Half-year Report

The People's Operator (AIM: TPOP), the cause-based commercial mobile virtual network operator ("MVNO"), is pleased to announce its unaudited half year results for the six month period ended 30 June 2017.

Financial Highlights

· US revenues up 34% from January 2017 to June 2017

· Total revenue slightly lower at £1.615m (H1 2016: £1.703m) as the result of TPO's now completed exercise to move away from unprofitable customer contracts in the UK

· Gross profit of £127,895 (H1 2016: gross loss of £180,315)

· Loss of £2.9m (H1 2016: £3.9m) representing a significant reduction of 26%

· Cash and cash equivalents as at 30 June 2017 of £1.96m (30 June 2016: £2.7m)

· Average blended monthly revenue per subscriber in the UK of £11.22 (H1 2016: £12.42)

· Average one-off UK customer acquisition costs remain extremely low at an average £5.29 (H1 2016: £6.34)

· Average monthly revenue per subscriber in the US of $20.88 (H1 2016: $21.88)

· Average one-off US customer acquisition costs remain very low at $21.71 (H1 2016: $12.27)

· The Company undertook two separate rounds of fundraising via the issuance of equity during the first half of the year. In January it raised net proceeds of £200,000 and in March net proceeds of

£1.5 million.

Michael J Butler, Non-Executive Chairman commented:

"I am pleased with the progress TPO has made in the first six months of 2017. We have seen the results of active marketing in the UK and US leading to a significant increase in customer acquisitions and, with new commercial terms and rigid cost control, I am very pleased to note our landmark achievement of gross margin profitability within this interim period. With the input of a strengthened and committed Board and the experienced leadership of our newly-appointed Executive team, I am optimistic that this trend will continue and that our commitment to focus again on the core principles of the product offering will continue to attract a loyal and profitable customer base."

For further information

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. The Group has negotiated favourable long-term wholesale contracts with two major network providers in both the UK and the US. Consequently customer 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 when generated by The People's Operator LLP.

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.

Business Review

We are pleased to report a successful six months trading performance for the Company.

UK Operations

There were no significant operational issues with either of our network providers in the UK during the first half of the year. Our existing customers operate on either the EE or Three networks, offering increased flexibility and increasing the ease with which existing agreements can be transferred. All our new customers operate on the Three network.

Average Revenue per User (ARPU) remains in line with the market, with current blended monthly revenue standing at £11.22. This is in line with previous performance.

Customer acquisition costs, which are a one-off expense, currently average £5.29, appreciably lower than those of competing operators. These costs are likely to rise over the next half year as a consequence of our new marketing initiatives; but we expect them to remain at very low levels.

US Operations

In common with the UK, we offer the choice of two networks in the US. Our customers are able to choose between Sprint and T-Mobile as their provider. We are similarly pleased to report that there have been no major operational issues with either provider this year.

The monthly revenues in the US market have increased by 34% from January 2017 to June 2017.

Average Revenue per User (ARPU) is currently running at $20.88 per month, a 10% increase on the beginning of the year. Virtually all our US customers are on pre-pay/autopay agreements so we have minimal exposure to bad debt.

Our customer acquisition cost in the US stands at $21.71. Once again this is a non-recurring cost.

Key Performance Indicators

The Company's key performance indicators are based on customer acquisition cost and average net revenue per customer.

Following last year's efforts to reduce the number of unprofitable customers by restricting the use of teaser deals, the Company is also moving away from the use of price comparison sites to ensure that our churn rate remains low. The success of this emphasis on customer behaviour is demonstrated by our achievement of profitability at the gross margin level during the first half of the year.

Cash and cash equivalents at 30 June 2017 were £1.957m. The Company has continued to implement tight cost control. The employment terms for both Executive staff and Non-Executive members of the Board have been reviewed and are now at a level more appropriate to a company of its current size. Furthermore, in August, the Company closed one of its two London offices and all staff, including the Customer Service wing, are now based in a single location.

Trading Update

We have been encouraged by robust July and August trading. US revenues grew by 7% from June 2017 to August 2017 with ongoing growth forecast beyond August. Billings have increased in excess of this percentage and we are pleased to report that we reached the milestone figure of $300k in US cash receipts for the month of August.

UK revenues grew from £113k in June 2017 to £140k in August 2017, an increase of 24%.

Outlook

The Board is committed to reinforcing the ethos of the Company as a means of supporting good causes rather than simply a low-cost MVNO. To this end, the Board has reviewed the previous marketing strategy and is delighted to announce the appointment of 360i as our marketing and communications partner. 360i is an award-winning agency which harnesses digital media and technology to communicate effectively with potential customers.

360i has been tasked with the relaunch of the core message of the TPO brand, which is the ability to do good within the framework of an everyday medium. 360i will advise on the use of digital marketing and modern communication techniques to facilitate the acquisition of profitable long-term customers who share a passion for the causes of their choice. Both parties have agreed that the Agency will be rewarded on a results basis.

James Townsend, the CEO of 360i, comments: "We are delighted to be partnering with TPO. We believe in the proposition and in helping TPO realise its potential as a business and a brand. Our partnership incentivises us to focus on sustainably growing a high value customer base, an area we have strong pedigree in delivering for brands like TSB, Converse and Norwegian Airlines. In addition we want to bring to life the beauty of the business model via the brand story: a vibrant customer-centric business that does good in this world."

The notes accompanying this Report and those accompanying the Annual Report for 2016 acknowledge a risk that the group's available working capital might prove insufficient to cover the operating activities. In order to mitigate this risk and to ensure that the significant growth achieved in the first half of 2017 can be maintained and built upon, it is the Company's intention to seek further funding in the near future, on terms to be announced in due course.

Approved by the board and signed on its behalf

M J Butler

Date: 19 September 2017

The People's Operator Plc

Consolidated statement of financial position

for the six months ended 30 June 2017

The People's Operator Plc

Consolidated statement of cash flows

for the six months ended 30 June 2017

The People's Operator Plc

Notes

These interim consolidated financial statements have been prepared using accounting policies based on International Financial Reporting Standards (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 31st December 2016 Annual Report. The financial information for the half years ended 30th June 2017 and 30th June 2016 does not constitute statutory accounts within the meaning of Section 434 (3) of the Companies Act 2006 and both periods are unaudited. 

The annual financial statements of The People's Operator Plc are prepared in accordance with IFRS as adopted by the European Union. The comparative financial information for the year ended 31st December 2016 included within this report does not constitute the full statutory Annual Report for that period. The independent Auditors' Report on that Annual Report and Financial Statement for the year ended 31st December 2016 was unqualified, but did include a reference to the uncertainty surrounding going concern, to which the auditors drew attention by way of emphasis and did not contain a statement under 498(2) - (3) of the Companies Act 2006.

Going Concern is considered in note 2. 

The same accounting policies, presentation and methods of computation are followed in these interim consolidated financial statements as were applied in the Group's 31st December 2016 annual audited financial statements. In addition, the IASB have issued a number of IFRS and IFRIC amendments or interpretations since the last Annual Report was published. It is not expected that any of these will have a material impact on the Group. The Board of Directors approved this interim report on 19 September 2017.

2. Liquidity and Going Concern

These interim financial statements have been prepared on the going concern basis. The Directors have reviewed Group's going concern position taking account of its current business activities, budgeted performance and the factors likely to affect its future development, which are set out in this Annual report, and include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and its exposure to credit and liquidity risks.

The directors have prepared cash flow forecasts covering a period of at least 12 months from the date of approval of these interim financial statements. However the time to close new customers and the value of each customer, which are deemed high volume and low value in nature are factors which constrain the ability to accurately predict revenue performance. Furthermore investment in winning customers, via marketing expenditure, remains an important function of the forecasts too.

There is a risk that the group's available working capital may prove insufficient to cover the operating activities. To mitigate this risk and to ensure that the significant growth achieved in the first half of 2017 can be maintained and built upon, it is the Company's intention to seek further funding in the near future, on terms to be announced in due course. The directors have a history of raising financing from similar transactions. Furthermore, those investors who participated in the fundraising of April 2017 received warrants attached to their new shares, giving them the right to a further subscription for new shares subject to the attainment of a specific share price metric.

The directors have concluded that the circumstances set forth above represent a material uncertainty, which may cast significant doubt about the Group's ability to continue as a going concern. However they believe that taken as a whole, the factors described above enable the Group to continue as a going concern for the foreseeable future. The interim financial statements do not include the adjustments that would be required if the Group were unable to continue as a going concern.

3. Revenue and segmental information

The Group supplies communication services and products to the UK and US markets, 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:

The following item has been included in arriving at operating loss:

This document contains certain forward-looking statements relating to the Group. The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Group to differ materially from those contained in any forward-looking statement. These statements are made by the directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.