MNO.L Regulatory News (MNO)

Total Revenue

444

345

29%

35%

Cost of Sales

158

78

103%

114%

Total Expenses

1,958

1,043

88%

93%

Other Income

376

361

4%

9%

EBITDA

(1,296)

(415)

212%

218%

Maestrano Group plc

Directors' report

31 December 2018

Grant Thornton (Nominated Adviser)

Colin Aaronson / Jamie Barklem

+44 (0)20 7383 5100

Arden Partners (Broker)

Ruari McGirr / Ciaran Walsh / Alex Penney

+44 (0)20 7614 5900

IFC Advisory Limited (Financial PR & IR)

Graham Herring / Miles Nolan / Zach Cohen

graham.herring@investor-focus.co.uk

miles.nolan@investor-focus.co.uk

+44 (0)20 3934 6630

Review of operations by the Chief Executive Officer

I am pleased to bring you my first report as Chief Executive Officer, having joined Maestrano Group plc (the 'Group' or 'Maestrano') during this financial half-year ended 31 December 2018 and having been appointed to this role in December 2018.

Since joining I have been impressed with Maestrano's platform that enables banks and other large enterprises to offer a differentiated service to their small and medium business customers. This platform along with the skilled technical team are being recognised by large enterprise customers as providing the ability to rapidly offer innovative and flexible solutions to their clients.

In today's global banking market new services are essential to allow both traditional and challenger bank market entrants to serve the demands and needs of their customers and take advantage of new opportunities that digital technologies offer. Banks need to respond in this rapidly changing market and need new delivery platforms. New regulations are forcing banks to open key areas of banking, such as payments, lending and data access and new competitors - such as big retailers, accounting software vendors, payments providers and others are moving into lucrative segments of banking such as lending and payments.

Maestrano's platform provide the tools for mature market players to rapidly pull together information and solutions from multiple internal systems and customer applications. Similarly, the Maestrano platform allows newer entrants to draw together newer applications to expedite market entry. As a result, we are very confident of Maestrano's longer term success in this large global market.

Operational highlights 

The Group made good progress during the six-month period ended 31 December 2018.

We successfully launched the first phase of a platform with a large and well-known USA based bank for a solution that is intended to reach up to four million small and medium business customers in due course. The launch of this complex solution was the culmination of much hard work from the Maestrano team and strong collaboration with the client. We expect the initial solution will be expanded during the coming year as the client methodically rolls out the solution to its customer base. Subscriber revenue from this client is expected to grow steadily during 2019.

During the period the Group also successfully launched a platform for a multinational value-add technology distributor, headquartered in the USA. The roll out of this new platform based on Maestrano technologies is scheduled for Asia Pacific and Europe in 2019.

Maestrano also commenced the implementation phase of a contract with a high-profile Australian bank for testing and pilot phases of a solution for its small and medium business customer base, initially targeted at the legal industry segment. This implementation work is scheduled to be completed during the second half of this financial year, with subscriber revenues expected to commence during the next financial year.

On the back of these key new clients our goals for the balance of the financial year will be to:

· drive revenue via end-user adoption of existing enterprise platforms;

· expand market penetration in key geographies in Europe, North America and Asia; and

· increase depth and breadth of the platform functionality.

Organisation

As foreshadowed at the time of the Company's admission to the Alternative Investment Market ('AIM") the Group has used some of the funds to strengthen its team particularly with the recruitment of incremental engineering, customer support and sales specialists to support its future growth. In addition, a specialised online customer on-boarding and support services company has been contracted to assist Maestrano's major rollouts. The in-house engineering and test team currently stands at 22.

Product engineering developments were primarily focused around performance and flexibility enhancements during the past year in preparation for the large-scale solutions that Maestrano's customers will take to market, in addition to specific deployment efforts within these customer projects. A number of new cloud applications were integrated during the financial period, notably Talech's point of sales ('POS') solution, and a key enhancement for Quickbooks Online, Intuit's accounting software-as-a-service ('SaaS'), via a new "Single Sign-On" ('SSO') capability.

Outlook

After detailed planning discussions with our major USA bank client, we have taken a much more cautious approach to the ramp up of end-user subscription revenue for 2019 and have revised our outlook accordingly. This cautious approach is expected to result in revenue and the adjusted loss for the 2019 financial year being materially behind market expectations.

Whilst end-users are steadily subscribing, the bank is taking care to "do it slow, get it right" by reducing the number of users who have visibility of the platform, to ensure that the data presented is complete and relevant and the experience exceeds their expectations. Notwithstanding end-user uptake taking longer than anticipated, our business model remains the same and we remain extremely confident that the bank will achieve its planned end-user targets over the next three years.

Follow on development phases are now in progress across three of our clients, together with sales outreach to potential new clients, particularly in Europe and Asia. We are proud of the performance of our team, including many new people who have joined in key roles. Our focus in 2019 will continue to be on end-user acquisition to drive recurring revenue growth.

_____________________________

Andrew Pearson

Chief Executive Officer

4 February 2019

As noted above this period has been focused on successfully delivering key customer projects that will drive recurring subscriber revenue in future periods as well as strengthening our technical and customer facing teams.

A summary of the Group's results are as follows:

Revenue 

Total revenue for the period increased by 29% to £0.44 million, when compared to the prior comparative period ('pcp'), as the Group focused on a small number of key implementation projects. Subscriber revenue increased modestly in the period. Current projects are expected to provide material long-term subscriber revenues in the coming years

Operating expenses

Overall operating expenses increased by £0.91 million compared to pcp primarily as a result of increases in staff costs as well as additional public company related costs. Staff expenses increased £0.61 million to £1.40 million as the Group strengthened its technical and customer support resources. Corporate and professional costs increased £0.24 million.

Other income derived from government research and development grants received in the period increased slightly to £0.37 million compared to £0.36 million in the pcp. This income is primarily received in the first-half of each financial year.

Underlying EBITDA for the period was a loss of £1.30 million due to the increased costs noted above.

Finance and other non-operating expenditure were immaterial for the period after the conversion of all outstanding convertible notes in May 2018.

The loss after tax for the period was £1.30 million an increase of 85% compared to pcp.

Balance sheet, cash and working capital

The Group balance sheet remained strong with cash resources of £3.76 million as at 31 December 2018.

Cash outflow from operating activities was £1.44 million. The operating cash flow was negatively impacted by the trading for the period as well as an increase in the work-in-progress, now classified as contract assets, given the timing of billing milestones for ongoing projects.

Underlying basis

The Group manages its operations by looking at the underlying EBITDA which excludes the impact of a number of one-off and non-cash items as this, in the Board's opinion, provides a more representative measure of the Group's performance. A reconciliation between the reported loss before tax and underlying EBITDA is included at note 6 to the financial statements.

____________________________

Craig Holden

Chief Financial Officer

4 February 2019

The interim financial statements of Maestrano Group plc (company number 11098701 (England and Wales)) were approved by the Board of Directors and authorised for issue on 5 February 2019. They were signed on its behalf by:

Note 1. General information

The financial statements cover Maestrano Group plc ('Company') as a consolidated entity consisting of Maestrano Group plc and the entities it controlled at the end of, or during, the period (referred to as the 'Group'). The financial statements are presented in Pound Sterling, which is Maestrano Group plc's functional and presentation currency.

The Company was incorporated on 6 December 2017 as a private company, Maestrano Group Limited. On 11 May 2018, the Company converted to a public company, Maestrano Group plc and on 30 May 2018 was admitted onto the Alternative Investment Market ('AIM'). On 19 April 2018, as part of a group reorganisation, the Company acquired 100% of the ordinary shares of Maestrano Pty Ltd from the existing shareholders and became the immediate and ultimate parent of the Group.

Maestrano Group plc is a listed public company limited by shares, incorporated and domiciled in England and Wales. Its registered office and principal place of business are:

A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 4 February 2019. The directors have the power to amend and reissue the financial statements.

Note 2. Significant accounting policies

These financial statements for the interim half-year reporting period ended 31 December 2018 have been prepared in accordance with International Accounting Standards IAS 34 'Interim Financial Reporting'.

These interim financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2018 and any public announcements made by the Company during the interim reporting period. 

New or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the International Accounting Standards Board that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

The following Accounting Standards and Interpretations are most relevant to the Group:

IFRS 9 Financial Instruments

The Group has adopted IFRS 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available.

IFRS 15 Revenue from Contracts with Customers

The Group has adopted IFRS 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is described further in the accounting policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with customers are presented in an entity's balance sheet as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period.

Impact of adoption

IFRS 9 and IFRS 15 were adopted using the full retrospective approach. The impact of adoption on opening accumulated losses as at the transition date of 1 July 2017 was £nil.

There has been no material impact on adoption of IFRS 9 and IFRS 15, other than the changes to disclosure as required by these standards, which includes:

Note 3. Operating segments

Identification of reportable operating segments

The Group operates in one segment being provision of data integration and analytic services. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources.

The operating segment information is the same information as provided throughout the consolidated financial statements and are therefore not duplicated.

Note 4. Revenue from contracts with customers

Disaggregation of revenue

The disaggregation of revenue from contracts with customers is as follows:

Enterprise implantation and enterprise subscriber income are recognised as revenue over time as opposed to a point in time.

Note 5. Other income

Government grants and rebates predominately relates to research and development rebates.

Note 6. EBITDA reconciliation (earnings before interest expense, taxation, depreciation and amortisation)

Underlying EBITDA represents EBITDA adjusted for significant, exceptional and other one-off items.

The financial statements include both the statutory financial statements and additional performance measures of EBITDA and Underlying EBITDA. The directors believe these additional measures provide useful information on the underlying trend in operational performance going forward without these exceptional and other one-off items.

Note 7. Current assets - trade and other receivables

Note 8. Current assets - other

Note 9. Current liabilities - trade and other payables

Note 10. Equity - other reserves

Movements in reserves

Movements in each class of reserve during the current financial period are set out below: