Interim Results

26th Feb 2009 07:00



Embargoed for 7.00 am, Thursday 26 February 2009

Monitise plc

Interim results for the six months to 31 December 2008

MONITISE BUILDS MOMENTUM AND NOW FIRMLY ESTABLISHED INTERNATIONALLY

Monitise plc ("Monitise"; LSE: MONI.L), the mobile money specialist, announces its unaudited interim results for the six months ended 31 December 2008.

Financial Highlights

Revenues of £1.1m (H1 2008: £0.4m) include recurring annuity based licence fees and continuing build of usage / transactional fees

Loss before tax reduced to £6.4m (H1 2008: £7.0m loss)

£11.5m funding (net of fees) raised through Placing in July 2008 from combination of new strategic and existing institutional investors

Cash balance of £15.4m at 31 December 2008 (H1 2008: £15.4m)

Evolution of business model enables significant reduction in cash overheads by year end 

£12m annualised cash cost planned for next financial year 

10,000 consumers a week now being acquired, and one million expected in 2009

Expectation of monthly cash break-even during financial year 2011

Business Highlights

UK

Patent awarded in February 2009 for our mobile banking & payments platform

Lloyds TSB launched services to UK customers in September 2008

Partner banks now represent over half of UK current account holders

Enhanced 'Mobile Money Manager' product set introduced including text alerts, account to account transfers and international remittance services

Consumers now using the service on average five times per month

North America

Over 60 financial institutions and pre-paid card providers signed up to the service in North America

Service is integrated into multiple Metavante platforms and is being sold actively by its sales force

Now acquiring live customers, albeit later than originally planned, and expect to report substantial progress by the year end 

  International Markets

Monitise India established to develop an open mobile money platform with a consortium of industry leaders 

US$1.5m funding agreed from Africa Enterprise Challenge Fund and partnership secured with E-Fulusi Africa to launch Monitise services in East Africa, with specific focus on the unbanked population

At least one significant international partnership expected to close in the second half of this financial year

Alastair Lukies, Chief Executive Officer, said:

"We continue to make progress. In the first half year, we have proven the scalability and internationalisation capabilities of our technology. Built to global banking, payment and mobile network standards, our platform is well placed to play a key role in what is proving to be a substantial market. This, alongside the evidence of substantial consumer appetite for our services, has reinforced confidence in our business model and positioning.

"Operating within our cash parameters, we expect to be monthly cash break-even, based on the current projections, during our 2011 financial year."

Duncan McIntyre, Chairman, added:

"Despite the turbulence in the financial markets which slowed our progress in the period, we are pleased with the underlying improvements and progress at Monitise. The enhancements in the platform, the maturing of the offering within the joint ventures, the reduction in costs and cash burn and improved customer experience means that we are ideally placed to take advantage of the global growth in demand.

"The Board is pleased with the increased strength of the Monitise pipeline which includes a number of deals, including a substantial one, which are due to crystallise during H2 2009. The complexity of these has led them to take longer to come to fruition than we had hoped but it is vital that we achieve the most appropriate outcome in each case."

  Enquiries

Contacts:
Monitise Group	Tel: 020 7868 5200
Alastair Lukies, Chief Executive Officer
Tom Spurgeon, Chief Financial Officer
Ben Evetts, Head of Communications
Financial Dynamics	Tel: 020 7831 3113
Juliet Clarke / Haya Chelhot / Erwan Gouraud
Investec	Tel: 020 7597 5000
Patrick Robb
Rowena Murray

About Monitise plc

Monitise plc (MONI.L), the mobile money people, has created the world's first mobile banking & payments network which allows 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 Metavante Corporation respectively, the Company is currently working with international partners to deliver similar safe, secure mobile banking & payment services in territories worldwide.

 

Current key partners include VocaLink, Metavante, Standard Chartered, HSBC, Lloyds TSB, first direct, Alliance & Leicester, Royal Bank of Scotland, NatWest, Vodafone, Orange, O2, T-Mobile and Hutchison 3G.

www.monitisegroup.com 

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.

   

Interim Management Report

Business Overview

Monitise plc continues to make progress in building a worldwide platform which leverages existing banking & payments infrastructures. There is rapid growth in the global mobile banking & payments market. With our live user base now in the hundreds of thousands, we expect one million consumers in 2009. 

Monitise is benefitting from the improvements it has made to its proposition, product toolkit and customer experience as it responds to worldwide demand for mobile services. In the period, we have seen an increase in both the number and scale of opportunities for our services. On 18 February 2009 we were granted a UK patent to protect Monitise's secure system for the provision of banking services on mobile phones. We believe this is an important development which further validates our strategy and the support of our customers and partners.

Despite the turbulence in the financial marketplace, our revenue streams for the six months to 31 December 2008 have proved resilient, reporting £1.1m (H1 2008: £0.4m). The loss before tax is in line with our expectations and reduced to £6.4m (H1 2008: £7.0m), with a closing cash balance of £15.4m.

Breaking out the split of revenue, deployment and integration income from professional services fees amounted to £0.7m (H1 2008: £0.2m), with licence fees at £0.2m (H1 2008: £0.2m) and usage/other fees generated through our joint ventures starting to build at £0.2m (H1 2008: £nil). 

Following six years of resource-intensive investment in our infrastructure and platform, a first stage of central cost reduction has been made and resources more closely aligned to the products and services demanded by new and existing partners. A second stage is now to be implemented as Monitise embarks on its global strategy involving the diffusion of costs through its joint venture model and use of a flexible resourcing approach to develop the now established platform. This will lead to a substantial reduction in cost with annualised cash overheads in our next financial year down from the previously indicated £14m to circa £12m. This represents a 30% reduction in our existing cash costs and includes circa £2m of investment focused on new territories.

We have invested heavily in integrating our service in North America and, although getting the service live took longer than anticipated, we have significantly improved our ability to roll out in multiple geographies as a result. The recent market volatility, alongside the increased scale of deals in our pipeline, has seen sales cycles lengthen and lower levels of consumer acquisition due to the postponement of planned marketing spend by UK banks. Recently we have seen an increase in consumer interest and a consequent pick-up in consumer transactions, which now average five per month, and 10,000 users have been acquired each week during the first three weeks in February.

We have seen an acceptance across all markets that mobile banking & payments will become a key retail channel for the financial institutions and one they believe will be their fastest growing channel over the coming years. Our business model, which leverages existing financial institutions' infrastructure and therefore requires little incremental capital investment, is particularly well suited for the current climate. We have also identified new retail channels to market our services in the UK.

  Global Strategy 

The Monitise platform enables fast speed to market for partners in countries globally, at low marginal cost. We are working with partners that are well established for the long term and also best placed to address the needs of both banked and unbanked customers. Monitise is also working closely with regulatory authorities to ensure a regulated and secure approach is taken in each market.

The evolution of our model, with a maturing and embedded product set, means that we are now in a position to make significant cost efficiencies. The flexible platform that has been created enables us now to move to a combination of joint development through our overseas ventures and flexing development requirements through outsourced partners.

As our joint venture model is proving, combining the capabilities, discipline and processes of an existing payments infrastructure organisation with mobile innovation is critical in the early stages of any market. We will continue to review how this business model evolves as our platforms mature and as market requirements dictate.

UK

Following the launch by Lloyds TSB of our service to their customers in September 2008, our partner banks now represent over 50% of UK current account holders. This covers customers of Lloyds Banking Group, HSBC Group, Alliance & Leicester and Royal Bank of Scotland Group. During the half, a pre-paid card service was launched with Tuxedo Money Solutions; Lloyds TSB began offering its customers an inter-account transfer service and NatWest became the first UK bank to let its customers remit money internationally by mobile phone.

North America

In North America, the 'go live' of our consumer service was later than hoped. However, Monitise mobile money services are now contracted with over 60 financial institutions and pre-paid card providers. We are acquiring users as these providers roll out the live service to their customers. The service is now also embedded within the product set of Metavante, who are committed to moving consumers to mobile banking. 

India

 

Monitise is making good progress with the development of Monitise India. It has been established to develop an open mobile money platform with a consortium of industry leaders.

  East Africa

The Africa Enterprise Challenge Fund (AECF) recently awarded Monitise US$1.5m funding to help establish Monitise's operations within East Africa. As part of this venture, Monitise has agreed a partnership with E-Fulusi Africa and we look forward to rolling out a fully integrated service addressing both the banked and unbanked population across East Africa.

Product Development and Service Enhancements

Our new Mobile Money Manager was launched in December 2008 enabling multi- access mechanisms (text, application download, WAP browser, web and internet banking) to the full range of mobile money services.

We continue to develop our service for the widest range of devices and our Mobile Money Manager is already available on over 570 different handsets, including BlackBerry™ smart phones. 2009 will see the service available across the full range of smart phones, including the increasingly popular touch screen handsets such as the Apple iPhone.

Current UK growth is being boosted by new Mobile Money Manager services, specifically debit card activation, transfers and payments. A wide range of services is now also delivered by text including balances and activity alerts. Services under development will enable users without bank accounts in high growth markets in developing countries to make deposits and day to day payments.

Board and Management Team

As previously announced, during the period there have been two Board changes, both taking effect in December 2008. 

Duncan McIntyre, previously Executive Chairman, moved to become Non-Executive Chairman of the Board. He will continue to provide guidance and support to Alastair Lukies, Chief Executive, and the executive team. Lee Cameron has been appointed to the Board as an Executive Director. Lee joined the company in 2006 as General Counsel. 

  Outlook 

The momentum of Monitise's global development is now established within the fast growing worldwide market for mobile banking & payments. We expect to have one million users in 2009 and to be operating in both developed and emerging territories. 

Financially, we plan to:

move towards sustainable recurring revenues with increases in both licences and usage fees

continue our significant reduction in costs as we move from platform development to deployment 

manage within our cash parameters moving towards break-even 

Foundations have been established and we have a strong pipeline of opportunities. Revenues, whilst lower than previously forecast, will grow substantially during the second half driven by a step change in licence fees along with growth in usage fees. Increasing revenues and the evolution of our model which will enable us to realise significant cost efficiencies, will reduce cash burn during the balance of this financial year. Based on our current focused investment opportunities, our expectation is that we will reach monthly cash break-even during financial year 2011.

The Board retains a positive outlook, reflecting not only Monitise's unique positioning as a potential global provider in this complex market, the maturing nature of our model and the expertise of our people, but also the real potential of what is acknowledged to become one of the true growth markets in the financial sector.

Alastair Lukies	Tom Spurgeon
Chief Executive Officer	Chief Financial Officer

Consolidated Income Statement

All activities derive from continuing operations.

Consolidated Balance Sheet

		31 December 2008 (unaudited)	31 December 2007 (unaudited)	30 June 2008 (audited)
		£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		429	390	465
Intangible assets		818	833	793
		1,247	1,223	1,258
Current assets
Trade receivables		595	189	642
Prepayments and other receivables		3,752	2,151	2,895
Cash and cash equivalents		15,363	15,410	9,681
		19,710	17,750	13,218
Total assets		20,957	18,973	14,476
LIABILITIES
Current liabilities
Trade payables		(474)	(784)	(432)
Other payables		(1,907)	(1,421)	(2,441)
Finance lease		(33)	(17)	(33)
Financial liabilities		(3,344)	(1,669)	(2,344)
		(5,758)	(3,891)	(5,250)
Non-current finance lease liability		(76)	(54)	(91)
Total liabilities		(5,834)	(3,945)	(5,341)
Net assets		15,123	15,028	9,135
EQUITY
Capital and reserves attributable to equity holders of the Company
Ordinary shares		3,366	2,545	2,545
Share premium		30,199	19,334	19,334
Merger reserve		32,952	32,952	32,952
Reverse acquisition reserve		(25,321)	(25,321)	(25,321)
Share-based payments reserve		3,259	1,460	2,540
Foreign exchange translation reserve		(36)	-	(12)
Retained loss		(29,296)	(15,942)	(22,903)
Total equity		15,123	15,028	9,135

   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 2007 (unaudited)
Balance at 1 July 2007	2,540	19,261	32,952	(25,321)	433	(8,929)	-	20,936
Recognition of share- based payments	5	73	-	-	1,027	-	-	1,105
Total recognised income and expense for the 6 months ended 31 December 2007	-	-	-	-	-	(7,013)	-	(7,013)
Balance at  31 December 2007	2,545	19,334	32,952	(25,321)	1,460	(15,942)	-	15,028
Twelve months to  30 June 2008 (audited)
Balance at 1 July 2007	2,540	19,261	32,952	(25,321)	433	(8,929)	-	20,936
Issue of shares	5	73	-	-	-	-	-	78
Recognition of share-based payments	-	-	-	-	2,107	-	-	2,107
Total recognised income and expense for the year	-	-	-	-	-	(13,974)	(12)	(13,986)
Balance at 30 June 2008	2,545	19,334	32,952	(25,321)	2,540	(22,903)	(12)	9,135
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 recognised income and expense 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

Consolidated Cash Flow Statement

		Six months ended 31 December 2008 (unaudited)	Six months ended 31 December 2007 (unaudited)	Year ended  30 June 2008 (audited)
	Note	£'000	£'000	£'000
Cash flows utilised in operating activities
Cash utilised in operations	7	(6,171)	(5,157)	(10,999)
Interest received		532	383	824
Net cash utilised in operating activities		(5,639)	(4,774)	(10,175)
Cash flows utilised in investing activities
Purchases of property, plant and equipment		(65)	(24)	(257)
Capitalisation and purchases of intangible assets		(202)	(165)	(260)
Net cash utilised in investing activities		(267)	(189)	(517)
Cash flows provided by financing activities
Proceeds from issuance of ordinary shares (net of expenses)		11,548	-	-
Share options exercised by the directors		15	-	-
Net cash provided by financing activities		11,563	-	-
Net increase/(decrease) in cash, cash equivalents and bank overdrafts		5,657	(4,963)	(10,692)
Cash, cash equivalents and bank overdrafts at beginning of the period/year		9,681	20,373	20,373
Effect of foreign exchange rates		25	-	-
Cash, cash equivalents and bank overdrafts at end of the period/year		15,363	15,410	9,681

Effective date
IFRS 2 (amendment) – Share-based payment	1 January 2009
IFRS 8 – Operating segments	1 January 2009
IAS 1 (amendment) – Presentation of financial statements	1 January 2009
IAS 23 (amendment) – Borrowing costs	1 January 2009
IAS 32 (amendment) – Financial instruments: presentation	1 January 2009
IFRS 3 (amendment) – Business combinations	1 July 2009

 

	Six months ended 31 December 2008	Six months ended 31 December 2007	Year ended  30 June  2008
	(unaudited)	(unaudited)	(audited)
Loss for the period/year (£’000)	(6,393)	(7,013)	(13,974)
Weighted average number of ordinary shares in issue (‘000)	328,821	254,295	254,429
Loss per share (pence)	(1.94)	(2.76)	(5.50)

 

	For the six months ended 31 December 2008 (unaudited)	For the six months ended 31 December 2007 (unaudited)	For the year ended 30 June 2008 (audited)
	£’000	£’000	£’000
Loss before income tax	(6,393)	(7,013)	(13,974)
Adjustments for:
Depreciation	105	66	149
Amortisation	177	119	257
Issue of shares	-	-	78
Deferred annual bonus	33	-	-
Share-based payments	834	1,105	2,107
Finance income – net	(479)	(560)	(919)
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):
Trade and other receivables	170	332	(1,321)
Trade and other payables	(618)	794	2,624
Cash utilised in operations	(6,171)	(5,157)	(10,999)

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