Interim results

RNS Number : 4720T

Zamano PLC

29 September 2010

 

Press Release

29 September 2010

 

zamano PLC

("zamano" or "the Group")

Interim Results 

 

zamano PLC (AIM:ZMNO, IEX:ZAZ) announces its interim results for the 6 month period ended 30 June 2010.

 

Highlights:

 

·; Revenue of €8.75 million (H1 2009: €13.3 million) and gross margin of 32% (H1 2009: 32%)

·; EBITDA €0.95 million (H1 2009: €2.3 million)

·; H1 revenues and EBITDA in line with expectations

·; Adjusted EPS of 0.4 cents (H1 2009: 2.3 cents)

·; Gross debt reduced from €11.8 million to €5.7 million, with net debt at €1.4M

·; One off €6.5M charge against impairment of goodwill associated with 2007 acquisitions

·; Re-structuring programme completed in June 2010

·; Strong year on year revenue growth in US (24%) and Spanish (277%) markets

 

John O'Shea, CEO of zamano, commented: "the marketplace has continued to present challenges for the Group. We are transitioning the business accordingly and have completed a significant restructuring programme during H1. This has removed cost from the business, improved efficiencies and focused our attention on core competencies and markets in which scale has been achieved. Initial indications in Q3 are positive with stability achieved and new opportunities identified which may lead to growth in the next year."

 

Mike Watson, Chairman of zamano, added: "after a difficult first half, the Board is encouraged by signs of stability and opportunities for growth. At the same time, we are conscious of ongoing challenges within the business and realize that there are still some months of effort before a more defined and robust picture of the Company's long term prospects become clearer".

 

 

For further information, please contact:

 

zamano plc

John O'Shea, Chief Executive Officer

Tel: +353 1 488 5830

 

NCB Corporate Finance

Conor McCarthy / Shane Lawlor

Tel: +353 1 611 5100

 

Cenkos Securities

Jon Fitzpatrick

Tel: +44 (0) 20 7397 8900

Ken Fleming

Tel: +44 (0)131 200 6939

 

Media enquiries:

 

Edelman

Donnchadh O'Leary

Tel +353 1 678 9333/+353 87 2820436

www.edelman.com

 

 

CEO's Statement

 

zamano sells compelling entertainment and interactive services to mobile phone users. This is a very fast-moving market, driven by advances in handset technologies, cheaper bandwidth, changing regulations and richer service offerings. The Company has built up considerable levels of experience in the market, and has specialised competencies in 3 areas:

 

·; digital marketing - both on the mobile and traditional internet;

·; presentation and sign-up on mobile devices - recognising the handset from the many thousands of varieties, optimising the content offering, and signing users up for services in a manner which is completely compliant with regulatory guidelines; and

·; mobile billing.

 

zamano's future growth prospects are dependent on leveraging these key assets. To this effect, the Company is vigorously pursuing opportunities with third party owners of digital content, who wish to take advantage of improvements in digital marketing techniques and in delivery to mobile users. It is zamano's intention to develop these opportunities into new streams of revenues which are more sustainable and predictable.

 

By way of example, through a deal recently signed with Setanta Sport, zamano will shortly launch a service whereby Barclay's Premiership Goals will be delivered to mobile customers on all Irish networks with any handset-types, within 6 minutes of being scored. This highly interactive service will give fans the fastest access to goals scored by their teams, and will also provide round-ups of all other action in matches on the day. zamano has put in place a Cloud-based solution which can scale seamlessly to meet the parallel demands of many thousands of consumers. The technology has many re-sale opportunities which are being investigated by the sales teams.

 

 

Market Review

 

The market space in which the Group operates remains attractive, though very challenging. Mobile phone ownership, data usage and advertising volumes all continue to grow. There is a growing shift away from operator portals to applications and other brands' mobile web presences.

 

zamano is at the forefront of this movement in consumer mobile web usage, both in terms of how and where to advertise, and in the content delivered.

 

To ensure ease of access across all handset types, the Group is focusing on mobile web solutions. The approach involves recognizing the handset type and optimizing the content to take advantage of the features of the handset, and allows faster delivery of services and more flexibility in billing.  

 

Financial Review

 

As announced on the day of the Group's AGM on 22nd July 22, a re-structuring was implemented at the end of H1, which resulted in a considerable cost reduction, and a re-focusing of the business on core competencies and markets in which scale has been achieved.

 

A plan was put in place to stabilise the business by delivering revenues above the level achieved in June and to grow profitability over the course of H2 2010 and into 2011. Indications are that in Q3, the aim of stabilising the business has been achieved.

 

Details within the H1 results provide clear indications of the changing composition of the business. Revenue declines in B2B Ireland, making up 43% of the overall drop in revenues from H1 2009, were caused by partners abandoning traditional TV and print advertising channels. zamano's own Direct to Consumer (D2C) sales in Ireland in the period were only down 2%, as the business completed a successful migration to web and mobile channels. The UK witnessed further decline, driven by continued difficulty with the new PayForIt payment technologies.

 

On a positive note, revenues in the USA were up 24% on H1 2009, and Spain saw dramatic growth of 277%, driven by zamano's focus on mobile internet marketing.

 

In the light of the reduced scale of the business, an impairment charge of €6.5M was necessary, bringing the retained value of intangible assets on the balance sheet down to €13.5M

 

Notably and importantly, gross debt was reduced from €11.8M (30 June 2009) to €5.7M. Net debt of €1.4M on the 30 June was below Directors' expectations, but was impacted by the timings of some payments and receipts and, within 3 days of the start of July, net debt was at the expected level of €2.5M.

 

 

Outlook

 

The Board is pleased to report that the Company traded in line with plan in Q3, and that stability has been achieved.

 

With this foundation, and the emphasis of building on the rich experience and competencies within the team, the Group is well positioned to take advantage of the growth opportunities identified, making the Board cautiously optimistic about future prospects.

 

John O Shea

Chief Executive Officer

28 September 2010

 

zamano plc and subsidiaries

 

Unaudited condensed consolidated income statement

for the half-year ended 30 June 2010

 

		Half- year ended 30 June 2010	Half-year ended 30 June 2009
	Notes	€'000	€'000
Revenue	5	8,750	13,332
Cost of sales		(5,944)	(9,024)
Gross profit - continuing activities		2,806	4,308
Other administrative expenses	14	(2,028)	(2,082)
Depreciation		(65)	(74)
Amortisation of intangible assets		(231)	(1,203)
Impairment of goodwill	10	(6,499)	-
Total administrative expenses		(8,823)	(3,359)
Operating (loss)/profit	5	(6,017)	949
Finance income		53	37
Finance expense		(357)	(379)
(Loss)/profit before tax		(6,321)	607
Income tax (expense)/credit	6	(199)	15
(Loss)/profit for the period - all attributable to owners of the company		(6,520)	622
Earnings per share
- basic	7	(€0.068)	€0.008
- diluted	7	(€0.067)	€0.007

 

Unaudited condensed consolidated statement of comprehensive income

for the half-year ended 30 June 2010

 

	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	€'000	€'000
(Loss)/profit for the period - all attributable to owners of the company	(6,520)	622
Other comprehensive income:
Foreign currency translation adjustment	3	24
Total comprehensive (expense)/income - all attributable to owners of the company	(6,517)	646

 

Unaudited condensed consolidated balance sheet

at 30 June 2010

 

		30 June 2010	31 December 2009	30 June 2009
	Notes	€'000	€'000	€'000
Assets
Non-current assets
Property, plant and equipment	11	162	206	202
Intangible assets	10	13,280	19,762	20,549
Deferred tax asset		69	69	55
		13,511	20,037	20,806
Current assets
Trade and other receivables		2,493	3,446	4,749
Income tax recoverable		192	270	10
Cash and cash equivalents		4,430	6,958	5,957
		7,115	10,674	10,716
Total assets		20,626	30,711	31,522
Equity
Share capital		95	95	81
Share premium		13,442	13,442	11,156
Capital conversion reserve		1	1	1
Foreign currency translation reserve		(61)	(64)	(56)
Share-based payment reserve		597	576	499
Retained earnings		(4,432)	2,085	1,653
Total equity		9,642	16,135	13,334
Liabilities
Non-current liabilities
Loans and borrowings		4,433	7,478	8,690
Deferred tax liability		-	-	133
		4,433	7,478	8,823
Current liabilities
Trade and other payables		3,976	4,041	4,894
Business combination accrual	15	1,312	1,328	1,343
Loans and borrowings		1,263	1,729	3,076
Income tax payable		-	-	52
		6,551	7,098	9,365
Total liabilities		10,984	14,576	18,188
Total equity and liabilities		20,626	30,711	31,522

 

Unaudited condensed consolidated cash flow statement

for the half-year ended 30 June 2010

 

	30 June 2010	30 June 2009
	€'000	€'000
Cash flows from operating activities
(Loss)/profit before tax	(6,321)	607
Adjustments to reconcile profit for the period to net cash inflow from operating activities
Depreciation	65	74
Amortisation of intangible assets	231	1,203
Impairment of goodwill	6,499	-
Share-based payments expense	21	75
Foreign exchange	3	24
Decrease in trade and other receivables	953	1,193
Decrease in trade and other payables	(63)	(1,449)
Finance income	(53)	(37)
Finance expense	357	379
Cash generated from operations	1,692	2,069
Interest paid	(25)	(10)
Income tax	(119)	-
Net cash inflow from operating activities	1,548	2,059
Cash flows from investing activities
Payment of deferred consideration on acquisition of subsidiaries	(16)	-
Purchase of property, plant and equipment	(21)	(14)
Purchase of intangible assets	(248)	(353)
Interest received	53	37
Net cash outflow from investing activities	(232)	(330)
Cash flows from financing activities
Repayment of debt	(3,844)	(1,516)
Net cash outflow from financing activities	(3,844)	(1,516)
Net (decrease)/increase in cash and cash equivalents	(2,528)	213
Cash and cash equivalents at 1 January	6,958	5,744
Cash and cash equivalents at 30 June	4,430	5,957

 

 

Notes to the half-yearly condensed consolidated financial statements (unaudited)  

 

1 Reporting entity

 

zamano plc is a limited company incorporated and domiciled in Ireland whose shares are publicly traded on the Alternative Investment Market (AIM) in London and the Enterprise Securities Market (ESM) in Dublin.

 

The half-yearly condensed consolidated financial statements of zamano plc as at and for the six months ended 30 June 2010 consist of the results and financial position of the company and its subsidiaries together referred to as "the Group." The principal activities of the Group are the provision of mobile data services and technology.

 

2 Statement of compliance

These half-yearly condensed consolidated financial statements (the "half-yearly financial statements") have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 "Interim Financial Reporting", as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published financial statements of the Group. The comparative figures included for the year ended 31 December 2009 do not constitute statutory financial statements of the Group within the meaning of the European Communities (Companies: Group Accounts) Regulations 1992. The consolidated financial statements for the year ended 31 December 2009 are available at www.zamano.com. The auditor's report on those financial statements was unqualified.

These condensed consolidated financial statements were approved by the Board on 23 September 2010 and are available at www.zamano.com.

 

3 Significant accounting policies - basis of preparation

 

These half-yearly condensed consolidated financial statements have been prepared in accordance with the accounting policies set out in the Group's 31 December 2009 published consolidated financial statements, which were prepared in accordance with IFRS as adopted by the EU.

 

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010:

 

- Improvements to IFRSs (issued April 2009)

- IFRS 3 (Revised), "Business Combinations"

- IAS 27 (Revised), "Consolidated and Separate Financial Statements"

- IFRIC 17, "Distribution of Non-Cash Assets to Owners"

- Amendments to IAS 39, "Financial Instruments: Recognition and Measurement: Eligible Hedged Items" (effective for annual periods beginning or after 1 July 2009), and

- Amendments to IFRS 2: Group Cash-Settled Share-Based Payment Transactions, effective 1 January 2010.

The adoption of these amendments to standards and interpretations did not materially impact on our financial position or results from operations.

We have considered all EU endorsed IFRS standards, amendments to these standards and IFRIC interpretations that have been issued, but which are not yet effective and these have not been early adopted in these financial statements. These future requirements are as follows:

 

- IFRIC 19: "Extinguishing Financial Liabilities with Equity Instruments", effective on 1 July 2010;

- Revised IAS 24: "Related Party Disclosures", effective on 1 January 2011;

- Amendment to IFRIC 14: "Prepayments of a Minimum Funding Requirement", effective on 1 January 2011;

- Amendment to IAS 32: "Financial Instruments: Presentation: Classification of Rights Issues", effective on 1 February 2010.

 

The above new or revised standards and interpretations will be adopted in future financial statements, if applicable. The Group does not anticipate that the adoption of these new or revised standards and interpretations will have a material impact on the Group's overall results from operations or financial position.

 

4 Estimates

 

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting polices and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these half-yearly condensed consolidated financial statements, the significant judgements made by management and the key sources of estimation uncertainty were the same as disclosed in note 4 to the most recently published annual consolidated financial statements. The most subjective judgement relating to these interim financial statements relates to the valuation of goodwill on a previous business combination. Details related to our key assumptions in this regard are set out in note 10.

 

5 Segment information

 

 The Group has two reportable segments which are defined as follows: the Group facilitates communication and interaction between companies and consumers on mobile phones through a range of value-added mobile applications (B2B). The Group also develops, promotes and distributes mobile content and interactive services directly to consumers (D2C).

 

Information regarding the results of each reportable segment is included below. Performance is measured based on segment results as included in the reports that are reviewed by the Group's Chief Operating Decision Maker (or 'CODM')

 

The Group's operations are not significantly impacted by seasonal fluctuations.

 

Half-year ended 30 June 2010	B2B	D2C	Total
	€'000	€'000	€'000
Revenue from external customers
Ireland	1,649	2,659	4,308
UK	421	1,119	1,540
USA	-	2,304	2,304
Australia	-	113	113
Spain	-	415	415
South Africa	-	70	70
Total revenue	2,070	6,680	8,750
Segment profit before goodwill impairment	96	1,759	1,855
Impairment of goodwill	-	(6,499)	(6,499)
Segment results	96	(4,740)	(4,644)
Unallocated expenses			(1,373)
Operating loss			(6,017)
Net finance expense			(304)
Loss before tax			(6,321)
Income tax			(199)
Loss for the period			(6,520)
Half-year ended 30 June 2010	B2B	D2C	Total
	€'000	€'000	€'000
Revenue
Ireland	3,969	2,731	6,700
UK	917	3,068	3,985
USA	-	1,859	1,859
Australia	-	678	678
Spain	-	110	110
Total revenue	4,886	8,446	13,332
Segment profit	986	2,361	3,347
Unallocated expenses			(2,398)
Operating profit			949
Net finance expense			(342)
Profit before tax			607
Income tax expense			15
Profit for the period			622

 

 

6 Income tax (credit)/ expense

 

The major components of the income tax (credit)/expense in the half-yearly condensed consolidated income statement are:

 

	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	€'000	€'000
Current tax
Irish corporation tax	118	153
Foreign tax	2	2
Under/(Over) provision in prior year	79	(20)
	199	135
Deferred tax
Movement in deferred tax amounts for the period	-	(150)
Income tax (credit)/expense	199	(15)

 

 

7 Earnings per share

 

Basic earnings per share amounts are calculated by dividing net profit for the half-year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

 

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

 

The following reflects the income and share data used in the basic and diluted earnings per share computations:

 

	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	€'000	€'000
Basic EPS	(0.068)	0.008
Diluted EPS	(0.067)	0.007
	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	€'000	€'000
Net (loss)/profit attributable to equity holders of the company	(6,520)	622
	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	000's	000's
Basic weighted average number of shares	95,854	81,930
Dilutive potential ordinary shares:
Employee share options	1,862	2,398
Diluted weighted average number of shares	97,716	84,328

8 Adjusted earnings per share

The following reflects earnings per share based on adjusted net income:

 

	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	€	€
Adjusted basic EPS	0.004	0.023
Adjusted diluted EPS	0.004	0.023
Adjusted net income is calculated as:	Half- year ended 30 June 2010	Half-year ended 30 June 2009
	€'000	€'000
(Loss)/profit after tax	(6,520)	622
Share-based payments expense	24	75
Impairment of goodwill	6,499	-
Amortisation of intangible assets	231	1,203
Redundancy costs	142	-
	376	1,900

 

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