Mobile Tornado Regulatory News (MBT)

Mobile Tornado Group plc

("Mobile Tornado", the "Company" or the "Group")

Half Yearly Report

Mobile Tornado (AIM: MBT), the instant communications services provider for mobile devices, announces its unaudited results for the 6 month period to 30 June 2017.

Financial Highlights

· Total revenue increased by 21% to £1.11m (H1 2016: £0.92m)

o Recurring revenue increased by 24% to £1.04m (H1 2016: £0.84m)

· Operating expenses increased by 14% to £2.09m (H1 2016: £1.83m)

o adversely impacted by the depreciation of sterling

· Adjusted EBITDA* loss of £1.04m (H1 2016: £0.96m)

· Group operating loss of £1.12m (H1 2016: £1.53m)

· Loss after tax of £1.06m (H1 2016: £1.56m)

· Basic loss per share of 0.42p (H1 2016: 0.63p)

· Cash and cash equivalents of £0.25m (H1 2016: £0.17m)

o Completed a placing to raise a total of £1.19m before expenses in April 2017

*excluding exchange differences and exceptional items

Operating highlights

· Full commercial launches with two Mobile Network Operator ("MNO") customers in South Africa

· Established trading relationships with two independent Push to Talk ("PTT") operators in South America

· Completed the development of new Instant Communication platform, with significantly higher capacity and additional user features

· Software Development Kit ("SDK") upgraded and released to market

· Development of the new Dispatch Console (MDC200) completed and released to market

Jeremy Fenn, Chairman of Mobile Tornado, commented: "The improvements we have made to our platform over the last 12 months have been borne out by the recent wins in the Middle East and the increasing number of tenders we have been asked to participate in. Further evidence that adoption of PoC is accelerating was provided by the recent acquisition of Kodiak Networks, one of our principle competitors, by Motorola Solutions.

"I am confident that our experienced management team led by Avi Tooba, our recently appointed CEO, place the Company in a strong position as the market develops. We look forward to the balance of this year and the Company's prospects in 2018 and beyond. "

Enquiries:

Chairman's report

Financial results

Total reported turnover in the six-month period to 30 June 2017 increased by 21% to £1.11m (H1 2016: £0.92m). This increase was aided by the depreciation of Sterling during the period and at a constant currency level was an increase of 11% on the comparative period. Recurring revenues, a key performance indicator for the business, continued its upwards trajectory and increased 24% to £1.04m (H1 2016: £0.84m) as reported, and by 13% at a constant currency level. Non-recurring revenues, comprising installation fees and professional services, decreased slightly to £0.07m (H1 2016: £0.08m). As a result, gross profit increased 20% to £1.05m (H1 2016: £0.87m).

The majority of our operating expenses are denominated in New Israeli Shekels and whilst our underlying operating cost-base remained largely unchanged over the comparative period on a like-for-like basis, our reported operating expenses increased by 14% to £2.09m (H1 2016: £1.83m) due primarily to the depreciation of Sterling during the period.

The Group reported an unrealised foreign exchange gain of £0.07m (H1 2016: £0.42m loss) and recorded a net income tax credit in respect of our qualifying investment in R&D activities during the period of £0.38m (H1 2016: £0.28m).

As a result of all the above, the loss after tax for the period decreased to £1.06m (H1 2016: Loss £1.56m).

The net cash outflow from operating activities during the period increased to £1.42m (H1 2016: £0.82m) resulting in cash and cash equivalents as at 30 June 2017 of £0.25m (H1 2016: £0.17m). As at 30 June 2017, the Group had net debt of £9.71m (30 June 2016: £7.75m). Of this net debt figure, £7.87m is in respect of preference shares and associated unpaid accrued interest, held by Intechnology plc, our majority shareholder. The preference shares are redeemable at par value on 31 December 2018, or, at the Company's discretion, at any earlier date.

Review of operations 

I'm pleased to report a period of solid operational progress across the business.

We have seen full commercial launches from our two Mobile Network Operator ('MNO') customers in South Africa having successfully commissioned and deployed dedicated server platforms for both customers. Discussions have also commenced with one of the MNOs to explore the roll out of services across other African countries.

In South America we continue to work with one of the major MNOs operating in that territory and have now established trading relationships with two other independent Push to Talk ("PTT") operators. There is a huge market for PTT in LATAM and we are continuing to strengthen our position to ensure we can take full advantage of the opportunity as it develops.

In the Middle East we have concluded a deal with an MNO that had previously deployed the iDEN platform. As reported previously, this technology is being closed down over the next couple of years, and we hope to work with this MNO to enable them to replace their legacy MNO systems with our own platform. We are in discussions with several other MNOs in LATAM, Middle East and Europe.

We continued to invest heavily in our research and development activities. A significant proportion of our cost-base is devoted to our engineering teams based at our development centres in Israel, Ukraine and India. Our new leadership team has been focused on recruiting the engineers needed to move the business forward across a number of areas and we are delighted with the advances that have been made.

During the period we also completed the development of our new Instant Communication platform, with significantly higher capacity and additional user features. We intend during the second half of the year to release a new line of lower cost server platforms for small and medium organisations. These systems will facilitate the replacement of legacy radio systems, saving initial installation costs and significantly reduce annual operating costs.

Our Software Development Kit ('SDK') was upgraded and released to the market during the first half. The SDK is currently being used by several partners, who are working to integrate our PTT solution with existing workforce management applications. The partners operate across a number of sectors including security, logistics and transportation. I am hopeful that we will see positive results soon, and begin to access significant deployed customer bases quickly and effectively.

The development of the new Dispatch Console (MDC200) was completed and released to the market. It is being tested by a number of customers around the world and the initial feedback has been excellent.

With regard to hardware, we introduced several new low cost ruggedised devices, manufactured by our partners, and sold through our customers in developing countries, primarily South America and Africa. As cost is a primary issue in these territories, it is encouraging to see the price levels falling significantly, making our proposition even more compelling to prospective customers. Later this year, we plan to introduce screen-less 3G and 4G devices to compete with low cost radio devices. The initial response from our partners to the early prototypes has been very encouraging.

Funding & going concern

The Company completed a placing on 27 April 2017 of 23.8 million shares at 5p per share to raise a total of £1.19m before expenses. The Directors subscribed for 12,000,000 shares comprising 50.4% of the issue. The Directors believe that the Group has sufficient working capital for the foreseeable future, which also takes into consideration its currently contracted revenues, anticipated contracts and the continued support of Intechnology plc, our majority shareholder.

Outlook

The macro outlook for our business continues to strengthen. With the global roll out of 3G/4G networks worldwide, users now have the option to use PoC for their instant communication requirements, instead of traditional radio platforms such as LMR, DMR and iDEN. The transition will intensify as the last iDEN systems shut down around the world and MNOs extend their LTE coverage.

At the same time, an increasing number of device manufacturers are adding PoC devices to their portfolio, which is bringing the prices down and allowing for greater penetration in developing countries. We are well placed, with customers and partners in each of the key territories, to take advantage of this emerging trend.

The improvements we have made to our platform over the last 12 months have been borne out by the recent wins in the Middle East and the increasing number of tenders we have been asked to participate in. Further evidence that adoption of PoC is accelerating was provided by the recent acquisition of Kodiak Networks, one of our principle competitors, by Motorola Solutions.

I am confident that our experienced management team led by Avi Tooba, our recently appointed CEO, place the Company in a strong position as the market develops. We look forward to the balance of this year and the Company's prospects in 2018 and beyond.

Jeremy Fenn

Chairman

28 September 2017

Consolidated income statement

For the six months ended 30 June 2017

Consolidated statement of comprehensive income

For the six months ended 30 June 2017

Consolidated statement of changes in equity

For the six months ended 30 June 2017

Consolidated balance sheet

As at 30 June 2017

Consolidated cash flow statement

For the six months ended 30 June 2017

Notes to the interim report

For the six months ended 30 June 2017

1 General information

The financial information in the interim report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and has not been audited or reviewed. The financial information relating to the year ended 31 December 2016 is an extract from the latest published financial statements on which the auditor gave an unmodified report that did not contain statements under section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

2 Basis of preparation

These interim financial statements are for the six months ended 30 June 2017. They have been prepared using the recognition and measurement principles of IFRS.

The interim financial statements have been prepared under the historical cost convention.

The interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2016. The accounting policies have been applied consistently throughout the Group for the purpose of preparation of the interim financial statements.

3 Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £1,063,000 (30 June 2016: £1,562,000, 31 December 2016: £3,448,000) by the weighted average number of ordinary shares in issue during the period of 255,311,200 (30 June 2016: 247,553,189, 31 December 2016: 247,553,189).

4 Share capital and share premium

Non-voting preference shares

Liabilities and preference shares totalling £5,702k were converted into 71,277k 8p preference shares on 28 August 2013. The preference shares are non-voting, non-convertible redeemable preference shares redeemable at par value on 31 December 2018, or, at the Company's discretion, at any earlier date. The preference shares accrue interest at a fixed rate of 10% per annum.

5 Cash used in operations

6 Shareholder information

The interim announcement will be published on the company's website www.mobiletornado.com on 28 September 2017.