Preliminary Results

RNS Number : 5812R

Monitise PLC

25 August 2010

 

Wednesday 25 August 2010

 

 

Monitise plc

 

Preliminary Results for the year ended 30 June 2010

 

Strategic Global Partnerships and Fast Developing

 Live Operations drive Growth

 

Monitise plc (the "Group" or "Company", LSE: MONI.L), a leading global mobile banking and payments provider, announces its preliminary results for the year ended 30 June 2010.

 

FINANCIAL HIGHLIGHTS

 

·; Revenues of £6.0m

o 125% year on year growth (2009: £2.7m)

o Significant increase across all revenue types, led by transactional revenues

o Transactional revenues of £2.9m (2009: £0.5m), now nearly 50% of Group revenues

o Licence revenues £1.7m (2009: £1.1m), consultancy revenues £1.4m (£1.1m)

o H2 revenues of £4.3m, up 150% on first half (H1 2010: £1.7m)

 

·; Increased investment in H2 for future operations and technology platform

·; Adjusted* operating loss of £14.3m (2009: £12.0m)

·; Statutory operating loss of £17.1m (2009: £13.7m)

 

*(excluding share based payments and exceptional gain)

 

 

OPERATIONAL HIGHLIGHTS

 

·; Strong growth in core business:

o 100% ownership of UK joint venture, Monilink, renamed Monitise Europe, from August 2009

o Monitise Europe on track to reach month on month cash break-even by December 2010

o Over 200 banks signed up in the US

o Well over 2 million registered customers

 

·; Key partnerships broaden global footprint:

o Global Alliance Agreement with Visa Inc extended through to 2015

§ Visa smartphone app. ready for launch in the US, one of many services under development between Visa and Monitise

§ Minimum revenue commitment over new term increased from $13m to $16m

§ JV formed in India to launch a wide range of services

o Partnership with First Eastern, a leading Hong Kong based direct investment firm

§ JV formed to rollout Mobile Money across Asia Pacific region

§ Initial deployment in Hong Kong planned for FY11

 

·; Strengthened balance sheet:

o Raising of £31.0m (net) in July 2010

§ Placing of shares to new and existing institutional shareholders

§ Subscriptions by Visa International Service Association and First Eastern (Holdings) Limited

o Cash balances in excess of £42m, post fund-raising

o Financial resources in place to support the Group's strategy to:

§ Achieve Group cash break-even

§ Broaden the product range in both live and new markets

§ Sustain and extend strong position in core markets

 

·; Key Board appointments:

o John Brougham as Chief Financial Officer

o Elizabeth Buse, Group Executive, International for Visa Inc , as Non- Executive Director

o Lee Cameron takes additional board responsibility as Chief Commercial Officer

 

References to FY10, FY11 and FY12 relate to the financial year ended 30 June.

 

Alastair Lukies, CEO of Monitise, commented,

 

"The Monitise model of open, collaborative networks and a robust operating platform linked to proven payment infrastructures has clearly emerged as the way forward for sustainable mobile financial services. It is why our partner financial institutions in the UK and North America now see mobile banking as strategically critical and why global organisations like Visa, FIS and First Eastern are supporting us as we open new markets across the world.

 

"The market potential is enormous and we are well placed to sustain our leadership role."

 

Duncan McIntyre, Chairman of Monitise, added,

 

"Monitise has transformed its financial position over the past year. We have undertaken successful fund raisings and emerged with a strong balance sheet that will now fund us through to cash break-even. Revenues are accelerating as we attract new customers and they use more of our premium services. Our cost structures in the UK and North America are now fully aligned to revenue growth.

 

"Our investments in new territories globally are directed at high growth markets in partnership with key players and we confidently expect those investments to follow a similar commercial path as in the UK and North America."

 

Contacts

 

Monitise plc	Tel: 020 7947 4300
Alastair Lukies, CEO
John Brougham, CFO Tom Spurgeon, Finance Director & Company Secretary
Evolution Securities Limited (NOMAD, Joint Financial Adviser and Joint Broker)	Tel: 020 7071 4300
Tim Worlledge / Bobbie Hilliam / Tim Redfern
Piper Jaffray Ltd. (Joint Financial Adviser and Joint Broker) Jamie Adams / Eric Sanschagrin	Tel: 020 3142 8700

 

Financial Dynamics	Tel: 020 7831 3113
Juliet Clarke / Haya Herbert-Burns / Erwan Gouraud

 

About Monitise

 

Monitise plc (LSE: MONI.L) has created the world's first mobile money networks, which allow customers of multiple banks and mobile operators to perform banking and payment transactions directly from their mobile handset.

 

With live services in the UK and in the USA, where it is in partnership with FIS, the company is currently working with international partners to deliver similar safe, secure mobile banking and payment services in territories worldwide. Current key partners include Visa, VocaLink, FIS, First Eastern, HSBC, Lloyds TSB, First Direct, Royal Bank of Scotland, NatWest, Travelex, Ulster Bank, Vodafone, Orange, O2, T-Mobile and 3 UK.

 

For more information visit www.monitisegroup.com

CHIEF EXECUTIVE'S BUSINESS REVIEW

 

 

Overview

 

Monitise's user base continues its strong growth with an improving mix of customers. The Company currently has well in excess of 2 million registered customers, having more than doubled the number of registered customers since October 2009. The current growth rate is in the region of 100,000 per month. We are seeing improved revenue per customer; in particular, smartphone users are an increasing segment of our customer base and they are both using a wider range of our services and using those services more frequently.

 

Full year revenues were £6.0 million, an increase of 125% from £2.7 million in FY09. Monitise continues to perform well with revenues in the second half of FY10 of £4.3 million, an increase of 170% from £1.6 million in the second half of FY09. All revenue streams are growing with transactional revenues, in particular, growing rapidly at £2.9 million in FY10, representing an increase of 490% from £0.5 million in FY09*.

 

Cost levels in the second half of the year include increased investment in the technology platform and costs of supporting our international growth. The adjusted operating loss for the full year, excluding share based payments and the exceptional gain made on taking 100% ownership of our UK joint venture, was £14.3 million* (2009: £12.0 million).

 

The strong demand for the higher value services, driven in part by the launch of the Company's smartphone platform in November 2009, has meant that the high value "advanced" segment now represents 28% of our customer base, compared to 23% reported for the half year results, with an accompanying impetus to both revenues and underlying gross margin. The launch by Visa of a smartphone application, produced under our Global Alliance Agreement, together with other impending partner product launches are expected to boost user numbers substantially during FY11.

 

Post the year-end we secured investment of £32.4 million, before expenses, by a subscription for new ordinary shares by Visa International and First Eastern and a placing of new shares with new and existing institutional investors.

 

The fund raising is expected to enable the Group to become cash generative without the need for further equity funding.

 

* Growth in transactional revenues and an increased cost base from acquiring full ownership of Monitise Europe (formerly Monilink) in August 2009 are discussed further in the Financial Review.

 

 

Live Operations

 

Monitise Europe

 

During the financial year Monitise acquired full ownership of its UK operations, Monilink - formerly a 50/50 joint venture with VocaLink. The business has been fully absorbed and rebranded as Monitise Europe.

 

Monitise Europe has already achieved coverage which gives access to its technology to more than 55% of the UK retail banking market. Revenues have grown rapidly during FY10 and are currently at an annualised run rate close to £5 million. Consumer demand for our smartphone apps. has been a strong revenue driver, and operations have been scaled accordingly. We are now seeing customers for our "Advanced" smartphone apps transacting on average 16 times a month. As revenues have grown the operating loss has reduced, and this 100% owned business remains on track to reach month-on-month cash break-even by December 2010.

 

Monitise Americas

 

In the USA we have a 49% equity stake in a joint venture, Monitise Americas, with our partner FIS. FIS provides wide coverage of financial institutions throughout the USA, and Monitise Americas has agreements in place with more than 200 financial institutions, offering a wide range of services. Taking into account the Group's share of the annual licence fee of US$1.5 million payable by the joint venture, Monitise Americas is currently operating at close to cash break-even.

 

Global Accounts*

 

Monitise announced a Global Alliance Agreement (GAA) with Visa on 30 June 2009. This five year agreement stipulated minimum revenues payable to Monitise by Visa of US$13 million, combining Visa's reach, payments expertise and brand with the Monitise Mobile Money Manager platform and toolkit.

 

As announced on 13 July 2010, to build on this relationship, Monitise reached an agreement with Visa to extend the five year term of the GAA by an additional one year to June 2015, at the same time increasing the minimum revenues payable to Monitise by Visa under the GAA from US$13 million to US$16 million.

 

The joint venture in India is a key milestone in our relationship with Visa, and is discussed in further detail below. In addition, Monitise agreed to grant Visa an exclusive licence for deployment of its Mobile Money Manager platform in Russia and Mexico for a licence fee of US$1.5 million, expected to be recognised in FY11.

 

We are delighted that Visa is to launch its first smartphone service in the US and look forward to further deployments during the coming year. Monitise is a key strategic development partner for Visa's suite of mobile services, which include payments, mobile money transfers, mobile transaction alerts and mobile marketing offers to support Visa's mobile strategy. Development activity continues and has built in scale significantly during the year. We anticipate that transactional revenues from the Global Alliance Agreement will build during FY11.

 

*Global accounts represent the group's products and services to Monitise's global cross-territory customers, including Visa and Travelex.

 

 

Investment in future operations

 

Monitise Asia Pacific

 

Our 50/50 joint venture with First Eastern Mobile Investments Limited (part of the First Eastern Investment Group), which was announced in April 2010, is now up and running. The initial focus is on Hong Kong as a launch market, where discussions are underway with a number of banks and network partners. There are also plans for entry into the mainland China market and we expect this JV to take advantage of other opportunities across the broader Asia-Pacific region. The joint venture is expected to see transactional revenues commence in FY11 and to scale significantly following roll-out of live services in China in FY12.

 

Monitise India

 

The formation of a 50/50 joint venture in India with Visa, which was announced in May 2010, completed in June 2010 as scheduled. Launch is anticipated in FY11 and transactional revenues are expected to build in FY12.

 

The new joint venture company combines Visa's expertise in enabling secure, globally interoperable financial transactions with Monitise's know-how in developing mobile financial technology for a broad range of handsets. It builds on the existing partnership between Visa and the Company and will give providers of financial services in India a platform to accelerate the delivery to consumers of mobile financial services such as banking, bill payments, mass transit ticketing, mobile top-up and other services in a market with an estimated 584 million mobile phone subscriptions as at March 2010**.

 

In addition to the joint venture with Visa, Monitise is broadening its presence in the Indian market through a partnership with Standard Chartered Bank.

 

**Source: Telecom Regulatory Authority of India

 

Monitise Africa

 

Development activity in delivering Mobile Money services for Africa is ongoing with funding support from the Africa Enterprise Challenge Fund. Positive dialogue with potential partners is expected to lead to announcements later this year.

 

mCommerce

 

We expect mCommerce to play a key part in future developments and we are actively developing a Mobile Retail proposition to provide Mobile Money services to retailers and their customers. Discussions with various partners continue to progress positively, and we expect to launch pilot services in the medium term.

 

 

Investment in technology platform

 

Monitise continues to invest in the development, maintenance and enhancement of its Mobile Money Manager platform. Our goal is to maintain market leadership through enabling flexible connectivity between the infrastructures of leading financial institutions and payments systems, mobile phone operators, handset manufacturers, transaction processors and merchants across a range of business sectors.

 

 

Board appointments

 

We are delighted to welcome Elizabeth Buse to the Board as Non-Executive Director. Elizabeth joined the Board in July following Visa's additional investment. She is a member of the Executive Team and the Group Executive, International, for Visa Inc. with responsibility for overseeing Visa's global sales and client service functions across Asia-Pacific, Central Europe, the Middle East and Africa.

 

John Brougham was appointed Chief Financial Officer in April 2010, adding a weight of experience gained through many years in a variety of senior executive positions at BT. In addition, we announced in April 2010 that Lee Cameron, a current board director and General Counsel, would take additional responsibility for group business development and marketing as Chief Commercial Officer.

 

Strategy and Outlook

 

Monitise aims to be the global leader in mobile financial solutions.

 

Monitise's Mobile Money Manager platform has been designed to enable banking and payments anywhere and everywhere in the world. Our aim is to be the platform of choice for banking and other financial institutions throughout the world. Having established itself and proven the technology in the UK and US markets, Monitise's strategy is to continue to invest in its technology and to expand its reach, initially into other markets with high growth potential, by working with local and international partners who can provide both the secure local infrastructure and the international functionality which are necessary in new markets.

 

Monitise Europe, is on track to reach month on month cash break-even by December 2010, and in total our existing live operations, comprising our activities in Monitise Europe, Monitise Americas and on our Global Accounts, are expected to become month on month cash break-even during FY12.

 

Our cash balance at the date of this report is in excess of £42million and will enable Monitise to retain and extend its technological advantage, to fund investment in new areas of operation and to provide funding for ongoing growth through to cash break-even for the Group.

 

Alastair Lukies

Chief Executive Officer

 

FINANCIAL REVIEW

 

 

Monitise continues to grow rapidly with total revenues more than doubled in the year to £6.0 million. Critical to the Group's move towards profitability is the expansion of transactional revenues, which at £2.9 million in the year were £2.4 million higher than the previous year.

 

All the Group's current live operations are on track to become cash break-even before or during FY12, and our new joint ventures in India and Asia Pacific show that we continue to invest where there is great potential to create significant value from our growing portfolio of mobile banking and payment services.

 

The recent fundraising (see note 8) greatly strengthens the balance sheet, enables us to realise benefits in full from high growth opportunities, and is planned to fund the Group until it becomes cash generative through its own operations.

 

Financial Performance

 

Financial highlights

 

Revenues in the year grew by 125% from £2.7 million to £6.0 million, with increases in all three revenue categories, consultancy from £1.1 million to £1.4 million, licence fees from £1.1 million to £1.7 million and a step change in growth in transactional revenues from £0.5 million to £2.9 million. On a like for like basis, allowing for the acquisition of full ownership of Monitise Europe in August 2009, total revenue growth was £3.8 million. Transactional revenue growth on a like for like basis was £2.0 million.

 

The primary driver of transaction revenue growth was the rollout of our Smartphone platform in November 2009, and this was a major factor in the growth in revenues from £1.7 million in the first half to £4.3 million in the second half. Transactional revenues are expected to continue to represent a growing proportion of total revenues in future years.

 

Revenues doubled in our live operations from the first to second half of the year resulting in a significant reduction in operating losses as demonstrated below:

 

Live Operations			2010		2010		2010
			H1		H2		FY
			£'m		£'m		£'m
Revenue			1.6		3.2		4.8
Operating loss			(1.6)		(0.9)		(2.5)

 

Monitise Europe is on track to reach month on month cash break even by December 2010. In total the existing live operations, comprising our activities in Monitise Europe, Monitise Americas and on our Global Accounts, are expected to become cash break even during FY12.

 

A more detailed financial breakdown of the operating segments in Monitise is shown in note 2. The largest business area is Monitise Europe, which was our first operation to go live in 2007 and generated £3.2 million of revenues in the year.

 

Monitise Americas became live in 2008 and, taking into account the Group's share of the annual $1.5 million licence paid from the joint venture, as well as the consultancy and transactional revenues it generates, is currently close to break-even.

 

There is significant, and growing, development activity within our Global Accounts business and we expect the first Monitise enabled Visa Inc product launch in FY11 with the first transactional revenues generated later in the year.

 

Within the investment in future operations segment, our Asia Pacific joint venture is expected to generate transactional revenue for live services in both Hong Kong and China during FY12. The India joint venture is planned to launch by the end of FY11 with transactional revenues building the following year.

 

The Group spent £4.9 million on its technology platform in the year to maintain and extend our technological capabilities and strengthen the depth of our customer propositions. We will continue to invest in our platform to maintain our technological advantage in the market and drive ongoing growth.

 

The adjusted operating loss for the Group, excluding share based payments and exceptional gain, in the year was £14.3 million (2009: £12.0 million). In August 2009 we acquired the other 50% of our joint venture in the UK, Monilink, now rebranded as Monitise Europe. We have previously reported 50% of the operating losses in this business under proportional consolidation. On a like for like basis, the adjusted operating loss for the Group for the year was flat compared to prior year with a reduction in loss in Monitise Europe, as it continues its journey to break-even, being offset by increased investment in new development opportunities across the Group.

 

Statutory operating loss for the Group was £17.1 million (2009: £13.7 million).

 

As part of the acquisition accounting required under revised IFRS 3 rules, the Group reported a gain of £1.0 million in the year. Full details of the acquisition accounting are included in note 7.

 

In line with the requirements of IFRS 2, we have recognised a non-cash charge of £3.8 million for share-based payments (2009: £1.8 million). The majority of the charge arises from options whose vesting was accelerated in March 2010 in line with the agreement by shareholders on 25 March 2010 to modify vesting criteria and in advance of increased tax rates for the 2009/10 tax year. Share based payment charges are expected to decline in future years.

 

 

Loss Per Share

 

The basic and diluted loss per share was 3.7p (2009: loss 4.0p). Details can be found in note 4.

 

 

Cash Flow and Funds

 

Monitise raised £17.9 million in the year through subscriptions and issue of new shares. After the year end, in July 2010, a further £31.0 million has been raised through a further subscription and placing agreement for new shares (see note 8) giving a cash balance in excess of £42 million after receipt of funds in August 2010. All subscription and placing amounts are quoted after expenses.

 

The cash outflow from operating activities, including the Group's share of joint venture activities, was £13.9 million (2009: £11.4 million). The cash outflow from capital expenditure was £1.1million (2009: £0.3 million) with the increase in spend representing the Group's strategic decision to provide an improved hosting solution for its core platform.

 

 

Treasury Activities and Policies

 

The Board formulates the Group's treasury policy objectives and policies which are designed to manage the Group's financial risk and secure cost-effective funding for the Group's operations. These objectives include the requirement to minimise risk on investment funds but maintain flexibility. The majority of funds are currently held in a mix of term deposits. Other financial instruments are comprised principally of trade receivables and payables arising from the Group's operating activities.

 

Hedging of known future foreign cash investments or income flows will be undertaken, as deemed appropriate, to mitigate the Group's exposure to foreign exchange risk going forward. It is and will continue to be the Group's policy that no speculative trading in derivatives shall be undertaken.

 

 

 

 

John Brougham

Chief Financial Officer

 

Consolidated Statement of comprehensive income for the year ended 30 June 2010

		2010	2009
	Note	£'000	£'000
Revenue	2	6,019	2,658
Cost of sales		(2,213)	(1,167)
Gross profit		3,806	1,491
Distribution costs		(2,502)	(2,217)
Administrative expenses before share-based payments *		(15,592)	(11,251)
Operating loss before exceptional gain and share based payments charge	2	(14,288)	(11,977)
Share-based payments	5	(3,776)	(1,754)
Exceptional gain on acquisition of subsidiary	7	956	-
Operating loss		(17,108)	(13,731)
Net Finance income		65	604
Loss before income tax		(17,043)	(13,127)
Income tax		273	-
Loss for the year attributable to the owners of the company		(16,770)	(13,127)
Other comprehensive income
Currency translation differences on consolidation		(77)	(3)
Total comprehensive income for the year attributable to the owners of the company		(16,847)	(13,130)
Loss per share attributable to the owners of the Company during the year (expressed in pence per share):
- basic and diluted	4	(3.7)	(4.0)

 

 

 

 

* Total administrative expenses after share based payments £19,368,000 (2009: £13,005,000)

 

 

 

 

 

Consolidated Statement of financial position as at 30 June 2010

 

		2010	2009
		£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		931	333
Intangible assets		2,725	659
		3,656	992
Current assets
Trade and other receivables		4,187	5,653
Cash and cash equivalents		13,218	10,145
		17,405	15,798
Total assets		21,061	16,790
LIABILITIES
Current liabilities
Trade and other payables		(5,687)	(4,020)
Financial liabilities		(36)	(3,379)
		(5,723)	(7,399)
Non-current liabilities
Trade and other payables		(613)	-
Financial liabilities		(21)	(57)
Deferred tax liabilities		(485)	-
Total liabilities		(6,842)	(7,456)
Net assets		14,219	9,334
EQUITY
Capital and reserves attributable to owners of the Company
Ordinary shares		5,368	3,401
Share premium		46,560	30,649
Foreign exchange translation reserve		(92)	(15)
Other reserves		9,060	11,329
Retained losses		(46,677)	(36,030)
Total shareholders' equity		14,219	9,334

 

 

 

Consolidated Statement of Changes in Equity

 

		Share Capital	Share Premium	Merger Reserve	Reverse Acquisition Reserve	Share-based Payment Reserve	Retained losses	Foreign Exchange Reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2008		2,545	19,334	32,952	(25,321)	2,540	(22,903)	(12)	9,135
Issue of shares (net of expenses)		841	11,010	-	-	-	-	-	11,851
Recognition of share-based payments		-	-	-	-	1,463	-	-	1,463
Total comprehensive income in the year		-	-	-	-	-	(13,127)	(3)	(13,130)
Exercise of share options		15	305	-	-	(305)	-	-	15
Balance at 30 June 2009		3,401	30,649	32,952	(25,321)	3,698	(36,030)	(15)	9,334
Balance at 1 July 2009		3,401	30,649	32,952	(25,321)	3,698	(36,030)	(15)	9,334
Issue of shares (net of expenses)		1,720	16,214	-	-	-	-	-	17,934
Reclassification		-	(305)	-	-	-	305	-	-
Recognition of share-based payments		-	-	-	-	3,549	-	-	3,549
Total comprehensive income in the year		-	-	-	-	-	(16,770)	(77)	(16,847)
Exercise of share options		247	2	-	-	(5,818)	5,818	-	249
Balance at 30 June 2010		5,368	46,560	32,952	(25,321)	1,429	(46,677)	(92)	14,219

 

 

 

 

 

 

 

 

Consolidated Cash Flow Statement for the year ended 30 June 2010

				2010	2009
			Note	£'000	£'000
Cash flows from operating activities
Cash utilised in operations			3	(14,071)	(11,396)
Net income tax receipt				207	-
Net cash utilised in operating activities				(13,864)	(11,396)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired				71	-
Interest received				70	604
Purchases of property, plant and equipment				(865)	(78)
Capitalisation and purchases of intangible assets				(239)	(229)
Net cash (used in) / generated from investing activities				(963)	297
Cash flows from financing activities
Proceeds from issuance of ordinary shares (net of expenses)				17,694	11,548
Capital element of finance leases				(40)	-
Share options exercised				221	15
Net cash generated from financing activities				17,875	11,563
Net increase in cash and cash equivalents				3,048	464
Cash and cash equivalents at beginning of the year				10,145	9,681
Effect of exchange rate fluctuations on cash held				25	-
Cash and cash equivalents at end of the year				13,218	10,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Basis of Preparation

 

The financial information presented in this Preliminary Announcement is extracted from, and is consistent with, the Group's audited financial statements for the year ended 30 June 2010.

 

The preliminary announcement for the year ended 30 June 2010 was approved by the Board of Directors on 24 August 2010. The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2010 or 2009 but is derived from those accounts. Statutory accounts for 2010 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

The Group's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

 

2. Segmental Information

 

Monitise has adopted IFRS 8 'Operating segments' for the full year results to 30 June 2010 and this has resulted in a change to the segmental information reported. Comparative information has been presented on a consistent basis and restated accordingly.

 

Monitise's operating segments are being reported based on how the Group is structured, and the financial information provided to the Board of Directors. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly share based payment charges, goodwill, certain other intangible assets, cash, corporate expenses and assets, and tax (as described as 'Corporate' below).

 

Operating segments are as follows:

 

Live Operations, including both territory deployments and development contracts, consist of:

·; Monitise Europe which provides the group's products and services to the UK and covers European opportunities.

·; Monitise Americas which represents Monitise Group's 49% proportion of the trading statement and statement of financial position of the joint venture entity Monitise Americas LLC. This segment also includes Monitise Group's share of the annual licence fee charged to Monitise Americas.

·; Global accounts which represents the group's products and services to Monitise's global cross-territory customers, including Visa and Travelex.

Investment in future operations segment represents the group's operations which are not yet live operations covering both pre-sales and start-up period. The segment includes both revenues (e.g. initial licences and consultancy services prior to deployment) and costs. In 2010, the segment includes the joint ventures in the Indian and Asia Pacific regions, investment to host new operational platforms, and new business development activity.

 

Investment in technologyplatform segment comprises the ongoing development, enhancement and maintenance costs of the core Monitise platform. The division is responsible for the continued availability and improvement of the product across all other segments.

 

 

 

 

 

 

 

 

Year ended 30 June 2010
The statement of comprehensive income		Revenue £'000	Revenue £'000	Operating loss £'000	Operating loss £'000
Live operations:
Monitise Europe *		3,231		(2,092)
Monitise Americas		831		(3)
Global accounts		756		(418)
Total live operations			4,818		(2,513)
Investment in future operations			1,201		(2,817)
Investment in technology platform			-		(4,904)
Total			6,019		(10,234)
Corporate costs					(4,054)
Operating loss before exceptional gain and share based payments charge					(14,288)
Share based payments charge					(3,776)
Exceptional gain on acquisition of subsidiary					956
Group Operating loss					(17,108)
Net financing income					65
Loss before income tax					(17,043)
Income tax					273
Loss for the year					(16,770)

* Monitise Europe represents 100% ownership from 21 August 2009.

 

Year ended 30 June 2009
The statement of comprehensive income	Revenues £'000	Revenue £'000	Operating loss £'000	Operating loss £'000
Live operations:
Monitise Europe	1,482		(1,428)
Monitise Americas	571		(620)
Global accounts	-		-
Total live operations		2,053		(2,048)
Investment in future operations		605		(720)
Investment in technology platform		-		(5,501)
Total		2,658		(8,269)
Corporate costs				(3,708)
Operating loss before exceptional gain and share based payments charge				(11,977)
Share based payments charge				(1,754)
Group Operating loss				(13,731)
Net financing income				604
Loss before income tax				(13,127)
Income tax				-
Loss for the year				(13,127)

 

 

 

 

 

 

 

 

Products and services
		Revenue
	2010 £'000		2009 £'000
Consultancy services	1,425		1,068
Licences	1,743		1,108
Transactional revenue	2,851		482
Total	6,019		2,658

 

 

3. Reconciliation of Net Loss to Net Cash Utilised by Operating Activities

 

	2010	2009
	£'000	£'000
Loss before income tax	(17,043)	(13,127)
Adjustments for:
Depreciation	375	210
Amortisation	745	363
Share-based payments	3,776	1,754
Profit on acquisition of joint ventures	(956)	-
Finance income - net	(65)	(604)
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation):
Trade and other receivables	1,678	(2,116)
Trade and other payables	(2,581)	2,124
Cash utilised in operations	(14,071)	(11,396)

 

 

 

4 Loss per Share

 

Basic and Diluted

 

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary shares in issue during the year. As the Group is loss-making, any share options in issue are considered to be "anti-dilutive". As such, there is no separate calculation for diluted earnings per share.

 

Reconciliations of the loss and weighted average number of shares used in the calculation are set out below.

	2010 Loss for the year £'000	2010 Weighted average number of shares (thousands)	2010 Loss per share amount (pence)	2009 Loss for the year £'000	2009 Weighted average number of shares (thousands)	2009 Loss per share amount (pence)
Losses attributable to ordinary shareholders	(16,770)	453,494	(3.7)	(13,127)	329,110	(4.0)

 

 

 

 

5 Share based payment charge

 

The total share-based payments charge for 2010 is £3,776,000 (2009: £1,754,000), of which £2,382,000 relates to a one off charge arising primarily in relation to the waiving of vesting conditions and accelerated vesting on 25 March 2010 as approved by shareholders at a general meeting.

 

6 Principal Risks and Uncertainties

 

The Board has identified the principal risks and uncertainties which it believes may have an impact on the Group and its operations.

 

In line with groups of a similar size, the Group is managed by a limited number of key personnel, including Executive Directors and senior management, who have significant experience within the Group and the wider IT or communications sectors and who may be difficult to replace. Executive remuneration plans, incorporating long term incentives, have been implemented to mitigate this risk.

 

The Group is reliant on a number of key relationships with banking, payment processors and mobile operator partners for provision of the Group's services to the marketplace. A key element of the Group's strategy is to continue to build and maintain strong relationships with all key partners including engagement at senior level. This is facilitated through the engagement of both the Monitise Board and senior external advisors. Account management plans are implemented for all key partners.

 

The marketplace for the Group's services is characterised by rapid technological changes, frequent introductions of new services and products and evolving industry standards. Monitise will continue to enhance its current products and develop new products in response to changes in technology, industry standards or customer preferences in order to maintain its competitive position.

 

A key risk remains the ability to operate within projected capital constraints, to forecast effectively and to manage costs within plan in an environment of rapid growth. A number of controls operate to ensure this risk is minimised, including the development and approval of an annual budget based on realistic estimations. A rolling forecast is also maintained, and progress against budget is monitored regularly together with detailed trend analysis of revenue flows and consumer uptake. Providing early warnings of adverse variances against plan enables decisions to be made on flexing the plan through active management of costs or consideration of other options.

Given the rapid escalation of activity there is a risk that the focus on key deliverables is not maintained and existing resources are not prioritised appropriately. Focus on key deliverables is led from Board level and managed through a clearly defined organisational structure which has been put in place to ensure clear areas of responsibility and lines of reporting so that the allocation of resources can be agreed as appropriate. New business development opportunities are monitored closely and a focus is placed on succession planning to ensure as much strength in depth to cover all key functional areas as practical, to ensure that no one individual is irreplaceable. The organisational structure is continuously under review.

 

7 Acquisitions

 

Monitise Europe Limited (previously named Monilink Limited)

 

On 21 August 2009, the Group acquired an additional 50% of the issued share capital in its joint venture, Monitise Europe Limited (previously named Monilink Limited) from its joint venture partner VocaLink Limited for an initial cash consideration of £1,500,000 payable in three equal instalments over 3 years, which has been discounted to £1,477,000. The first payment of £500,000 was made in the year. A further £124,000 discounted contingent consideration has been provided which is dependent on certain financial performance criteria being met. The undiscounted potential payment under the contingent consideration criteria ranges from £nil to £1,500,000.

 

The Group has made this acquisition to take full ownership of its core business operations in its home market, including all future revenues, as the global mobile money industry accelerates. This opportunity does not wholly translate into separately identifiable intangible assets, but represents much of the assessed value within Monitise Europe Limited supporting the recognised goodwill.

The amount of the equity interest held by Monitise Group Limited in Monitise Europe Limited immediately before the acquisition had a fair value of £1,601,000 and the gain on such fair valuation recognised in the statement of comprehensive income as an 'exceptional gain' was £956,000.

 

The Monitise Europe Limited acquisition had the following effect on the Group's assets and liabilities, with 50% of the book value of the identified assets and liabilities brought into the consolidated statement of financial position:

 

	Book value	Fair value adjustment	Fair value
	£'000	£'000	£'000
Intangible assets	218	1,967	2,185
Property, plant and equipment	216	-	216
Receivables	424	-	424
Payables	(708)	(551)	(1,259)
Cash and cash equivalents	1,141	-	1,141
	1,291	1,416	2,707
Fair value of 50% interest previously held			(1,601)
Consideration			(1,601)
Goodwill recognised			495
Consideration satisfied by:
Cash paid			500
Discounted deferred cash consideration			977
Discounted contingent consideration			124
			1,601

 

No adjustments for accounting policy alignments were required. A deferred tax liability of £551,000 on the capitalisation of the intangible assets has been created on acquisition.

 

The intangible assets capitalised as part of the acquisition of Monitise Europe Limited will be amortised over a period of seven years and can be analysed as follows:

				£'000
License				773
Customer contracts				1,194
				1,967

 

 

8. Events After Balance Sheet Date

 

Equity transactions

 

On 30 July 2010, the Group issued 42 million new Ordinary shares as part of a subscription agreement with existing share holders, Visa International Service Association, a subsidiary of Visa Inc and First Eastern (Holdings) Limited In addition, on the same day, the Group issued 113,971,200 new Ordinary shares as part of a placement with new and existing shareholders.

 

As a result £32.4 million (before expenses) has been raised and, taken together with year end cash balances of £13.2 million, provide the Group with a total cash position of in excess of £42 million as at the date of receipt of funds. The Directors believe that this new subscription and placement will provide additional flexibility for the Group to continue to implement its development strategy and grow its business in a number of territories.

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