MAIS.L Regulatory News (MAIS)

blur Group plc

("blur Group", "blur", the "Group" or the "Company")

Unaudited Interim Results

blur Group, the world's first enterprise services platform and marketplace, is pleased to present its unaudited interim results for the six months ended 30 June 2016. This period saw a continued focus on the larger Enterprise opportunities that drive higher margin revenues, lower costs, improved EBITDA and cash burn.

Operational highlights

· EBITDA** loss reduced by 54% compared to H1 2015

· Cash burn, excluding foreign exchange, reduced by 58% compared to H1 2015. Cash collections improved

· Enterprise-focused model producing higher quality revenue streams

· Pilot phases, that could lead to wider roll out programs, in progress with a number of large Enterprise customers

· Total revenues lower due to reduction in low margin, small business revenues

· Higher margin revenues improved 75% Q2 vs. Q1 2016. $0.07m in H1 2016

· Focus on Enterprise customers drives further improvements in operational gearing

Summary Financial Results

**before share based payments and foreign exchange differences

Philip Letts, Chief Executive Officer, commented:

"During H1 2016, we have seen continued validation of our Enterprise strategy with the proportion of Enterprise services projects being placed on the platform growing in the period. We have seen a reduction in revenues overall, as the project revenue we derive from the small business continues to be replaced by higher margin Enterprise customers, improving both blur's operational leverage and margins. These results indicate the medium to long term benefits we can expect from working with larger Enterprises.

"By focussing on our Enterprise strategy, blur's operational efficiency has continued to improve. Post-proof of concept, blur no longer uses digital marketing tools, such as Pay Per Click, to attract higher volumes of lower quality projects to the platform. Instead we work closely with targeted, larger Enterprise customers to gain a deep understanding of their business and how we might best partner with them to reduce their indirect business services spend. As indirect business services spend can make up around 20% of overall business spend, our approach can have a considerable impact on the cost base of these Enterprises and as such blur is working toward long term, significant relationships with these Enterprises.

"This strategy allows us to generate higher margin revenues, predominantly through license and subscription income derived from providing access to our Marketplace. We've seen the start of income being derived from our Premium Services products, and expect these offerings to become increasingly relevant to our Enterprise customers as we work together to develop wider adoption of our platform across their businesses.

"With the reduction in low margin, small business revenues, the higher quality nature of our customer base means that blur is able to improve, and increasingly automate, its delivery processes, with H1 2016 achieving a reduction in delivery staff costs of 60% compared to H1 2015. Despite the overall revenue reduction in the period, that automation and increased efficiency saw the business generate a gross profit in Q2 2016. This gross profit has been driven by working ever more closely with our customers to drive projects to a successful conclusion rather than, as was the case in the earlier years, through the application, against ultimately unsuccessful projects, of a Cancellation fee.

"By reducing the number of small business customers, we have also been able to gain efficiency in other areas of our business. This is reflected in total administrative expenses falling by 46% compared to H1 2015. Our costs of bad debts have been positively transformed with a small credit in H1 2016, compared to a $0.4m charge in H1 2015 and we've also reduced our headcount costs by 40% as our platform has matured into an increasingly fully automated, Enterprise-class tool.

"Across a number of verticals, we see increasing engagement from larger Enterprises as the wider macro-economic environment affects the leadership priorities in these organisations. Cost control, supporting cash optimisation, has moved up the CEO's and CFO's agenda and while the long sales cycles will mean it will take time for those trends to positively impact blur's revenues, we remain convinced that partnering with larger Enterprises and working towards a wider adoption of blur's platform is the right strategy to support blur's path to sustainable profitability."

This announcement contains inside information.

For further information, please contact:

blur Group plc investors@blurgroup.com

Tim Allen, CFO Tel: +44 (0) 1392 927189

N+1 Singer

Shaun Dobson/Jen Boorer Tel: +44 (0) 20 7496 3000

Yellow Jersey PR

Alistair de Kare-Silver Tel: +44 (0) 7825 916715

About blur Group plc at blurgroup.com

Since 2010, blur Group has been helping enterprises worldwide eliminate waste and inefficiency in their indirect procurement process through its market leading Enterprise Services Platform & Marketplace. To date over 65,000 businesses, including companies like, Tesco, Danone, Trinity Mirror, and PwC, have adopted blur's platform to either buy or sell services online submitting over $500m of services requirements to blur Group's platform.

blur Group is a public company listed on the London Stock Exchange's AIM market (BLUR) and is headquartered in the UK with regional sales offices in the US and Europe.

Business Review

blur's Enterprise Services Platform

blur Group operates an Enterprise Services Platform that helps private and public sector organizations eliminate the waste and inefficiency inherent in the purchasing of business services. It combines cloud software and managed services which include sourcing, supplier short listing, contract and project management with payment processing and reporting.

Organizations such as Danone and the University of Greenwich increasingly trust blur to source, manage and deliver their business service needs. blur's Marketplace has the world's largest number of approved organizations supplying business services.

Enterprise projects 

During H1 2016, blur continued to widen its engagement with large Enterprise customers, with an increasing proportion of its project base being submitted by Enterprise customers:

* blur defines the Enterprise as a business with 50 or more employees

In addition, blur continued to see high rates of repeat business in the period with 95% of all projects kicked off in H1 2016 coming from existing customers.

Enterprise pipeline

During the period, blur kicked off projects from four new Enterprise customers:

· US-based Systems Integrator

· UK-based law firm

· UK-based multi-platform media organization

· Multinational real estate service firm

These four new customers are all at an early stage of using blur's platform to reduce their indirect spend.

Typically, the early stages of blur's engagements with its Enterprise customers consist of two phases:

· Pre-pilot - blur and the Enterprise work together to demonstrate the benefits of blur's platform, analyze the organization's indirect spend data, calculate potential savings and identify projects that would be suitable for a Pilot

· Pilot - the Enterprise places a small number of lower value projects through blur's platform to support the business case for wider adoption

In H1 2016, blur worked with, among others, the following three customers:

UK listed enterprise, aerospace engineering; blur is working with a large corporation on a pilot program that is planned for Q3 and Q4 2016. The pilot process will involve on-boarding a single division's indirect spend supplier base to blur's platform.

UK listed enterprise, multi-platform media; blur is working with a corporation on an initial pilot due to launch in Q3 2016. The pilot is focused on improving the effectiveness of the corporation's marketing spend.

UK listed enterprise, oil and gas; blur has been working with this large corporation for several quarters, with a pilot in process. blur aims to become the strategic supplier for indirect business services spend, initially focused on the marketing function.

Beyond the successful completion of the pilot phase, blur works toward wider adoption of its platform as organizations seek to reduce their indirect business services spend by using the Group's combination of cloud software and managed services.

Technology developments - blur 6.0

Following the completion of blur 5.0 in 2015, the Group is now working on its blur 6.0 release which focuses on functionality specifically designed for the Enterprise customer. During the first half, blur delivered a number of enhancements to the platform including multi-account management and improved platform messaging capability.

In addition, blur launched its ROI (Return on Investment) calculator in the period. This tool combines specific customer data with blur's industry expertise, including data compiled over many distinct industries, to produce analysis of the savings that the use of blur's Marketplace may generate. blur has found that the ROI calculator helps our Enterprise customers come to an earlier recognition and understanding of the size of their indirect spend and the savings that can be made by working with blur.

Philip Letts

Chief Executive Officer

10 August 2016

Financial Review

Revenue

In the first half of 2016, blur continued to focus on its Enterprise strategy.

Overall revenue for the six months to 30 June 2016 decreased by 62% to $0.6m (six months to 30 June 2015: $1.7m) within which Project fee revenue declined by 47% to $0.6m (H1 2015: $1.1m). This reflects the reduction in one off, low margin small business projects together with the long sales cycles and pilot phases which characterize the typical development of blur's relationship with a larger Enterprise.

Enterprise projects continued to exhibit a high propensity to complete and convert to cash. This is reflected by the reduction in Cancellation fee revenue, which was zero in the period, compared to $0.6m in the previous year's comparative period.

The Group's higher margin revenues grew by 75% in Q2, over Q1. The three elements of the Group's higher margin revenues, Premium Services, Access Fees and Subscriptions, each increased, driving a gross profit for the Q2 2016.

Gross margin

Gross profit was negative $(0.01m) in H1 2016 (H1 2015: positive $0.35m). This decrease has been driven by the reduction to zero of Cancellation fee (previously Listing fee) income in H1 2016.

Delivery staff costs charged to cost of sales reduced by 60% to $0.19m (H1 2015: $0.48m). Further automation of blur's software platform and delivery processes has driven improved operational efficiency. In addition, blur's focus on Enterprise customers, leads to greater completion of projects which also drives a more efficient delivery function.

blur has also seen improvements to higher margin revenues in H1 2016. These improvements, together with improved efficiency, delivered a gross profit in Q2 2016.

Costs

Total administrative expenses decreased by 46% to $2.9m (H1 2015: $5.3m).

As blur's revenue increasingly reflects a higher proportion of Enterprise business, the Group has seen a significant improvement in the quality of trade receivables. As a consequence, bad debt charges improved, falling by 102%, resulting in a small credit in the period.

In addition, improved operational efficiencies led to reduced overall headcount, reducing staff costs by 40% compared to H1 2015.

Share based payments reduced by 44% compared to H1 2015.

Operating lease costs fell by 29% as the lease on blur's London office accommodation was terminated.

Other administrative expenses fell by 68%. Reductions include cancellation of Pay Per Click subscriptions as blur no longer seeks to bring high volumes of lower quality, one off projects to the platform, preferring instead to focus on highly targeted Enterprise customers.

LBITDA

The LBITDA (Loss before Interest, Tax, Depreciation and Amortization, Foreign Exchange movements and Share Option costs) for H1 2016 reduced by 54% to $2.12m (H1 2016: $4.63m) despite the reduction in gross profit. Q2 2016 LBITDA improved by 25% over Q1 2016 and by 43% compared to Q4 2015.

This was largely driven by the reduction in administrative costs in the period.

Loss after tax

The loss after tax for the period reduced by 38% to $2.7m (H1 2015: $4.5m).

Finance income fell to $0.02m (H1 2015: $0.2m) reflecting lower cash balances held on deposit, together with reduced available returns.

Cash

The cash balance at the period end was $4.3m (31 December 2015: $7.1m).

The Group predominantly holds its cash in sterling. At 30 June 2016, the Group's sterling deposits totaled £3.22m with a further US$0.02m held in USD and EUR denominated accounts.

blur's reported cash balance has been impacted by $0.7m of unrealized exchange losses in H1 2016, as the valuation of blur's sterling denominated cash balances were affected by the decline in the GBP: USD exchange rate since the end of December 2015.

The net decrease in cash and cash equivalents was 58% lower in H1 2016 compared to H1 2015, driven by higher quality revenues, improving efficiency and cost reductions. Expressed in underlying GBP and excluding foreign exchange effects, the Group's cash balances reduced by £1.60m in H1 2016.

Risks and uncertainties

The key business risks affecting the Group remain as stated in the Annual Report for the Year ended 31 December 2015.

Going concern

The group had cash reserves of $4.3m as at the 30 June 2016. The cash burn in Q2 2016, excluding foreign exchange effects, was $1.1M.

The Directors have prepared a cash flow forecast covering a period extending 12 months from the date of approval of these interim financial statements which shows that the Group will have sufficient cash to meet its debts as they fall due over that period. blur is a disruptive and evolving technology company and uncertainties exist in the forecast as a result. The forecast contains certain assumptions about the performance of the business including growth in future revenue, both in project revenues and in premium services, the cost model and margins, and the level of cash recovery from trading. In the next 12 months, the most critical assumptions are those concerning the control of costs. The Directors are aware of the risks and uncertainties facing the business as it pursues its Enterprise strategy but the assumptions used are the Directors' best estimate of the future development of the business.

After considering the forecasts and the risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence over the period of the forecast. For these reasons, they continue to adopt the going concern basis of accounting in preparing these financial statements. However, beyond the forecast period the Group will need either to substantially increase its revenues or take actions to ensure it remains sufficiently funded. As with any disruptive, evolving technology company there is always an inherent risk over the ability of the Group and Company to continue as a going concern if forecasts are not met and cash resources are not adequate. These interim financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

Conclusion & Outlook

H1 2016 saw significant improvement across a range of key financial metrics, including EBITDA, costs and cash burn, driven by blur's focus on the larger Enterprise. However, as volumes of small business related projects taken on by blur were reduced, overall revenues fell compared to H1 2015.

Despite that reduction, and by working with the Enterprise customer base to effectively complete projects, blur saw gross profit being generated in Q2 2016, with zero Cancellation fee income, and significant improvement in bad debt charges. blur's operational efficiency continued to improve with both the cost of delivery and the wider organizational costs falling significantly compared to H1 2015. Overall, the proportion of Enterprise projects kicked off by blur increased compared to H2 2015.

Overall blur's EBITDA H1 loss has fallen by 54% compared to the same period last year.

In Q3 2016, blur will continue to enhance the 6.0 platform. This will include adding further multi-user account management improvements and additional functionality to blur's automated delivery processes.

blur will also continue to work closely with Enterprise customers in Pre-pilot and Pilot phases. blur views indirect spend management and reduction as a priority with both its customers and the wider economic community.

We expect these trends to continue to drive operational efficiencies at blur in Q3 and beyond. We will remain focused on our cash and our rate of cash burn. Sales cycles remain long and while blur continues to service a smaller volume of small business driven, viable projects, the Group's focus remains on successfully completing the Pilot phases with a number of Enterprises, further increasing its overall proportion of Enterprise revenues and subsequently driving wider adoption of blur's platform within those customers. Ahead of achieving wider roll outs with an Enterprise customer, we would expect H2 revenues to be reduced on H1 2016 with EBITDA and cash in line with management expectations.

The Company will host a Capital Markets Day at the Group's offices in Q4 2016. Chaired by Philip Letts, Chief Executive Officer, the day will focus on the company's pipeline, operations and technology and will provide an opportunity for analysts and investors to meet management. Further details will be made available in due course.

A typical project

The process starts with a customer submitting their services requirements, timeline and budget range using blur's 'Brief App'. The project is then 'Listed' on the marketplace and relevant service providers are invited to pitch for the business. At this stage, we say a project has moved to 'Pitching On'.

blur's intelligent matching engine, blurSenseTM, efficiently identifies the best service provider pitches using references, ratings, credentials and credit scores. The shortlist is finalized by blur's 'Customer Success' team.

Once an approved service provider has been chosen, blur's platform produces a digital 'Statement of Work' (SOW) that forms the contract for the work. At this stage, we determine the project to have 'Kicked Off".

During the delivery cycle, our project management team, the customer and service provider keep in touch through 'Project Space', our online project management and collaboration system. At agreed milestones, and on project completion, billing and payments are handled by 'blurPayTM', our secure payment gateway.

The business model

blur derives revenue in the following five ways:

1. Buyer Plans - customers pay for access to the global Marketplace of around 65,000 service providers either on a one-time 'Single Access' basis or through an annual 'Buyer Plan'. The annual plans were introduced in 2015 to better suit the repeat business expected from the Enterprise market.

2. Buyer Premium Services - comprising additional wraparound support services:

a. blur Manage Ultra - a dedicated project manager improves the customer experience and provides the single point of contact our Enterprise customers appreciate;

b. blur Protect Advanced - provides greater control and flexibility to the customer, specifically with respect to change requests and budgets;

c. blur Express - shortens the process and timeline to engage a service provider if a project is on a tight deadline; and

d. blur Engage - provides bespoke industry-specific expertise over and above blur's standard support package; this may be offered at any stage during the customer journey.

3. Buyer Market Intelligence tools - blur sells subscriptions to our online tool, 'blur Data', which analyses the business services landscape including category trends, pricing and timeline forecasts.

4. Service Provider Subscriptions - service providers can select from a tiered annual subscription model to gain access to high value project opportunities and market insights.

5. Project revenue - for each project that a service provider delivers blur charges the service provider a percentage of the project value.

Condensed Consolidated Statement of Total Comprehensive Income

for the period ended 30 June 2016

The results reflected above relate to continuing activities.

The accompanying notes are an integral part of these financial statements.

Condensed Consolidated Statement of Financial Position

At 30 June 2016

The notes on pages 13 to 21 form part of these financial statements.

Condensed Consolidated Statement of Changes in Equity

for the Period Ended 30 June 2016

Condensed Consolidated Statement of Cashflows

for the Period Ended 30 June 2016

The accompanying notes are an integral part of these financial statements.

Notes to the Condensed Consolidated Financial Information

1. Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of these condensed financial statements are set out in the full accounts for 2015. The policies have been consistently applied to all the periods presented, unless otherwise stated.

These condensed financial statements have been prepared in accordance with IAS34 "Interim financial statements", as adopted by the European Union.

These condensed interim financial statements do not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006. The comparative information for the full year ended 31 December 2015 has, however, been derived from audited statutory financial statements. A copy of the 31 December 2015 statutory financial statements has been delivered to the Registrar of Companies. The auditor's report on those statements was unqualified, did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The accounting policies have been applied consistently throughout the group for the purposes of the preparation of the interim statements.

The Group financial statements consolidate the financial statements of the Company and its subsidiaries (together referred to as "the Group").

Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries (the Group) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

Foreign currency

The functional currency of blur Group plc and blur Ltd is Pound Sterling, whereas of blur Inc. it is US Dollars.

The presentational currency is US Dollars ($), as the Group's management believe that in the future the majority of revenues and activity will be generated in US Dollars. This is consistent with prior years.

The exchange rates used for translating the statement of financial position at 30 June 2016 was at a closing rate of £1 = US$1.3390 (2015: US$1.5719) and the statement of comprehensive income at an average rate of US$1.4441 (2015: US$1.555).

On a constant currency basis (using the 31 December 2015 exchange rates) cash and cash equivalents at 30 June 2016 would have been $5.1m and the EBITDA loss for H1 2016 would have been $2.2m.

2. Segmental analysis

The Group currently has one reportable segment, provision of services, and categorizes all revenue from operations to this segment.

The Group currently has four reportable categories which are:

1. project revenues - for the provision of services from projects that list on blur's marketplace, where the customer accepts the bid from the expert supplier and a legally binding contract between blur and its customers is established;

2. cancellation fees (formerly listing fees) - where the project is cancelled after listing and there is an expectation of collection. The Cancellation fee is a mandatory charge when a customer listed a project and decided to close their trading account or not to select an expert;

3. premium services - comprising wraparound support services for projects, including blur Manage Ultra, blur Protect Advanced, blur Express, and blur Engage; and

4. subscriptions and licenses - for the provision of tiered annual subscriptions to service providers to gain access to high value project opportunities and market insights; the provision of access to blur's software Platform and for the provision of subscriptions of blur Data, which analyses the business services landscape including category trends, pricing and timeline forecasts.

The Group operates in three main geographic areas: UK, USA and Rest of the World. Revenue by origin of geographical segment for all entities in the Group is as follows:

3. Loss from operations

The operating loss as at 30 June 2016 is stated after charging:

4. EBITDA

EBITDA is calculated as follows:

5. Loss per share

Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The basis for calculating the basic loss per share is as follows:

Due to the loss in the period the effect of the share options was considered anti-dilutive and hence no diluted loss per share information has been provided.

7. Trade and other receivables

All amounts shown under receivables are due within one year.

8. Loans and borrowings

Book value approximate to fair value for the convertible debt and is stated at fair value at initial recognition and at amortized cost subsequently.

The convertible loan notes (referred to as convertible debt II) were issued in 2011 with a coupon rate of 15% at a total face value of US$78,010. The loan notes are either repayable in four years from the issue date at its total face value, with interest accrued and payable as ordinary shares issued in the Company or can be converted at any time within two years into shares at the holder's option. The value of the liability component and the equity conversion component were determined at the date the instrument was issued.

9. Share capital

Share capital allotted and fully paid up

Ordinary shares of £0.01 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Pounds Sterling and translated at the historic rate.

The table below shows the movements in share capital for the year:

The Group has not issued any partly paid shares nor any convertible securities, exchangeable securities or securities with warrants. The Group does not hold any treasury shares.

10. Share-based payments

In compliance with the requirements of IFRS 2 on share-based payments, the fair value of options granted during the period or which were granted in previous periods but had an extended period before vesting is calculated either using the Black Scholes option pricing model or on the basis of the fair value of remuneration waived in consideration for the grant.

11. Related party transactions

Out of above balances outstanding at period end in trade payables and accruals are $8,512 (31 December 2015: $16,390).

1 Consultancy fees of $69,783 (Six months ended 30 June 2015: $95,130) were paid to Revviva LLC, a company in which K Cardinale has an interest. These were paid for K Cardinale's director services.

2 Service fees of $2,417 (Six months ended 30 June 2015: $52,411) were paid to CFPro Limited for accounting and consultancy support, a company in which Barbara Spurrier has an interest.

3 Project revenue includes $16,986 (Six months to 30 June 2015: $nil) in revenue recognized for projects carried out on behalf of Letts Estates Limited, a company in which Philip Letts has an interest. The projects were carried out on an arms-length basis. A balance of $8,964 is included in aged receivables at the period end (Six months to 30 June 2015: $nil).

The following loans are due (to)/from Directors:

The loans are interest free and repayable on demand.

12. Events after the reporting date

There are no disclosable events following the reporting date.

13. Control

There is no ultimate controlling party

Statement of Directors' Responsibilities

The directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of blur Group plc are listed in and are unchanged from those disclosed in the blur Group plc Annual Report for 31 December 2015.

By order of the Board

Philip Letts

Chief Executive Officer

Tim Allen

Chief Financial Officer

10 August 2016