The Group's financial instruments comprise cash along with various items, suchas trade creditors. Hedging will be undertaken to mitigate the Group's exposureto foreign exchange risk going forward. It is and will continue to be theGroup's policy that no speculative trading in derivatives shall be undertaken. Consolidated Income Statement For the year For the nine ended months ended 30 June 2007 30 June 2006 £'000 £'000 Revenue 472 240Cost of sales (327) (250)Gross profit/(loss) 145 (10) Distribution costs (912) (684) Administrative expenses before exceptional costs (7,325) (2,644)Exceptional salary costs (596) -Total administrative expenses (7,921) (2,644) Operating loss (8,688) (3,338) Finance income 8 7 Loss before income tax (8,680) (3,331)Income tax credit 2,775 897Loss for the year (5,905) (2,434) Attributable to:Equity holders of the Company (5,905) (2,434)Minority interest - - (5,905) (2,434)Loss per share for loss attributable to the equityholders of the Company during the year(expressed in pence per share):- basic & diluted (3.75) (1.55) Consolidated Balance Sheet As at As at 30 June 2007 30 June 2006 (£'000) (£'000)ASSETSNon-current assetsProperty, plant and equipment 357 338Intangible assets 790 478Deferred tax asset - 310 1,147 1,126 Current assetsTrade receivables 185 -Prepayments and other receivables 1,936 613Cash and cash equivalents 20,373 160 22,494 773 Total assets 23,641 1,899 LIABILITIESCurrent liabilitiesTrade payables (199) (36)Other payables (1,212) (502)Financial liabilities - borrowings (1,294) (4,328)Current tax liability - (57) Total liabilities (2,705) (4,923) Net assets/(liabilities) 20,936 (3,024) EQUITYCapital and reserves attributable to equity holdersof the CompanyOrdinary shares 2,540 -Share premium 19,261 -Merger reserve 32,952 -Reverse acquisition reserve (25,321) -Share-based payments reserve 433 -Retained loss (8,929) (3,024) 20,936 (3,024) Minority interest in equity - -Total equity 20,936 (3,024) Consolidated Statement of Cash Flow For the year For the nine ended months ended 30 June 2007 30 June 2006 (£'000) (£'000)Cash flows utilised in operating activitiesCash utilised in operating activities (8,680) (3,909)Interest received 8 7Income tax paid (56) -Net cash utilised in operating activities (8,728) (3,902) Cash flows utilised in investing activitiesPurchase of property, plant and equipment (104) (125)Capitalisation and purchase of intangible assets (437) (120)Net cash utilised in investing activities (541) (245) Cash flows provided by financing activitiesProceeds from issuance of ordinary shares (net) 20,232 -Loan from joint venture parties 499 350Loan/funding from related party 8,751 3,951Net cash provided by financing activities 29,482 4,301 Net increase in cash, cash equivalentsand bank overdrafts 20,213 154 Cash, cash equivalents and bank overdraftsat beginning of the year/period 160 6 Cash, cash equivalents and bankoverdrafts at end of the year/period 20,373 160 1. Basis of Preparation Monitise plc ("the Company") was incorporated on 28 November 2006. The Companyacquired Monitise Group Limited (the holding company for the existing Monitisegroup of companies within Morse plc) through an issue of shares on 28 June 2007.As such these consolidated results have been prepared using reverse acquisitionaccounting principles and therefore represent a continuation of the results ofMonitise Group Limited. The Group's results incorporated in the preliminary announcement have beenprepared in accordance with International Financial Reporting Standards (IFRS)as adopted by the EU. The preliminary announcement for the year ended 30 June 2007 was approved by theBoard of Directors on 20 August 2007. The financial information set out abovedoes not constitute the Company's statutory accounts for the year ended 30 June2007 or 2006 but is derived from those accounts. Statutory accounts for 2007will be delivered following the Company's annual general meeting. The auditorshave reported on those accounts; their report was unqualified and did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. This preliminary announcement has been prepared in accordance with legislationin the United Kingdom, which may differ from legislation in other jurisdictions.The Annual Report and Accounts for the year ended 30 June 2007 will be sent toshareholders in September 2007. 2. Exceptional Costs The £0.6m shown as an exceptional charge for 2007 represents bonus payments forthe founders (£0.5m) and staff bonuses relating to the admission to AIM(£0.1m). Bonuses relating to the founders were committed to by Morse plc priorto the demerger of the Group. 3. Loss per Share Basic & Diluted Basic loss per share is calculated by dividing the loss attributable to equityholders of the Company by the weighted average number of ordinary shares inissue during the year. As the Group is loss-making, any share options in issueare considered to be "anti-dilutive". As such, there is no separate calculationfor diluted loss per share. Reconciliations of the loss and weighted average number of shares used in thecalculation are set out below: 2007 2006 Weighted 2007 Weighted 2006 Average loss per average loss per 2007 number of share 2006 number of share Losses shares amount Losses shares amount (£'000) (thousands) (pence) (£'000) (thousands) (pence)Losses attributableto ordinaryshareholders (5,905) 157,368 (3.75) (2,434) 156,914 (1.55) Note that the 2006 calculation has been presented to reflect the reverseacquisition accounting principles applied in line with IFRS 3. 4. Post Balance Sheet Events Share options were issued subsequent to the year end under the following longterm incentive plans: Number of Options Exercise PriceIncentive Plan Date of Grant Issued (pence) Monitise Rollover Plan 2 July 2007 11,164,195 1Monitise Rollover Plan 2 July 2007 1,573,143 11.5Deferred Annual Bonus Plan 2 July 2007 1,544,318 0Performance Share Plan 2 July 2007 12,392,945 1Monitise Option Plan 16 July 2007 1,370,090 22 The issue of options under the Monitise Rollover Plan represents replacementoptions for those previously granted under the Monitise Group Ltd Plan. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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