Source - RNS
RNS Number : 2513J
Monitise PLC
08 September 2016
 

 

Monitise plc
8 September 2016

 

Monitise announces FY 2016 results

FINKit® initial revenues

45% reduction in H2 operating costs

 

London - 8 September 2016 - Monitise plc (LSE: MONI, "Monitise", or the "Group"), the financial services digital technology company, announces preliminary results for its financial year ended 30 June 2016.

 

 

FY 2015

FY 2016

FY 2016

FY 2016

 

Total

H1

H2

Total

 

£'m

£'m

£'m

£'m

Revenue

89.7 

33.4 

34.2 

67.6 

EBITDA1

(41.8)

(20.2)

0.6 

(19.6)

Loss before tax

(227.4)

(210.5)

(32.6)

(243.1)

Capex

(45.0)

(7.5)

(1.6)

(9.1)

Cash from operations

(50.3)

(22.3)

0.4 

(21.9)

Cash usage2

(106.2)

(36.4)

(11.9)

(48.3)

Cash balance

88.8 

53.4 

42.1 

42.1 

Headcount (period end)

850 

627 

500 

500 

 

  • Monitise's FY 2016 results confirm substantial improvement in operating figures in the second half
  • FINKit®3, our new business unit which enables banks and financial services organisations to transform their digital services, launched during the year generating initial revenues in the second half of FY 2016, and received a positive response from current and potential clients and partners
  • Full year revenue of £67.6m declined 24.7% compared to the prior year as anticipated but stable half-on-half and in line with previous guidance
  • Monitise reported half-year EBITDA profitability of £0.6m in the second half of the year in line with previous guidance
  • Cash flow stabilised with positive cash from operations in the second half, and cash usage down 84% compared to the same period in FY 2015
  • Improved transparency with disclosure of revenue and EBITDA of six business units including the new FINKit® business

 

Monitise CEO Lee Cameron said: 'In my first year as CEO we have made substantial progress in making Monitise a more stable and simpler business which is well positioned to achieve profitability. At the EBITDA level we recorded a small profit in the second half of the year. Our restructuring has halved operating costs in the second half of the year and reduced headcount by 41 per cent compared to a year ago while maintaining our high client service levels and launching our FINKit® digital banking and financial services product.'

Monitise Chairman Peter Ayliffe said: 'The past year has seen an unprecedented amount of change throughout both the business and the Board. However, I am pleased to report that the outcome is a business which is much better managed, and much more appropriately structured for successful longer-term profitable growth based on its business unit focus, FINKit® platform and associated capabilities.'

Outlook

Monitise expects FINKit® revenue to grow strongly, albeit from a low base. As previously stated, overall Group revenue is expected to decline, driven by the full year revenue impact of the completion of professional services contracts during FY 2016.  FY 2017 will benefit from the full year effect of cost savings made during FY 2016.  At 31 August 2016 headcount had further fallen to 469.

FINKit® represents a significant opportunity for Monitise to establish long-term sustainable growth, and we will continue to invest in developing that part of our business throughout the current financial year. Overall, capital expenditure requirement is expected to be lower than in FY 2016 and we will continue to evaluate all the Group's assets to make sure that they remain relevant to our strategy and add to our value.  

This announcement contains inside information. 

About Monitise

Monitise plc is a specialist in financial services technology focused on accelerating the digital transformation of banks and financial institutions.

Monitise FINKit® platform and associated capabilities builds upon over a decade of experience in delivering digital services to banks and financial services partners. Whether it is augmenting legacy systems with minimal impact on those systems, a greenfield project, or strategic digital transformation, FINKit® delivers innovation at speed, safely and securely.

Monitise management will present the results at 9.00 am today 8th September 2016 at the London offices of their NOMAD and broker Canaccord Genuity. A recording of the meeting will be made available on the investor relations section of the Monitise website.

Find out more at www.monitise.com

(1)   EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.

(2)   Cash usage does not include the impact of foreign exchange movements.

FINKit® is a registered trademark in the UK.

 

For further information:

Monitise plc     

 

Lee Cameron, Chief Executive Officer                              

Tel: +44(0)20 3657 0331

Gavin James, Chief Operating Officer 
 

 

Canaccord Genuity (NOMAD)   

 

Simon Bridges, Cameron Duncan, Emma Gabriel            

Tel: +44(0)20 7523 8000

Attila Consultants          

 

Charles Cook

Tel: +44(0)20 7947 4489                               

Bill Spears                                                        

Tel: +44(0)7710 910 563

 

 

Chief Executive Officer's Review

 

Upon my appointment as Chief Executive a year ago, I set the company three key objectives: first, stabilise the business, second, simplify the organisation and third, accelerate our transition from a group of companies whose revenues have historically depended on product licences, to one where prosperity will be driven from sustainable income across all lines of business and, in particular, from clients using FINKit®, our new platform, which enables banks and financial services organisations to transform their digital services. Twelve months on, I am pleased to report that we have made substantial progress in delivering the first two, and I am very encouraged by the positive reaction of our current and prospective clients and partners with regard to the third.

We undertook a substantial corporate restructuring during the year to simplify the business which enabled us to reduce operating costs in the second half of the year by 45 per cent. when compared to the first half. Our number of employees has decreased by 41 per cent. during the period, while we have continued to maintain high levels of service to clients and successfully launched FINKit®. It has been a significant period of change, especially for our employees. The professionalism and dedication demonstrated by both our current staff and those who are no longer with the Group has been exemplary. 

A simpler organisation enables greater transparency for all stakeholders. It also allows us to identify each business unit and empower their respective management teams to have responsibility and accountability for their approved business plans. It is important to me that our external financial reporting reflects the clarity we have established internally to allow all stakeholders to track each business' performance. You will find detail on the financial performance of each business unit in the Operations and Financial Review below.

Most importantly for the future prospects of Monitise, the final objective was to accelerate the transition of our business model and make a success of FINKit®. This is not wholly in our control and is dependent on clients and partners working with us. Whilst it is taking longer than we had anticipated to conclude long-term FINKit® contracts, we have recorded our first FINKit® revenues from clients in the second half of the year and I remain confident, due to the positive engagement we have had with clients, that we will be able to report our first contracts in the near future. 

The market need for the services offered by FINKit® continues to grow, driven by the requirement of our clients to find ways of delivering their customers' digital needs quickly, cost effectively and securely. Regulatory changes also exert pressure on our clients to adopt new ways of serving their customers as they comply with new standards. We are in daily dialogue with banks who have expressed a need for capability that can be delivered by FINKit®. I am also encouraged by the support and level of validation we have received from our strategic partner, IBM, in helping us bring FINKit® to the market. 

FINKit® builds upon the expertise and reputation that Monitise has established over the last decade by offering components of capability, infrastructure and the environment that allow banks to work with Monitise and our FinTech partners to create their own customer propositions. 

We have achieved a great deal over the past 12 months and have a clear vision of what still needs to be done but we remain a business in transition. 

Operations and Financial Review

 

 

 

 

FY 2015

FY 2016

FY 2016

FY 2016

 

 

 

Total

H1

H2

Total

 

 

 

£'m

£'m

£'m

£'m

Revenue

 

89.7 

33.4 

34.2

67.6 

EBITDA1

 

(41.8)

(20.2)

0.6 

(19.6)

Loss before tax

(227.4)

(210.5)

(32.6)

(243.1)

Capex

 

 

(45.0)

(7.5)

(1.6)

(9.1)

Cash from operations

(50.3)

(22.3)

0.4 

(21.9)

Cash usage2

 

(106.2)

(36.4)

(11.9)

(48.3)

Cash balance

 

88.8 

53.4 

42.1 

42.1 

Headcount (period end)

 

850 

627 

500 

500 

 

1 EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.

2 Cash usage does not include the impact of foreign exchange movements

 

Overview

The year ended 30 June 2016 has seen a significant restructuring of the organisation, including headcount, property requirements, and the Group being managed as six separate businesses, each working under a plan to achieve, or improve, profitability. This business structure was put in place in the second half of the fiscal year and Monitise now reports revenue and EBITDA for each business segment. FY 2015 estimate comparative figures are provided.

 

Revenue

EBITDA

 

FY 2015

FY 2016

FY 2015

FY 2016

 

£'m 

£'m 

£'m 

£'m 

Americas

25.9 

19.1 

(5.2)

(3.1)

Europe

45.8 

30.3 

(18.3)

(4.9)

FINKit

0.5 

(2.3)

(3.8)

Create

14.5 

5.7 

1.8 

(1.2)

MEA

7.3 

8.1 

1.1 

1.1 

Content

6.9 

9.9 

1.0 

2.7 

Central/unallocated

(10.7)

(6.0)

(19.9)

(10.4)

Total

89.7 

67.6 

(41.8)

(19.6)

 

The restructuring has been undertaken in a phased approach, starting with identification of the optimal organisation structure. This was followed by the structuring of each of the business units identified in a planned approach to attain profitability in a reasonable timescale, whilst structuring the businesses in a manner that provides flexibility in their cost bases to take account of future changes in activity.

This restructuring is in its final stages with activity continuing to ensure variability of cost in our core Europe and Americas delivery organisations.

The results of the first two phases of the plan have been realised in the second half of the financial year reflecting a £20.0m reduction in costs by comparison to the first half, and resulted in EBITDA of £0.6m for the second half compared to a loss of £20.2m in the first half.

Prospectively, we anticipate the business unit structure to evolve as the operational management of the Group changes to reflect the development of FINKit®.

Business Segments

Americas

The Americas business has seen a reduction in revenues and EBITDA loss as a result of our decision to cease selling perpetual licences to customers, the loss of some customer contracts taken in-house, and reduced revenue from fixed price contracts signed in the prior year, primarily in relation to software version upgrades. Action is being taken to ensure that our cost base is adaptable to activity levels, which will enable an improvement in the profitability of this business despite the full year negative impact on FY 2017 revenue.

Europe

The European business has seen a reduction in revenues year on year due in part to the decision to change our business model leading, as expected, to a reduction in licence revenue from £9.9m in FY 2015 to £1.1m in the current year, and due to the completion of some large loss-making development projects. Despite this decreased revenue base, the EBITDA losses of the business have declined reflecting the restructuring that has taken place, the ending of a number of the large FY 2015 loss making development projects, and reduced resource activity in the second half of the year in relation to a fixed revenue partner relationship. In FY 2017 the action to ensure our cost base is more variable with activity will offset the impact of revenue reduction as a result of the full year impact of the projects completed in FY 2016.

FINKit®

In FY 2016, we saw the FINKit® business record its first revenues as clients signed up to paid testing of the platform. The costs in FY 2015 reflected the costs of a team managing the initial design and build of the offering and developing the proposition. This team was extended throughout FY 2016 and further investment was made to continue the development of the platform and capabilities as the organisation prepares itself to take on operational clients.

Monitise Create

The Create business is going through a transformation with a new management team and a relaunch planned for later this calendar year. Revenues in FY 2015 benefited from £7.0m of Monitise originated work, both supporting the Group and its clients largely through professional services projects, which reduced to £1.5m in FY 2016.  A key driver of this reduction is the changing business model of Monitise.  In addition, external revenues in FY 2015 were £7.5m compared to £4.2m in FY 2016, driven in-part by fewer new business wins in FY 2015 impacting the flow through of business into FY 2016, and the management transition in the first half of FY 2016.  As a result of the reduction in revenues the business has incurred EBITDA losses of £1.2m in the year to 30 June 2016, as opposed to EBITDA profits of £1.8m in FY 2015.

Monitise MEA

The MEA business performed well in the year increasing revenues from £7.3m to £8.1m. EBITDA in FY 2016 of £1.1m was consistent compared with FY 2015 of £1.1m. Through the year the business has continued to broaden its customer base in the Gulf region and Turkish markets obtaining new clients. MEA continues to provide technology and engineering support to other Group businesses.

Monitise Content

The Content business saw strong progress with growth in revenues and profit in the year with a major contributing factor being the overall growth in visits (57% year-on-year) to the UK voucher business - myvouchercodes.co.uk.

The business saw further success with a number of initiatives including a modification of its search engine marketing techniques resulting in a positive uplift of keyword rankings within search engines that consumers use to search for retailers' offers.  Additionally, positive investment in developing retailer relationships to secure rights to drive more traffic through investment in building a more engaged consumer base enabled the business to grow visits to myvouchercodes.co.uk through CRM initiatives.

With positive growth in the UK the business invested in its international propositions and saw visit growth of 27% year-on-year in the French market through codespromotion.fr and launched a number of new international propositions.

Group

Central and unallocated revenue and costs

The Central/unallocated revenues represent the elimination of intra-group revenues. The EBITDA reflects the level of central costs which have declined from £19.9m in FY 2015 to £10.4m in FY 2016. There was a material reduction in central EBITDA loss in H2 compared to H1, driven by the cost-reduction efforts described above.

Revenues

Revenues in FY 2016 declined by £22.1m from £89.7m to £67.6m.  The drivers of the decline in revenue were the Europe, Create and Americas businesses. In Europe and Americas, the decision to transition the business model led to an anticipated fall in license revenues from £11.9m to £1.1m.  A declining market for our customised solutions led to a reduction in Development and Integration revenue from £44.7m to £33.6m. Create was impacted by the change in management and the Americas business also saw a reduction in services revenues.  This was offset by an improvement in the Content revenue which was up from £6.9m to £9.9m.

Gross Margin

The calculation of gross margin has been revised in the year to include media costs in the Content business that are variable with activity within cost of sales. These amount to £1.8m in FY 2016 and £1.1m in FY 2015 and were previously included in operating costs. There was no impact on EBITDA as a result of this reclassification.

Gross margin improved in the year from 50.6% to 57.5%. The improvement in gross margin results from the increasing contribution from our Content business, reduction in third party cost of sales and the completion of the large fixed price customised solution projects noted in last year's report.

EBITDA and Operating costs

The EBITDA loss in the year was £19.6m as compared to £41.8m in FY 2015, with the company reaching EBITDA profitability of £0.6m in H2 FY 2016. The significant improvement in EBITDA results from the restructuring and cost reduction exercise initiated towards the end of the first half of FY 2016. The operating costs in FY 2016 were £58.5m, a reduction of £28.7m from £87.2m reported in FY 2015. The reduction in cost for the year was predominantly headcount related with people costs reducing by £24.5m from £69.2m to £44.7m. Additional savings were made through a reduction in property costs as less space is required and a tightening of other costs generally.

In the second half of the year, benefiting from the restructuring exercise, operating costs reduced from £37.8m in H1 FY 2016 to £20.7m in H2 FY 2016, a reduction of £17.1m.

Headcount as at 30 June 2016 was 500 by comparison to 850 as at 30 June 2015.

In addition to the activity to reduce costs initiated in the first half of the year, during the second half we have continued the restructuring programme with the objective of converting fixed or semi-fixed costs of supporting our core Europe and Americas delivery organisations into a more variable form. This will enable the Group to further manage its cost base as existing long term contracts reach their natural end.

Other costs

Depreciation and Amortisation

Depreciation was £2.8m in the year (FY 2015: £4.2m). Amortisation in the year of £25.5m (FY 2015: £20.7m) includes amortisation of acquired intangible assets of £21.2m, capitalised development costs of £2.0m and purchased software licences of £2.3m. The useful economic lives of acquired intangible assets were reviewed in conjunction with the impairment review resulting in reduced lives for some customer and technology assets and a consequent increase in amortisation in the period to £21.2m (FY 2015: £11.7m).

Impairments

Impairments of £176.9m have been recorded relating to property, plant and equipment £3.3m, goodwill £162.7m, customer contracts £7.5m, and £2.5m of acquired technology and other assets and £0.9m of investment in joint ventures, reflecting the fact that no further investment is currently planned for the Santander joint venture which is not operationally active. £169.9m of these impairments were announced in the H1 FY 2016 results.

These impairments all relate to assets that do not drive sufficient economic returns in the near term to support their carrying values. The impairments reflect evolving market conditions, growth prospects for certain platforms, and changes in customers' approach to technology provision.

Share Based payments

The share based payments charge of £16.5m (FY 2015: £28.0m) is largely comprised of earn-out share based payments relating to the acquisitions of Grapple, Pozitron and Marko Media as well as Group employee share option grants. The fall in the charge when compared to FY 2015 is largely a result of options which lapsed as a result of people leaving the Group.

Exceptional costs                  

A net charge of £3.5m for exceptional items has been taken in the year (FY 2015: £34.2m). The make-up of the net charge is summarised as follows:

 

 

 

FY 2015

FY 2016

 

 

 

£'m

£'m

Exceptional income

 

(6.9)

Onerous contracts

 

28.5 

(3.2)

Surplus property costs      

1.8 

4.4 

Contingent consideration adjustment

1.3 

Restructuring costs

4.5 

8.7 

Other    

 

(1.9)

0.5 

Total

 

34.2 

3.5 

 

Exceptional income represents payments received following the restructuring of customer contracts which are not anticipated to recur. The credit in relation to the onerous contracts reflects the settlement of some of the obligations recognised in prior periods at amounts less than those provided. The surplus property provision relates to provision for excess property following the reduction in headcount in both the UK and US. The restructuring costs are the costs relating to the reduction in headcount and the associated activities to improve the variability of our cost base.

Loss before Tax

The Group reported a loss before tax of £243.1m compared to a loss of £227.4m in FY 2015.

Tax

A tax credit of £9.7m was recorded in the year (FY 2015: £3.9m) in both cases principally relating to non-cash movements on the un-winding of deferred tax recognised in relation to acquired intangible assets. The Group has an unrecognised deferred tax asset of £79.0m which is available for offset against future tax expenses in the companies in which these losses arose.

Statutory loss after tax

The statutory loss after tax for the year was £233.4m (FY 2015: £223.6m).  The loss in the year is driven by an improved EBITDA resulting from cost reductions across the Group, lower share based payment charges and lower exceptional costs offset by higher impairment charges.

Loss per share

The basic and diluted loss per share was 10.5p (FY 2015: 10.8p).

 

Cash flow and funds

The Group ended the year with gross cash balances of £42.1m compared to £88.8m at 30 June 2015. A summary of the cash flows are as follows:

 

 

FY 2015

FY 2015

FY 2015

FY 2016

FY 2016

FY 2016

 

H1

H2

Total

H1

H2

Total

 

£'m

£'m

£'m

£'m

£'m

£'m

Cash used in operations

(38.0)

(12.3)

(50.3)

(22.3)

0.4 

(21.9)

Capex

(2.6)

(1.5)

(4.1)

(0.6)

(0.2)

(0.8)

Capitalisation of intangibles

(23.3)

(17.6)

(40.9)

(6.9)

(1.3)

(8.2)

Joint venture and other

0.3 

(1.4)

(1.1)

(0.3)

0.1 

(0.2)

Free cash flow

(63.6)

(32.8)

(96.4)

(30.1)

(1.0)

(31.1)

Exceptional items

(3.7)

(5.8)

(9.5)

(5.9)

(10.1)

(16.0)

Other

49.1 

(1.5)

47.6

(0.4)

(0.9)

(1.3)

Total cash flow

(18.2)

(40.1)

(58.3)

(36.4)

(12.0)

(48.4)

           

The reduction in costs during the period has led to a significant reduction in cash usage, in particular in the second half of the year reflecting the impact of the restructuring. The capital expenditure and in particular the capitalisation of internal activity were much reduced in the year as the core build of the FINKit® platform nears completion. In the future we plan to focus our development primarily towards specific customer requirements as opposed to generic builds, and hence would expect future cash flow in this regard to be lower than prior periods. The expenditure on exceptional items reflects both exit costs related to staff reductions of £5.3m, payments in relation to onerous contracts of £13.0m, and lump sum payments in relation to settlement of onerous contracts of £4.1m, offset by exceptional income of £6.1m.

Provisions

At 30 June 2016 the Group carries total provisions of £18.9m (FY 2015: £29.9m). These provisions comprise £16.7m for onerous contracts including provisions for surplus property and £2.2m in relation to the remaining cost base reduction. Of these provisions the restructuring costs are anticipated to be expended in FY 2017, whilst the timing of the cash flows in relation to the onerous contracts are subject to the timing of subletting or assigning surplus property, and the results of our efforts to negotiate settlements in relation to onerous supply contracts.

 

Consolidated statement of comprehensive income

 

 

 

for the year ended 30 June 2016

 

 

 

 

 

2016 

2015 

 

Note

£'000 

£'000 

Revenue

2

67,565 

89,700 

Cost of sales

 

(28,706)

(44,280)

Gross profit

 

38,859 

45,420 

Operating costs before depreciation, amortisation, impairments and share-based payments1

 

(58,482)

(87,220)

EBITDA2

 

(19,623)

(41,800)

Depreciation, amortisation and impairments1

 

(205,216)

(119,196)

Operating loss before share-based payments and exceptional items

 

(224,839)

(160,996)

Share-based payments1

 

(16,468)

(27,977)

Other exceptional items1

3

(3,492)

(34,151)

Operating loss

3

(244,799)

(223,124)

Finance income

 

1,975 

712 

Finance expense

 

(200)

(1,233)

Share of post-tax loss of joint ventures

 

(58)

(3,788)

Loss before income tax

 

(243,082)

(227,433)

Income tax

 

9,711 

3,882 

Loss for the year attributable to the owners of the parent

 

(233,371)

(223,551)

Other comprehensive income that may be reclassified subsequently to profit or loss:

 

 

 

Currency translation differences on consolidation

 

8,889 

8,150 

Total comprehensive expense for the year attributable to the owners of the parent

 

(224,482)

(215,401)

 

 

 

 

Loss per share attributable to owners of the parent during the year (expressed in pence per share):

 

 

 

- basic and diluted

4

(10.5)

(10.8)

 

 

 

 

1

Total operating costs after depreciation, amortisation, impairments, share-based payments and exceptional expenses are £283,658,000 (2015: £268,544,000).

2

EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.

The comparative figures include a reclassification of marketing costs from operating expenses to cost of sales and net foreign exchange gains on financing activities have been reclassified from finance costs to finance income.

         

Consolidated statement of financial position

 

as at 30 June 2016

 

 

 

 

 

 

2016

2015

 

Note

£'000

£'000

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

5

3,338 

7,276 

Intangible assets

6

36,155 

216,273 

Investments in joint ventures

 

500 

Other receivables

 

370 

 

 

39,863 

224,049 

Current Assets

 

 

 

Trade and other receivables

 

15,970 

27,824 

Current tax assets

 

12 

Cash and cash equivalents

 

42,089 

88,801 

 

 

58,071 

116,625 

Total assets

 

97,934 

340,674 

 

 

 

 

LIABILITIES

 

 

 

Current Liabilities

 

 

 

Trade and other payables

 

(21,627)

(34,494)

Current tax liabilities

 

-

(24)

Provisions

9

(10,864)

(14,658)

Financial liabilities

 

(1,002)

(10,036)

 

 

(33,493)

(59,212)

Non-current liabilities

 

 

 

Other payables

 

(950)

(3,936)

Provisions

9

(8,016)

(15,200)

Financial liabilities

 

(807)

(335)

Deferred tax liabilities

 

(1,021)

(10,208)

Total liabilities

 

(44,287)

(88,891)

Net assets

 

53,647

251,783

 

 

 

 

EQUITY

 

 

 

Capital and reserves attributable to owners of the parent

 

 

 

Ordinary shares

 

22,519 

21,682 

Ordinary shares to be issued

 

2,511 

2,511 

Share premium

 

383,721 

383,721 

Foreign exchange translation reserve

 

6,377 

(2,512)

Other reserves

 

269,449 

244,214 

Accumulated losses

 

(630,930)

(397,833)

Total equity

 

53,647 

251,783 

 

 

 

 

         
  

Consolidated statement of changes in equity

 

 

 

for the year ended 30 June 2016

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary
shares

Ordinary
shares to be issued

Share premium

Merger reserve

Reverse acquisition reserve

Share-based payment reserve

Accumulated losses

Foreign exchange translation

Total
equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2014

19,448

2,511

336,990

221,539

(25,321)

20,823 

(182,019)

(10,662)

383,309 

Loss for the year

-

-

-

-

-

(223,551)

(223,551)

Other comprehensive income

-

-

-

-

-

-

8,150 

8,150 

Total comprehensive (expense)/income

-

-

-

-

-

(223,551)

8,150 

(215,401)

Issue of Ordinary shares (net of expenses)

1,614

-

46,014

-

-

-

47,628 

Issue of Ordinary shares relating to prior year business combinations

458

-

-

7,133

-

(151)

-

7,440 

Share-based payments

-

-

-

-

-

27,928 

-

27,928 

Exercise of share options

162

-

717

-

-

(7,737)

7,737 

-

879 

Balance at 30 June 2015

21,682

2,511

383,721

228,672

(25,321)

40,863 

(397,833)

(2,512)

251,783 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2015

21,682

2,511

383,721

228,672

(25,321)

40,863

(397,833)

(2,512)

251,783 

Loss for the year

-

-

-

-

-

-

(233,371)

-

(233,371)

Other comprehensive income

-

-

-

-

-

-

-

8,889

8,889 

Total comprehensive (expense)/income

-

-

-

-

-

-

(233,371)

8,889

(224,482)

Issue of Ordinary shares relating to prior year business combinations

791

-

-

9,511

-

(470)

-

9,832 

Share-based payments

-

-

-

-

-

16,468 

-

16,468 

Exercise of share options

46

-

-

-

-

(274)

274 

-

46 

Balance at 30 June 2016

22,519

2,511

383,721

238,183

(25,321)

56,587

(630,930)

6,377

53,647 

 

 

 

 

 

Cash flow statements

 

 

 

 

for the year ended 30 June 2016

 

 

 

 

 

 

2016

2015

Note

£'000

£'000

Cash flows used in operating activities

 

 

 

Cash used by operations, before exceptional expenses

7

(21,869)

(50,345)

Exceptional expenses

 

(15,959)

(9,491)

Net income tax paid

 

(80)

(141)

Net cash used in operating activities

 

(37,908)

(59,977)

Investing activities

 

 

 

Investments in joint ventures

 

(500)

(1,244)

Interest received

 

338 

447 

Proceeds on disposal of property, plant and equipment

 

35 

Purchases of property, plant and equipment

 

(894)

(4,135)

Purchase and capitalisation of intangible assets

 

(8,238)

(40,821)

Net cash (used in) from investing activities

 

(9,259)

(45,753)

Financing activities

 

 

 

Proceeds from issuance of ordinary shares (net of expenses)

 

46,995 

Share options and warrants exercised

 

85 

879 

Interest paid

 

(122)

(164)

Repayments of finance lease liabilities

 

(1,155)

(277)

Net cash (used in)/from financing activities

 

(1,192)

47,433 

Net decrease in cash and cash equivalents

 

(48,359)

(58,297)

Cash and cash equivalents at beginning of the year

 

88,801 

146,828 

Effect of exchange rate changes

 

1,647 

270 

Cash and cash equivalents at end of the year

 

42,089 

88,801 

 

 

 

 

               

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 2016.

The preliminary announcement for the year ended 30 June 2016 was approved by the Board of Directors on 7 September 2016. The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2016 or 2015 but is derived from those accounts.   Statutory accounts for 2016 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.

 

Going concern

At 30 June 2016, the Group had cash of £42,089,000. The Directors have prepared a cash flow forecast, including reasonable sensitivities, which shows sufficient funding to see the Group through the forecast period. The forecast includes the benefits from the cost savings which are being made from the business optimisation programme, headcount rationalisation, exiting from non-core geographies and property rationalisation. Furthermore, capital expenditure is expected to continue at the substantially reduced level experienced during the year ending 30 June 2016 following the development and launch of the new platform. This new platform is expected to drive a new, higher margin revenue stream. The Directors therefore confirm that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future and accordingly these financial statements are prepared on a going concern basis.

 

2. Segmental information

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. During the year ended 30 June 2016, the Group changed internal reporting from one operating segment to six.  The operating segment's operating results are reviewed regularly by the Board of Directors in order to make decisions about resources to be allocated to the segment and to assess its performance.

 

 

Segment revenues and results

The following is an analysis of the Group's revenue and results by reportable segment for the year ended 30 June 2016:                                                                                                                      

 

Americas

Europe

FINKit

Create

MEA

Content

Unallocated

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

External revenue

19,088

29,001

463

4,218

5,160

9,635

-

67,565

Inter-segment revenue

-

1,340

-

1,504

2,916

307

(6,067)

-

Total revenue

19,088

30,341

463

5,722

8,076

9,942

(6,067)

67,565

 

 

 

 

 

 

 

 

 

EBITDA

(3,093)

(4,870)

(3,827)

(1,221)

1,050

2,745

(10,407)

(19,623)

Depreciation, amortisation and impairments

 

 

 

 

 

 

 

(205,216)

Other exceptional items

 

 

 

 

 

 

 

(3,492)

Share of loss of joint ventures

 

 

 

 

 

 

 

(58)

Share-based payments

 

 

 

 

 

 

 

(16,468)

Net finance income

 

 

 

 

 

 

 

1,775 

Loss before income tax

 

 

 

 

 

 

 

(243,082)

 

The following is an analysis of the Group's revenue and results by reportable segment for the year ended 30 June 2015:

 

Americas

Europe

FINKit

Create

MEA

Content

Unallocated

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

External revenue

25,603

45,311

-

7,447

4,731

6,608

-

89,700

Inter-segment revenue

301

471

-

7,009

2,545

261

(10,587)

-

Total revenue

25,904

45,782

-

14,456

7,276

6,869

(10,587)

89,700

 

 

 

 

 

 

 

 

 

EBITDA

(5,219)

(18,334)

(2,323)

1,798

1,082

987

(19,791)

(41,800)

Depreciation, amortisation and impairments

 

 

 

 

 

 

 

(119,196)

Other exceptional items

 

 

 

 

 

 

 

(34,151)

Share of loss of joint ventures

 

 

 

 

 

 

 

(3,788)

Share-based payments

 

 

 

 

 

 

 

(27,977)

Net finance expense

 

 

 

 

 

 

 

(521)

Loss before income tax

 

 

 

 

 

 

 

(227,433)

 

Geographical disclosures

 

 

 

 

 

In presenting information on the basis of geography, revenue is based on the location of the customers. Non-current assets are based on the geographical location of those assets.

 

 

Revenues

Non-current assets

 

 

2016

2015

2016

2015

 

 

£'000

£'000

£'000

£'000

United Kingdom

 

41,878

54,511

17,798

63,153

Americas

 

18,588

25,114

11,868

142,498

Turkey

 

5,166

4,731

8,397

16,549

Europe

 

1,476

2,787

-

-

Rest of World

 

457

2,557

1,800

1,849

Total

 

67,565

89,700

39,863

224,049

           

Products and services

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

2016

2015

 

 

 

 

£'000

£'000

Product licences

 

 

 

1,111

11,875

Platform supply and transactions

 

32,830

33,089

User generated revenue

 

 

 

33,941

44,964

Development and integration services

 

 

 

33,624

44,736

Total

 

 

 

67,565

89,700

 

 

 

 

 

 

Revenues derived from single customers whose revenues are 10% or greater than overall Group revenues in either the current, or prior, financial year are given below:

 

 

 

 

2016

2015

 

 

 

 

£'000

£'000

External customer

 

 

 

15,943

15,855

External customer

 

 

 

6,680

8,251

 

3. Operating loss

 

 

 

 

 

 

 

This is stated after charging:

 

2016

2015

 

 

£'000

£'000

Depreciation

 

2,814

4,204

Impairment of property, plant and equipment

 

3,268

1,501

Amortisation

 

25,465

20,671

Impairment of intangible assets

 

172,728

92,380

Impairment of investment in joint venture

 

941

440

 

 

 

 

Exceptional items comprise:

 

2016

2015

 

 

£'000

£'000

Exceptional income

 

(6,874)

Onerous contracts

 

(3,190)

28,475 

Restructuring costs

 

8,734 

4,485 

Surplus property costs

 

4,382 

1,817 

Strategic Review and corporate development costs

 

440 

1,945 

Adjustment to contingent consideration

 

1,314 

Release of acquisition-related liabilities

 

(3,885)

 

 

3,492 

34,151 

 

 

 

 

The exceptional income relates to an amount received in respect of a revision to a customer contract.                                                                                                                                                                                                                                                                                                      

The charge for onerous contracts relates to those contracts under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefit expected to be received under it.  In particular, obligations associated with a number of contracts with a third party IT and business services provider have been provided.  Additionally, a number of restructuring activities were undertaken which resulted in several onerous property lease contracts.                                                                                                                                                                                                                                                                                             

Restructuring costs are associated with a number of restructuring activities undertaken and principally relate to redundancy and termination costs.                                                                                                                                                                                                                                              

Adjustments to contingent consideration reflect the recalculation of amounts owed to former shareholders of the acquired businesses based on performance related criteria in accordance with acquisition related contracts.                                                                                                                                                                                                                                                              

Strategic Review and corporate development costs related primarily to professional advisor fees incurred in respect of Monitise's review of its strategy and ownership structure announced on 22 January 2015 and costs associated with a number of corporate development projects.                                                                                                                                                                                                                                                                                                       

The release of acquisition-related acquired liabilities relates to the settlement of a number of historic patent claims associated with the previous acquisition of Monitise Americas, Inc. (formerly Clairmail, Inc.).

                                                                                                                               

4. Loss per share                                                                                                                                                 

Basic and diluted                                                                                                                                                               

Basic loss per share is calculated by dividing the loss attributable to owners of the parent 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 loss per share.                                                    

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

 

2016

2015

 

Loss for the year

Weighted average number of shares

Loss per share

Loss for the year

Weighted average number of shares

Loss per share

 

£'000

(thousands)

(pence)

£'000

(thousands)

(pence)

Loss attributable to owners of the parent

(233,371)

2,215,733

(10.5)

(223,551)

2,069,164

(10.8)

           

5. Property, plant and equipment

 

 

 

 

 

Office

Computer

Leasehold 

 

 

equipment

equipment

improvements

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

As at 1 July 2014

1,124 

9,386 

5,137 

15,647 

Exchange differences

143 

14 

(23)

134 

Additions

460 

2,103 

358 

2,921 

Disposals

(479)

(3,214)

(47)

(3,740)

As at 30 June 2015

1,248 

8,289 

5,425 

14,962 

Accumulated depreciation and impairment

 

 

 

 

As at 1 July 2014

416 

4,299 

797 

5,512 

Exchange differences

152 

34 

(1)

185 

Charge

412 

2,960 

832 

4,204 

Impairment

427 

1,074 

1,501 

Disposals

(462)

(3,209)

(45)

(3,716)

As at 30 June 2015

518 

4,511 

2,657 

7,686 

Net book value

 

 

 

 

As at 1 July 2014

708 

5,087 

4,340 

10,135 

As at 30 June 2015

730 

3,778 

2,768 

7,276 

Cost

 

 

 

 

As at 1 July 2015

1,248 

8,289 

5,425 

14,962 

Exchange differences

138 

435 

159 

732 

Additions

1,504 

127 

1,635 

Disposals

(319)

(5,439)

(5,758)

As at 30 June 2016

1,071 

4,789 

5,711 

11,571 

Accumulated depreciation and impairment

 

 

 

 

As at 1 July 2015

518 

4,511 

2,657 

7,686 

Exchange differences

79 

139 

222 

Charge

217 

2,042 

555 

2,814 

Impairment

325 

1,606 

1,337 

3,268 

Disposals

(319)

(5,438)

(5,757)

As at 30 June 2016

820 

2,860 

4,553 

8,233 

Net book value

 

 

 

 

As at 1 July 2015

730 

3,778 

2,768 

7,276 

As at 30 June 2016

251 

1,929 

1,158 

3,338 

The impairment charge relates to the write-off of leasehold improvements associated with certain vacated property leases and computer equipment which had become redundant mainly as a consequence of the restructuring activities conducted.  Fully depreciated and impaired assets have been treated as disposals as they have no residual value.                                                                                                                                                                              

6. Intangible assets

 

 

 

 

 

 

 

 

Goodwill

Customer contracts

Intellectual property rights

Acquired technology

Purchased and acquired software licences

Capitalised development costs

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Cost:

 

 

 

 

 

 

 

As at 1 July 2014

196,394

45,694

277

26,744

16,986 

36,383

322,478 

Exchange differences

8,536

473

-

333

(147)

179

9,374 

Additions

-

-

-

-

3,051 

29,611

32,662 

Disposals

-

-

-

-

(2,007)

-

(2,007)

As at 30 June 2015

204,930

46,167

277

27,077

17,883 

66,173

362,507 

Accumulated amortisation:

 

 

 

 

 

 

 

As at 1 July 2014

1,546

7,997

222 

6,936

4,164 

13,846

34,711 

Exchange differences

1

368

(1)

226

(146)

31

479 

Charge

-

6,601

31 

5,026

3,803 

5,210

20,671 

Impairment

40,223

1,853

3,365

9,533 

37,406

92,380 

Disposals

-

-

-

(2,007)

-

(2,007)

As at 30 June 2015

41,770

16,819

252 

15,553

15,347 

56,493

146,234 

Net book value:

 

 

 

 

 

 

 

As at 1 July 2014

194,848

37,697

55 

19,808

12,822 

22,537

287,767 

As at 30 June 2015

163,160

29,348

25 

11,524

2,536 

9,680

216,273 

 

 

 

 

 

 

 

 

Cost:

 

 

 

 

 

 

 

As at 1 July 2015

204,930 

46,167 

277 

27,077 

17,883 

66,173 

362,507 

Exchange differences

25,226 

5,743 

2,352 

305 

1,257 

34,883 

Additions

1,988 

6,333 

8,321 

Disposals

(183,230)

(8,595)

(277)

(6,422)

(11,525)

(4,262)

(214,311)

As at 30 June 2016

46,926 

43,315 

- 

23,007 

8,651 

69,501 

191,400 

Accumulated amortisation:

 

 

 

 

 

 

 

As at 1 July 2015

41,770 

16,819 

252 

15,553 

15,347 

56,493 

146,234 

Exchange differences

18,208 

4,096 

1,963 

335 

527 

25,129 

Charge

15,162 

15 

6,017 

2,253 

2,018 

25,465 

Impairment

162,738 

7,464 

10 

2,200 

316 

172,728 

Disposals

(183,230)

(8,595)

(277)

(6,422)

(11,525)

(4,262)

(214,311)

As at 30 June 2016

39,486 

34,946 

- 

19,311 

6,726 

54,776 

155,245 

Net book value:

 

 

 

 

 

 

 

As at 1 July 2015

163,160 

29,348

25 

11,524 

2,536 

9,680 

216,273 

As at 30 June 2016

7,440 

8,369

- 

3,696 

1,925 

14,725 

36,155 

 

 

 

 

 

 

 

 

 

Impairment in the year                                                                                                                                                     

During the year the useful economic lives of intangible assets were reviewed within the Group accounting policies.  As a result, an accelerated amortisation charge of £2,510,000 was recorded in respect of Acquired Technology and £9,148,000 in respect of Customer Contracts. 

The Group has impaired intangible assets during the year following indications that impairments were required.  Impairments comprise goodwill and other intangible assets relating to historic acquisitions as well as previously capitalised software and research and development costs where either these technologies or geographies are no longer core to Monitise's future technology strategy in the short term due to market readiness.                                                                                                                                              

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating unit ('CGU') that is expected to benefit from that business combination.   The CGUs identified in the current year are the same as those identified in the prior year.               

The carrying amounts of goodwill at 30 June, post impairment, and the CGUs to which they are allocated, are as follows:

 

2016

2015

 

£'000

£'000

Americas

-

116,629

Content

2,440

16,270

Create

4,000

24,500

MEA

1,000

5,761

 

7,440

163,160

                                                                               

7. Reconciliation of net loss to net cash used in operating activities

 

 

 

2016

2015

 

£'000

£'000

Loss before income tax

(243,082)

(227,433)

Adjustments for:

 

 

Depreciation and impairments to property, plant and equipment

6,082 

5,705 

Amortisation and impairments to intangible assets

198,193 

113,051 

Impairment of investments in joint ventures

941 

440

Share-based payments

16,468 

27,977 

(Profit)/loss on disposal of property, plant and equipment

(35)

24 

Finance (costs)/income - net

(1,775)

521 

Exceptional costs

3,492 

34,151 

Share of post-tax loss of joint ventures

58 

3,788 

Operating cash flows before movements in working capital

(19,658)

(41,776)

Decrease/(increase) in receivables

15,292 

9,055 

Decrease in payables

(19,100)

(16,968)

Increase/(decrease) in provisions

1,597 

(656)

Cash used in operations

(21,869)

(50,345)

 

 

 

                

8. Net funds

 

 

 

 

 

 

2016 

2015 

 

£'000 

£'000 

Cash at bank and in hand

42,089 

88,801 

Finance leases

(1,809)

(596)

Net funds

40,280 

88,205 

 

 

 

9. Provisions

 

 

 

 

Reorganisation

Onerous contracts

Total

 

£'000

£'000

£'000

As at 1 July 2015

29,858 

29,858 

Additional provisions in the year

5,602 

10,068 

15,670 

Release of provision

(34)

(8,227)

(8,261)

Utilisation of provision

(3,393)

(15,493)

(18,886)

Exchange differences

28 

471 

499 

As at 30 June 2016

2,203 

16,677 

18,880 

 

 

 

 

 

 

2016

2015

 

 

£'000

£'000

Due within one year

 

10,864

14,658

Due after one year

 

8,016

15,200

 

 

 

 

The additional provision for onerous contracts relates to those contracts under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefit expected to be received under it.  These include provision for surplus properties as a result of the reorganisations undertaken and obligations associated with a number of contracts with a third party IT and business services provider.   Additionally, provision has been made for the ongoing costs of closing the Group's Far East investments and the finalisation of the restructuring activities.                                                                                                                                                                  

                                                                                                                                                                               

The release of provision related to the successful renegotiation of onerous contracts which had been provided for in the prior year.                                                                                                                                                                                                                                


This information is provided by RNS
The company news service from the London Stock Exchange
 
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FR ZMGGLLNKGVZM