8th Feb 2008 07:00
Monitise PLC08 February 2008 Friday 8th February 2008 Monitise plc Interim results for the six months to 31 December 2007 Monitise plc ("Monitise"; LSE: MONI.L), the mobile banking & payments technologyspecialist, announces its unaudited interim results for the period ended 31December 2007. Highlights • Continued progress in the UK • Strong interest from HSBC, first direct and Alliance & Leicester for both existing and new MONILINK services • Royal Bank of Scotland, NatWest & Ulster Banks live from November 2007 and significant customer acquisition expected in the second half • Commencing integration with another Tier One bank which will bring aggregate market coverage of bank current accounts to 53% • Momentum ahead of expectations in the US • Service live within six months of signing JV with Metavante Corporation • 20 banks already contracted to the Monitise Americas platform • Software licence agreement secured with Monitise Americas • International roll-out now focused on the joint venture model • Rapid progress in US validates the JV model for further overseas expansion • Strong progress being made in Germany, Africa and Australia • Strategic partnerships delivering results • Visa Europe and Monitise developing multiple services and innovations for Visa's 348 million cards. First commercial service announced as Visa Shopping Voucher • Tuxedo Money Solutions to launch mobile management for pre-pay card services in the second half powered by Monitise's technology • Over 110,000 consumer registrations to date • Further product enhancements announced • Market leading product set including SMS alerts, international remittances and Near Field Communications (NFC) payments platform • Confident of continued strong progress • Excellent market position • Investment phase continues in line with plans • Revenue stream at an early stage with take-up rates improving • Global mobile banking & payments market momentum building rapidly • Strong interest from global partners in a growing number of other international territories Alastair Lukies, CEO, commented: "The appetite for mobile banking & payments services is continuing to grow andMonitise has exposure to all five of the major global opportunities in thatmarket: mobile banking; mobile payments; pre-paid cards; identity services andNFC. Payments technology, especially NFC services, the burgeoning internationalremittances market and the growth of pre-pay accounts is driving increasedactivity and investment in the market. Having established our core platform asa showcase for the growth of mobile banking services, we continue to invest inexpanding our suite of products to meet the demands of banks, mobile operatorsand consumers as they evolve. "The strong interest shown in our new services makes us confident that we areallocating investment in the appropriate areas and we expect steady revenuegrowth from this over the coming months." Duncan McIntyre, Chairman added: "We continue to make very positive progress in the UK mobile banking & paymentsmarket and the significant progress in the US demonstrates the success of thejoint venture model in developing new geographies. We have undertaken researchinto which new geographic markets should be a focus for joint ventureinitiatives and have already made good headway in identifying suitable jointventure partners. "We are building a new banking & payments channel and, four years into thisjourney, we are pleased with progress to date and remain confident of our futureprospects." Contacts: Monitise Group Tel: 020 7868 5200Duncan McIntyre, ChairmanAlastair Lukies, CEOBen Evetts, Head of Communications Financial Dynamics Tel: 020 7831 3113Harriet KeenHaya ChelhotErwan Gouraud About Monitise plc Monitise plc (MONI.L) is a specialist in mobile banking & payments technology.It has developed the world's first mobile banking ecosystems, which allowcustomers of multiple banks and mobile operators to perform banking and paymenttransactions directly from their mobile handset. With live services in the UK and the USA, where it has delivered the MONILINKand Monitise networks in partnership with VocaLink and Metavante Corporationrespectively, the Company is currently working with international partners todeliver similar safe, secure mobile banking & payment services in territoriesworldwide. Current key partners include VocaLink Interchange Network, Metavante,Visa Europe, BT Global Services, T-Systems, HSBC, first direct, Alliance &Leicester, Royal Bank of Scotland, NatWest, Vodafone, Orange, O2, T-Mobile andHutchison 3G. Monitise was recognised as a 'Technology Pioneer' by the World Economic Forum in2006; 'Mobile Innovation of the Year' by The Banker Magazine in 2007 and awardedthe Innovation in Messaging Award 2007 by the Mobile Messaging Association.www.monitisegroup.com Operational Review Monitise has continued to make good progress in its first six months as a listedcompany. The Company remains in an investment phase, and these interim resultsare consistent with the Board's expectations, reporting a loss before tax of£7.0 million (six months ended 31 December 2006: £3.3 million) and a turnover of£0.4 million (six months ended 31 December 2006: £0.4 million). We are already a leading player in the UK mobile banking & payments market andhave made significant progress in the US during the period, which will helpshape the further roll-out of the business overseas. At the same time, we havekept pace with the rapidly developing trends in the market, introducing newproducts and services and further developing our operations and excellentcompetitive position. UK Operations The MONILINK joint venture with VocaLink has made good progress. We have consolidated our position in the United Kingdom as the 'industryplatform' for mobile banking & payments through our MONILINK joint venture.Alliance & Leicester, first direct and HSBC have continued to add consumers tothe service and The Royal Bank of Scotland Group (Royal Bank of Scotland,NatWest and Ulster Bank) is now fully integrated into the MONILINK platform andbegan offering services to its consumers in November 2007. We are seeing strong interest from consumers for the service, especially thoseof the Royal Bank of Scotland Group, and expect its pipeline of mobile bankingconsumers to grow significantly during the second half due to its major plannedmarketing activity. There is also strong interest from financial institutions inthe 2008 product set which we announced in September 2007, including SMS triggeralerts and additional payments services. We expect a number of banks to offerthese new services to their customers during the second half. We are also pleased to report that another Tier One bank is currentlyintegrating our service and will begin offering MONILINK services to itscustomers later this year. This will increase our overall current accountcoverage in the UK from 37% to 53%, further cementing our market-leadingposition. US Operations Monitise Americas is making excellent progress. Our US joint venture with theMetavante Corporation was able to offer services to customers just six monthsafter signing, reflecting the robust and scalable nature of our technologyplatform. Monitise Americas has benefited from its inclusion in the coreservice set of Metavante Corporation and the NYCE (New York Cash Exchange)Payments Network, marketed through their sales channels which reach over 8,600financial institutions. Monitise Americas has already successfully contractedits services to 20 financial institutions. These range from small communitybanks to larger financial institutions. A Software Licence Agreement with Monitise Americas was finalised in October2007 under which a licence fee of US$1.5 million per annum and royalties of upto US$20 million based on volume thresholds are paid to Monitise. We are also continuing to work closely with a number of payment processors andcard schemes across North America with a view to pursuing a multi-switchstrategy in that market. Availability of our service on US cellular networks iscurrently close to 50% and the introduction of our BREW client for CDMA networkswill deliver penetration across all major US networks during the second half. Other International Operations In other international markets we have progressed steadily. T-Systems hasextended its exclusivity period for the rights to the Monitise platform inGermany and discussions are ongoing with potential partners for theestablishment of the service in Australia, India and Africa. We are alsodiscussing extending the MONILINK service into the Republic of Ireland. Since we last reported results, BT Global Services has informed us that it nolonger wishes to progress licence negotiations for Egypt and the Gulf States asthey do not fit within its commercial objective at this time. However, we arecontinuing to work with other partners in the region and are working with BTGlobal Services on a global basis to assist our business development in otherkey markets. Strategic Partnerships During the period we made excellent progress, partnering with Visa Europe andalso developing other card provider relationships, including Tuxedo MoneySolutions. Our partnership with Visa Europe, which has a long-term outlook of providingfull mobilisation services to Visa Europe's range of card and payments products,will initially see the launch of a virtual pre-paid card product, delivered andmanaged using our technology, during the second half. This partnership providesus with a potential issuer base of 4,600 European member banks and over 348million Visa cards. Our partnership with Tuxedo Money Solutions, which willprovide a complete mobile management and payment service for their range ofpre-paid cards, is scheduled for launch in the second half. These contracts position Monitise as the global leading provider of mobilepre-paid card management services and we believe we are well placed to become akey partner for global card schemes as we continue to work with Visa Europe andother international card schemes. Products and Services We have continued to innovate and our investment in product development gives usconfidence that we now have the most comprehensive service set of any companyoperating in this space. In September 2007 we announced our 2008 product set, which included the additionof a range of new services including international remittances, a wide range ofpayment services, SMS alerts and NFC. Accode, our mobile security-based authentication solution, has continued to makeprogress. We have delivered a strong reseller strategy for the product, whichspans both the voice and data channel, and have a balanced approach covering theenterprise market. In anticipation of developing trends in our market, we have developed a NFCservice, branded MoniTrust, which acts as a platform for the management of NFCpayments. MoniTrust has been successfully launched, with pilots planned withkey partners during the second half. Markets The appetite for mobile banking & payments continues to grow, driven by fivecore areas: mobile banking; mobile payments; pre-paid cards; identity servicesand NFC. Monitise has already established itself as a global leader in thefirst three segments and our commercial success presents a considerable barrierto competitors. The identity and NFC industries remain at an early growth stagein terms of industry adoption and we are confident that our current investmentsin these markets position Monitise to take advantage of the opportunities thatthese industries present. In particular, a number of new payments technologies including NFC services(e.g. Oyster in London or Visa PayWaveTM), the burgeoning internationalremittances market and the growth of pre-pay accounts are now reachingmainstream consumer acceptance. These are driving the mobile banking & paymentsmarket faster than initially anticipated as the industry looks to delivermanagement tools to consumers to support the uptake of these new services. Strategy Since the inception of Monitise four years ago, we have invested significantlyin building an industry platform that sits at the core of all the services weoffer, whether around mobile banking & payments, mobile top-up or securityservices such as on-line authentication solutions. As each new service functionis added to the existing platform, it confines Monitise's investment to buildingthe technology specific to that service, rather than having to invest inbuilding a separate supporting platform. It then becomes immediately availableto our network of participating banks, card processors and mobile operatorswithout the requirement for significant additional technical integration. Inthis way, we uniquely provide our partners with a clear line of sight to futurebanking and payment innovations. With the platform model already proven, we have continued to execute against ourstated strategy to: • Sign up the world's leading banks and switches to the Monitise platform. • Attract the appropriate partners to deliver a sustainable ecosystem. • Develop a compelling and consumer-centric product roadmap ahead of the market. In the UK and the US, where we have an established presence, we remain focusedon adding new banks and card processors. In other territories, while negotiations around licensing our technology inGermany and Australia have progressed well, the rapid success of the USoperation under the JV model has brought us to the view that pursuing similarjoint venture agreements in other strategic regions worldwide is our preference.We also strongly believe that this model will deliver greater value over thelong-term. The US, in particular, has become the showcase for joint ventures in newgeographies on the basis that it demonstrates our ability to successfully launchour platform to consumers within six months of signing with a joint venturepartner. We believe that this is the right approach to accelerate the roll-outof our international operations and to meet our aspirations for growth. We arealready actively engaged in other international markets and have made goodheadway in identifying suitable joint venture partners. We look forward tomaking further updates when appropriate. Finance Revenues of £0.4 million for the six months to 31 December 2007 reflect asignificant increase on revenues of £0.1 million in the preceding six months to30 June 2007. The mix of revenues is starting to move away from consultancyactivity, with licence income (referenced by the US licence and fees paid forthe two exclusivity agreements in the period) and transactional income startingto flow. During the second half, it is anticipated that transactional incomewill form a significantly higher proportion of overall revenues, with the endingof the "free to all" campaign in the UK and the increase in consumer numbers inthe US. Continued investment in the Monitise platform and further development of ourintellectual property has generated an operating loss for the period of £7.6million. This loss includes a non-cash charge of £1.1 million for share-basedpayments in accordance with IFRS2. Annualised cash costs are approaching £15million and are starting to plateau. Interest receivable on the cash balancesraised via the Placing in June 2007 amounts to £0.6 million and reduces theoverall loss before tax to £7.0 million. Available cash balances at 31 December 2007 across the Group amount to £15.4million. Awards We have continued to be recognised for our considerable market success havingwon 'Innovation of the Year 2007' for the MONILINK service from BankingTechnology magazine in the UK. This accolade, alongside existing awards fromthe World Economic Forum, The Banker Magazine and the Mobile MessagingAssociation demonstrate that our market leadership is respected by many acrossthe industry. Board and People During the period, we were delighted to welcome to the Board Tom Spurgeon, ourChief Financial Officer, and John Brougham, Finance Director of BTTransformation, who joined as a Non-Executive Director and Chairman of the AuditCommittee. We would also like to take this opportunity to thank all our staff for theircontinued hard work and commitment. Outlook We are positively exposed to all five of the major global market opportunitiesfor mobile banking & payments. The strong interest shown in our new services byparticipating banks and card scheme members ensures confidence that we areallocating investment in the appropriate areas and we expect considerablerevenue upsides from this investment over the coming months. Longer term, we are tracking market developments and believe our industryplatform approach is the most appropriate to maximise on the opportunitiespresented by new markets including NFC payments, the international remittanceindustry and remote payments. Whilst consumer uptake of mobile banking & payments services has been somewhatslower than we initially anticipated, we are pleased to report that, to date,over 110,000 consumers have registered for our services. Importantly, we arealso seeing the rate of consumer take-up improving in line with marketinginvestment by our bank partners and continuing improvements in our customerregistration process. We are confident of solid progress over the second halfin both the United Kingdom and United States. Our business development activity continues to grow across a number ofinternational markets and we expect the joint venture model to replicate thesuccess we have experienced in the US in other strategic markets. Thisactivity, coupled with the growing success of our live services in the UnitedKingdom and United States, ensures that we remain confident of our futureprogress. Alastair LukiesChief Executive Officer MONITISE, ACCODE and MONITRUST are trademarks of Monitise plc (MONITISE andACCODE are registered trademarks in the UK).MONILINK is a UK registered trademark of Link Interchange Network Limited.VISA PAYWAVE is a UK registered trademark of Visa International ServiceAssociation. Consolidated Income Statement For the For the six months six months For the ended ended year ended 31 December 31 December 30 June 2007 2006 2007 Notes (unaudited) (unaudited) (audited) £'000 £'000 £'000_________________________________________________________________________________________________________________ Revenue 392 363 472Cost of sales (197) (218) (327)_________________________________________________________________________________________________________________ Gross profit 195 145 145 Distribution costs (1,126) (333) (912) ________________________________________________________________________________________________________________| || Administrative expenses before exceptional costs (5,537) (3,056) (7,142)|| || Share based payments charge 7 (1,105) (7) (183)|| || Exceptional salary costs - - (596)||________________________________________________________________________________________________________________| Total administrative expenses (6,642) (3,063) (7,921)_________________________________________________________________________________________________________________ Operating loss (7,573) (3,251) (8,688) Finance income 560 2 8_________________________________________________________________________________________________________________ Loss before income tax (7,013) (3,249) (8,680)Income tax credit - 960 2,775_________________________________________________________________________________________________________________ Loss for the period/year (7,013) (2,289) (5,905)_________________________________________________________________________________________________________________ Attributable to:Equity holders of the Company (7,013) (2,289) (5,905)Minority interest - - -_________________________________________________________________________________________________________________ (7,013) (2,289) (5,905)_________________________________________________________________________________________________________________ Loss per share for loss attributable to the equityholders of the Company during the period/year(expressed in pence per share):- basic and diluted 6 (2.76) (1.46) (3.75)_________________________________________________________________________________________________________________ Consolidated Balance Sheet As at As at As at 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000___________________________________________________________________________________________________________________ ASSETSNon-current assetsProperty, plant and equipment 390 335 357Intangible assets 833 616 790Deferred tax asset - 530 -___________________________________________________________________________________________________________________ 1,223 1,481 1,147___________________________________________________________________________________________________________________ Current assetsTrade receivables 189 324 185Prepayments and other receivables 2,151 1,117 1,936Cash and cash equivalents 15,410 14 20,373 17,750 1,455 22,494___________________________________________________________________________________________________________________ Total assets 18,973 2,936 23,641___________________________________________________________________________________________________________________ LIABILITIESCurrent liabilitiesTrade payables (784) (104) (199)Other payables (1,421) (1,068) (1,212)Finance lease liability (17) - -Financial liabilities - borrowings (1,669) (7,070) (1,294)Current tax liability - - -___________________________________________________________________________________________________________________ (3,891) (8,242) (2,705) Non-current finance lease liability (54) - -___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ Total liabilities (3,945) (8,242) (2,705)___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ Net assets/(liabilities) 15,028 (5,306) 20,936___________________________________________________________________________________________________________________ EQUITYCapital and reserves attributable to equityholders of the CompanyOrdinary shares 2,545 - 2,540Share premium 19,334 - 19,261Merger reserve 32,952 - 32,952Reverse acquisition reserve (25,321) - (25,321)Share-based payments reserve 1,460 7 433Translation reserve - - -Retained loss (15,942) (5,313) (8,929) 15,028 (5,306) 20,936___________________________________________________________________________________________________________________ Minority interest in equity - - -___________________________________________________________________________________________________________________ Total equity 15,028 (5,306) 20,936___________________________________________________________________________________________________________________ These financial statements were approved and authorised for issue by the Boardof Directors on 7 February 2008 and were signed on its behalf by: Duncan McIntyre Alastair LukiesChairman Chief Executive Officer Consolidated Statement of Changes in Equity Share- Reverse based Share Share Merger Acquisition Payments Retained Minority Capital Premium Reserve Reserve Reserve Loss Interest Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000____________________________________________________________________________________________________________________Six Months to31 December 2006 Balance at 1 July2006 (audited) - - - - - (3,024) - (3,024) Total recognised incomeand expense for the6 months ended31 December 2006 (unaudited) - - - - - (2,289) - (2,289) Recognition of share- basedpayments (unaudited) - - - - 7 - - 7____________________________________________________________________________________________________________________ Balance at 31 December2006 (unaudited) - - - - 7 (5,313) - (5,306)____________________________________________________________________________________________________________________ 12 Months to30 June 2007 Balance at 1 July2006 (audited) - - - - - (3,024) - (3,024) Shares issued ondemerger (audited) 1,569 - 32,952 (25,321) - - - 9,200 Issue of shares onflotation (audited) 971 19,261 - - - - - 20,232 Recognition of share- basedpayments (audited) - - - - 433 - - 433 Total recognised income andexpense for the year (audited) - - - - - (5,905) - (5,905)____________________________________________________________________________________________________________________ Balance at 30 June2007 (audited) 2,540 19,261 32,952 (25,321) 433 (8,929) - 20,936____________________________________________________________________________________________________________________ Six Months to31 December 2007 Balance at 1 July2007 2,540 19,261 32,952 (25,321) 433 (8,929) - 20,936 Recognition of share- basedpayments (unaudited) 5 73 - - 1,027 - - 1,105 Total recognised incomeand expense for the6 months ended31 December 2007 (unaudited) - - - - - (7,013) - (7,013)____________________________________________________________________________________________________________________ Balance at 31 December2007 (unaudited) 2,545 19,334 32,952 (25,321) 1,460 (15,942) - 15,028____________________________________________________________________________________________________________________ Consolidated Cash Flow Statement For the For the For the six months six months year ended ended ended 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000_________________________________________________________________________________________________________________ Cash flows utilised in operating activitiesCash utilised in operations 8 (5,157) (3,429) (8,680)Interest received 383 2 8Income tax paid - - (56)_________________________________________________________________________________________________________________ Net cash utilised in operating activities (4,774) (3,427) (8,728)_________________________________________________________________________________________________________________ Cash flows utilised in investing activitiesPurchases of property, plant and equipment (24) (26) (104)Capitalisation and purchases ofintangible assets (165) (175) (437)_________________________________________________________________________________________________________________ Net cash utilised in investing activities (189) (201) (541)_________________________________________________________________________________________________________________ Cash flows provided by financing activitiesProceeds from issuance of ordinaryshares (net of expenses) - - 20,232Loan from joint venture parties andsubsidiaries - 244 499Loan/funding from related party - 3,219 8,751_________________________________________________________________________________________________________________ Net cash provided by financing activities - 3,463 29,482_________________________________________________________________________________________________________________ _________________________________________________________________________________________________________________ Net increase in cash, cash equivalents and bank overdrafts (4,963) (165) 20,213_________________________________________________________________________________________________________________ Cash, cash equivalents and bankoverdrafts at beginning of the period/year 20,373 160 160 _________________________________________________________________________________________________________________ Cash, cash equivalents and bankoverdrafts at end of the period/year 15,410 (5) 20,373_________________________________________________________________________________________________________________ Notes to the Consolidated Financial Statements for the period ended 31 December2007 1. General Information Monitise plc ('The Company') was incorporated on 28 November 2006. On 28 June 2007, the Company acquired the whole issued share capital of MonitiseGroup Limited, a company incorporated and domiciled in England and Wales. Theconsideration was satisfied through the issue of shares. This transaction hasbeen accounted for as a reverse acquisition by Monitise plc. The consolidated financial statements have been prepared using reverseacquisition accounting principles with the period from 28 June 2007 representinga continuation of the consolidated financial statements of Monitise GroupLimited, the legal subsidiary acquired. The retained earnings shown as at 31December 2006 are those for Monitise Group Limited and its subsidiaries andjoint venture. The use of reverse acquisition accounting was a departure from the Companies Actwhich required the use of acquisition accounting. In the opinion of theDirectors, the departure was necessary for the financial statements to show atrue and fair view. The effect on the position shown in the financialstatements as a result of this departure has not been quantified as, in theopinion of the Directors, it is unwarranted. 2. Summary of Significant Accounting Policies 2.1 Basis of Preparation The financial information for the six months ended 31 December 2007 and the sixmonths ended 31 December 2006 has been neither audited nor subject to an interimreview and does not constitute statutory accounts as defined by Section 240 ofthe Companies Act 1985. The financial statements are presented as unauditedinterim Group financial statements. The information provided in this report for the year ended 30 June 2007 does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. A copy of the statutory accounts for the year ended 30 June 2007 has beendelivered to the Registrar of Companies. The Auditors' report on those accountswas unqualified. The financial statements have been prepared under the measurement principles ofIFRS, using accounting policies and methods of computation consistent with thoseset out in the 2007 Monitise plc Annual Report and Accounts. The financialstatements have been prepared under the historical cost convention. The accounting policies, as set out in the 2007 Monitise plc Annual Report andAccounts, have been extended to include the following accounting policies withregards to foreign currency translation and finance leases to take into accountongoing developments in the Group's activities. 2.2 Foreign Currency On consolidation, assets and liabilities of foreign subsidiaries (with afunctional currency other than £ sterling) are translated into £ sterling at theperiod end exchange rate. The results of foreign subsidiaries are translatedinto £ sterling at the average rate of exchange for the year (unless thisaverage is not a reasonable approximation of the cumulative effects of the ratesprevailing on the transaction dates, in which case income and expenses aretranslated at the dates of the transactions). Foreign exchange differencesarising on retranslation of assets and liabilities are recognised directly in aseparate component of equity, the translation reserve. In the event of thedisposal of a subsidiary with assets and liabilities denominated in foreigncurrency, the cumulative translation difference associated with the undertakingin the translation reserve is charged or credited to the gain or loss ondisposal. Non-monetary items that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rates as at the dates of the initialtransactions. Non-monetary items measured at fair value in a foreign currencyare translated using the exchange rates at the date when the fair value wasdetermined. 2.3 Finance Leases Assets held under finance leases, which are leases where substantially all therisks and rewards of ownership of the assets have passed to the Group, and hirepurchase contracts are capitalised in the balance sheet and are depreciated overthe shorter of the lease term and the assets' useful lives. The capital elementsof future obligations under leases and hire purchase contracts are included asliabilities in the balance sheet. The interest elements of the rentalobligations are charged in the profit and loss account over the periods of theleases and hire purchase contracts and represent a constant proportion of thebalance of capital repayments outstanding. 3. Critical Accounting Estimates and Judgements Sources of estimation uncertainty The preparation of the financial statements requires the Group to makeestimates, judgements and assumptions that affect the reported amounts ofassets, liabilities, revenues and expenses and related disclosure of contingentassets and liabilities. The Directors base their estimates on historicalexperience and various other assumptions that they believe are reasonable underthe circumstances, the results of which form the basis for making judgementsabout the carrying value of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. The Group believes that there are five areas of critical accounting estimate: a) Revenue recognition Revenue for consulting services is recognised as the right to consideration isearned as each project progresses. Provisions against accrued income are made asand when management become aware of objective evidence that the amount of timeworked will not be recoverable in full. b) Share-based payments Management have made a number of assumptions in respect of the calculation of anIFRS 2 charge for the Group's employee share option schemes. Details of theassumptions are set out in Note 7. c) Development costs The Group capitalises internal and external costs that are directly related tothe development of new technologies that are expected to generate futurerevenues for the Monitise Group. Management has made an assumption that all suchexpenditure incurred since 30 September 2006 will generate revenues and may beconsidered for capitalisation. All expenditure incurred before that date wasconsidered too uncertain of generating future revenues and was fully expensed tothe income statement as incurred. Development costs have been assumed to have auseful economic life of three years. d) Going concern The Directors have prepared projections of the Group's anticipated futureresults based on their best estimate of likely future developments within thebusiness and therefore believe that the assumption that the Group is a goingconcern is valid. The financial information has therefore been prepared on the ''going concern'' basis. e) Impairment of assets In line with the going concern assumption, based on best estimate of likelyfuture developments within the business, the Directors do not consider that animpairment provision against assets held is necessary as at the balance sheetdate. 4. Segment Information Primary segmental analysis The business segment is the primary reporting segment for the Group. The Groupoperates only one business segment, relating to the provision of mobilephone-initiated transactions. All revenue and costs are recorded in the profitand loss account under this segment. 5. Interest in Joint Ventures The Group has a 50% interest in a joint venture, MONILINK Limited, whichprovides mobile phone-initiated services to the banking industry. As at 31December 2007 the Group's share of the joint venture assets was £0.8m (31December 2006 £1.3m, 30 June 2007 £0.9m) and its share of liabilities was £3.0m(31 December 2006 £2.5m, 30 June 2007 £2.7m). The Group proportionallyconsolidates MONILINK Limited into its results on the basis that it has jointcontrol of the strategic financial and operating decisions relating to theentity's activities, in line with the requirements of International AccountingStandard 31. The Group has a 49% interest in a joint venture, Monitise Americas LLC (acompany incorporated in the United States of America), which provides mobilephone-initiated services to the banking industry in North America. MonitiseAmericas LLC was incorporated on 28 August 2007. As at 31 December 2007 theGroup's share of the joint venture assets was £0.5m and its share of liabilitieswas £0.4m. The Group proportionally consolidates Monitise Americas LLC into itsresults on the basis that it has joint control of the strategic financial andoperating decisions relating to the entity's activities, in line with therequirements of International Accounting Standard 31. The interests in the assets and liabilities of the joint ventures set out aboveare stated before consolidation adjustments are made to eliminate inter-companybalances. 6. Loss Per Share Basic & Diluted Basic loss per share is calculated by dividing the loss attributable to equityholders of the Company by the weighted average number of ordinary shares inissue during the year. As the Group is loss-making, any share options in issueare considered to be "anti-dilutive". As such, there is no separate calculationfor diluted earnings per share. Reconciliations of the loss and weighted average number of shares used in thecalculation are set out below. The calculation for 2006 has been presented inline with the reverse acquisition accounting principles applied under IFRS 3. Six months to 31 December 2007 Six months to 31 December 2006 Weighted Loss Weighted Loss average per average per number of share number of share shares amount shares amount Losses £'000 (thousands) (pence) Losses £'000 (thousands) (pence)________________________________________________________________________________________________________________Losses attributableto ordinaryshareholders (7,013) 254,295 (2.76) (2,289) 156,914 (1.46)_________________________________________________________________ _____________________________________________ Year ended 30 June 2007 Weighted Loss average per number of share shares amount Losses £'000 (thousands) (pence)____________________________________________________________________ Losses attributableto ordinaryshareholders (5,905) 157,368 (3.75)____________________________________________________________________ 7. Share-based Payments During the period Monitise plc issued Directors and staff with a total of31,629,577 options. These options vest between July 2008 and December 2010. Theoptions expire on 30 June 2017. The options were valued based on an assumedvolatility of 40 per cent and risk free interest rates, where applicable, ofbetween 5.6 per cent and 5.7 per cent. Options under the Monitise Rollover Planand the Monitise Share Save Scheme were valued using the Black Scholesmethodology as no performance hurdles (other than retention of employment) applyto options under these plans. The Deferred Annual Bonus Plan, the Performance Share Plan and the MonitiseOption Plan will vest based on Total Shareholder Return (TSR) growth measuredagainst the FTSE Techmark 100 index constituents over three years. The vestingschedule provides for 30 per cent vesting at the median TSR point for FTSETechmark 100 constituents rising on a straight-line basis to 100 per centvesting at the upper quartile point for FTSE Techmark 100 constituents. TheRemuneration Committee also reserves the right to reduce the number of ordinaryshares over which awards vest if overall financial performance is not adequatelyreflected in TSR performance. There is no element of retesting. These optionshave been valued using a Monte Carlo valuation method. As transactions made through the above schemes are effectively 'equity-settled'transactions, they have been accounted for as a movement through equity. Optionsare expensed on a straight-line basis between issue date and the date they vest.The total amount expensed during the period as a result of option issues was£1,027,552. During the period Monitise plc issued 545,452 shares to Non-Executive Directorsin lieu of cash consideration for their service as directors. These issuesresulted in increases of the Ordinary Share Capital and Share Premium accountsin Equity of £5,455 and £72,272 respectively. The total amount expensed for the period, through the Income Statement, inrelation to share based payments was £1,105,279 (six months to 31 December 2006£6,949, 12 months to 30 June 2007 £432,665, of which £250,000 formed part of theExceptional salary cost disclosed separately on the face of the ConsolidatedIncome Statement). 8. Reconciliation of Net Income to Net Cash Utilised by Operating Activities For the For the For the six months six months year ended ended ended 31 December 31 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000____________________________________________________________________________________________________ Loss before income tax (7,013) (3,249) (8,680) Adjustments for:Depreciation 66 29 84Amortisation 119 37 126Share-based payments 1,105 7 433Finance income - net (560) (2) (8)Changes in working capital (excluding theeffects of acquisition and exchangedifferences on consolidation): Trade and other receivables 332 (828) (1,508) Trade and other payables 794 577 873____________________________________________________________________________________________________ Cash utilised in operations (5,157) (3,429) (8,680)____________________________________________________________________________________________________ 9. Contingencies Legal Contingencies Except as set out below, no member of the Group is or has been involved in anygovernmental, legal or arbitration proceedings and the Directors are not awareof any such proceedings pending or threatened by or against the Group during the12 months preceding the date of these financial statements which may have orhave had, in the recent past, a significant effect on the financial position orprofitability of the Group. Mobile VPT Limited has issued a UK infringement claim against MonitiseInternational Limited (formerly known as Monitise Limited) and other relatedparties. Following advice from leading counsel, the Directors believe that theMonitise Business's activities in the UK do not infringe any valid claim ofMobile VPT's Patent and that the Mobile VPT Patent may be invalid. As a resultno provision has been reflected in the accounts. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Monitise