Results for the 6 months ended 30 June 2012

InternetQ plc

('InternetQ', the 'Group' or the 'Company')

RESULTS FOR THE six months ended 30 June 2012.

InternetQ, one of the leading providers of mobile marketing and digital entertainment solutions for mobile network operators and brands, is pleased to report interim results for the six months ended 30 June 2012.

Financial Highlights 

·; Revenue: €32.8 million (H1 2011: €21.8 million)

·; EBITDA: €3.6 million (H1 2011: €2.9 million)

·; Adjusted EBITDA: €4.1 million (H1 2011: € 3.0 million)

·; Profit after tax: €1.7 million (H1 2011: €1.4 million)

·; Adjusted Profit after tax: €2.2 million (H1 2011: €1.5 million)

·; Earnings per share: €0.05 (H1 2011: €0.05)

·; Adjusted Earnings per share: €0.07 (H1 2011: €0.06)

·; Net cash: €4.1 million (H1 2011: €(0.2) million)

Operational Highlights

·; Strong demand for mobile services across the Group's geographic footprint;

·; Accelerating revenue growth by 51% in addition to a compounded annual growth rate of 45% for the last 3 years (2009-2011);

·; Emerging market focus remains with Asia as the fastest growing market, where our revenue grew by more than ten times compared to the first half of 2011 and exceeded €11.7 million;

·; 43% growth of the AKAZOO registered user base, extending to 3.4 million members by the end of June, of which 0.55 million were paying a monthly fee;

·; Despite high growth, neutral cash flow from operations as a result of efficient working capital management;

·; Successful share placing completed in July, raising gross proceeds of approximately €7.6 million;

·; Trading remains strong and in line with market expectations.

Konstantinos Korletis, Chief Executive Officer of InternetQ commented:

"We are very pleased with the Group's first half 2012 performance. We continue to show solid growth in both mobile marketing and digital entertainment services and across all main geographic territories. Our sustained success is driven by our industry leading mobile marketing software platform, which continues to gain market traction.

At the same time we have made substantial progress on the rollout of the AKAZOO social music service in faster growing markets and have deliberately avoided exposure to more saturated markets of the European Union.

Alongside our successful capital raise of €7.6 million, which completed last July, we anticipate organic growth to remain strong and continue throughout 2013. Expanding our geographic footprint further, fortifying our position in key growth markets and maintaining a technological leadership remain key strategic goals for the Group.

We believe demand for our products and services are yet to peak and the Group will continue to expand its services and exploit new market opportunities. Therefore, our near term trading prospects remain positive and I look forward to reporting further another period of progress.

For further details

 Chief Executive Officer's Review

Introduction

The first six months of 2012 have seen another period of operational progress for the Group. Our business continued to grow organically in most territories, primarily in Asia, the CIS and Africa, while in July we completed a successful €7.6 million capital raise by placing newly issued shares to new and existing institutional investors in the UK and the US.

Our mobile marketing business continued to grow at a strong pace driven by our successful sales and marketing initiatives and the ongoing efficiency of our software platform. At the same time, the rollout of AKAZOO, our music service, is progressing smoothly with the number of subscribers and the average revenue charged growing in all markets we focus on.

Consequently, the Group revenues increased by 51% to €32.8 million and realized an adjusted EBITDA* of €4.1 million and an adjusted Profit after tax* of €2.2 (38% and 48% increase from H1-2011 respectively).

At the same time, we have made significant progress in improving our operating efficiency, with an increase in revenue per employee and a simultaneous reduction in operating expenses per employee. We therefore anticipate margins to improve further in the second half of the current year and into 2013. More specifically, revenue per employee improved to €265,000 from €254,000 in H1-2011, while operating expenditure per employee retracted to €40,000, from €51,000 in H1-2011.

* reference to EBITDA and OPEX is made on an adjusted basis, where adjustments relate to share based compensation and one-off acquisition related costs included in the reporting period

Strategic direction

InternetQ is extremely adept and technically advanced, thereby enabling rapid and intensive scaling of our service provision in all markets where growth opportunities are presented. To match this opportunity, the Group is aligned to achieve the following near-term objectives:

·; Continue growing organically, exploiting our timely entrance in key markets;

·; Increase our business development efforts in Asia and Africa, in recognition of the regions' very promising growth prospects;

·; Actively pursue bolt-on mobile marketing acquisition opportunities to improve our platform capabilities and/or enhance our market position in certain territories;

Operational update

Mobile Marketing

Our focus remains with mobile network operators, which continue to be the biggest clients for our value added marketing services. During the first half of 2012, we were awarded a number of new contracts, which include:

- High impact, brand awareness booster campaign on behalf of VODAFONE in Malta;

- Brand promotions for Korek in Iraq (executed in cooperation with BT, our regional partner);

- The first P-SMS branded campaign executed on behalf of Warid in Pakistan, through partnership with BT and ARPU+;

- Large scale SMS campaign on behalf of MTN in Zambia; being the third such campaign organized during the last eighteen months;

- Cross-operator mobile marketing campaign to promote the Kazan 2013 Universiade Sport Event in Russia;

- Branded operator and cross-operator campaigns done in Malaysia, China, the Philippines and other smaller countries;

- The enabling of a long-term mobile marketing campaign organized by Orange for the promotion of the UEFA European Football Championship 2012, in which the carrier was a key sponsor.

At the same time, we continued building our relationships with publishers and media partners, driving on their behalf several customer retention mobile interactive campaigns on our platform. New customers included FOX Network in Turkey, MTV in Poland, NOVA subscription service in Greece, the Eurovision contest and several small-sized media assets in Southeast Asia.

During the first six months of 2012, we made several improvements and additions to our proprietary software platform, the most important of which being:

- New features for optimization of communication with customers belonging to different segments;

- Automation in message testing helping our campaign managers to run more concurrent campaigns;

- Introduction of additional analytics in our customer service web interface, to provide better insight to customer interactions and transaction history.

AKAZOO

During the first half of 2012 we made significant progress in rolling out our music service in key markets like Thailand, Malaysia and Singapore. In addition, we worked towards completing the AKAZOO 2.0 version, which was introduced in the marketplace last July. The newly designed service showcases many exciting features, including music streaming, integration with Facebook, richer content, a user-friendly interface and extended mobile billing capabilities.

Most importantly, we have decided to focus on expanding AKAZOO's market share in some of the key markets we have already launched and moderate our current expansion plans into specific new territories. Our aim is to effectively balance revenue growth with margin improvement, a key measurement for the service, therefore maximizing returns.

Placing of New Shares

In July, we announced the successful placing of 2.86 million new ordinary shares at a price of 210 pence per share, raising gross proceeds of approximately €7.6 million (£6million). The proceeds will be used to fund future organic growth and acquisitions.

The placing attracted strong institutional demand, predominately from new shareholders in the UK and the US.

The market

Without doubt, the mobile industry is incredibly vibrant, challenging and ultimately (from a market perspective) dominating almost all forms of human commerce globally. As such, InternetQ is perfectly positioned to take advantage of this vast and ever-expanding opportunity.

Mobile, as it stands today, is the most astonishing industry by any analysis, the numbers however are still set to jump massively. Rising through the next few years to hit some 4.6 billion active mobile users across roughly 9.1 billion connections (including a broadband base of 3.2 billion); the infrastructure platform is securely in place for those who can exploit it best. InternetQ already has access to 2.4 billion subscribers and a portfolio that comfortably supports existing feature-phones, yet extends compellingly into all smartphones.

The end result of this rapid mobile adoption and yet immense growth potential in emerging economies, gives us confidence that InternetQ is well positioned to deliver profitable growth for the foreseeable future.

Outlook

Demand for our mobile marketing services continues to gather momentum from both existing and new customers. Our new business pipeline is as strong as it has ever been, driven by the global demand for mobile value-added services, the strength of our platform and our successful track record. Our pipeline is now fed both by our direct marketing efforts and our relations with regional partners.

AKAZOO sales are expected to continue growth, fuelled by our re-designed service and our focus on specific high-potential markets.

We remain confident of meeting market expectations for growth in revenue and earnings for the year, while we anticipate maintaining adequate cash reserves to fuel our organic growth ambitions.

The Board therefore believes that trading for the current year remains in line with market expectations.

Konstantinos Korletis

Chief Executive Officer

The accompanying notes are an integral part of the interim financial statements.

The accompanying notes are an integral part of the interim financial statements.

The accompanying notes are an integral part of the interim financial statements. 

The accompanying notes are an integral part of the interim financial statements.

The accompanying notes are an integral part of the interim financial statements.

1. Corporate Information

INTERNETQ PLC (hereinafter referred to as "INTERNETQ PLC" or the "Company"), is incorporated in England and Wales. The Company's registered office is located in St. Botolph Building, 138 Houndsditch, London EC3A 7AR, United Kingdom and the Registered No. is 5512988.

INTERNETQ PLC and its subsidiaries (hereinafter the "Group") are mainly engaged in trading and development of software and related products and services used in wireless communication and telecommunication.

The activities of the Group are described in note 4.

2. Basis of preparation

a. Basis of preparation and statement of compliance

The accompanying interim consolidated financial statements have been prepared under the historical cost convention except for investment properties and derivative financial instruments that have been measured at fair value. The financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The Directors have assessed the ability of the Company and the Group to continue operating as a going concern and believe that the preparation of these financial statements on the going concern basis is appropriate.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for year ended 31 December 2011.

Certain line items of the previous year financial statements were reclassified in order to conform to the current year's presentation.

3. Changes in accounting policies and disclosures

a. New and amended standards and interpretations

The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2011, except for the adoption of new standards and interpretations as of 1 January 2012, noted below:

IAS 12 -Deferred Tax: Recovery of Underlying Assets (Amendment)

The Group has an investment property at fair value. The jurisdiction in which the investment property is located does not have a different tax charge for sale of the respective asset. Therefore, while the amendment is applicable, it has no impact on the financial statements of the Group.

The following amendments to IFRSs standards did not have any impact on the accounting policies, financial position or performance of the Group:

IFRS 7 - Disclosures - Transfers of financial assets (Amendment)

IFRS 1 - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendment)

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

4. Operating segment information

For management purposes, the Group is organized into business units based on their products and services. Consequently, the Group has five reportable operating segments as follows:

The Mobile Marketing operating segment: Specially designed for campaigns on mobile telecommunications networks.

The AKAZOO operating segment: Services offering access to digital content (music, games, subscriptions) from the Group's internet site AKAZOO.

The Legacy operating segment: Media Services involving audience through compelling promotions, programs and live shows that draw attention to content.

The Aggregation Services operating segment: Services that enable customers' billing directly via the users' mobile phone.

Investment Properties: Rental income from operating leases.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties. Segment income, expenses and results will include those transfers between business segments which eliminated on consolidation.

The following tables represent revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2012 and 2011, respectively.

1. Inter-segment revenues are eliminated on consolidation.

2. Segment profit/(loss) does not include income tax charges (€ 235,493).

3. Segment assets do not include deferred tax asset (€ 985.773) and non-current financial assets (€ 2,146,081), as these asset are managed on a group basis.

4. Segment liabilities do not include deferred tax (€ 149,443), current income tax payable (€ 878,737), as these liabilities are managed on a group basis.

1. Inter-segment revenues are eliminated on consolidation.

2. Segment profit/(loss) does not include income tax charges (€ 351,426).

3. Segment assets do not include deferred tax asset (€ 327,850), as this asset is managed on a group basis.

4. Segment liabilities do not include deferred tax (€ 136,091), current income tax payable (€ 658,493) and derivatives (€ 6,328), as these liabilities are managed on a group basis.

Geographic information

Non-current assets

Non-current assets include property, plant, and equipment, intangible assets, investment properties and other non-current financial assets.

5. Income tax

The amounts of income taxes which are reflected in the accompanying interim financial statements are analysed as follows:

6. Earnings / (loss) per share

Basic earnings/ (loss) per share amounts are calculated by dividing net profit/ (loss) for the reporting period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the respective period.

7. Intangible assets

Intangible assets in the accompanying interim financial statements of the Group are analysed as follows:

8. Non-current financial assets

On 23 January 2012, the Group has entered into a 2.6 million euro convertible bond loan facility with Aventurine S.A. Aventurine is an established independent software developer with focus on the production and marketing of online games. The company also has developed an extensive software code (platform) capable of hosting various applications including online games.

The convertible bond loan facility is disbursed in 6 monthly installments provided that all the milestones set in the respective agreement are fulfilled. The bond loan will mature on January 2015 and bears an interest of 6% per annum. The Company has the option to convert the bonds into shares at any time before the maturity date.

The total interest income for the bond loan for the period ended 30 June 2012 amounts € 45,773 and it is included in financial income in the accompanying consolidated income statement.

9. Share capital and share premium

The movement of the Company's share capital is analysed as follows:

The movement of the Company's share premium is analysed as follows:

On 27 January 2011, 36.457 ordinary shares 0.25 pence each were issued to the non-executive directors of the Company. These shares were issued under the Non-Executive Directors Incentive Share Plan in consideration of the release of the Company's liability to pay a portion of their annual fee for the year 2011.

On 27 April 2011, 169.230 ordinary shares of 0.25 pence each were allotted and fully paid at a price of £1.20 pursuant to the exercise warrants. The above resulted to a total proceed of € 230.912.

On 9 June 2011, 200.000 ordinary shares of 0.25 pence each were issued and allotted to certain eligible employees of the Company. These shares were issued under the Group's Share Incentive Plan following the achievement of the certain performance targets for the financial year ended 31 December 2010.

On 1 July 2011, the Company issued 914,865 ordinary shares as consideration for the 100% interest in I-POP Networks Pte Ltd.

On 1 July 2011, 4,363,636 ordinary shares of 0.25 pence each were allotted and fully paid at a price of £2.75. The above resulted to a net proceed of €12,617,482 (after transactions costs of € 642,186).

On 2 April and 10 May 2012, 36.457 and 4,629 ordinary shares of 0.25 pence each were issued to the non-executive directors of the Company. These shares were issued under the Non-Executive Directors Incentive Share Plan in consideration of the release of the Company's liability to pay a portion of their annual fee for the year 2012.

10. Events after the reporting period

Successful placement of 2,800,000 new ordinary shares

On 31 July 2012, the Group has successfully completed the placement of 2,860,000 new ordinary shares at a price of 2.10 pounds per share. The total amount of gross proceeds raised amounted to 6 million pounds (approximately 7.6 million Euro).

11. Other Information

Reconciliation of adjusted figures with figures presented in the Annual Report and Accounts

a) Adjusted EBITDA

EBITDA is defined by adding back to (or subtracting form) profit after tax, income tax, finance costs and finance income and depreciation and amortization expenses. For the adjusted EBITDA calculation please refer to the below table:

b) Adjusted profit after tax

For the adjusted Profit after tax calculation please refer to the below table:

c) Adjusted Earnings per share basic

For the adjusted Earnings per share calculation please refer to the below table:

Directors ISIN Number

Stuart Cruickshank GB00B5BJJR09

Chairman

Tradable instrument

Panagiotis Dimitropoulos Display mnemonic

President Founder INTQ

Konstantinos Korletis Website

Chief Executive Officer www.internetq.com

Veronica Julia Nocetti

Chief Financial Officer

Iain Barrie Johnston

Non-executive Director

Michael Gordon Jolliffe

Non-executive Director

Robert Beveridge

Non-executive Director

Company Secretary

Philip Rogers

Registered Office

St. Botolph Building,

138 Houndsditch,

London EC3A 7AR,

United Kingdom

Registered Company Number

5512988

Nominated Advisor

Grant Thornton Corporate Finance

Solicitors of the Company

Clyde & Co LLP

Financial Public Relations

Buchanan Communications Limited

Registrar

Share Registrar Limited