Interim Results

19 February 2014

MONITISE plc

Interim results for the six months to 31 December 2013

 H1 FY 2014 REVENUE UP 67% ON H1 FY 2013

GROSS MARGIN MOMENTUM MAINTAINED: MARGINS AT 73% VERSUS 72% A YEAR AGO

VALUE OF TRANSFERS AND PAYMENTS ACROSS MONITISE PLATFORM RISES 133% TO $71BN

 REGISTERED CUSTOMERS 28M, COMPARED WITH 20M A YEAR AGO

GROUP ON TRACK FOR REVENUE GROWTH OF APPROXIMATELY 50% IN FY 2014

LONDON - Monitise plc (LSE: MONI)("Monitise", the "Company" or the "Group"), a global leader in Mobile Money solutions, announces its unaudited interim results for the six months ended 31 December 2013.

Financial Highlights

· H1 FY 2014 revenue £46.5m, up 67% on H1 FY 2013.

· Gross margin increased to 73% from 72% in H1 FY 2013, with user generated margin particularly strong, owing to a number of product licence deals following recent customer wins and renewals.

· EBITDA (1) loss of £10.2m (H1 FY 2013 loss: £14.7m).

· Adjusted loss after tax (2) of £16.4m (H1 FY 2013 loss: £21.0m) and adjusted loss per share of 1.0p (H1 FY 2013 loss: 1.8p). Statutory loss after tax of £22.0m (H1 FY 2013 loss: £30.3m) with loss per share of 1.4p (H1 FY 2013 loss: 2.6p).

· Group net cash of £66.2m as at 31 December 2013. Free cash outflow (3)of £20.3m compared to £21.6m in H1 FY 2013.

(1) EBITDA is defined as operating profit/loss before exceptional items, depreciation, amortisation, impairments and share-based payment charges.

(2) Adjustments comprise share-based payments, exceptional items, impairments and acquisition-related amortisation.

(3) Free cash flow comprises cash used in operating and investing activities including capital expenditure and JV funding. It excludes exceptional items and net cash acquired on acquisitions.

Outlook

· We continue to see increasing demand for our services and positive momentum across the Group and therefore see the need for continued investment as we look to maximise the growth opportunities for Monitise. We reiterate our full-year guidance.

· Expected revenue growth of approximately 50% in FY 2014.

· FY 2014 gross margin to be maintained above 70%.

· The Group sees multiple opportunities in all geographies both from direct sales channels and our growing partner network.

· A move to the London Stock Exchange's main market in calendar 2014 continues to be considered.

Operational Highlights

· Rising demand for Monitise-enabled Mobile Money services

o Processed payments and transfers now worth $71bn on an annualised basis, compared with $31bn a year ago.

o Further growth in live transactions, with more than 3.4bn transactions on an annualised basis, compared with 2bn a year ago.

o Registered end-user customers at 28m, compared with 20m a year ago.

· Global footprint strengthened

o IBM publicly announced working with Monitise in September 2013, calling out the development of new solutions to extend the adoption of Mobile Money services across the two businesses' client and partner networks.

o Monitise recognised with a 2014 IBM Choice Award for High Performing New Business Partner at IBM's PartnerWorld Leadership conference in Las Vegas on 11 February 2014.

o Following Monitise's appointment as the preferred mobile payments and commerce technology partner for Telefónica Digital in FY 2013, preparation is underway for a series of service roll-outs in geographies around the world.

o Industry recognition with CEB Tower Group and Javelin Research and Strategy "best in class" vendor awards.

· Growing global network of brands focused on new Monitise-developed solutions

o Europe

§ More than 30 Visa Europe member banks are now signed up to person-to-person payment solutions developed by Monitise that allow Visa cardholders to send money to each other using their mobile phones.

§ Monitise entered into a Mobile Money partnership with a leading UK bank and financial services company.

§ A major mobile banking and payments contract was renewed with a leading bank for a new minimum five-year term.

§ Grapple Mobile Ltd ("Grapple") was acquired by Monitise in September 2013 and integrated into Monitise Create. The business has a broad pipeline of new commercial opportunities across financial services and other sectors such as sport, travel and entertainment in the UK, Europe and internationally. Monitise Create is working with FIFA and Samsung and has won its first contract with a leading US bank.

§ Mobile banking services for Clydesdale Bank and Yorkshire Bank launched, generating strong customer adoption rates across iPhone, Android and BlackBerry devices.

o US

§ Vantage 5.1, the hybrid version of Monitise's technology platform in the Americas, was released with positive customer feedback.

§ U.S. Bank began a pilot programme with Monitise to directly connect consumers' offline and online shopping experiences via smartphones and tablets.

§ Monitise-developed NFC mobile payment capabilities launched by Desjardins Group, Canada's leading cooperative financial group.

§ With Visa Inc., Monitise is working on a number of initiatives to support its mobile strategies, including enhancements to the Visa DPS mobile platform, Visa PayWave for contactless payments and a new mPOS platform.

§ Partnership began with credit union CSCU that sees the Group's technology being offered to more than 2,600 credit unions across North America.

o India

§ Movida, which is Monitise's 50/50 Joint Venture (JV) with Visa in India contracted ICICI, India's largest private bank, to make the Movida mobile payments functionalities available to its customers. This follows Movida's previously announced partnership with HDFC Bank, India- second-largest private bank.

o Asia Pacific

§ Monitise secured full control of Monitise Asia Pacific Ltd, its former 50:50 JV with First Eastern Mobile Investments Ltd.

§ Monitise's first Chinese language Mobile Money solution was launched with the rollout of 'Easy TopUp' for Bank of China (Hong Kong). Using technology developed by Monitise, Bank of China became the first bank in Hong Kong to provide such a service to its customers in cooperation with Joint Electronic Teller Service Limited (JETCO), the ATM network provider in Hong Kong.

· Board appointments - New Chairman and Non-Executive Director

o Appointment of Peter Ayliffe as Non-Executive Chairman.

o Steve Chambers and Victor Dahir appointed Non-Executive Directors.

· Post period-end highlights

o Acquisition of Pozitron Yazilim A.Ş., ("Pozitron") in February 2014 to accelerate Monitise's Mobile Money capabilities in Turkey and the Middle East.

o Further to entering a three-year deal for multi-language mobile Point of Sale services with OP-Pohjola Group, Finland's leading banking group, for its business customers, new mPOS customer deals are under negotiation. Further announcements expected in coming months regarding business wins in the UK and Europe, including Germany, Italy, and internationally.

Monitise CEO Alastair Lukies said:

"Mobile Money is growing and evolving as fast as ever and we have made solid progress in the first half of 2014. The world has gone mobile and industries are moving to catch up with consumer demand. As a trusted and non-threatening enabler, we are very pleased to be playing our role in helping to reconnect brands to their customers and bringing together an ecosystem of industries for the benefit of all.

During the half, we entered new relationships and deepened existing collaborations with leading players across financial services, payment processing, mobile network operators, technology businesses and retail. This helped to lift our revenue 67% to £46.5m and saw the value of payments and transfers running across our platforms hit $71bn, more than double what they were a year ago. But there is a lot further to travel. Large deals signed in 2013 are still in build phase, and our work with channel partners are also yet to materially impact our top line.

This is now a very dynamic market and fast evolving industry and we have positioned ourselves extremely well to cement a long-term and sustainable role in the way that society banks, pays and buys for generations to come."

Monitise Chairman Peter Ayliffe commented:

"In my first statement as Chairman, I am pleased to report that Monitise has delivered another impressive performance in the first half of 2014. Banking, payments and commerce are being transformed by digital and mobile technology. While the sectors that Monitise operates in are large and some relatively complex, it is essentially about partnerships, robust infrastructure and collaborations that create compelling benefits for all participants in the ecosystem. This is an exciting time for the Group as it evolves to the next level in executing against its Mobile Money growth strategy.

The Board continues to assess scope for further investment to capitalise on the significant opportunity in our space and deliver value to our partners, clients and shareholders. Monitise has made a positive start to the second half and we look to the future with confidence."

An analyst presentation will be held on 19 February, 2014 at 2.30pm GMT at the London Stock Exchange, London, EC4M 7LS. A live webcast of the presentation will be available to view online via investor relations on www.monitise.com. A replay facility will be accessible via www.monitise.com/investor_relations within 24 hours of the results presentation.

An interview with Monitise CEO Alastair Lukies regarding the interim results is available to view via www.monitise.com/investor_relations.

About Monitise

Monitise (LSE: MONI) is a world leader in Mobile Money - banking, paying and buying with a mobile device. Leading banks, payments companies, retailers and mobile networks utilise Monitise's technology platforms and services to securely connect people with their money. 

Already 28 million consumers benefit from Monitise's patented technology to 'bank anywhere', 'pay anyone' and 'buy anything', accounting for $71bn of payments, purchases and transfers annually. More information is available at www.monitise.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.

Business Review

The first half of our 2014 financial year was a period of strategic progress and strong financial results. Our performance again underscores the merits of the Group's ongoing focus on creating a best-in-class growing ecosystem of partners and clients using Monitise's bank-grade platform technology around the world. Our capabilities have been designed to enable financial institutions working with us to leverage the high engagement realities of mobile banking solutions and services into new, commerce-related revenue opportunities.

The 67% increase in first-half revenue to £46.5m was driven by user generated revenue continuing to grow as a proportion of total revenue year on year.

The corporate and commercial benefits of our platform technology are reflected in the increasing interest and engagement we are seeing around the world among both the clients we serve and their customer audiences. Monitise is now processing 3.5bn transactions on an annualised basis, compared with 2bn a year ago. Amid the growth in our partner network over the period and broadening connections to new services, Monitise now has 28m registered customers, compared with 20m a year ago. The scale of consumer engagement with the solutions we enable for the businesses we work with is underscored by strong growth in the value of payments and transfers initiated via our Mobile Money platform technology rising to $71bn. This compares with $31bn a year ago and $50bn at the time of the Group's full-year results in September 2013.

During the period the Group continued to invest strategically in technology and talent to help further scale our business and meet the growing mobile commerce opportunities the industry faces.

In September 2013, the Group announced the acquisition of European mobile innovation and design agency Grapple, which has been integrated into Monitise Create. Bringing the business into Monitise supported the growth of our creative capabilities and further reinforced our leading position as a technology enabler at the heart of the Mobile Money ecosystem.

Towards the end of FY 2013, Monitise entered into a five-year agreement to become the preferred mobile payments and commerce technology partner for Telefónica Digital. Since the appointment, work has commenced on the forthcoming roll-out of a series of mobile payments and commerce services in geographies around the world. More updates about the services will follow at launch.

Earlier this month, Yankee Group predicted that the mobile economy is evolving at an even faster rate than expected and that by 2017 it will be valued at $3.1 trillion, $200bn more than the $2.9 trillion Yankee Group forecasted in October 2012. Such trends help explain why banks are becoming more interested in unlocking the commercial benefits that mobile technology can deliver. Amid this, U.S. Bank is working with Monitise to build and trial new product discovery and shopping services via smartphones and tablets. U.S. Bank is the fifth-largest retail bank in the US. Other highlights during the period include our collaboration with IBM to extend the adoption of Mobile Money capabilities across the two businesses' client and partner networks. IBM is providing a broad range of software, technology services and consulting, including IBM MobileFirst solutions, to help power Monitise mobile services for Visa Europe.

As an enabler at the heart of the Mobile Money ecosystem, our priorities are centred on embracing new partners and developing new technology to make our network the network of choice. We have a clear strategy to deliver growth through investment and innovation and have laid deep and broad foundations upon which the Group will grow further. Together with our partners, we are making payments smarter, faster and more convenient than ever before.

· Industry Recognition

Monitise continues to set the pace in global innovation with respect to bringing to market world-class solutions and capabilities. This is evidenced by the recognition the Group received across the industry confirming our best-in-class approach to Mobile Money solutions.

In a CEB TowerGroup 'Mobile Banking Technology Analysis' report in December 2013, Monitise's technology platform was given the highest available ranking across all categories - for Customer Experience, Interface Development, Integration and Management, and Enterprise Support. In a Javelin Strategy & Research survey of the global mobile banking industry, Monitise secured top-three positions in each of the survey's three categories - Top Mobile Banking, Top Standard Solution and Top Customised Solution. Monitise technology also scored top marks in security. Significantly, Monitise was the only vendor to score 100% in this area, and in any category, including alerting, a key differentiator in advanced mobile engagement strategies. Collectively, this reinforces why Monitise is considered a best-in-class Mobile Money provider, as security remains the number one issue that consumers care about with respect to mobile banking. In addition, high engagement, driven by the opportunity alerting affords financial institutions as they seek to reconnect with their customers, opens up the opportunity to move from banking to higher value payments and commerce services.

Person-to-person (P2P) payment services Monitise developed for Royal Bank of Scotland Group won the Best Innovation category at the Best Business Awards and Monitise was recognised prominently in the latest Deloitte Technology Fast 50, a ranking of the 50 fastest-growing technology companies in the UK. This marked the third year running that Monitise has maintained a top 15 ranking, having been named third and 12th in 2012 and 2011 respectively.

In October 2013, the Group won the Best Peer-to-Peer Programme category at the Emerging Payments awards for its Indonesian BlackBerry Messenger payments service, BBM Money. The category recognised the best live P2P payment programmes and innovations around the world and was open to any type of solution - whether based on an open loop or closed network, and across cards, mobile, or online.

We were also extremely honoured to have been recognised earlier this month as the winner of an IBM Choice Award for High Performing New Business Partner.

Taken together, these results reinforce the confidence we have in our business and underscore our drive to focus further on delivering value to our partners and clients.

Financial Review

The Group continued to deliver a strong performance in the period.

Revenue

Revenue was up by 67% to £46.5m in H1 FY 2014 from £27.8m in H1 FY 2013. User generated revenue continued to grow as a proportion of total revenue, representing 59% of the total in H1 FY 2014, compared to 51% in H1 FY 2013. Total user generated revenue in the period was £27.3m and included a strong contribution of £11.1m from product licence revenue attributable to recent customer wins and renewals. Product licence based deals include subsequent subscription and/or transaction based revenue, as well as development and integration revenue.

Subscription revenue excluding licenses grew 14% to £16.3m in the period driven largely by rising existing customer end-user count. The very large contracts signed in calendar 2013 have not yet been converted to material new user growth and are still in development and integration phases. Monitise is very focused on raising end-user count through new wins and raising penetration at existing customers, in all geographies. We expect subscription revenue growth to accelerate in the medium term.

Development and integration revenue increased by 41%, reflecting, in part, the first phases of work on recent large contract wins including Telefónica Digital and Visa Europe.

Gross Margins

Gross margin increased to 73% (H1 FY 2013: 72%), driven by user generated revenue increasing from 51% to 59% of total revenue. User generated margin reached 91% from 86% in H1 FY 2013 owing in part to strong product licence revenue. Development and integration gross margin was 46% in the period, compared to 58% in H1 FY 2013. The decline in development and integration margin is largely due to the impact of certain large contracts, where bulk price commitments were made on development work for the benefit of greater transaction revenue share. More generally, there is a broad range of gross margin Monitise can generate depending on the customer and type of work, therefore we expect development and integration margin to continue to fluctuate around the 50% level depending on the mix and type of work undertaken in any given period.

EBITDA

The Group EBITDA loss was £10.2m in H1 FY 2014 compared to £14.7m in H1 FY 2013. In line with our strategy, we continue to invest to create value from the growing opportunities in the Mobile Money market. The growth in operating costs to £44.0m in the period (H1 FY 2013: £34.8m) reflects a front-loaded increase in headcount and senior hires, as well as increased IT and corporate costs, as we continue to scale the business to meet customer demand.

Other Movements

Depreciation & Amortisation

Depreciation was £1.9m in the period (H1 FY 2013: £1.5m). Amortisation of £7.4m (H1 FY 2013: £4.6m) includes amortisation of acquired intangible assets of £3.7m and capitalised development costs of £2.4m.

Share-based Payments

The share-based payment charge of £3.1m in the period (H1 FY 2013: £2.1m) includes share-based remuneration components relating to employee share option grants.

Exceptionals

£1.0m of exceptional costs were recorded in the period largely reflecting acquisition related items and litigation costs. A non-cash exceptional gain of £2.3m was recorded relating to the acquisition of Monitise Asia Pacific Limited, which was the Joint Venture previously held with First Eastern Investments Mobile Limited.

Loss Before Tax

Group loss before tax was £23.3m, compared to a loss in H1 FY 2013 of £29.7m.

Tax

A non-cash tax credit of £1.3m was recorded in the period (H1 FY 2013: £0.6m charge) relating to unwinding of deferred tax recognised on acquired intangible assets.

Attributable Loss

The reported loss after tax for H1 FY 2014 was £22.0m (H1 FY 2013: £30.3m). On an adjusted basis excluding share-based payments, exceptional items, impairments and acquisition-related amortisation, attributable loss after tax was £16.4m (H1 FY 2013: £21.0m).

Loss Per Share

The basic and diluted loss per share was 1.4p (H1 FY 2013: 2.6p). On an adjusted basis excluding share based payments, exceptional items, impairments and acquisition-related amortisation, basic and diluted loss per share was 1.0p compared to 1.8p in H1 FY 2013.

Cash Flow and Funds

The Group ended the half year with a strong balance sheet, holding £66.2m of net cash at 31 December 2013 compared to £100.4m at 31 December 2012 and £85.6m at 30 June 2013. Free cash outflow excluding exceptional items, funding and acquired cash was £20.3m, compared to £21.6m in H1 FY 2013.

Joint Venture funding, comprising investments and loans, totalled £1.2m in the year, down from £2.9m in H1 FY 2013. The reduction is driven by the buyout of two JVs (Mobile Money Network in December 2012 and Monitise Asia Pacific in October 2013). Capital spending increased from £8.6m to £9.1m as the Group continued investing to take advantage of the mobile payment and mobile commerce markets.

Capital spending included £1.0m (H1 FY 2013: £3.7m) of tangible asset purchases, and £8.1m (H1 FY 2013: £4.8m) of intangible asset purchases and capitalisation.

Post Balance Sheet Events

On 3 February 2014, the Group announced the acquisition of 100% of the issued share capital of Turkey-based Pozitron, an internationally-recognised company delivering Mobile Money solutions. Initial consideration was satisfied by the issue of 35,925,589 ordinary shares valued at £24m based on the closing share price of 66.5p on 31 January 2014. In addition, contingent consideration of up to £36m may be payable in shares or cash, at Monitise's discretion, based upon the achievement of aggressive earn out targets over three years.

Operational Review

· UK and Europe

Monitise provides enabling technology behind Visa Europe Mobile Money programmes including the payment processor's Personal Payments service. More than 30 banks, including RBS, NatWest and Ulster Bank, as well as Allied Irish Bank which launched digital peer-to-peer services in January 2014, have signed up to the service that the Group has developed for Visa Europe member banks. We are also seeing strong growth in our RBS implementation of Visa Europe's Personal Payments and more launches are expected during the second half. In January, Visa Europe reported that more than £1 in every £3 spent in the UK was now spent using a Visa account and the drive to enable payments to be available through mobile devices continues at pace.

On 31 December 2013, Monitise announced it had extended its commercial contract with a leading financial institution and entered into a five-year Mobile Money partnership with a leading UK bank and financial services company. As part of this, Monitise will design, build, and manage new banking, payments and shopping services. The partnership has a contract value of several million pounds. In line with Monitise's strategic focus on moving further towards a user-generated business model, the new partnership includes provisions for revenue sharing arising from retail offers generated via the Group's growing mobile commerce network. More details about the new partnership will follow in due course.

Monitise's mobile banking services for Clydesdale Bank and Yorkshire Bank went live during the first half. The banks, which entered a partnership with Monitise earlier in 2013, have seen strong customer adoption rates for the apps across iPhone, Android and BlackBerry devices since launch.

Post period-end, Monitise entered into a three-year deal with OP-Pohjola Group, Finland's leading banking group, for multi-language mPOS services for its business customers. Further announcements are expected in coming months regarding business wins in the UK and Europe, including Germany, Italy, and internationally.

· Monitise Create

The Grapple business, which was acquired in September 2013, has been integrated into Monitise Create, a mobile innovation division within the Group that is working with leading businesses and brands such as Whitbread and B&Q. Shortly after the acquisition, Monitise Create announced it had helped to develop Samsung 'My Galaxy', an application designed to help users get the most from their smartphones, including content and ticket offers. In December 2013, Monitise Create moved into the football sector and helped to create the Official FIFA App for the forthcoming 2014 FIFA World Cup Brazil. The FIFA app is expected to be the most downloaded sports application ever. Monitise Create has also developed applications for Whitbread's Premier Inn business to make it simpler and quicker for guests to book and manage hotel stays, significantly increasing app conversion rates.

In December, market research business eConsultancy described Monitise Create's work for DIY giant B&Q as one of the 10 most inspiring uses of mobile in retail, given how the app gives customers a reason to go in-store to take advantage of exclusive discounts.

Monitise Create expects to announce a number of new business wins during the second half in the finance, sport, travel and entertainment sectors in the UK, Europe and internationally and has secured its first contract with a leading US bank.

· US

During the period, Monitise enhanced its platform technology capabilities designed to deliver the group's Bank Anywhere, Buy Anything and Pay Anyone products to US financial institutions. Leading clients working with Monitise in the Americas include one third of the top 50 banks in North America. The Group's growing business in the Americas has more than 12m registered direct users from a variety of customers including First Interstate Bank, American Savings Bank, Webster Bank, BMO Bank of Montreal, Fifth Third Bank, U.S. Bank, Frost Bank, UMB and First Citizens, among others.

Monitise delivers mobile services to financial institutions in the Americas via its industry-leading Vantage platform, which gives clients the option of having core mobile banking services run on premise and the ability to layer on payments and commerce solutions via the cloud from a growing network of premium content providers. The rollout of Vantage 5.1 during the first half involved the release of technology based on an innovative modular architecture. This was specifically designed to give financial institutions maximum flexibility in updating their mobile offerings in a cost effective way that supports rapidly-changing business needs - a hallmark of the intensely competitive US marketplace.

This innovation platform has been coupled with a roadmap that provides a rapid release capability designed to take advantage of new technological innovations that can help financial institutions retain and attract new customers, and grow market share.

U.S. Bank is currently working on a pilot with Monitise to directly connect consumers' offline and online shopping experiences via smartphones and tablets. The 'see it, click it, buy it' initiative is expected to launch in the coming months, and supports the growing notion that consumers are interested in shopping experiences and mobile commerce, and mobilising the process of product discovery is becoming more important than the actual payment.

During the period, Monitise also announced a partnership with CSCU that sees the Group's technology being offered to more than 2,600 credit unions across North America, and a deal with Desjardins, the largest financial cooperative in Canada, to develop NFC-enabled payment capabilities. 

With Visa Inc., Monitise is working on a number of initiatives to support its mobile strategies. These include functionality enhancements to the Visa DPS Mobile Card Management Services designed to enable Visa's bank partners to use Monitise's mobile technology in a cost and time-effective way. These enhancements will support iPhone and Android native apps, as well as deployment of mobile remote deposit capture services later this year. During the period, Monitise further enhanced the platform to support Canadian issuers looking to capitalise on the growing mobile opportunity in the prepaid market.

Monitise is also working on Visa PayWave, Visa's contactless payments application including development support for the Android Kitkat OS with the ability to support Host Card Emulation. Additionally, development work supporting the Visa V.me platform extends mobile wallet services for smartphones enabling commerce acceptance to mobile devices. In payments, Monitise advanced the development of a comprehensive mPOS white label solution that can be delivered as a branded app across multiple iOS and Android devices, a solution Visa plans to offer to select merchants later in the year.

Monitise is seeing strong demand from banks across the Americas to leverage the banking, payments and commerce capabilities of the Group with a strong pipeline of further services planned during the second half.

· India

On 22 July 2013, Movida, Monitise's mobile payments joint venture in India with Visa Inc., announced a deal with ICICI Bank, India's largest private sector bank, to deploy Movida's mobile payments service. The service will enable ICICI Bank payment card holders to pay bills, recharge prepaid airtime and buy cinema tickets from their mobile phone. Soon to be implemented by ICICI Bank for its payment card holders, the service is designed to operate across all mobile networks using any payment card - both Visa and non-Visa.

· Asia Pacific

Monitise operates in Asia Pacific from a regional base in Hong Kong.

Shortly before the end of the first half, Monitise launched a Chinese language version of its Mobile Money platform following the granting of regulatory approval by the Hong Kong Monetary Authority. 'Easy TopUp' offers a simple, secure and convenient real-time mobile service to top up PCCW-HKT pre-paid SIM cards with payment taken direct from their bank account, as opposed to purchasing vouchers from convenience stores. Bank of China (Hong Kong) is the first bank in Hong Kong to provide such service to its customers in cooperation with Joint Electronic Teller Service Limited (JETCO), the ATM network provider in Hong Kong. This was the first joint initiative to be launched following the signing of a Memorandum of Understanding with Bank of China (Hong Kong) in September 2012 and other banks among the 30 within the JETCO network are expected to follow.

During the period, additional features for the BBM Money service developed by AGIT Monitise in partnership with PermataBank for BlackBerry in Indonesia were rolled out. Updates included bill pay and cardless cash withdrawals. Since the service upgrade there has been ongoing growth in the use of value added services such as mobile phone top up and re-charging prepaid electricity accounts. 

On 21 October 2013, Monitise took full control of its Asia Pacific joint venture, Monitise Asia Pacific Limited, which was a 50:50 joint venture with First Eastern Mobile Investments Limited, a leading Hong Kong-based investment group controlled by Victor Chu.

With the live deployments in Indonesia and Hong Kong, the Group's focus is on driving usage and working closely with partners on exploring opportunities to expand the new services into other growth markets across the Asia Pacific region. 

· Board appointments

During the first half we further strengthened the Board of Directors with the appointments of Peter Ayliffe as Non-Executive Chairman and Steve Chambers and Victor Dahir as Non-Executive Directors.

Peter led Visa Europe as President and Chief Executive for seven and a half years and had served as a Non-Executive Director on the Board of Monitise since November 2011 before assuming his new duties on 1 October 2013, following his retirement from Visa Europe. He succeeded Duncan McIntyre, who stepped down as Chairman, but continues as a special advisor to the company.

Steve Chambers and Victor Dahir both joined the Group as Non-Executive Directors.

Outlook

· We continue to see increasing demand for our services and positive momentum across the Group and therefore see the need for continued investment as we look to maximise the growth opportunities for Monitise. We reiterate our full-year guidance.

· Expected revenue growth of approximately 50% in FY 2014.

· FY 2014 gross margin to be maintained above 70%.

· The Group sees multiple opportunities in all geographies both from direct sales channels and our growing partner network.

· A move to the London Stock Exchange's main market in calendar 2014 continues to be considered.

Alastair Lukies

Monitise Chief Executive Officer

Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2013

1. General Information

Monitise plc '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 address of the registered office is provided at the end of this document. Monitise plc and its subsidiaries are together referred to as 'the Group' throughout this financial information.

The condensed consolidated interim financial information was approved for issue by the Board on 18 February 2014.

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 2013 were approved by the Board on 4 September 2013 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 of the Companies Act 2006.

The condensed consolidated interim financial information is neither audited nor reviewed by the auditors and the results of operations for the six months ended 31 December 2013 are not necessarily indicative of the operating results for future operating periods.

2. Summary of Significant Accounting Policies

2.1. Basis of preparation

The condensed consolidated interim financial information has 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 Company's 2013 Annual Report and Accounts. The financial statements have been prepared under the historical cost convention. As permitted by AIM rules, the Group has not applied IAS 34 'Interim reporting' in preparing this interim report.

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 this financial information.

The comparatives for the six months ended 31 December 2012 have been updated to include revised acquisition accounting and final fair values of intangible assets, other balance sheet items and goodwill arising on the Monitise Americas Inc. and Mobile Money Network Limited acquisitions.

2.2. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2013, as described in those annual financial statements. The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2013, but are not currently relevant for the Group, or have had no material impact:

· IAS 19 'Employee benefits' (revised 2011)

· Amendment to IAS 12 'Income taxes'

· IFRS 13 'Fair value measurements'

· Annual improvements 2011

· IFRS 1 'First-time adoption of IFRS' (amendments 2012)

· IFRS 7 'Financial instruments: Disclosures' (amendments 2011)

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2013 and have not been early adopted:

Effective date (subject to EU endorsement)

· IFRS 10 'Consolidated financial statements' 1 January 2014

· IFRS 11 'Joint arrangements' 1 January 2014

· IFRS 12 'Disclosure of interests in other entities' 1 January 2014

· Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) 1 January 2014

· IFRIC 21 'Levies' 1 January 2014

· IAS 27 'Separate financial statements' (revised 2011) 1 January 2014

· IAS 28 'Investments in associates and joint ventures (revised 2011) 1 January 2014

· IAS 32 'Financial Instruments: Presentation' (amendments 2011) 1 January 2014

· IAS 36 'Impairment of assets' (amendments 2013) 1 January 2014

· IAS 39 'Financial instruments: Recognition and measurement (amendments 2013) 1 January 2014

· IFRS 9 'Financial instruments' 1 January 2015

· Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) 1 January 2014

· Annual improvements 2012 and 2013 1 July 2014

· Amendment to IAS 19 'Employee benefits' 1 July 2014

The Directors do not believe that the adoption of IFRS 11, 'Joint arrangements' will have a material impact on the presentation of the Group's results due to a change in accounting policy in 2011/12. The Group is currently assessing the impact on its results, financial position and cash flows of the other standards listed above.

The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed by the European Union and require adoption by the Group in future accounting periods.

3. Critical Accounting Estimates and Judgements

The preparation of the financial statements requires the Group to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Directors base their estimates on historical experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

In the process of applying the Group's accounting policies, management has made a number of judgements and estimations, which have been consistent with those set out in the Company's 2013 Annual Report and Accounts.

a) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services provided within the Group's ordinary activities, net of discounts and sales taxes. It comprises user generated revenues, product licences and development and integration services.

User generated revenue relates to revenue generated from all types of end-user activity and may take various forms including per user fees, click fees, commissions and revenue share, and includes associated managed services. This revenue is recognised as the services are performed.

Product licences are sales where the customer has the ability to exploit the licenced functionality upon delivery and include both certain term-based and perpetual licences. These licence revenues are recognised as a sale of a good once all of the below recognition criteria have been met:

· the Group has transferred to the buyer the significant risks and rewards of ownership of the licence;

· the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

· the amount of revenue can be measured reliably;

· it is probable that the economic benefits associated with the transaction will flow to the Group; and

· the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue relating to development and integration services contracted on a time and materials basis is recognised as the services are performed. Revenue relating to development and integration services identified as a service contract is recognised on a straight-line basis. Development and integration service revenue delivered under a fixed price contract is recognised on a percentage-of-completion basis, based on the extent of work completed as a percentage of overall estimated project cost, when the outcome of a contract can be estimated reliably. Determining whether a contract's outcome can be estimated reliably requires management to exercise judgement and estimates are continually reviewed as determined by events or circumstances. Provision is made as soon as a loss is foreseen.

Typically, a number of the above elements may be sold together as a bundled contract. Revenue is recognised separately for each component if it is considered to represent a separable good or service and a fair value can be reliably established. The Group may derive fair value for its services based on a reliable cost estimate plus an appropriate market-based margin. Where a product licence is included within a bundled arrangement, the residual value of the contract is ascribed to the product licence after a fair value has been allocated to all other components.

Amounts which meet the Group revenue recognition policy which have not yet been invoiced are accounted for as accrued income whereas amounts invoiced which have not met the Group's revenue recognition criteria are deferred and are accounted for as deferred income until such time as the revenue can be recognised. Management makes an assessment of the certainty of any accrued revenue amounts in determining how much revenue to recognise.

b) Share-based payments

Judgement and estimation is required in determining the fair value of shares at the date of award. The fair value is estimated using valuation techniques which take into account the awards' term, the risk-free interest rate and the expected volatility of the market price of the Company's shares.

c) Going concern

The Directors have prepared projections of the Group's anticipated future results based on their best estimate of likely future developments within the business and therefore believe that the assumption that the Group is a going concern is valid. The financial information has therefore been prepared on the 'going concern' basis.

d) Development costs

The Group has capitalised internally generated intangible assets as required in accordance with IAS 38. Management has assessed expected contribution to be generated from these assets and deemed that no adjustment is required to the carrying value of the assets. The recoverable amount of the assets has been determined based on value in use calculations which require the use of estimates and judgements. Management has also reviewed the assets for impairment and deemed that no impairment is required.

e) Provisional acquisition accounting and goodwill

Where the Group undertakes business combinations, the cost of acquisition is allocated to identifiable net assets and contingent liabilities acquired and assumed by reference to their estimated fair values at the time of acquisition. The remaining amount is recorded as goodwill. Identifiable net assets are valued using external valuation providers and involve an element of judgement related to projected results. Fair values that are stated as provisional are not finalised at the reporting date. Final fair values may be determined that are materially different from the provisional values stated.

f) Impairment of assets

IFRS requires management to undertake an annual test for impairment of indefinite lived assets, including goodwill, and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of growth and discount rates. Changing the assumptions selected by management could significantly affect the Group's impairment evaluation and hence results. The Group's review includes the key assumptions related to sensitivity in the cash flow projections.

g) Deferred tax

Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration given to the timing and level of future taxable income.

h) Provisions

Management uses judgement to estimate the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

i) Fair value estimation for financial instruments

The fair value of financial instruments that are not traded in an active market, for example over-the-counter derivatives and contingent consideration liabilities, is estimated using valuation techniques. Management uses judgement to select a variety of methods and make assumptions that are based on market conditions existing at the end of the reporting period as well as internal information regarding a variety of probable outcomes.

4. Segmental Information

Reportable segment

Monitise's operating segment is reported based on how the Group is structured and the financial information provided to the chief operating decision maker. The Board of Directors is the Group's chief operating decision maker. Management has determined the operating segment based on the information reviewed by the Board of Directors for the purposes of allocating resources and assessing performance.

Since the acquisition of Monitise Americas Inc. in June 2012, the Group has transitioned to operating as a single operating segment worldwide. The Monitise plc Board of Directors considers revenue, cost of sales, operating costs, exceptional costs and a measure of adjusted EBITDA of the Group as a whole when assessing the performance of the business and making decisions about the allocation of resources. In addition, the Board reviews revenue split by products and geographies to assist with the allocation of resources. Accordingly, the Group had one reportable operating segment for the six months ended 31 December 2013. The operating segment derives revenues from delivering mobile banking, payments and commerce networks worldwide. The results from continuing operations, in the format as provided to the Board, have not been reproduced and can be found in the Condensed Consolidated Statement of Comprehensive Income.

Entity-wide disclosures

Products and services are sales where the customer has the ability to exploit the licensed functionality upon delivery and include both certain term-based and perpetual licences.