Interim Results

25 September 2018

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain

Mi-Pay Group plc

('Mi-Pay', the 'Group', or the 'Company')

Interim Results

Mi-Pay (AIM: MPAY), a leading provider of digital transformation, mobile payment and payment fraud management solutions to Tier 1 Mobile Network Operators, Mobile Virtual Network Operators and digital content providers, is pleased to present its unaudited Interim Results for the six months ended 30 June 2018.

Operational Highlights

· Successfully integrated into our largest client's new infrastructure following our contract extension in 2017. This is expected to drive stronger payment transaction growth in H2 2018.

· Direct fraud management service developed and extended with our new European client.

· Continued to deliver operational excellence with high payment success rates and low fraud levels.

· Renewed 5 year lease for core transaction processing infrastructure, commencing in July 2018 and new 3 year terms for our global PCI accredited data centre infrastructure commencing in August 2018. The Board expect this to reduce annual costs by £0.2 million from August 2018 whilst delivering enhanced business continuity, security and scalability.

· Successfully delivered annual PCI DSS level 1 accreditation for 2018/2019.

· March 2018 restructure and placing, improving financial position and performance. Michael Dickerson assumed the role of Executive Chairman, John Beale to Chief Executive Officer and Seamus Keating to continue as an independent Non-Executive Director. John Beale will continue his duties as Chief Financial Officer in the interim until a suitable successor is appointed.

Financial Highlights

• The total value of payment transactions processed in the period increased by 11% to £50.2 million versus H1 2017. As at 31 August 2018, the Group was processing over £112 million payment transactions on an annualised basis.

• Indemnified an additional £17.8 million of payments for fraud during the period as a new product stream. (H1 2017: Nil). This delivered new revenues of £0.1 million for the 6 month period to 30 June 2018.

• Total revenue recognised in the period £1.6 million (H1 2017: £1.5 million).

• Total Gross margin remained strong at of 62% (H1 2017: 63%) despite the reduction in average revenue per transaction due to new pricing with our largest client. Total Gross profit remained flat at £1.0 million versus the same period in 2017.

• £0.2 million reduction in administrative expenses to £1.1 million (H1 2017: £1.3 million) during the period following the Board restructure in February 2018 which will continue (£0.1 million) and reduced expenditure on non-recurring exceptional items (£0.1 million).

• Operating loss of £0.1 million for the period (H1 2017: £0.3 million).

• Net assets increased from £nil at 31 December 2017 to £0.4 million as at 30 June 2018 following the Board restructure, conversion of previously deferred salary to ordinary shares and investment in March 2018 (£0.5 million), partly offset by losses in the period.

• Cash & cash equivalents as at 30 June 2018 increased to £3.1 million from £2.9 million at 31 December 2017 as payment transaction volumes grew.

• Operational cash outflow for the period of £0.3 million was offset post period end by the receipt of £0.3 million in August 2018 for annual research and development tax credits.

• Basic and diluted loss per share 0.3 pence (H1 2017: 0.8 pence loss per share).

Michael Dickerson, Chairman of Mi-Pay Group plc commented:

"The Board is pleased with the performance in 2018 to date and broadly in line with expectations. Real progress has been made in underpinning our move to profitability with growth within our existing customers and new fraud management services, supported by strong operational performance and further cost reductions during the period. This has delivered a material reduction in losses for the period in line with our expectations. With further revenue growth delivered from our largest client and contracted cost savings from August 2018, we seek to move towards profitability in H2 2018, underpinned by our improved financial position and stability.

Our digital payment, fraud and security solutions, expertise and commercial flexibilities are increasingly relevant in our market and we are becoming more important to our clients as their customers naturally move to digital channels. Crucially, whilst demonstrating an ability to deliver major client deliverables in our Mobile Operator market we have now demonstrated an ability to break out from this vertical market to wider geographical, digital content fraud services markets."

For further information, please contact:

Mi-Pay Group plc IFC Advisory Allenby Capital Limited

Tel: +44 207 112 2129 Tel: +44 20 3053 8671 Tel: +44 203 328 5656

Michael Dickerson, Chairman Graham Herring James Reeve

John Beale, CEO Tim Metcalfe Asha Chotai

Heather Armstrong

Chief Executive Officer's review

H1 2018 Operational Review

Trading

During the period we have delivered continued growth as our clients' customers naturally migrate to the digital platforms we provide, extended our services to include direct fraud management whilst improving and securing both the operations and platform stability, financial stability and reduced the overall cost base of the Group.

We delivered further growth in our processed payment transactions during the period to £50.2 million (H1 2017: £45.4 million) primarily driven from existing clients. Our core focus was to integrate into our largest client's new infrastructure which is expected to drive incremental growth in H2 2018, as we on-board its recently acquired customer base. Despite delays which have impacted our short term performance, this was successfully delivered in August 2018 and we now process an annualised £112 million per annum across all of our clients (2017: £94 million). In addition, we are pleased to have successfully indemnified from payment fraud, £17.8 million payment transactions in Western Europe, primarily for digital content which has enabled us to deliver further value from our in house fraud management solution and bring new diversified revenue streams on-line. We will continue to invest in these clients and expect to drive increased profitability and growth over the coming periods.

Our total revenue increased to £1.6 million (H1 2017: £1.5 million) with the growth primarily due to the new managed fraud service and we expect to see increased levels of growth in H2 2018 from our largest client's new customers. Growth in our Transaction Services revenues remained flat as the extra volumes processed were offset by the new commercial terms, reducing revenue per transaction with our largest client, which we expect to drive increased benefit over the longer term. We also remain less reliant on our one-time Professional Services revenues which remained flat versus H1 2017 at £0.2 million. This revenue stream is underpinned by our secure card vault solution that collects and processes all the payment transaction for a major UK Mobile Network Operator, securely transferring over £264 million of payments in the period (H1 2017: £259 million). We have also commenced discussions with another of the Group's main customers with regards to the continuation and growth of the Company's existing relationship with them.

Across our wider client base, we see increased customer adoption of our digital payment solutions and need for high level security and data protection, an area in which we continue to invest. Our delivery of relevant digital payment methods, such as PayPal and Amazon Payments, in addition to traditional card processing continues to grow. In H2 2018, we also expect to add Apple Pay and other alternative payment solutions across Europe to enhance our offering. Over the medium term we see direct banking payment solutions as real opportunities to expand our payment offerings and will invest in these areas with our connected partners.

In 2018, we have continued to see an increased focus in data security and compliance. We have ensured we remain PCI level 1 and GDPR compliant, supported by the investment in a Data Protection Officer to oversee this transition in the longer term. We see the security of our clients' data as a key objective. Our ability to work securely with this data and provide relevant business intelligence and customer relationship management solutions is a crucial part of our development to remain strategically important to our clients. We will continue to invest more in this area in the coming periods.

Aligned to our focus on data security, we have continued to deliver excellent value to our clients with respect to payment fraud management via our in-house solution. Total fraud as a percentage of transaction value processed reduced to 0.04% (H1 2017: 0.06%), whilst delivering strong payment success rates of 88% (H1 2017: 89%). These elements deliver stable gross margin but more importantly increase customer satisfaction. The additional delivery of indemnified fraud management direct to an external client has driven increased volumes, revenue and enhanced our knowledge in this market including a wider data set for us to better understand and manage payment fraud risks across Europe. This remains a key investment focus both as a commercial product offering and intellectual property as we move to more automated machine learning capabilities. We target to deliver longer term margin growth from this new revenue stream outside our traditional mobile operator client base.

The growth of our solution in Asia remains slow, however we continue to work with our contracted client in the region to drive growth via new payment methods and wider country expansion.

Infrastructure stability and consolidation

As part of our continued investment in stability and business continuity we agreed new terms with our existing transaction processing software provider for a further 5 year lease on terms similar to prior periods with no upfront investment. This commenced on July 1st 2018. In addition we also renewed terms with our existing PCI accredited infrastructure managed services partner for a further 3 years from August 1st 2018 and expect this to deliver enhanced scalability and business continuity solutions whilst delivering £0.2 million of further annual cost savings. Both of these solutions ensure we have reduced our operational risks, enhanced client stability and limited capital investment requirements whilst delivering a more efficient and more stable platform for us to build from.

Financial Review

¹Adjusted Net cash flow from operating activities excludes cash flows from the management of client payments, exceptional items and £273,750 payments made to Directors for settlement of deferred salaries, subsequently fully reinvested as Ordinary share capital on 1 March 2018

²Adjusted Cash flow from financing excludes £273,750 cash inflow from the settlement of deferred salaries, subsequently fully reinvested as Ordinary share capital on 1 March 2018

Our strong performance in transaction volume growth and new fraud management services drove revenues up by £0.1m with our gross profits remaining at £1.0 million for the period as the reduced pricing with our largest client offset the volume growth. However, we believe this approach will deliver longer-term benefits to the Group as our volumes grow, driven primarily by the new contract with our largest client entered into in 2017. Our overall margins remain strong and stable.

Our Administrative expenses reduced by £0.2 million for the period versus H1 2017. The Board restructure in March 2018 delivered a reduction of £0.1 million and a further £0.1 million saving due to reduced expenditure on exceptional items related to merger and acquisition investments in H1 2017. This led to an improved operating loss of £0.1 million for the period (H1 2017: £0.3 million) in line with our expectations. We expect these improvements to both continue and increase for the full year as we deliver further cost reductions through our new infrastructure partner contracts from August 2018.

In our balance sheet, our total capital and reserves grew from £nil as at 31st December 2017 to £0.4 million as at 30 June 2018, primary due to the placing in March 2018 which increased our share capital by £0.5 million as new shares were issued, increasing both our cash balances (£0.2 million) and converting previously accrued deferred Director salaries (£0.3 million). This was offset by our losses for the period of £0.1 million. £0.6 million of previously charged share based payments was credited to the retained deficit reserve from Share options reserve as previously issued share options were cancelled and re-issued. This has no impact on the Consolidated Statement of Comprehensive income for the period.

The Group ended the period with £3.1 million in cash and cash equivalents (£2.9 million at 31 December 2017), noting that of this balance, £2.6 million related to the management of client payments (£2.3 million as at 31 December 2017). Excluding the client related cash movements cash outflow was £0.1 million in the period:

· £0.3 million outflow due to operational expenditure, capital investment and lease payments.

· £0.2 million net inflow the new shares issued in March 2018.

This outflow was subsequently offset by a receipt of £0.3 million for research and development tax credits in received in August 2018, related our 2017 claim. This increased our operating cash position.

Brexit

We continue to review the risks associated with Brexit. 39% of our revenue during the period was related to clients based in Europe, primarily in Ireland for payment services (27%) and our Fraud services reside in Holland (9%). We see these two regions as our largest risks. Our solutions are primarily local domestic payment solutions, delivered on behalf of local entities for their local customers and we believe this reduces our risk. For our Irish client, our services are directly supported by an Irish registered payment institution which will enable us to transact locally via a local entity should this be required. We process successfully using this methodology today in Asia pacific. Our fraud service, as a pure software based solution and not involving the processing of cash, can also be managed and processed locally if required. Whilst some incremental costs and administration effort would be involved we do not believe this will be material. For our resources, where the majority of our support teams are based in Europe, this operates as a stand-alone trading entity, abiding by all local laws, taxes and compliance. We expect this to have minimal impact. Crucially, we are committed to continue to comply with the most rigorous data protection regulation and will as such retain full compliance with the European Union 'General Data Protection Regulation' regime and will retain our global PCI data security standard.

Employees

We recognise that the performance achieved in this period would not have been possible without the support and continued dedication of our staff. They continue to support our delivery model and enhance our solutions to our clients, support the strong transaction growth and develop and deliver improved, secure technologies. They are our most valuable resource and we would like to thank them for their efforts and stability they give to the Group. We encourage a strong, innovative culture and our resources in the United Kingdom and Romania offer a highly skilled, experienced and stable delivery structure with a proven capacity to scale efficiently as we grow. In H2 2018 will look to invest further in our security, fraud and business intelligence solutions, product delivery and commercial resources with their support.

Outlook

Mi-Pay has significantly reduced its trading losses and improved its financial stability during the period. We have continued to drive growth in our core business with our existing clients whilst adding new services outside of our traditional market, opening up new opportunities in new geographies and vertical markets. Despite delays, which have impacted short term revenue outlook, we expect to deliver an increased gross profit for H2. This will be achieved by the delivery of increased customer transactions, as we deliver the new connectivity to our largest client and continue to improve the growth and profitability of our managed fraud solution. This will also be supported by the improved efficiencies in our cost base in H1 2018 with an expected further reduction in H2 2018 as we deliver the new infrastructure commercial terms. When combined, we expect these to drive us to a position of run rate profitability, all underpinned by our naturally growing annuity based volumes as consumers migrate to our digital channels away from traditional retail solutions.

The reduced deferred salary liability, new investment in ordinary shares and receipt of £0.3 million of research and development tax credits in August 2018 enables us to continue to invest in our people and solutions, without a need for material capital investments. In H2 2018, we will focus on our fraud management capabilities, data security solutions and enhancing the stability and scalability of our global infrastructure looking to invest more in our delivery and commercial capabilities. Underpinning this, we will continue to deliver wider customer interaction solutions such as secure call centre payments and payments over voice services, latest e-commerce digital payment options and focus on enhancing the use of our existing data to deliver enhanced business intelligence. We believe these areas will increase our strategic importance to our clients.

The Board remains confident that our total market opportunity continues to increase as the digital payments market expands globally and our solutions become increasingly relevant to a wider set of customers, geographies and vertical markets. Our growing relationship with all of our clients and our broader solutions keeps us in a strong position to take advantage of this consumer trend.

John Beale Michael Dickerson

CEO Chairman

Consolidated Statement of Comprehensive Income

For the period of six months ended 30 June 2018

Consolidated Statement of Financial Position

As at 30 June 2018

John Nicholas Beale

Chief Executive Officer

Consolidated Statement of Cash Flows

For the period of six months ended 30 June 2018

Consolidated Statement of Changes in Equity

For the period of six months ended 30 June 2018

Consolidated Statement of Changes in Equity

For the period of six months ended 30 June 2017

Consolidated Statement of Changes in Equity

For the year ended 31 December 2017

Notes to the Financial Information

1 Basis of preparation

The unaudited consolidated half-yearly financial information in this report has been prepared on the basis of the accounting policies expected to apply for the financial year to 31 December 2018 and in accordance with recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union. The accounting policies applied in the preparation of this half-yearly financial information are consistent with those used in the financial statements for the year ended 31 December 2017 excluding those related to IFRS 9 (Financial Instruments) which introduces a new approach to how financial assets and liabilities are classified and an expected loss impairment model and IFRS 15 (Revenue from Contracts with Customers). Neither of the changes have materially affected the accounts for the period. This interim report has not been reviewed by the Group's auditors, and does not constitute statutory accounts within the meaning of the Companies Act 2006. The financial information for the six months ended 30 June 2017 and 30 June 2016 is not audited.

The financial information contained in this document does not include all of the information required for full annual financial statements and do not comply with all of the disclosures in IAS34 'Interim Financial Reporting'. Accordingly, whilst this financial information has been prepared in accordance with IFRS they cannot be construed as being in full compliance with IFRS.

The financial information for the year ended 31 December 2017 does not constitute the full statutory accounts for that period. The Annual Report and Accounts for 31 December 2017 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Accounts for 2017 was unqualified and did not include references to any matters which the auditors drew attention to by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

2 Segmental analysis

The chief operating decision maker has been identified as the Chief Executive Officer (CEO) of the Group. The chief operating decision maker is responsible for regularly assessing the performance of the Group's operating segments and performing the function of allocating resources. To assist the chief operating decision maker in this process, internally generated reporting is prepared for each operating segment.

The Group has two operating segments that it reports on. These operating segments are:

· Transaction Services Revenues: This segment generates revenue from the processing of transactions on behalf of clients and is Mi-Pay Group plc's core business.

· Professional Services Revenues: This segment generates revenue from the development, delivery and hosting of our platform and client solutions.

The CEO assesses the performance of the operating segments based on revenue and gross profit. The CEO uses these measures to assess performance because they are quick to analyse and directly relevant to evaluating the results of each segment. ¹

Both segments are continuing operations and results are as follows:

Operating Segments

¹ There is no inter segment trading and assets and liabilities are not allocated to segments.

3 Exceptional items

The exceptional item recognised in the six-month period to 30 June 2017 and 12 month period to 31 December 2017 reflects costs that, in the opinion of the board of directors, are non-recurring as they relate to professional fees incurred on continued review of merger and acquisition opportunities.

4. Operating Loss

This is arrived at after charging / (crediting)

5 Staff costs

In the 12 month period to 31 December 2017 Wages and salaries included £157,500 accrued bonus in recognition for a reduction in salary. This was unpaid as at 31 December 2017 and was subsequently converted into Ordinary Shares, along with £42,500 of previously deferred salary on 1 March 2018. This was partly offset by the release of £108,333 of deferred salary previously accrued in relation to Seamus Keating which was forgone as at 31 December 2017

6 Loss per share

The numerators shown above represent the total loss from continuing operations for the period or year.

Since the Group was in a loss making position for all three periods presented, there was no difference between the weighted average number of shares used to calculate basic and diluted net loss per share.

7 Trade and other receivables

8 Trade and other payables

9 Share capital and premium

On 1 March 2018 Mi-Pay placed 4,141,048 new ordinary shares of 10p nominal value each ('Placing Shares') at a placing price of 12.5p per share (the "Placing Price") (the 'Placing').

The Placing delivered:

1. Gross proceeds (before expenses) totalling £260,000, comprising of a £150,000 strategic investment by Huub Sparnaay (via his investment company No Blue Potato B.V), a £50,000 investment by Michael Dickerson and £60,000 investment by Helium Special Situations Fund Limited.

2. The conversion to Placing Shares of £257,631 deferred salaries previously accrued that had not been paid to Directors of Mi-Pay, which has the beneficial effect of reducing Mi-Pay's liabilities. This included £200,000 of previously accrued emoluments due to Michael Dickerson, £25,131 due to Allen Atwell and £32,000 due to Albion Capital.

The Placing Shares rank pari passu with the Group's existing ordinary shares of 10 pence each. The Placing Shares were admitted to trading on AIM on 6 March 2018.

Use of proceeds

The new cash of £260,000 will be invested in the Group's fraud management platform and used for general working capital, including to support (following a successful trial) a new long-term fraud services relationship with Alphacomm B.V.

Total voting rights

Following the issue of the Placing Shares, the number of Ordinary Shares in the Group in issue increases to 45,734,277. There are no ordinary shares held in treasury. Therefore, in accordance with the FCA's Disclosure and Transparency Rule 5.6.1, the Group confirms that following Admission, the total number of voting rights in the Group is 45,734,277.

10 Share Based Payment

The Group operates two equity-settled share-based remuneration (share options) schemes for employees: a United Kingdom tax authority approved EMI share options scheme and an unapproved share option scheme. The granting of options to employees in 2014 and 2018 was decided upon by the Group and no legal or constructive obligation exists to grant further options in future years.

On 28 February 2018, the Group issued options over a total of 3,750,000 Ordinary Shares (under the terms of the Group's existing share option scheme), with an exercise price of 13 pence per share. Existing share options over 3,763,425 Ordinary Shares with an exercise price of 41 pence have been cancelled, or forgone. As a result of cancellation of previously issued share options, the £624,729 of share option reserve as at 31 December 2017 was transferred to retained deficit during the period with no impact on the Consolidated Statement of Comprehensive Income for the six month period to 30 June 2018. No charge has been made to the Consolidate Statement of Comprehensive Income for the new issue during the period to 30 June 2018.

The vesting condition for employees awarded share options is to deliver 3 consecutive months of positive Earnings before Interest and Tax and that the individual remains an employee of the Group over the vesting period. The contractual life of the options is ten years and there are no cash settlement alternatives.

The movement in the number of share options in the 6 month period to 30 June 2018 is set out below.