Interim Results

RNS Number : 1857H

Monitise PLC

16 February 2010

 

 

 

 

 

Monitise plc

Interim Results for the six months to 31 December 2009

 

MONITISE SUSTAINS GROWTH AND WELCOMES 1.75MILLION CUSTOMERS

 

Monitise plc ("Monitise"; LSE: MONI.L), the mobile money specialist, announces its unaudited interim results for the six months ended 31 December 2009.

 

Financial Highlights

 

·; 57% growth in revenue to £1.7m (H1 2009: £1.1m)

o Annualised run rate revenue grew to £5million in December 2009, a 66% increase on June 2009

o We see this growth trend continuing in the second half of the financial year.

o Approximately 1.75 million registered customers today, more than one million up from 30 June 2009 and growing by over 150,000 per month

o Improved mix of revenue, with transactional fees reflecting almost 50% of H1 revenues

 

·; Operating loss, before share based payments and exceptional item*, of £6.9m (H1 2009: £6.0m) reflecting:

o Increased investment following the acquisition of the remaining 50% of Monilink (£6.0m operating loss excluding the impact of Monilink acquisition)

o Continued investment in geographical expansion and product development

 

·; Financial position benefits from significantly strengthened cash resources:

o Cash balance of £9.5m on 31 December 2009

o Up to £15.8m additional funding in place post period end from a combination of new and existing investors:

§ £7.4m subscription completed in January 2010

§ £8.4m conditional subscription and warrant anticipated in first quarter 2010

 

Strategy Update

 

·; Technology

§ Over 240 financial institutions now signed up to our Mobile Money Manager platform

·; Live operations

§ Position consolidated in UK by taking 100% ownership of our rapidly growing former joint venture, Monilink

§ Strong growth in US business through partnership with FIS, following its acquisition of Metavante

§ New Visa services well into development stage

·; Investments

§ Agreement with Travelex to provide services to 1.75m Cash Passport cardholders

§ Heads of Terms announced for Asia Pacific joint venture with First Eastern

§ Progressing with joint venture agreements in India and Africa

§ Developing significant new retailer proposition with The Carphone Warehouse

 

  

Outlook

 

·; Strong growth in registered customers expected to continue throughout the year as new services are launched and new markets come on stream

·; Continuing increase in revenue driven by recurring fees from value added services

·; UK Operations on track to reach month-on-month cash breakeven this year

·; Continued investment in joint ventures and new initiatives to maximise growth in shareholder value

 

*Exceptional item relates to a one-off £1.0m profit from accounting treatment of Monilink acquisition

 

 

Alastair Lukies, Chief Executive Officer, Monitise, said:

 

"Mobile money has now taken off; it is no longer just an opportunity for the future. As of today 1.75 million people have registered for our services and we expect the rapid growth in customer registrations to continue.

 

"Our customers are moving up the value chain: using more of our services, more often as they upgrade to even more valued propositions. The launch of our portfolio of smartphone apps has taken the banking market by storm.

 

"I am equally excited by our international growth strategy and our excellent relationship with Visa. We look forward to swift completion of our ground breaking joint venture to develop the Asia Pacific market with First Eastern. We shall have true global reach in 2010.

 

"Add to this the enormous potential of our development of new retailer propositions with The Carphone Warehouse, enabling a wide range of mobile shopping services, and the geographical and service expansion arms of our strategy are in great shape."

 

Duncan McIntyre, Chairman, Monitise, said:

 

"This has been an exhilarating six months for the Group. We are well past the tipping point in the development of both the mobile banking and payments market and of Monitise as a company. Our revenue run rate is very encouraging in this, the commercial phase of our development.

 

"Taking 100% control of our UK operations, as our business accelerates has been a highly successful move. The Board expects UK operations to reach month-on-month cash breakeven this year.

 

"In addition to growing our live businesses in the UK and North America and with Visa, we intend to invest in the significant opportunities presented with First Eastern and The Carphone Warehouse.

 

"The additional funding which we confirmed in January 2010 has set us up very well to continue our strategy to ensure that Monitise can both develop its live markets and invest in selected global partnerships and territories."

 

Contacts:
Monitise Group	Tel: 020 7947 4300
Alastair Lukies, CEO
Tom Spurgeon, CFO
Financial Dynamics	Tel: 020 7831 3113
Juliet Clarke Harriet Rumball Haya Herbert-Burns Erwan Gouraud
Evolution Securities Limited (NOMAD and Joint Broker)	Tel: 020 7071 4300
Bobbie Hilliam Tim Worlledge Tim Redfern
Piper Jaffray Limited (Joint Broker)	Tel: 020 3142 8700
Eric Sanschagrin Jamie Adams

 

ABOUT MONITISE PLC

 

Monitise plc (MONI.L), the mobile money specialists, has created the world's first mobile banking networks, which allow customers of multiple banks and mobile operators to perform banking and payment transactions directly from their mobile handset. With live services in the UK and the USA, where it has delivered the Monilink and Monitise networks in partnership with VocaLink and FIS respectively, the Company is currently working with international partners to deliver similar safe, secure mobile banking and payment services in territories worldwide.

 

Forward Looking Statements

This document includes forward looking statements. Whilst these forward looking statements are made in good faith they are based upon the information available to Monitise at the date of this document and upon current expectations, projections, market conditions and assumptions about future events. These forward looking statements are subject to risks, uncertainties and assumptions about the Group and should be treated with an appropriate degree of caution.

 

Business Review

 

Overview

 

This has been an excellent six months for Monitise as we pursue our dual strategies of building our international presence in selected markets and of broadening and deepening our product range.

 

Monitise operates within a rapidly growing market place and the scale of the opportunity is extremely exciting. In order to understand and manage our business, we view it in three key areas; technology, live operations, and investments, alongside the central costs of running the Group.

 

·; Technology

 

We have developed world leading mobile banking and payments technology and continue to invest in the future road map, keeping our platform at the leading edge.

 

Our Mobile Money Manager technology has now been selected by over 240 financial institutions, including Visa, in the UK and US to provide secure mobile banking and payments to their millions of customers, because of its ability to connect securely and openly with the multiple organisations required.

 

·; Live Operations

 

We have live operations in the UK and USA and with Visa, with which we shall be launching our first services shortly. We expect the UK business to become month-on-month cash breakeven this year and the US business to follow a similar trajectory.

 

We have grown by more than a million customers since the beginning of the financial year to 1.75million customers today (31 December 2009: 1.5 million) and are adding over 150,000 every month. We are very encouraged by the proportion of new registered customers using more, higher value services more often, with its positive effect on revenue.

 

·; Investments

 

We continue to invest in developing new opportunities: geographically in Asia Pacific with First Eastern, in India and Africa and with Standard Chartered Bank in a number of territories, and for business sector and services expansion with Travelex and The Carphone Warehouse. We believe that it is vital that we establish a presence in new markets and sectors as the mobile banking and payments industry establishes itself. They will require initial capital, but like our live operations, we expect these to create significant shareholder value.

 

 In addition, Monitise has consolidated its position in the UK and US, by taking full ownership of Monilink and establishing a good working partnership with FIS, following its merger with Metavante.

 

Financial Review

 

Monitise's financial position benefits from a significant strengthening of its cash resources. In July 2009, subscriptions for new shares totalling £5.1m were completed alongside our new partnership with Visa. In December 2009 we announced that our key partners and existing investors have conditionally committed up to £15.8m in additional funding agreements. Of this additional funding, £7.4m completed in January 2010 and £8.4m of conditional subscriptions and warrant are anticipated to complete later in the first quarter of 2010. Taken together, and adding the 31 December 2009 cash position of £9.5m, this provides Monitise with potential funding of £25m.

 

Revenue for the six months to 31 December 2009 has grown by 57% to £1.7m (H1 2009: £1.1m) or £1.4m excluding the acquisition of the remaining share of Monilink. The operating loss before share based payments and exceptional gain on acquisition of Monilink is £6.9m (H1 2009: £6.0m) or £6.0m excluding the impact of the acquisition of Monilink.

 

An improved mix of revenue can be seen with transaction fees generated through our live operations showing a fourfold increase to £0.8m (H1 2009: £0.2m), license fees and royalties of £0.5m (H1 2009: £0.2m) and deployment and integration income from professional services fees of £0.4m (H1: £0.7m).

 

Net cash outflow for operating activities for the six months to 31 December 2009 amounted to £5.6m (H1 2009: £6.2m)

 

In August 2009, Monitise took 100% ownership of Monilink, the UK's leading mobile banking and payments network, by buying out its joint venture partner VocaLink. As previously disclosed, we acquired the business debt free for an initial consideration of £1.5m, spread over 3 years, and contingent consideration of £1.5m.

 

In addition to this acquisition, which sees us taking 100% of both costs and future revenue, the half year saw continued investment in technical areas, establishing the structures to build on our new business lines, and costs of preparation for the opportunities that are now crystallising from our new partnerships. Looking forward, overall costs in H2 will increase to reflect investment in key opportunities in Asia Pacific, India and with the Mobile Money Network.

 

Total cash overheads on an annualised basis include: an ongoing cost of approximately £5m for technology requirements; £5m being spent on growing our existing live platforms in the UK and US along with our new Visa contract; and £3m being spent on group administrative and central costs. The balance of our costs are for investment areas and will vary dependent on timing of completion of our new joint ventures and the appropriate pace of investment as the businesses are established.

 

 

Operational Review

 

1 Technology

 

Our Mobile Money Manager platform enables us to create open networks including financial institutions, mobile network operators, payments organisations, processors and merchants. It is the chosen technology for over 240 financial institutions in the UK and USA and by Visa, to provide secure mobile banking and payments services to their millions of customers. Its flexibility means that it can enable service propositions to banked and unbanked people across the world.

 

We continue to enhance the product set and deepen the propositions we can deliver, including developing a portfolio of downloadable mobile apps for smartphones, to ensure that the platform continues to be positioned as a leader in this growing market.

 

We have refined our product toolkits to Feeder propositions - enabling card activation, Essential services - largely text based, and upgraded Advanced services - available from downloadable mobile apps.

 

 

2 Live Operations

 

·; UK

 

Monitise now has full ownership of its UK operations at a time when its business growth is accelerating. The acquisition by the company of the remaining 50% share of Monilink has put Monitise in full control of its most developed market at a hugely exciting time, and whilst increasing costs in the short-term will be a key driver for long-term shareholder value.

 

The rate of take up of all services, including Feeder, Essentials and Advanced, has been rapid and continues to accelerate. The launch of our smartphone mobile money services app, with TV advertising support from a major banking partner, has created exceptionally high demand, which we expect to continue as our mobile app becomes available from an increasing range of app stores and markets.

 

The rise in revenue per customer driven by our enhanced service range has been very significant with 23% of customers now in our top "Advanced" tier. Our approach to upgrade entry level and lower value text only customers to higher value service packages is a key part of our strategy and is expected to continue to drive growth in average revenue per customer and revenues overall.

 

Typically a mobile app customer will use our services more than 9 times per month. As a result we have seen activity volumes across the Mobile Money Manager platform increase from two million per month to seven million per month over the last quarter of 2009.

 

·; North America

 

North America remains a key market for Monitise, with over 230 financial institutions and prepaid card providers having signed up to the service in the USA. Monitise Americas is established as one of the leaders in the market, and has seen a recent acceleration in customer registrations, fuelled in part by roll out of services to H&R Block, the world's largest tax preparation company.

 

The service range provided by Monitise Americas, including higher value services such as bill payments delivered by mobile apps continues to be enhanced and we expect revenues in the USA to follow a similar growth trajectory as we have seen in the UK.

 

Monitise Americas is ideally placed to connect with the full range of financial institutions in the US through our partnerships with Visa and with FIS, the leading global payments organisation. Our partnerships give Monitise access to both Tier 1 and Tier 2 financial institutions, as well as large numbers of smaller institutions.

 

·; Visa

 

Following the signing of a Global Alliance agreement with Visa International (a subsidiary of VISA Inc.), announced on 30 June 2009, development work is well advanced for the launch of services this financial year. The agreement is worth a minimum of $13m over a five year period and has seen Monitise become a key partner to the world's largest electronic payments network as it seeks to provide mobile capability to four billion mobile handset owners worldwide.

 

In the last six months we have established a Monitise team on site in California and development work is well underway. We expect a flow of new Visa mobile services to be launched in the market over the coming months.

 

 

3 Investments and partnerships

 

·; Travelex

 

In November 2009, Monitise announced an agreement with Travelex, the global travel and payments group, to launch mobile services for Travelex's 1.75 million global Cash Passport™ cardholders. The Cash Passport™, a prepaid travel money card available in seven currencies, offers holidaymakers and those travelling on business a secure and convenient way to carry money overseas.

 

·; India

 

We have secured regulatory approval for our ecosystem approach and are in the final stages of negotiations with substantial partners to both launch our joint venture and live services.

 

·; Africa

 

In Africa, we are working with Paynet, the international payments organisation, to develop Mobile Money services in Africa, assisted by Africa Enterprise Challenge Fund funding.

 

·; Asia Pacific

 

In December, Monitise signed Heads of Terms with First Eastern, a leading Hong Kong based investment company, for an agreement to provide mobile banking and payment services in Hong Kong and China and, in due course, other territories in Asia and beyond. It is intended that Hong Kong will be the launch territory for the first mobile banking services, and will serve as the natural stepping stone into China. The Board anticipates that the joint venture agreement will be concluded this quarter, and steps to bring together a network of banks in Hong Kong are already well progressed.

 

·; The Carphone Warehouse

 

Following on from the Mobile Money agreement signed in May 2009, Monitise signed Heads of Terms with The Carphone Warehouse in December 2009 to create a Mobile Money Network, providing mobile money services to retailers and their customers.

 

Further information will be provided on the new services, once the joint venture is formalised

 

Outlook

 

In the next six months, we will see further key developments of our mobile retailer proposition and the completion of the Asia Pacific joint venture with First Eastern, in addition to continuing progress across other geographies. The launch of services with Visa, the increasing levels of customer take up in the UK and USA, the trends of usage and increased proportion of higher value users are very encouraging. The Board is targeting UK operations to reach month-on-month cash breakeven this year.

 

We have an annualised revenue run rate of £5m as we enter 2010, and see a strong trajectory of growth as we progress through the year. Our cost base reflects our decision to take 100% ownership of the UK business as a key driver for increasing long-term shareholder value, and additional investment in bringing us the significant opportunities presented by our partnerships with Visa, First Eastern and The Carphone Warehouse. As a result of these new opportunities, we will see costs for the rest of the financial year increase against the first half. We believe that this investment is crucial in maintaining Monitise's growth momentum and in maximising future success as the global market expands.

 

The additional funding which we confirmed in January 2010 has set us up very well for our continued investment in new territories and improved product offerings, supporting progress in the second half of the financial year and beyond. The Board is very encouraged by the development of the company and take up of its services, and looks to the future with confidence.

 

Alastair Lukies

Chief Executive Officer

 

Consolidated Statement of Comprehensive Income

 

	Notes	Six months ended 31 December 2009 (unaudited)	Six months ended 31 December 2008 (unaudited)	Year ended 30 June 2009 (audited)
		£'000	£'000	£'000
Revenue		1,728	1,103	2,658
Cost of sales		(797)	(638)	(1,167)
Gross profit		931	465	1,491
Distribution costs		(1,115)	(1,203)	(2,217)
Administrative expenses before share-based payments		(6,728)	(5,300)	(11,251)
Share-based payments charge	5	(755)	(834)	(1,754)
Total administrative expenses		(7,483)	(6,134)	(13,005)
Operating loss before exceptional gain		(7,667)	(6,872)	(13,731)
Exceptional gain	8	956	-	-
Operating loss		(6,711)	(6,872)	(13,731)
Finance income		41	484	611
Finance costs		(3)	(5)	(7)
Loss before income tax		(6,673)	(6,393)	(13,127)
Income tax		402	-	-
Loss for the period/year attributable to equity shareholders		(6,271)	(6,393)	(13,127)
Other comprehensive income;
Currency translation differences on consolidation		(8)	(24)	(3)
Total comprehensive income for the period		(6,279)	(6,417)	(13,130)
Loss per share attributable to the equity holders of the Company during the period/year (expressed in pence per share):
- basic and diluted	4	(1.55)	(1.94)	(4.0)
- adjusted basic and diluted	4	(1.78)	(1.94)	(4.0)

 

All activities derive from continuing operations.

Consolidated Balance Sheet

 

		31 December 2009 (unaudited)	31 December 2008 (unaudited)	30 June 2009 (audited)
		£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		363	429	333
Intangible assets		2,981	818	659
		3,344	1,247	992
Current assets
Trade and other receivables		1,575	4,347	5,653
Cash and cash equivalents		9,532	15,363	10,145
		11,107	19,710	15,798
Total assets		14,451	20,957	16,790
LIABILITIES
Current liabilities
Trade and other payables		(4,436)	(2,414)	(4,020)
Financial liabilities		(36)	(3,344)	(3,379)
		(4,472)	(5,758)	(7,399)
Non-current liabilities
Deferred income tax liability		(525)	-	-
Financial liabilities		(39)	(76)	(57)
Other liabilities		(612)	-	-
		(1,176)	(76)	(57)
Total liabilities		(5,648)	(5,834)	(7,456)
Net assets		8,803	15,123	9,334
EQUITY
Capital and reserves attributable to equity holders of the Company
Ordinary shares		4,141	3,366	3,401
Share premium		34,999	30,199	30,649
Foreign exchange translation reserve		(23)	(36)	(15)
Other reserves		11,987	10,890	11,329
Retained loss		(42,301)	(29,296)	(36,030)
Total equity		8,803	15,123	9,334

Consolidated Statement of Changes in Equity

 

	Share Capital	Share Premium	Merger Reserve	Reverse Acquisition Reserve	Share-based Payments Reserve	Retained Loss	Foreign Exchange Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months to 31 December 2008 (unaudited)
Balance at 1 July 2008	2,545	19,334	32,952	(25,321)	2,540	(22,903)	(12)	9,135
Issue of shares	821	10,865	-	-	-	-	-	11,686
Recognition of share- based payments	-	-	-	-	719	-	-	719
Total comprehensive income for the 6 months ended 31 December 2008	-	-	-	-	-	(6,393)	(24)	(6,417)
Balance at 31 December 2008	3,366	30,199	32,952	(25,321)	3,259	(29,296)	(36)	15,123
Twelve months to 30 June 2009 (audited)
Balance at 1 July 2008	2,545	19,334	32,952	(25,321)	2,540	(22,903)	(12)	9,135
Issue of shares	841	11,010	-	-	-	-	-	11,851
Recognition of share-based payments	-	-	-	-	1,463	-	-	1,463
Total comprehensive income for the year	-	-	-	-	-	(13,127)	(3)	(13,130)
Exercise of share options	15	305	-	-	(305)	-	-	15
Balance at 30 June 2009	3,401	30,649	32,952	(25,321)	3,698	(36,030)	(15)	9,334
Six months to 31 December 2009 (unaudited)
Balance at 1 July 2009	3,401	30,649	32,952	(25,321)	3,698	(36,030)	(15)	9,334
Issue of shares	740	4,350	-	-	-	-	-	5,090
Recognition of share-based payments	-	-	-	-	658	-	-	658
Total comprehensive income for the 6 months ended 31 December 2009	-	-	-	-	-	(6,271)	(8)	(6,279)
Balance at 31 December 2009	4,141	34,999	32,952	(25,321)	4,356	(42,301)	(23)	8,803

Consolidated Cash Flow Statement

 

		Six months ended 31 December 2009 (unaudited)	Six months ended 31 December 2008 (unaudited)	Year ended 30 June 2009 (audited)
	Note	£'000	£'000	£'000
Cash flows utilised in operating activities	6	(5,999)	(6,171)	(11,396)
Tax received		376	-	-
Net cash flows utilised in operating activities		(5,623)	(6,171)	(11,396)
Cash flows utilised in investing activities
Acquisition of subsidiary net of cash acquired		71	-	-
Interest received		38	532	604
Purchases of property, plant and equipment		(62)	(65)	(78)
Capitalisation and purchases of intangible assets		(51)	(202)	(229)
Net cash utilised in investing activities		(4)	265	297
Cash flows provided by financing activities
Proceeds from issuance of ordinary shares (net of expenses)		5,012	11,548	11,548
Share options exercised		2	15	15
Net cash provided by financing activities		5,014	11,563	11,563
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(613)	5,657	464
Cash, cash equivalents and bank overdrafts at beginning of the period/year		10,145	9,681	9,681
Effect of foreign exchange rates		-	25	-
Cash, cash equivalents and bank overdrafts at end of the period/year		9,532	15,363	10,145

Notes to the Consolidated Financial Statements for the six months ended 31 December 2009

 

1. General Information

 

The Company is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange.

The condensed consolidated interim financial information was approved for issue by the Board on 15 February 2010.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2010 were approved by the Board on 24 August 2009 and delivered to the Registrar of Companies. The Auditors' report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 Companies Act 2006.

The condensed consolidated interim financial information is neither audited nor reviewed under IAS 34 and the results of operations for the six months ended 31 December 2009 are not necessarily indicative of the operating results for future operating periods.

2. Summary of Significant Accounting Policies

 

2.1 Basis of Preparation

The financial statements have been prepared under the measurement principles of IFRS, using accounting policies and methods of computation consistent, except as noted below, with those set out in the 2009 Monitise plc Annual Report and Accounts. The financial statements have been prepared under the historical cost convention. As the Group is listed on AIM, it is not required to adopt IAS 34 'Interim Financial Statements' in preparing the interim consolidated financial information and therefore is not in full compliance with IFRS.

Based on projections prepared of the Group's anticipated future results, the Directors have reasonable expectations that the Group will have adequate resources to continue in existence for the foreseeable future. Therefore the Directors continue to adopt the going concern basis in preparing these financial statements.

2.2 Accounting Policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2009, as described in those annual financial statements with the addition of the following:

Government grants

Government grants (IAS 20) are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Government grants are of a revenue nature and are credited to deferred income on receipt and are then, over time, deducted from the expenditure to which they relate.

The Group has adopted IAS 1 (revised) Presentation of Financial Statements. The amendment affects the presentation of owner changes in equity and introduces a ''Statement of Comprehensive Income''. The Group has elected to present a single statement of performance, being the Statement of Comprehensive Income.

The Group has adopted the amendment to IFRS 3 during the period which revises the accounting for business combinations. The effects of this in the period are described in note 8.

The amendment to IFRS 2 relates to vesting conditions and cancellations for share options. No restatement of prior period information has been necessary as a consequence of adopting this standard.

Upon adoption of IFRS 8, the group will need to expand the disclosure in relation to segmental analysis which currently presents one business segment relating to the provision of mobile-phone-initiated transactions. The adoption of this standard is not expected to impact the Group's result or net assets and will be adopted for the year ended 30 June 2010.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2009, but are not currently relevant for the Group:

IFRS 5 (amendment) - Non-current Assets Held for Sale and Discontinued Operations.

IAS 16 (amendment) - Property, Plant and Equipment.

IAS 29 (amendment) - Financial reporting in Hyperinflationary Economies.

IAS 32 (amendment) - Financial Instruments: Presentation.

IAS 39 (amendment) - Financial Instruments: Recognition and measurement.

IFRIC 14, IAS 19, The limit on a defined benefit asset, minimum funding requirements and their interaction;

IFRIC 15, Agreements for the construction of real estate;

IFRIC 16, Hedges of a net investment in a foreign operation;

IAS 23 (2007), Borrowing costs.

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2009 and have not been early adopted:

Effective date
IFRS 2 (amendment) - Share-based payment.	1 January 2010
IAS 1 (amendment) - Presentation of Financial Statements.	1 January 2010
IAS 7 (amendment) - Statement of cash flows	1 January 2010
IAS 8 (amendment) - Operating segments.	1 January 2010
IAS 36 (amendment) - Impairment of assets	1 January 2010

 

The Directors do not anticipate that the adoption of any of the remaining standards or interpretations will have a material impact on the Group's financial statements in the period of initial application.

 

3. Interest in Joint Ventures

 

The Group has a 49% interest in a joint venture, Monitise Americas LLC (a company incorporated in the United States of America), which provides mobile phone-initiated banking and payments services in North America. Monitise Americas LLC was incorporated on 28 August 2007. During the period, consultancy charges and licence fees of £0.7m (six months ended 31 December 2008: £0.5m; year ended 30 June 2009: £1.2m) were billed to Monitise Americas LLC before consolidation adjustments. As at 31 December 2009, the Group's share of the joint venture assets was £0.2 (31 December 2008: £0.3m; 30 June 2009: £0.3m) and its share of liabilities was £0.5 (31 December 2008: £0.4m; 30 June 2009: £0.4m). The Group proportionally consolidates Monitise Americas LLC into its results on the basis that it has joint control of the strategic financial and operating decisions relating to the entity's activities, in line with the requirements of International Accounting Standard 31.

On 21 August 2009, the Group acquired an additional 50% of the issued share capital in its joint venture, Monilink Limited, from its joint venture partner VocaLink Ltd (further details in note 8) which provides mobile phone-initiated banking and payment services to the banking industry in the United Kingdom. In all periods to 21 August 2009 the Group proportionally consolidated Monilink Limited into its results on the basis that it had joint control of the strategic financial and operating decisions relating to the entity's activities, in line with the requirements of International Accounting Standard 31. After 21 August 2009 the Group consolidated 100% of the results of Monilink Limited.

The interests in the assets and liabilities of the joint ventures set out above are stated before consolidation adjustments are made to eliminate inter-company balances.

4. Loss Per Share

 

Basic & Diluted

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. As the Group is loss-making, any share options in issue are considered to be "anti-dilutive". As such, there is no separate calculation for diluted earnings per share.

Reconciliations of the loss and weighted average number of shares used in the calculation are set out below.

	Six months ended 31 December 2009	Six months ended 31 December 2008	Year ended  30 June  2009
	(unaudited)	(unaudited)	(audited)
Loss for the period/year (£'000)	(6,271)	(6,393)	(13,127)
Weighted average number of ordinary shares in issue ('000)	405,295	328,821	329,110
Loss per share (pence)	(1.55)	(1.94)	(4.0)

 

To provide a comparable measure of performance per share from the normal operations of the business, a supplementary EPS has been calculated in addition to the disclosure required by IAS 33 with the following adjustments to the basic EPS:

 

	Six months ended 31 December 2009	Six months ended 31 December 2008	Year ended  30 June  2009
	(unaudited)	(unaudited)	(audited)
Loss for the period/year (£'000)	(6,271)	(6,393)	(13,127)
Exceptional gain	(956)	-	-
Adjusted loss	(7,227)	(6,393)	(13,127)
Weighted average number of ordinary shares in issue ('000)	405,295	328,821	329,110
Adjusted Loss per share (pence)	(1.78)	(1.94)	(4.0)

 

5. Share-based Payments

The Group operates a number of equity settled share-based payments plans and a summary of the main terms of the plans has been provided in the 2009 Monitise plc Annual Report and Accounts.

During the period, a total of 4.9m options were granted (six months ended 31 December 2008: 19.3m; year ended 30 June 2009: 19.5m). At 31 December 2009, the number of share options in issue was 52.3m (31 December 2008: 48.6m; 30 June 2009: 48.5m).

As disclosed in the 2009 Report and Accounts, warrants were granted to Fleming Family and Partners Advisory Limited ("FF&P"). A total of 2.5m have been granted during the period (six months ended 31 December 2008: 6.1m; year ended 30 June 2009: 6.1m).

During the period, the Group issued 0.8m shares to consultants in lieu of cash payments for services provided (six months ended 31 December 2008: 2.0m; year ended 30 June 2009: 5.5m)

Assumptions used in the Valuation of Share-based Payments

 

In calculating the fair value of equity-settled share-based payment arrangements, the Group has used the same underlying valuation methodologies as applied in the 2009 Annual Report and Accounts.

 

Charge to Income Statement

As transactions made through the above schemes are effectively 'equity-settled' transactions, they have been accounted for as a movement through equity. Share options and warrants have been issued during the year and expensed on a straight-line basis between issue date and the date they are assumed to vest. Shares issued to consultants in lieu of cash consideration for their services have been expensed as incurred.

The total amount expensed for the period, through the Income Statement, in relation to share-based payments was £755,000 (six months ended 31 December 2008: £834,000; year ended 30 June 2009: £1,754,000).

 

6. Reconciliation of Net Loss to Net Cash Utilised by Operating Activities

 

	For the six months ended 31 December 2009 (unaudited)	For the six months ended 31 December 2008 (unaudited)	For the year ended 30 June 2009 (audited)
	£'000	£'000	£'000
Loss before income tax	(6,673)	(6,393)	(13,127)
Adjustments for:
Depreciation	140	105	210
Amortisation	299	177	363
Exceptional gain	(956)	-	-
Deferred annual bonus	-	33	-
Share-based payments	755	834	1,754
Finance income - net	(38)	(479)	(604)
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):
Trade and other receivables	4,290	170	(2,116)
Trade and other payables	(3,816)	(618)	2,124
Cash utilised in operations	(5,999)	(6,171)	(11,396)

 

7. Contingencies

Legal Contingencies

Except as set out below, no member of the Group is or has been involved in any governmental, legal or arbitration proceedings and the Directors are not aware of any such proceedings pending or threatened by or against the Group during the 12 months preceding the date of these financial statements which may have or have had, in the recent past, a significant effect on the financial position or profitability of the Group.

Mobile VPT Limited has issued a UK infringement claim against Monitise International Limited (formerly known as Monitise Limited) and other related parties. Following advice from leading counsel, the Directors believe that the Monitise Business's activities in the UK do not infringe any valid claim of Mobile VPT's Patent and that the Mobile VPT Patent may be invalid. As a result, and in line with the fact that there has been no adverse movement since the proceedings in this case were stayed in October 2007 no provision has been reflected in the financial statements.

8. Acquisition of subsidiary

On 21 August 2009, the Group acquired an additional 50% of the issued share capital in its joint venture, Monilink Ltd from its joint venture partner VocaLink Ltd. If the acquisition had occurred on 1 July 2009, combined Group sales and loss for the period would not have been materially different.

Monilink Limited

On 21 August 2009 the Group acquired an additional 50% of the issued share capital in its joint venture, Monilink Ltd (incorporated and based in the UK), for an initial cash consideration of £1,500,000 payable in three equal instalments over 3 years, which has been discounted to £1,477,000. The first payment of £500,000 was made in the reporting period. A further £124,000 discounted contingent consideration has been provided which is dependent on certain financial performance being met. The undiscounted potential payment under the contingent consideration criteria ranges from £nil to £1,500,000.

The Group has made this acquisition to take full ownership of its core business operations in its home market, including all future revenues, as the global mobile money industry accelerates. This opportunity does not wholly translate into separately identifiable intangible assets, but represents much of the assessed value within Monilink Limited supporting the recognised goodwill.

In the period from acquisition to 31 December 2009, Monilink Ltd contributed revenue and loss after tax of £683,000 and £1,283,000 respectively to the Group consolidated results.

The amount of the equity interest held by Monitise group Ltd in Monilink Ltd, immediately before the acquisition had a provisional fair value of £1,601,000 and the gain on such provisional fair valuation recognised in the Income Statement as an 'exceptional gain' was £956,000.

The Monilink Ltd acquisition had the following effect on the Group's assets and liabilities:

 

			Provisional	Provisional
		Book value	fair value adjustment	fair value
		£'000	£'000	£'000
Intangible assets		218	1,967	2,185
Tangible assets		216	-	216
Receivables		424	-	424
Payables		(708)	(551)	(1,259)
Cash		1,141	-	1,141
		1,291	1,416	2,707
Fair value of 50% interest previously held				(1,601)
Consideration				(1,601)
Provisional goodwill				495
Consideration satisfied by:
Cash paid				500
Discounted deferred cash consideration				977
Discounted contingent consideration				124
				1,601

 

No adjustments for accounting policy alignments were required.

A deferred tax liability of £551,000 on the capitalisation of the intangible assets has been created on acquisition.

The intangible assets capitalised as part of the acquisition of Monilink Ltd will be amortised over a period of seven years and can be analysed as follows:

				£'000
License				773
Customer contracts				1,194
				1,967

 

The calculation of the provisional fair values of assets and liabilities such as goodwill, deferred consideration and intangible assets as well as the assessment of any impairment to fair values generally, involve estimations of likely future cash flows deriving from or accruing to those assets and liabilities. Judgement is also involved in selecting appropriate discount rates for determining the present value of those future cash flows.

9. Events After Balance Sheet Date

On 5 January 2010, the Group issued 57.3 million new Ordinary shares as part of a subscription agreement with existing share holders Visa, UBS Global Asset Management and Standard Chartered Bank and also with new share holders, First Eastern.

As a result £7.4million (before expenses) has been raised and, taken together with year end cash, provided the Group with a total cash position of circa £16.9m on receipt of funds in January 2010. The Directors believe that this new subscription, along with the further conditional subscriptions and warrant, approved by shareholders, of a total of 58.6 million Ordinary shares raising a further £8.4m (before expenses) will enable the Company to deploy appropriate resources to the new opportunities announced, and enable the Company to continue its growth.

 

 

 

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