IMO.L Regulatory News (IMO)

IMIMOBILE PLC

("IMImobile" or "the Company")

Unaudited preliminary results for the

period ended 31 March 2014

Introduction and note on basis of presentation

IMImobile today announces its unaudited financial results for the period ended 31 March 2014.

IMImobile is a leading provider of software and services which help businesses capitalise on the growth in mobile communication. Its services, delivered in over 60 countries in Europe, the Americas, MEA and India, help its clients to engage and transact with their customers more efficiently through smarter mobile engagement. The company's solutions allow customers to use mobile as a channel to create new revenue streams, as a CRM and customer engagement channel, and as a channel to improve business operations.

The Company was incorporated on 4 December 2013 and did not trade within the 17 week period ended 31 March 2014. As a result, no income statement or cash flow statement has been presented for the company within this preliminary announcement. As at 31 March 2014 the Company had net assets and equity of £100.

On 27 June 2014 the Company was successfully admitted to AIM and issued new shares and used part of the proceeds from the initial placing to pay the consideration for the acquisition of 76% of the issued share capital of IMI Mobile Private Limited. The Company and its NOMAD, Spark Advisory Partners Limited, have entered into a relationship agreement with the two founding shareholders ("the Founders") of IMI Mobile Private Limited who own 24% of the issued share capital of IMI Mobile Private Limited. The relationship agreement gives the Founders the right (but not the obligation) to exchange all of their IMI Mobile Private Limited shares for ordinary shares in the Company on the basis of one IMI Mobile Private Limited share for three ordinary shares in the Company.

Whilst at 31 March 2014 the Company had no trade or assets and had not completed the acquisition of IMI Mobile Private Limited, the Directors believe that the provision of additional information on the results of IMI Mobile Private Limited and its subsidiaries ("the Group") for the year ended 31 March 2014 and its financial position as at 31 March 2014, together with comparative information for the prior year, is necessary in order to present a true and fair view of the company's financial statements. This additional information has also been included in the unaudited preliminary results and is described as the Pro-Forma Consolidated Financial Information.

The additional information does not reflect the acquisition of IMI Mobile Private Limited by IMImobile PLC. This will be accounted for as a capital reorganisation, reflecting the substance of the transaction. Hence the consolidated financial statements of the company will be prepared on the same basis as presented in the Pro-Forma Financial Information with the 24% interest in IMI Mobile Private Limited owned by the two founding shareholders accounted for as a non-controlling interest.

The financial highlights and commentary below are based on the Pro-Forma information described above.

Group unaudited results at a glance

1 Adjusted EBITDA is defined by the Group as loss/profit before tax, depreciation, amortisation, net finance costs, fees incurred in relation to IPO, share based payment charge and excluding the impact of the disposal of subsidiaries

2Adjusted profit after tax is defined by the Group as loss/profit before fees incurred in relation to IPO, share based payment charge and excluding the impact of the disposal of subsidiaries

3 EPS for the Group has not been presented in the additional Pro-Forma consolidated financial information in note 3 as it does not reflect the non-controlling interest referred to in note 3.1 which will be included in the groups consolidated financial statements in the next reporting period

Group key financial highlights

· Revenue up 13% to £43.4m (2013: £38.5m)

· Gross profit up 18% to £27.9m (2013: £23.5m)

· Adjusted EBITDA1 up 19% to £7.2m (2013: £6.1m)

· Adjusted profit after tax2 up 45% to £3.8m (2013: £2.6m)

· Profit after tax up 86% to £3.9m (2013: £2.1m)

· Results in line with market expectations

· Outstanding contribution from Middle East and Africa with Gross Profit up 149% to £10.7m

· Net cash generated from operating activities of £8.7m, representing operating cash conversion of 121% (2013: 108%)

· Cash and cash equivalents at 31 March 2014 of £9.3m (2013: £4.6m)

Operational highlights

· New major operator wins in Middle East and Africa open up new geographies

· First major government contract win in India

· Launch of social networking products - DaVinci Social and TweetServe

· Opened sales office in Atlanta, Georgia and signed first major US customer contract

· Listed on the Alternative Investment Market of the London Stock Exchange in June 2014 raising net proceeds of approximately £8m (after considering fees and the acquisition of the Group) to support significant growth opportunities

Outlook

The 2015 financial year has started well with trading in line with expectation and renewals of several major customer contracts across the Group. IMImobile remains well placed to take advantage of the trends driven from the proliferation of mobile data networks and smart devices.

Jay Patel, Chief Executive Officer of IMImobile PLC, commented: 

"The year to 31 March 2014 was another year of progress for IMImobile with key contract wins across the globe demonstrating the attractiveness of our product offering to enterprises and network operators alike.

Our current financial year has started well with trading in line with our expectations and the Group, following the successful IPO, is well positioned for further growth. Underpinned by strong repeat and recurring revenue streams, we will continue to build on the organic growth achieved to date, whilst seeking additional growth opportunities in new regions such as the US and also complementary acquisitions.

As we invest and grow our business, taking advantage of positive global trends in the mobile market, we look forward to the future with confidence."

Cautionary statement

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and IMImobile's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, the outcome of business or industry restructuring, changes in economic conditions, currency fluctuations, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.

IMImobile undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.

For further information please contact:

About IMImobile PLC

IMImobile is a leading provider of software and services which help businesses capitalise on the growth in mobile communication. Its services, delivered in over 60 countries in Europe, the Americas, MEA and India, help its clients to engage and transact with their customers more efficiently through smarter mobile engagement. The Company's solutions allow customers to use mobile as a channel to create new revenue streams, as a CRM and customer engagement channel, and as a channel to improve business operations.

IMImobile's DaVinci suite of products is modular, scalable and delivered through cloud infrastructure which is integrated into mobile operator networks, internet services and social media platforms. The products and solutions have helped IMImobile establish a blue-chip client base of leading mobile operators and global enterprises. Key customers include Vodafone, O2, Telefonica, Aircel, Airtel, BSNL, AT&T, MTN, France Telecom, Centrica, Coca-Cola, Universal Music, Tata, the AA, the BBC and major financial institutions.

The Company is headquartered in London with offices in Hyderabad, Atlanta and Dubai and has 650 employees worldwide. IMImobile is quoted on the London Stock Exchange's AIM market with the TIDM code IMO.

Chairman's Statement

It is with great pleasure that I introduce the Group's inaugural statement as an AIM quoted company. Since the end of our financial year ended 31 March 2014 we have successfully completed the flotation of the Group and I would like to give a warm welcome to our new shareholders. The listing on AIM, combined with this strong set of results, helps position the Group well for continued future growth and I wish to thank all our advisers for steering us through the IPO process. I also welcome John Allwood and Simon Blagden as Non-Executive Directors. John, a former CEO of Orange UK and Mirror Group PLC, and Simon, former International CEO of The Quante Group and current Non-Executive Chairman of Fujitsu UK, bring a wealth of experience in telecoms, IT and media to the Group.

Since founding the Group we have been focused on the opportunities created by the expansion of mobile operator networks and their capacity to carry data services. The continued evolution and growth of these networks and smartphones provides the foundations for new business opportunities. Since we started the business we have remained entrepreneurial in our approach to product and market development and we shall remain so in what has become a complex and competitive eco-system.

We have always focused on profitable and cash generative growth. We have significantly developed the international footprint of our business to fully leverage the intellectual property created by the Group. I am pleased to report, therefore, that our successful growth over the last year has been accompanied by deployments in several new geographies.

In the year to 31 March 2014 revenues grew by 13% to £43.4m (2013: £38.5m) with significant growth coming from the Middle East and African region and continued growth from more mature European markets. The fact that growth has come despite a significant decline in the Indian market due to regulatory issues is testament to the resilient and diversified nature of the business.

Our strategy from the outset has been to create intellectual property in mobile data and services that can be deployed in global markets through a business model of recurring revenues. We believe that our DaVinci platform and suite of enterprise applications are well positioned to take advantage of the structural trends surrounding mobility, social networking and cloud computing.

Chief Executive's Report

In the year to 31 March 2014 the Group has delivered good growth across all relevant financial metrics and converted profits into cash. Growth has been robust in Europe with significant growth coming from the Middle East and Africa where a particularly good year for licence sales boosted revenues and margins significantly. The increase in revenues and profits has been achieved despite the establishment of a new US office and sales presence in Atlanta and against a backdrop of challenging conditions in India.

Our core products and services

Our market offerings, based on our own intellectual property, consist of a mobile service delivery platform, the DaVInci ESP, a suite of software applications and a set of technical, analytical and creative professional services. The products and services enable our customers to use mobile technologies to drive incremental revenue, enhancecustomer engagement and improve businessproductivity.

Revenue generation products and services

These are designed to deliver incremental revenue for clients through mobile and social channels, including digital and mobile content storefronts, mobile payments and caller ring back tone solutions.

Customer engagement products and services

Use of these solutions enables clients to acquire, service, engage and retain customers using mobile and digital channels and includes multichannel customer communication, marketing automation, social self-care and audience engagement solutions.

Business productivity products and services

These enable our clients to mobilise certain business processes and improve employee productivity through mobile technologies. These include field force management and customer care solutions.

Our revenue models

We deliver our core products and services using different revenue models that are based on the requirements of our customers. The products are tailored to meet with our clients' requirements and can be delivered via our cloud infrastructure either as a managed service or self-service and can be licensed for on-premise deployment.

Managed Solutions

A combination of software and professional services where we work closely with our clients to deliver software using our cloud infrastructure and assume the day to day management responsibilities of the service as well as technical delivery and platform maintenance. Managed Solution contracts tend to be long-term and recurring.

Software as a Service (SaaS)

A provision of software or API connectivity which is used directly by the client; this is supported and hosted using our infrastructure in the cloud. The commercial model tends to be a mix of recurring licence and support fees plus transactional revenues. The on-going operational support requirements tend to be lower, with variable third-party costs incurred, for example, in wholesale SMS messaging or email costs. For blue-chip clients the services often require deep integration into their own work-flows and processes and consequently are long-term relationships.

Licence Fees

Software provided under a licence fee model is deployed in the client's own network environment and sometimes sold in conjunction with third-party hardware. The licence fee is typically paid up front with an annual maintenance charge for ongoing support.

Regional performance

The Group is managed commercially on a regional basis with centralised resources for software development, finance and general management. A key operating metric for each region is Gross Profit as there are considerable differences in gross margins across regions, product lines and revenue models. Gross Profit also measures most directly the value of the software and solutions delivered by the Group which excludes the impact of network infrastructure, third party hardware and content costs.

Europe

Gross Profit in Europe grew steadily by 8% during the year, excluding the impact of discontinued operations. The margins for SaaS and Managed Solutions grew as expected due to further reductions in the cost of network infrastructure, a trend we expect will continue.

We are well positioned to take advantage of several macro trends which affect the UK market. Though revenue generation solutions for traditional operator led content services are in decline, there are growth opportunities in direct carrier billing and mobile payments and in 2014 IMImobile became the UK market leader in payments charged directly to the consumers' mobile bill.

The measurement and understanding of customer engagement is a growing area for large enterprises and mobile operators. Our previous successes and experience in this area led to several new client wins during 2014, including a deployment with Mobile by Sainsbury's, a Mobile Virtual Network Operator ("MVNO") launched by Sainsbury's on the Vodafone network. We provide a managed solution for customer engagement, the on-boarding experience of new customers and campaign management.

The increasing trend for large enterprises to adopt cloud based services and significant growth of digital communications with their customers has also supported the growth of Gross Profit derived from business productivity solutions. A particularly innovative deployment completed during the year was the "TweetServe" application developed in partnership with Twitter and deployed for O2, allowing customers to manage their tariff and account via their Twitter account. This "world first" solution helps increase consumer satisfaction, reduce customer service calls and add insight into specific consumer behaviour. This deployment has also achieved significant industry recognition, winning awards for the 'Best Use of Mobile for Customer Services'  

Middle East and Africa

Gross Profit grew very strongly by 149%. Growth in recurring revenue was 68% as further services and countries were launched under Group agreements with MTN and Orange. In particular services were successfully launched in Ivory Coast, Democratic Republic of Congo, Botswana and Senegal.

It was an exceptionally good year for licence revenue as two significant licence deals were signed with a global Systems Integrator and leading operator group in the Middle East and deployments completed in Kenya, Nigeria, Ghana and Iran. These multi-million US dollar licence deals are typically for an installation of the DaVinci ESP or multiple modules in the platform and demonstrate the value inherent in the intellectual property.

Though deployments can be lengthy and local network infrastructure and connectivity unstable, the Group has demonstrated an ability to deliver revenue generating services successfully in challenging circumstances and as a result is well placed to benefit from the predicted growth across Africa. In addition the Group has built relationships throughout the Middle East which position it for further growth across the region. 

India and SE Asia

Gross Profit declined by 29% compared with 2013 of which 10% was due to a depreciation of the Indian Rupee. The decline reflects a fall of 12% in Revenues measured in local currency and is a direct consequence of the implementation of new consumer protection regulation that has impacted our customers, chiefly the mobile network operators. In India our main activity is managing certain content and value added telecom services for mobile operators and tighter regulation requiring operators to seek additional consents to sign customers up to these services led to a period of transition as new third party consent gateways have been implemented.

As a Group we have welcomed the changes as overly aggressive marketing and over-charging had damaged consumer perception of mobile services and we believe that in the long term the changes will benefit the overall market.

During this period we have successfully won additional managed service deals with a major operator in India as well as a new operator group in Myanmar. We expect the full benefit of these deals to be realised over the next few years.

We also were successful in winning a contract to supply a regional state government in India covering 65m habitants, with an mGovernance multi-channel platform that will enable citizens in that state to access government and third party services via IVR (Interactive Voice Response), USSD (Unstructured Supplementary Service Data, allowing mobiles to communicate with service providers' computers), SMS, Mobile internet and on-device apps.

Strategic Initiatives

We continue to focus on our long-term objective of building a global business and see excellentopportunities for IMImobile to grow both organically and via acquisition.

To this end, during the year we took a significant step in establishing a truly global footprint with the opening of an office in the US. The US marketis undergoing considerable change currently and increasing competition amongst the US carriers is driving the need for US carriers to increase customer retention and loyalty. This represents an exciting opportunity for the Company to provide its market-leading customer engagement solutions and we were delighted to win our first major deal with a leading prepay operator during the year. Weexpect to make significant commercial progress in the next 12 monthsand in view of the scale of the opportunity, we will continue to invest for long- term growth.

In addition, the market for the provision of mobile software and services remains9 fragmented and we believe that IMImobile is well placed to act as a consolidator, underpinned by its strong financial position and broad based software platform. We continue to seek selective acquisitions which offer complementary product lines or customer bases, in line with our acquisition criteria, where we see the potential to deliver attractive shareholder value.

Outlook

The 2015 financial year has started well, building on the progress achieved in 2014 with trading in line with Directors expectations.

The contracts won last year will help to enhance revenues and profitability in 2015 and beyond. Moreover, since the start of the new financial year, the Company has renewed several major customer contracts. Underpinned by strong repeat and recurring revenue streams, we continue to build on the organic growth achieved to date. We will also continue to invest in our innovative solutions, building our business in both established geographies and in newer regions such as the US, which represents an exciting growth prospect for the Company.

Further, following the successful IPO of the Company in June, our strong financial position and cash balances will support our ambition to act as a consolidator within our industry and accelerate our growth potential.

IMImobile remains well placed to take advantage of the trends driven by the proliferation of mobile and data networks and smart devices and we look forward to the future with confidence.

Financial Review

Revenue and Gross Profit

For the year to 31 March 2014 total revenue increased by 13% to £43.4m (2013: £38.5m) and gross profit increased by 18% to £27.9m (2013: £23.5m). The Board considers that Gross Profit is the key operational measure in the business.

Geographical split of revenues and gross profit is as follows:

Revenue

Gross Profit

4 Non-core Greek subsidiary disposed of in May 2013

The Europe region gross profit grew by 8% in the year after removing the impact of the non-core Greek subsidiary which was sold in May 2013. Gross margin in Europe in the year was 51.8% up from 50.6% in 2013 in part as a consequence of the declining cost of third party network infrastructure.

The Middle East & Africa (MEA) region had a very strong year as a result of year on year increases from both existing managed solutions contracts and licence fees, with gross profit increasing by 149% to £10.7m (2013: £4.3m). Gross profit margin in MEA was up to 80.6% from 66.2% reflecting the increased proportion of licence fees recognised during the period.

In GBP the Indian and SEA region gross profit declined in the year by 29% to £5.9m (2013: £8.3m). A significant proportion of the year on year decline was attributable to the weakening of the Indian Rupee against the pound, and in local currency gross profit fell by 20%. The major reason for the decline in gross profit in local currency was the implementation of regulations in the Indian market imposed by the Telecom Regulatory Authority of India ("TRAI Regulations") which affected the managed solutions provided to the mobile operators in India. The TRAI Regulations include limitations on the volume of promotions that can be sent to consumers and the requirement for additional third-party consent to be obtained prior to the billing of any consumers for services consumed via the mobile device. The implementation of regulations was substantially completed during July 2013, and revenues were stable throughout the second half of the year.

Sales, marketing and general expenses

Sales, marketing and general expenses in the year were £23.0m (2013: £20.6m) including depreciation and amortisation of £2.1m (2013: £2.6m) and non-cash share based payment charge of £0.2m (2013: £0.5m). The increase in expenses was largely attributable to increased headcount in sales, commercial and product teams responsible for new business and proposition development.

Group operating profit and adjusted EBITDA

Operating profit for the year to 31 March 2014 was £4.9m (2013: £3.0m) and adjusted EBITDA was £7.2m (2013: £6.1m) representing an increase of 19.0% against the prior year. Adjusted EBITDA margin rose to 16.6% from 15.8%.

Group cash flow and working capital

Year-end cash and cash equivalents were £9.3m (2013: £4.6m). There were no borrowings at 31 March 2014 (2013: £1.3m). Cash generated from operations was £8.7m (2013: £6.6m) and represents an operating cash flow conversion of 121% of Adjusted EBITDA (2013: 108%).

Group working capital is made up as follows:

Trade receivables and payables include "pass through" amounts generated from mobile payment transactions. The receivables are from mobile operators and payables to customers who use IMImobile's payment APIs. These amounts are excluded from revenues and cost of sales, as the Group accounts only for the commission earned on such transactions within revenue as it is not the principal obligor in the arrangement.

Group profit after tax

Profit after tax was £3.9m (2013: £2.1m) after the impact of IPO costs of £0.1m (2013: £nil); share based payment charges of £0.1m (2013: £0.5m) and a one-off gain from the disposal of a subsidiary of £0.3m (2013: nil).

Group taxation

The tax charge for the year was £1.3m (2013: £0.6m). The effective rate of tax for the year was 25.5% (2013: 22.1%).

Group Capital expenditure

Capital expenditure during the year was £1.9m (2013: £1.6m) split between plant, property and equipment of £1.7m (2013: £1.3m) and third party software £0.2m (2013: £0.3m).

1. Basis of preparation

IMImobile PLC was incorporated on 4 December 2013 and did not trade within the 17 week period ended 31 March 2014. As a result no income statement, or cash flow statement, has been presented for the Company within this preliminary announcement.

On 27 June 2014 the Company was successfully admitted to AIM and issued new shares and used part of the proceeds from the initial placing to pay the consideration for the acquisition of 76% of the issued share capital of IMI Mobile Private Limited. The Company and its NOMAD, Spark Advisory Partners Limited, have entered into a relationship agreement with the two founding shareholders of IMI Mobile Private Limited who own 24% of the issued share capital of IMI Mobile Private Limited. The relationship agreement gives the Founders the right (but not the obligation) to exchange all of their IMI Mobile Private Limited shares for ordinary shares in the Company on the basis of one IMI Mobile Private Limited share for three ordinary shares in the Company.

Whilst at 31 March 2014 the Company had no trade or assets and had not completed the acquisition of IMI Mobile Private Limited, the Directors believe that the provision of additional information on the results of IMI Mobile Private Limited and its subsidiaries for the year ended 31 March 2014 and its financial position as at 31 March 2014, together with comparative information for the prior year, is necessary in order to present a true and fair view of the Company's financial statements. This additional information is described as the Pro-Forma Consolidated Financial Information and is presented in note 3

While the financial information of the Company contained in this unaudited preliminary announcement has been prepared under the historical cost convention in accordance with applicable United Kingdom law and accounting standards, this announcement as it refers to the Company, does not itself contain sufficient information to comply with UK GAAP.

The information for the period ended 31 March 2014 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ended 31 March 2014 will be delivered to the Registrar of Companies. The audit of the statutory accounts for the period ended 31 March 2014 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

At 31 March 2014 the Group had net assets of £13.9 million including £9.3 million of cash and cash equivalents (31 March 2013: net assets of £10.0 million including £4.6 million of cash and cash equivalents). The successful listing resulted in net proceeds for the Company of approximately £8 million (after considering fees and the acquisition of the Group). In determining whether the Company's accounts can be prepared on the going concern basis, the directors considered the Company, and Group's, business activities together with factors likely to affect its future development, performance and its financial position including cash flows, liquidity position and the principal risks and uncertainties relating to its business activities. Considering this and the future prospects of the Group and its current net asset position the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements

2. Subsequent events

On 16 June 2014 the Company agreed to acquire the IMImobile Private Limited Shares from each of the non-India resident minority shareholders for a cash consideration three times the placing price. The total consideration payable by the Company (before deduction of Commissions and tax) is £3,629,106. Such consideration was paid by the Company from the proceeds of the placing shortly after admission.

On 16 June 2014 the Company issued a letter to the India resident minority shareholders in IMI Mobile Private Limited. Pursuant to the terms of the letter the Company agreed to acquire the IMI Mobile Private Limited shares owned by the shareholders for a cash price of not less than INR 68.18. Following acceptance of these terms the Company served notice to the shareholders informing them that the Company intends to acquire each of the IMImobile India Private Limited shares at a price equal to three times the placing price less an amount equal to commission. The aggregate consideration payable by the Company is £2,798,622 which was paid by the Company from the proceeds of the placing shortly after admission.

On 18 June 2014 the Company entered into an agreement with Tarimela Business Holdings Private Limited and Shyamprasad Bhat pursuant to which the Company agreed to acquire 909,034 IMI Mobile Private Limited shares from Tarimela Business Holdings Private Limited and 157,809 IMI Mobile Private Limited shares from Shyamprasad Bhat for a cash consideration three times the placing price. The aggregate consideration payable to Tarimela Business Holdings Private Limited and Shyamprasad Bhat was £3,272,522 and £568,112 respectively. Such consideration was paid by the Company from the proceeds of the placing shortly after admission.

On 18 June 2014 the Company entered into an agreement with the Mauritian Shareholders pursuant to which the Company agreed to acquire 6,682,400 IMI Mobile Private Limited shares from the Mauritian Shareholders in consideration of the allotment of 20,046,200 Ordinary shares. In addition the Company agreed to acquire a further 2,666,570 IMI Mobile Private Limited shares from the Mauritian shareholders for cash. Each IMI Mobile Private Limited share was acquired for a cash price equal to three times the Placing Price and the aggregate consideration payable by the companies is £9,599,652. Such consideration was paid by the Company from the proceeds of the placing shortly after admission.

On 27 June 2014 the Company was successfully admitted to trading on AIM, a market operated by the London Stock Exchange. The initial placing, which comprised 25,000,000 Ordinary shares at £1.20 per Ordinary Share, raised gross proceeds of £30,000,000. £19,868,014 of the proceeds raised was used by the Company to satisfy its obligations to pay the cash consideration for the acquisition of IMI Mobile Private Limited, and its subsidiaries, which are summarised above.

3. Additional information

The accompanying notes are an integral part of the Pro-Forma consolidated Financial Information and are all attributable to continuing operations.

The accompanying notes are an integral part of the Pro-forma consolidated Financial Information.

The accompanying notes are an integral part of the Pro-Forma consolidated Financial Information.

The accompanying notes are an integral part of the Pro-Forma consolidated Financial Information.

The accompanying notes are an integral part of the Pro-Forma consolidated Financial Information.

PRO-FORMA CONSOLIDATED FINANCIAL INFORMATION

Notes to the Pro-Forma Financial Information

3.1 Basis of preparation of additional information

The financial information contained in the Pro-Forma consolidated Financial Information for the years ended 31 March 2013 and 2014 has been prepared applying the recognition and measurement principles set out in International Financial Reporting Standards as adopted for use in the European Union but do not contain all disclosures required by those standards.

The consolidated Financial Information, hereafter referred to as "the Group", is prepared on the historical cost basis. A presentational currency of UK Pounds Sterling has been used and accounts have been translated from other functional currencies into UK Pounds Sterling. The preparation of the Pro-forma consolidated Financial Information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

The preparation of the Pro-forma consolidated Financial Information in conformity with International Financial Reporting Standards requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Pro-forma consolidated Financial Information and the reported amounts of revenue and expenses during the year. Actual results could differ from the estimates.

Basis of consolidation

The Pro-forma consolidated Financial Information incorporates the consolidated financial information of IMI Mobile Private Limited and its subsidiaries. Control is achieved where IMI Mobile Private Limited has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies into line with those used by the Group. Inter-company balances and transactions, including inter-company profits and unrealised profits and losses are eliminated on consolidation.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss.

As described in Note 1, the additional information does not reflect the acquisition of IMI Mobile Private Limited by IMImobile PLC. This will be accounted for as a capital reorganisation, reflecting the substance of the transaction. Hence the consolidated financial statements of the company will be prepared on the same basis as presented in this Pro-Forma Financial Information with the 24% interest in IMI Mobile Private Limited owned by the two founding shareholders accounted for as a non-controlling interest.

3.2 Significant accounting policies

The principal accounting policies set out below have been applied consistently by the Group entities:

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group's interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each cash generating unit ("CGU" or "unit"), or Groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or Group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Accounts receivable

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Accounts payable

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown net of returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Where the Group enters into arrangements to deliver multiple elements (licensing, servicing and maintenance), such elements are separated for recognition based on stand-alone value where sold and delivered separately. If such elements cannot be separated they are treated as a single deliverable and recognised over the period of delivery when the criteria for recognition have been met and customer acceptance received. Amounts incurred but not yet billed are classified as unbilled amounts in work in progress. Where the Group acts as principal in the sale of goods and content, revenue is recognised on a gross basis.

Managed solutions and SaaS contracts

Revenues from managed solutions contracts are recognised proportionally over the period during which the services are rendered. Revenue from content related sales is recognised on delivery of the content, when all significant contractual obligations have been satisfied, the significant risks and rewards of ownership have been transferred and no effective ownership control is retained. Revenues are billed up to 60 days after month end and classified as amounts billable not yet invoiced till this point. 

Premium rate revenues, within SaaS contracts, recognised within turnover relate only to the commission earned on hosting each service and are recognised at the point of delivery to the customer. Pass through revenues collected on behalf of the customers are not recognised within turnover.

Licence fees and royalties

Revenue from sale of end user licences is recognised at fair value on customer acceptance following installation at the customer's locations as per the terms of the contract.

Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors that makes strategic decisions.

3.3 Business and geographical segments

Management considers the business from both a geographical and product perspective. Geographically, management considers the performance in Europe (predominantly relating to the UK), India and South East Asia (SEA), Middle East and Africa (MEA) and the rest of the world. From a product perspective management considers the performance within Managed solutions, Software as a service (SaaS) and Licence fees.

The performance of the operating segments is assessed based on a measure of revenue and gross profit. Any sales between related parties are carried out at arm's length.

The Group does not regularly provide information in relation to the assets or liabilities of operating segments to management.

Segment revenue and results

The following is an analysis of the Group's revenue and results by delivery model.

During the year revenues from Customer A and Customer B accounted for 12% (2013: 7%) and 15% (2013: 11%) of the Group's turnover.

Geographical revenue and results

The following is an analysis of the Group's revenue and results by geographical segment:

Sales between segments are carried out at arm's length. The revenue from external parties reported is measured in a manner consistent with that in the Pro-Forma Consolidated Income Statement. Revenues are attributed to countries on the basis of the customers' locations.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 3.2 for each period. The Group measures segment profit and loss as gross profit as reported. The Group does not allocate general admin, marketing and sales expenses to reported segments.

3.4 Tax

The total tax charge for the year can be reconciled to the result per the Pro-Forma consolidated Income Statement as follows:

Deferred tax in respect to temporary differences arising from long-term employee benefits including retirement benefits, provisions for doubtful debts, of carried forward trading losses available to offset profits in future periods and the difference between tax and accounting depreciation have been recognised in the income statement.

The finance act 2013 reduced the UK standard rate of corporation tax from 23% to 21% from 1 April 2014 and 21% to 20% from April 2015. All UK deferred tax assets and liabilities have been recognised at 20% (2013: 23%).

3.5 Goodwill

Goodwill is monitored by management at the operating segment level. The following is a summary of goodwill allocation for each operating segment:

The recoverable amount of all CGU's has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The long-term growth rates are management's conservative estimates. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments.

No goodwill has been allocated to Licence and professional fees as it is not expected to benefit from the synergies of the business combination. Operating segments serve a common group of customers such that the key assumptions used for value-in-use calculations for both operating segments are as follows:

No goodwill has been allocated to licence and professional fees as it not expected to benefit from the synergies of the business combination. Operating segments serve a common group of customers such that the key assumptions used for value-in-use calculations for both operating segments are as follows:

Value in use is calculated for the various CGU's based on approved business plans and forecasts taking into account certain variables for each CGU. Below is a description of the principal variables that have been considered for each CGU with significant goodwill.

Long-term growth rate

In all cases, impairment tests are performed using the projected cash flows based on board approved forecasts and strategic plans over a five year period. Cash flow projections from the sixth year are calculated using an expected constant growth rate.

Discount rate

The Pre-tax discount rates used are disclosed above and take into account the market risk rate associated with the company. A discount factor is calculated using the discount rate and applied to future projected cash flows.

The Group has conducted a sensitivity analysis on the impairment test of each CGUs carrying value. A cut in the growth rate by 3% percentage points would not cause the carrying value of goodwill to be less than its recoverable amount.

3.6 Cash and cash equivalents

Restricted short-term bank deposits represent cash balances deposited in bank accounts attracting a preferential interest rate and are typically deposited for a period of 90 to 180 days. Preferential interest rates are agreed in advance of the deposit being transferred and depend on the prevailing local rates and market conditions at the time.

3.7 Trade and other receivables

The fair value receivables approximate their carrying values as at 31 March 2014 and 31 March 2013.

As of 31 March 2014, trade receivables of £789,000 (31 March 2013 £1,509,000) were past 60 days due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

3.8 Notes to the Pro-Forma consolidated Cash Flow Statement

5 £739,000 of costs related to the IPO were incurred by the Group in the year ended 31 March 2014 of which £671,000 are held in prepayments at the balance sheet date awaiting transfer to equity on completion of the transaction. The remaining £68,000 of costs have been expensed in the period.

3.9 Disposal of subsidiary

On 21 May 2013, the Group sold WIN Societe Anonyme Wireless Products and Services to Moviestar Entertainment Limited for €1. Net assets disposed of were £340,000, comprising assets of £1,260,000 and liabilities of £1,600,000. The disposal resulted in a gain on disposal of £340,000 recognised through the Pro-Forma consolidated income statement and the cash balance on the date of disposal was £566,000 as stated in the Pro-Forma consolidated cash flow statement. The trade from this subsidiary is considered immaterial to the Group by the Board and hence, is not categorised as a discontinued operation.

3.10 Redeemable preference shares

The Group had in issue 4,711,768 redeemable preferences shares, issued at a premium of 220 Indian Rupees over their nominal value of 10 Rupees. The shares carry a dividend entitlement of 0.01% per annum. In the event equity shareholders receive a dividend in excess of this, the preference shareholders are entitled to the same dividend as the equity shares. During the year ended 31 March 2014 the preference shareholders waived their entitlement to such dividends. The two classes of preference shares have been detailed below:

Preference share A (optionally convertible preference shares)

2,016,216 optionally convertible Series A Preference shares were issued on 29 June 2006 and 521,739 were issued on 5 November 2009; both have a conversion ratio of 1.

Preference share A holders were entitled to, at their option, require IMI Mobile Private Limited to convert all or any part of the shares held by it into equity shares and without additional payment.

On 20 June 2014 the optionally convertible preference shares were converted to equity prior to the listing of the Company. Please refer to note 2 for further details related to the listing of the Company.

Preference share B (Mandatorily convertible preference shares)

2,173,813 optionally convertible Series A Preference shares were issued on 5 November 2009. Upon subscription to the Series B Preference Shares by the Investor, the Series B Conversion Ratio shall be such as gives the Investor a shareholding of 15.21 per cent in the share capital of the company at Closing on a Fully Diluted Basis.

Preference share B holders are entitled to, at their option, require the company to convert all or any part of the shares held by it into equity shares. In the event of a qualified IPO or one day prior to the date that is 20 years from the date of issuance, preference shares held by preference shareholders B will be mandatorily convertible into equity shares.

On 20 June 2014 the optionally convertible preference shares were converted to equity prior to the listing of the Company. Please refer to note 2 for further details related to the listing of the Company. On initial recognition the preference shares have been classified in borrowings and no amounts have been allocated to equity based on the redemption terms.