Final Results

Press Release

31 March 2017

zamano PLC

('zamano', the 'Company' or the 'Group')

Final Results

zamano PLC (AIM:ZMNO, ESM:ZAZ), a provider of interactive applications and services to mobile devices, has today announced results for the 12 months ended 31 December 2016. 

Highlights:

· Revenue of €32.1M (up 32.2% on revenue of €24.3M, 2015);

· Adjusted EBITDA of €1.7M (down 44.2% on Adjusted EBITDA of €3.0M, 2015);

· Post-tax profit, excluding €6.4M impairment, of €1.0M ( 2015, €2.1M);

· Pre-tax loss, including €6.4M impairment, of €5.2M (pre-tax profit of €2.5M, 2015);

· Post-tax loss, including €6.4M impairment, of €5.4M (post-tax profit of €2.1M, 2015); and

· Significant improvement in net cash during 2016 to €7.2M at 31 December 2016 (€6.3M at 31 December 2015).

PayForIt, a UK Mobile Network Operators joint initiative to further regulate mobile payments was mandated by all UK Mobile Network Operators on 1 November 2016. Prior to this revenue growth was maintained in 2016 but since its introduction the Group has seen a significant negative impact on business performance. Furthermore, regulatory changes that have come into effect in Ireland in 2017 will also further significantly impact the Group's business.

Following the implementation of PayForIt in November 2016 the Group has taken steps to reduce the cost base of the business. This included the implementation of a redundancy programme across all divisions, reducing payroll and related costs by approximately €330,000 on an annualised basis. A number of other cost saving measures were also evaluated and implemented which included reducing the number of Directors and streamlining I.T. and customer service costs.

These actions achieved material cost reductions. However, it is increasingly likely that the impact of regulatory changes across zamano's business lines will prevent the Group from maintaining a cashflow positive trading position going forward. As a consequence of this outlook, goodwill and intangible assets were reduced to zero by an impairment charge of €6.4 million.

In light of this, the Group took the decision in early February 2017 to formally wind down the existing business lines in order to protect the cash position on the balance sheet. The wind down of the existing business lines is ongoing and the Board is currently considering alternative strategic options. In the absence of a timely strategic alternative, the Group will look to maximise its cash position and make a distribution back to shareholders.

The zamano Board is focused on conserving the Group's strong cash position by optimising our withdrawal from our existing business lines and the Group remains fully committed to supporting its clients and providing a high level of customer experience and service during the wind down process.

Further announcements will be made in due course as appropriate.

For further information, please contact:

zamano plc

Michael Connolly, Chief Financial Officer

Tel: +353 1 554 7261

Investec Corporate Finance

Shane Lawlor/Ian McGreal

Tel: + 353 1 4210000

Cenkos Securities

Derrick Lee/Neil McDonald

Tel: + 44 (0) 131 220 6939

Media Enquires:

MCOMM Communications Consultants

Richard Moore

Tel: +353 1 6713788

Mob: +353 87 2414751

Email: [email protected]

Acting Chairman's statement

It was noted in zamano's outlook for 2016 that revenue growth was maintained from 2013 to 2016, despite the continuing challenging regulatory and market environment in its key markets of the UK and Ireland, but that PayForIt, a UK Mobile Network Operators joint initiative to further regulate mobile payments, would significantly impact on the Group and the industry in general once fully implemented. PayForIt was mandated by all UK Mobile Network Operators on 1 November 2016 and since its introduction the Group has seen a significant negative impact on business performance. 

In this regard, since its implementation on 1 November 2016, zamano has seen a reduction in performance across all its business lines and, to date, the Group has not secured any replacement revenue through new subscriber acquisitions in the UK since PayForIt's implementation.

In Ireland, certain MNOs are also now requiring service and payment flows to use similar rules to PayForIt in the UK. The Group anticipates that these changes, once fully implemented, will also significantly impact the Group's ability to acquire new customers in Ireland.

In November 2016 the Group, as a result of the impact of PayForIt in the UK, took steps to reduce the cost base of the business. This included the implementation of a redundancy programme across all divisions, reducing payroll and related costs by approximately €330,000 on an annualised basis. A number of other cost saving measures were also evaluated and implemented which included reducing the number of Directors and streamlining I.T. and customer service costs.

Despite taking these actions, which achieved material cost reductions, it is increasingly likely that the impact of regulatory changes across zamano's business lines will prevent the Group from maintaining a cashflow positive trading position going forward. As a consequence of this outlook, goodwill and intangible assets were reduced to zero by an impairment charge of €6.4 million.

In light of this, the Group took the decision in early February 2017 to formally wind down the existing business lines in order to protect the cash position on the balance sheet. The wind down of the existing business lines is ongoing and the Board is currently considering alternative strategic options. The Group will update the market further in due course on this matter. In the absence of a timely strategic alternative, the Group will look to maximise its cash position and make a distribution back to shareholders.

2016 Financial Review

As in previous years, the UK and Irish business were the mainstay of the Group's financial performance in the year ended 31 December 2016. Group sales at €32.1 million were 32% ahead of the €24.3 million recorded in 2015. UK sales in 2016 at €28.2 million were 37% ahead of the 2015 outcome of €20.5 million. Irish sales, however, failed to match that of the UK where revenue of €2.8 million in 2016 was down 10% on 2015.

Gross profit for the year at €4.1 million was 19% behind the corresponding figure of €5.1 million recorded in 2015. The gross profit margin fell from 21% in 2015 to 13% in 2016 due to the continued revenue shift towards UK business-to-business (B2B) sales which carry lower margins than zamano's direct-to- consumer (D2C) services.

Taking into account the decision to wind down the existing business lines, goodwill and intangible assets have been written down by €6.4 million. Goodwill and intangible assets are now recorded at €Nil on the balance sheet.

Pre-tax loss for the year was €5.2 million (2015 profit €2.5 million) whilst the after tax loss outcome was €5.4 million (2015: profit €2.1 million). However, excluding the impairment of goodwill and intangibles charge of €6.4 million, (2015: €nil) the Group earned an after tax profit of €1.0 million (2015: €2.1 million).

This profit after tax, excluding the impairment charge, led to a further improvement in the Group's net cash position. At 31 December 2016, net cash was €7.2 million, an increase of €0.9 million over the 31 December 2015 net cash figure of €6.3 million.

Market Review

Zamano's UK operation, which is largely comprised of web and mobile digital entertainment products and B2B services, performed strongly from a revenue generation perspective in 2016. Revenues in the UK at €28.2 million were 37% ahead of 2015 (€20.5 million).

The Irish business, which also focuses on web and mobile digital products and B2B services, continued to operate in an extremely challenging environment. Sales for 2016 were €2.8 million, down by 10% on the equivalent figure for 2015 of €3.1 million. This was a result of increased competition for advertising as new service providers entered the Irish market after exiting the UK.

Our sales performance in other locations during 2016 showed an increase on 2015. Sales at €1.1 million were 57% up on the corresponding figure of €0.7 million in 2015.

Outlook

The zamano Board is focused on conserving the Group's strong cash position by optimising our withdrawal from our existing business lines. The wind down of the existing business lines is ongoing. However, there is as yet no conclusion on strategic options. In the absence of concluding a transaction which shareholders approve, we will focus on how best to return the maximum amount of cash possible to shareholders.

The Group remains fully committed to supporting its clients and providing a high level of customer experience and service during the wind down process.

Further announcements will be made in due course as appropriate.

Colin Tucker

Acting Chairman

Consolidated income statement

for the year ended 31 December 2016

Consolidated statement of comprehensive income

for the year ended 31 December 2016

On behalf of the board

Colin Tucker Fergal Scully

Director Director

Consolidated balance sheet

at 31 December 2016

On behalf of the board

Colin Tucker Fergal Scully

Director Director

Consolidated statement of changes in equity

at 31 December 2016

Notes

1 Reporting entity

zamano plc ('the Company") is a company domiciled in the Republic of Ireland. The address of the Company's registered office is 3rd Floor, Hospitality House, 16-20 South Cumberland Street, Dublin 2.The consolidated financial statements of the Company as at and for the year ended 31 December 2016 comprise of the financial statements of the Company and its subsidiaries ("the Group").

The Company's shares are publicly traded on the London Alternative Investment Market ("AIM") and the Enterprise Securities Market ("ESM") in Dublin.The principal activities of the Group are the provision of mobile data services and technology.

.

2 Basis of preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU. A summary of pronouncements that came into effect after that date and the likely impact of these on the Group are set out in note 4. The consolidated financial statements were authorised for issue by the board of directors on 29 March 2017.

(b) Going concern

As explained in the Directors' Report, detrimental regulatory changes introduced during late 2016 have impacted both the Group's performance in the short term and the ability of the Group to sustain profitability going forward. In light of these changes, in February 2017, the Board took the decision to formally wind down existing business lines over the course of 2017. The Board is currently considering alternative strategic options for the Group beyond the cessation period for existing operations, one of which includes a liquidation and distribution of the Group's net assets to its shareholders. No decision has yet been made over the Group's strategic options however a decision is expected to be made during H1 2017.

The Group had net assets of €6.2 million at 31 December 2016 (2015: €11.6 million) which includes cash and cash equivalents of €7.2 million (2015: €6.3 million). In the absence of a decision on the strategic options of the Group having been fomally made by the Board, having regard to the Group's bank and cash balance at the balance sheet date and at the date of approval of the financial statements together with the projected financial performance of the Group over the next 12 months from the date of approval of these financial statements (taking into account of the impact of the wind down of the existing business of the Group), the Board considers that it is appropriate to prepare the consolidated financial statements of the Group on a going concern basis.

(c) Basis of measurement

The consolidated financial statements for the year ended 31 December 2016 have been prepared on an historical cost basis, with the exception of share-based payments, which are stated at grant date fair value.

(d) Functional and presentation currency

These consolidated financial statements are presented in euro which is the functional currency of the Company and the majority of the Group's entities. All financial information presented in euro has been rounded to the nearest thousand.

Notes to the consolidated financial statements (continued)

2 Basis of preparation (continued)

(e) Basis of consolidation 

All subsidiaries have a financial year end of 31 December.

Business combinations are accounted for using the acquisition method as at the acquisition date, i.e. when control is transferred to the Group. The consolidated financial statements consolidate the financial statements of zamano plc and all its subsidiaries up to 31 December 2016.

The Group controls an entity when it is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through the power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

3 Operating segments

The Group is managed based on two primary reportable segments which are defined based on geographical markets as follows: Republic of Ireland "ROI" and United Kingdom "UK". It also has sales in other jurisdictions but these are not deemed to be standalone reportable segments under the requirements of IFRS 8 and are classified as "other locations" in the table below.

The Group's sales consist of the development, promotion and distribution of mobile content and interactive services directly to consumers and also facilitating the communication and interaction between businesses and consumers on mobile phones through a range of value-added mobile applications.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment results as included in the reports that are reviewed by the Group's Chief Operating Decision Maker ("CODM") which the directors have determined to be the board of directors.

The following tables present revenue and profit and certain asset and liability information regarding the Group's reportable segments:

Unallocated expenses include the following non-cash items;

€,000

Depreciation 79

Amortisation 352

Share based payment expense 16

Unallocated expenses also include central overhead and payroll costs which are not allocated to individual reporting segments.

3 Operating segments (continued)

Unallocated assets are assets that cannot be attributed to a specific segment and comprise property, plant and equipment, software, deferred tax and cash and cash equivalents.

3 Operating segments (continued)

Year ended 31 December 2015

Unallocated expenses include the following non-cash items;

€,000

Depreciation 78

Amortisation 368

Share based payment expense 76

Unallocated expenses also include central overhead and payroll costs which are not allocated to individual reporting segments.

3 Operating segments (continued)

Unallocated assets are assets that cannot be attributed to a specific segment and comprise property, plant and equipment, software, deferred tax and group cash. Unallocated liabilities relate to borrowings and corporation tax payable.

4 Income tax expense

5 (Loss)/earnings per share

Basic (loss)/earnings per share amounts are calculated by dividing net (loss)/profit for the year attributable to ordinary equity holders of the parent by the weighed average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net (loss)/profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares if the effect is not accretive.

The following reflects the income and share data used in the basic and diluted loss per share computations:

The potential ordinary shares are antidilutive in the current year given the performance as disclosed below. Consequently Diluted EPS is equivalent to Basic EPS for the year ended 31 December 2016.

(a) The impact of exercising share options had it not being antidilutive would be to increase the weighted average outstanding number of ordinary shares by approximately 805,000 shares.  

6 Adjusted earnings per ordinary share

The following reflects adjusted earnings per share based on adjusted net income:

Reconciliation of reported operating profit across all segments to earnings before interest, tax, depreciation and amortisation ("EBITDA"), as adjusted for non-cash and non-recurring items ("adjusted EBITDA") is as follows:

7 Impairment of goodwill and intangible assets

Goodwill arising from business combinations in prior years and intangible assets were tested for impairment at 31 December 2016. Based on the assessment performed, the directors have determined that an impairment charge of €6,350,000 (2015: Nil) is required in the year. The net book value of goodwill and intangibles at 31 December 2016 is €Nil (2015: €6,428,000).

8 Related party disclosures

Compensation of key management

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, and includes the executive and non-executive directors and certain members of senior management. Key management personnel received total compensation of €523,000 (2015: €641,000) during the year ended 31 December 2016, including €85,000 in settlement of outstanding share options owned by the former Chief Executive Officer which resulted in the utilisation of €54,000 from the share based payment reserve. Total remuneration is included in other administrative expenses.

During the year, the Group incurred professional service fees of €41,000 (2015: €Nil) payable on an arms-length basis to a company which employs a former non-executive director of the Group, Edmond Murphy. Amounts payable remain outstanding as at the balance sheet date.

There were no other related party transactions in the period under review.

9 Litigation

In the normal course of business, the Group is involved in various legal proceedings with third parties, the outcome of which is uncertain. Where appropriate, provision is made in the financial statements based on the directors' best estimate of the potential outcome of such proceedings. It is the policy of the Group to rigorously defend all legal actions taken against the Group.

10 Post balance sheet events

Detrimental regulatory changes introduced during late 2016 have both impacted the Group's performance in the short term and the ability for the Group to sustain profitability going forward. In light of these changes, in February 2017, the Board took the decision to formally wind down existing business lines over the course of 2017.