Half Year Results

29 September 2015

The People's Operator plc

("TPO" or the "Company")

Half Year Results

The People's Operator (AIM: TPOP), the cause-based commercial mobile virtual network operator ("MVNO"), is pleased to announce its half year results for the six month period ended 30 June 2015.

Financial Highlights

· Revenue of £603,000 (H1 2014: £132,000), representing growth of 358%

· Loss of £4.4m (H1 2014: £0.6m)

· Cash and cash equivalents as at 30 June 2015 of £12.9m

· UK subscriber numbers as at 29 September: 50,360, up 6% in the two weeks since our last statement (and up 43% from 30 June 2015)

· Average revenue per subscriber in the UK for 1 April 2015 to 30 June 2015 of £13.63 for PAYM customers and £10.89 for PAYG customers

· Average customer acquisition costs remain considerably below industry standards at approximately £8.00

· Low monthly subscriber churn rate of less than 4%

Post Balance Sheet Events

· Successful launch in the US on 21 July 2015

o More than 30 partnership agreements signed, including UNHCR, Save the Children and other charities with broad reach

· TPO.com social network (TPO Community) successful launch with over 17,400 users as at 28 September

o 84 causes, including World Wildlife Fund and WaterAid UK signed up with more anticipated to join in the coming months

Jimmy Wales, Executive Chairman, commented:

"During the first half of the year our focus was on growing our UK operation and preparing for our launch into the US. I am delighted with the growth we are achieving in the UK which is in line with our expectations. Our launch in the US attracted considerable interest and early indications are very encouraging. The successful launch of the TPO Community continues to build on our strategy to drive word of mouth and engage both consumers and causes on the platform.

"We look forward to building on the momentum we have achieved and I am very confident about our prospects."

The calculation of the number of PAYM and PAYG customers, ARPU, churn rate and the definition of subscriber are as set out in the company's AIM admission document dated 28 November 2014.

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. 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 launched in the United States in July 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.

Business Review

We are pleased to report a successful six months for the Company following its admission to AIM in December 2014.

UK Operations

The majority of 2014 had been spent testing our operations, logistics and customer service operations and this had resulted in the acquisition of 14,000 customers by 31 December 2014. Following the successful IPO in December we continued to roll out our UK product and expand our domestic operations.

Subscriber numbers as at 30 June stood at 35,122 and, as disclosed in our statement of 15th September, that number had grown to 47,500. We are delighted to report that as of 29 September we have reached the significant milestone of 50,360 UK subscribers. We remain confident of exceeding our target of 69,000 subscribers by year end.

Average Revenue per User (ARPU) remains in line with the market. Average monthly revenue per Pay Monthly ("PAYM") subscriber from 1 April 2015 to 30 June 2015 was £13.63. The average revenue per Pay-as-you-Go ("PAYG") customer from 1 April 2015 to 30 June 2015 was £10.89.

Our churn rate remains low, at less than 4%, and customer acquisition costs remain significantly below industry standards at £8, reflecting the low cost of our viral marketing strategy.

Revenue, at £603,000, was more than four times the turnover for the equivalent period of 2014 and we have seen this progress month by month since 30 June, such that billings for July usage were £232,000 and billings for August usage are estimated to be circa £270,000. This represents attractive revenue growth and we remain confident that this trend will continue.

The Board remains focused on reducing the cost of sales proportionate to revenue. As our customer base grows, our average cost of sales will commensurately reduce. Moreover, we are confident that we will be able to secure better wholesale terms in the future and are increasingly focused on individual customer profitability.

The combination of increasing revenues in the UK and the generation of our first revenues in the US, the ability to negotiate lowered wholesale costs to increase gross margin and the reduction in operating expenses now that the US launch has been completed combined with our substantial cash balance at 30 June means that we are well positioned to aggressively grow the business.

US Operations

The US operation went fully live on 21st July 2015 following two months of soft marketing.

The media coverage of the launch within the US was outstanding. As of 20 August, the company had achieved 550 million impressions across 200 pieces of coverage. In addition, Jimmy Wales and Mark Epstein were interviewed, together or separately, by a number of leading media outlets including CNBC, Fox News, CNN, USA Today, Forbes and Business Insider.

Given the very early stage of the US operation, it is too early to be able to implement in-depth analysis. However, early indications are very encouraging and we have already received 5,000 subscriber commitments which are being processed. We continue to receive significant levels of enquiries from both individuals and corporate entities.

TPO Community

The TPO Community was successfully launched in tandem with the US product offering on 21 July. As of 28 September, we have 17,400 users across 150 countries and 84 registered charitable causes.

The growth of the TPO Community platform supports TPO's strategy of driving word of mouth growth among audiences that are supportive of cause-based initiatives. The programme to develop and launch the TPO Community has been shortlisted for a Telecoms.com Award, with the winning entries being announced in November 2015.

Key performance indicators

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

Revenue grew from £132,000 in H1 2014 to £603,000 in the six months to 30 June 2015, an increase of 358% on the equivalent period of 2014. The revenue increase was driven by the large growth in the number of TPO subscribers in the UK. We offer two types of service plans to our subscribers, a Pay Monthly plan and a Pay As You Go plan.

TPO ended the period to 30 June with over 35,000 subscribers, ahead of expectations. Since then subscriber numbers have continued to grow strongly and as at 29 September reached the 50,000 milestone.

Cash and cash equivalents at 30 June 2015 were £12.9m. At the beginning of the year, the Company had post-IPO cash reserves of £18.4m. Total expenses (including cost of sales) during the first half totalled £5.5m. Of this expenditure, £1.1m reflected non-recurring start-up costs, including £250,000 for the establishment of the US operation's technical base. Monthly cash burn during the first half averaged £730,000 and cash burn is now approximately £550,000 per month, reflecting subscriber and consequent revenue growth. The Company is confident that tight cost control and increasing subscriber numbers will see the cash burn rate to decline throughout 2016.

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 assured that the business model and platform are capable of international transposition and, in line with our stated strategy, we continue to investigate markets outside the UK and US for future commercial prospects.

Outlook

The mobile market is large and commoditised. We have a different proposition to our industry rivals which is proving very popular. Our unique giving proposition, linked to very competitive products and quality service point to the continuation of our record of strong growth.

We are greatly encouraged by the growth in our subscriber numbers in the UK and by the successful and seamless launch in the US. Over the next few months we will establish more data points in the US and look to reduce our wholesale costs in the UK as we grow subscriber numbers.

Approved by the board and signed on its behalf

M Epstein

Consolidated statement of comprehensive income for the six months ended 30 June 2015

Consolidated statement of financial position for the six months ended 30 June 2015

Consolidated statement of cash flows for the six months ended 30 June 2015

Notes forming part of the financial statements for the six months ended 30 June 2015

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 2014 Annual Report. The financial information for the half years ended 30th June 2015 and 30th June 2014 does not constitute full statutory accounts 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 2014 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 2014 was unqualified, and did not draw attention to any matters by way of emphasis.

After making enquiries, the directors have concluded that the Group has adequate resources to continue operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated unaudited financial statements.

The same accounting policies, presentation and methods of computation are followed in these interim consolidated financial statements as were applied in the Group's 2014 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 29th September 2015.

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:

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

During the year, the group incurred the following charges from Mass1 Ltd, a company owned by M Epstein who is a shareholder of the company. The balance outstanding at 30 June 2015 was: £1,015 (2014 - £2,871).

Group

During the year the following related parties subscribed to The People's Operator mobile phone network and incurred the following chargers:

The above income has been included within the turnover of the group.

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.