8 Sep 2016 07:00
Monitise plc8 September 2016
Monitise announces FY 2016 results
FINKit® initial revenues
45% reduction in H2 operating costs
London - 8 September 2016 - Monitise plc (LSE: MONI, "Monitise", or the "Group"), the financial services digital technology company, announces preliminary results for its financial year ended 30 June 2016.
| FY 2015 | FY 2016 | FY 2016 | FY 2016 |
| Total | H1 | H2 | Total |
| £'m | £'m | £'m | £'m |
Revenue | 89.7 | 33.4 | 34.2 | 67.6 |
EBITDA1 | (41.8) | (20.2) | 0.6 | (19.6) |
Loss before tax | (227.4) | (210.5) | (32.6) | (243.1) |
Capex | (45.0) | (7.5) | (1.6) | (9.1) |
Cash from operations | (50.3) | (22.3) | 0.4 | (21.9) |
Cash usage2 | (106.2) | (36.4) | (11.9) | (48.3) |
Cash balance | 88.8 | 53.4 | 42.1 | 42.1 |
Headcount (period end) | 850 | 627 | 500 | 500 |
Monitise's FY 2016 results confirm substantial improvement in operating figures in the second halfFINKit®3, our new business unit which enables banks and financial services organisations to transform their digital services, launched during the year generating initial revenues in the second half of FY 2016, and received a positive response from current and potential clients and partnersFull year revenue of £67.6m declined 24.7% compared to the prior year as anticipated but stable half-on-half and in line with previous guidanceMonitise reported half-year EBITDA profitability of £0.6m in the second half of the year in line with previous guidanceCash flow stabilised with positive cash from operations in the second half, and cash usage down 84% compared to the same period in FY 2015 Improved transparency with disclosure of revenue and EBITDA of six business units including the new FINKit® business
Monitise CEO Lee Cameron said: 'In my first year as CEO we have made substantial progress in making Monitise a more stable and simpler business which is well positioned to achieve profitability. At the EBITDA level we recorded a small profit in the second half of the year. Our restructuring has halved operating costs in the second half of the year and reduced headcount by 41 per cent compared to a year ago while maintaining our high client service levels and launching our FINKit® digital banking and financial services product.'
Monitise Chairman Peter Ayliffe said: 'The past year has seen an unprecedented amount of change throughout both the business and the Board. However, I am pleased to report that the outcome is a business which is much better managed, and much more appropriately structured for successful longer-term profitable growth based on its business unit focus, FINKit® platform and associated capabilities.'
Outlook
Monitise expects FINKit® revenue to grow strongly, albeit from a low base. As previously stated, overall Group revenue is expected to decline, driven by the full year revenue impact of the completion of professional services contracts during FY 2016. FY 2017 will benefit from the full year effect of cost savings made during FY 2016. At 31 August 2016 headcount had further fallen to 469.
FINKit® represents a significant opportunity for Monitise to establish long-term sustainable growth, and we will continue to invest in developing that part of our business throughout the current financial year. Overall, capital expenditure requirement is expected to be lower than in FY 2016 and we will continue to evaluate all the Group's assets to make sure that they remain relevant to our strategy and add to our value.
This announcement contains inside information.
About Monitise
Monitise plc is a specialist in financial services technology focused on accelerating the digital transformation of banks and financial institutions.
Monitise FINKit® platform and associated capabilities builds upon over a decade of experience in delivering digital services to banks and financial services partners. Whether it is augmenting legacy systems with minimal impact on those systems, a greenfield project, or strategic digital transformation, FINKit® delivers innovation at speed, safely and securely.
Monitise management will present the results at 9.00 am today 8th September 2016 at the London offices of their NOMAD and broker Canaccord Genuity. A recording of the meeting will be made available on the investor relations section of the Monitise website.
Find out more at www.monitise.com
(1) EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.
(2) Cash usage does not include the impact of foreign exchange movements.
FINKit® is a registered trademark in the UK.
For further information:
Monitise plc |
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Lee Cameron, Chief Executive Officer | Tel: +44(0)20 3657 0331 |
Gavin James, Chief Operating Officer |
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Canaccord Genuity (NOMAD) |
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Simon Bridges, Cameron Duncan, Emma Gabriel | Tel: +44(0)20 7523 8000 |
Attila Consultants |
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Charles Cook | Tel: +44(0)20 7947 4489 |
Bill Spears | Tel: +44(0)7710 910 563 |
Chief Executive Officer's Review
Upon my appointment as Chief Executive a year ago, I set the company three key objectives: first, stabilise the business, second, simplify the organisation and third, accelerate our transition from a group of companies whose revenues have historically depended on product licences, to one where prosperity will be driven from sustainable income across all lines of business and, in particular, from clients using FINKit®, our new platform, which enables banks and financial services organisations to transform their digital services. Twelve months on, I am pleased to report that we have made substantial progress in delivering the first two, and I am very encouraged by the positive reaction of our current and prospective clients and partners with regard to the third.
We undertook a substantial corporate restructuring during the year to simplify the business which enabled us to reduce operating costs in the second half of the year by 45 per cent. when compared to the first half. Our number of employees has decreased by 41 per cent. during the period, while we have continued to maintain high levels of service to clients and successfully launched FINKit®. It has been a significant period of change, especially for our employees. The professionalism and dedication demonstrated by both our current staff and those who are no longer with the Group has been exemplary.
A simpler organisation enables greater transparency for all stakeholders. It also allows us to identify each business unit and empower their respective management teams to have responsibility and accountability for their approved business plans. It is important to me that our external financial reporting reflects the clarity we have established internally to allow all stakeholders to track each business' performance. You will find detail on the financial performance of each business unit in the Operations and Financial Review below.
Most importantly for the future prospects of Monitise, the final objective was to accelerate the transition of our business model and make a success of FINKit®. This is not wholly in our control and is dependent on clients and partners working with us. Whilst it is taking longer than we had anticipated to conclude long-term FINKit® contracts, we have recorded our first FINKit® revenues from clients in the second half of the year and I remain confident, due to the positive engagement we have had with clients, that we will be able to report our first contracts in the near future.
The market need for the services offered by FINKit® continues to grow, driven by the requirement of our clients to find ways of delivering their customers' digital needs quickly, cost effectively and securely. Regulatory changes also exert pressure on our clients to adopt new ways of serving their customers as they comply with new standards. We are in daily dialogue with banks who have expressed a need for capability that can be delivered by FINKit®. I am also encouraged by the support and level of validation we have received from our strategic partner, IBM, in helping us bring FINKit® to the market.
FINKit® builds upon the expertise and reputation that Monitise has established over the last decade by offering components of capability, infrastructure and the environment that allow banks to work with Monitise and our FinTech partners to create their own customer propositions.
We have achieved a great deal over the past 12 months and have a clear vision of what still needs to be done but we remain a business in transition.
Operations and Financial Review
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| FY 2015 | FY 2016 | FY 2016 | FY 2016 |
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| Total | H1 | H2 | Total |
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| £'m | £'m | £'m | £'m |
Revenue |
| 89.7 | 33.4 | 34.2 | 67.6 | |
EBITDA1 |
| (41.8) | (20.2) | 0.6 | (19.6) | |
Loss before tax | (227.4) | (210.5) | (32.6) | (243.1) | ||
Capex |
|
| (45.0) | (7.5) | (1.6) | (9.1) |
Cash from operations | (50.3) | (22.3) | 0.4 | (21.9) | ||
Cash usage2 |
| (106.2) | (36.4) | (11.9) | (48.3) | |
Cash balance |
| 88.8 | 53.4 | 42.1 | 42.1 | |
Headcount (period end) |
| 850 | 627 | 500 | 500 | |
1 EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.
2 Cash usage does not include the impact of foreign exchange movements
Overview
The year ended 30 June 2016 has seen a significant restructuring of the organisation, including headcount, property requirements, and the Group being managed as six separate businesses, each working under a plan to achieve, or improve, profitability. This business structure was put in place in the second half of the fiscal year and Monitise now reports revenue and EBITDA for each business segment. FY 2015 estimate comparative figures are provided.
| Revenue | EBITDA | ||
| FY 2015 | FY 2016 | FY 2015 | FY 2016 |
| £'m | £'m | £'m | £'m |
Americas | 25.9 | 19.1 | (5.2) | (3.1) |
Europe | 45.8 | 30.3 | (18.3) | (4.9) |
FINKit | - | 0.5 | (2.3) | (3.8) |
Create | 14.5 | 5.7 | 1.8 | (1.2) |
MEA | 7.3 | 8.1 | 1.1 | 1.1 |
Content | 6.9 | 9.9 | 1.0 | 2.7 |
Central/unallocated | (10.7) | (6.0) | (19.9) | (10.4) |
Total | 89.7 | 67.6 | (41.8) | (19.6) |
The restructuring has been undertaken in a phased approach, starting with identification of the optimal organisation structure. This was followed by the structuring of each of the business units identified in a planned approach to attain profitability in a reasonable timescale, whilst structuring the businesses in a manner that provides flexibility in their cost bases to take account of future changes in activity.
This restructuring is in its final stages with activity continuing to ensure variability of cost in our core Europe and Americas delivery organisations.
The results of the first two phases of the plan have been realised in the second half of the financial year reflecting a £20.0m reduction in costs by comparison to the first half, and resulted in EBITDA of £0.6m for the second half compared to a loss of £20.2m in the first half.
Prospectively, we anticipate the business unit structure to evolve as the operational management of the Group changes to reflect the development of FINKit®.
Business Segments
Americas
The Americas business has seen a reduction in revenues and EBITDA loss as a result of our decision to cease selling perpetual licences to customers, the loss of some customer contracts taken in-house, and reduced revenue from fixed price contracts signed in the prior year, primarily in relation to software version upgrades. Action is being taken to ensure that our cost base is adaptable to activity levels, which will enable an improvement in the profitability of this business despite the full year negative impact on FY 2017 revenue.
Europe
The European business has seen a reduction in revenues year on year due in part to the decision to change our business model leading, as expected, to a reduction in licence revenue from £9.9m in FY 2015 to £1.1m in the current year, and due to the completion of some large loss-making development projects. Despite this decreased revenue base, the EBITDA losses of the business have declined reflecting the restructuring that has taken place, the ending of a number of the large FY 2015 loss making development projects, and reduced resource activity in the second half of the year in relation to a fixed revenue partner relationship. In FY 2017 the action to ensure our cost base is more variable with activity will offset the impact of revenue reduction as a result of the full year impact of the projects completed in FY 2016.
FINKit®
In FY 2016, we saw the FINKit® business record its first revenues as clients signed up to paid testing of the platform. The costs in FY 2015 reflected the costs of a team managing the initial design and build of the offering and developing the proposition. This team was extended throughout FY 2016 and further investment was made to continue the development of the platform and capabilities as the organisation prepares itself to take on operational clients.
Monitise Create
The Create business is going through a transformation with a new management team and a relaunch planned for later this calendar year. Revenues in FY 2015 benefited from £7.0m of Monitise originated work, both supporting the Group and its clients largely through professional services projects, which reduced to £1.5m in FY 2016. A key driver of this reduction is the changing business model of Monitise. In addition, external revenues in FY 2015 were £7.5m compared to £4.2m in FY 2016, driven in-part by fewer new business wins in FY 2015 impacting the flow through of business into FY 2016, and the management transition in the first half of FY 2016. As a result of the reduction in revenues the business has incurred EBITDA losses of £1.2m in the year to 30 June 2016, as opposed to EBITDA profits of £1.8m in FY 2015.
Monitise MEA
The MEA business performed well in the year increasing revenues from £7.3m to £8.1m. EBITDA in FY 2016 of £1.1m was consistent compared with FY 2015 of £1.1m. Through the year the business has continued to broaden its customer base in the Gulf region and Turkish markets obtaining new clients. MEA continues to provide technology and engineering support to other Group businesses.
Monitise Content
The Content business saw strong progress with growth in revenues and profit in the year with a major contributing factor being the overall growth in visits (57% year-on-year) to the UK voucher business - myvouchercodes.co.uk.
The business saw further success with a number of initiatives including a modification of its search engine marketing techniques resulting in a positive uplift of keyword rankings within search engines that consumers use to search for retailers' offers. Additionally, positive investment in developing retailer relationships to secure rights to drive more traffic through investment in building a more engaged consumer base enabled the business to grow visits to myvouchercodes.co.uk through CRM initiatives.
With positive growth in the UK the business invested in its international propositions and saw visit growth of 27% year-on-year in the French market through codespromotion.fr and launched a number of new international propositions.
Group
Central and unallocated revenue and costs
The Central/unallocated revenues represent the elimination of intra-group revenues. The EBITDA reflects the level of central costs which have declined from £19.9m in FY 2015 to £10.4m in FY 2016. There was a material reduction in central EBITDA loss in H2 compared to H1, driven by the cost-reduction efforts described above.
Revenues
Revenues in FY 2016 declined by £22.1m from £89.7m to £67.6m. The drivers of the decline in revenue were the Europe, Create and Americas businesses. In Europe and Americas, the decision to transition the business model led to an anticipated fall in license revenues from £11.9m to £1.1m. A declining market for our customised solutions led to a reduction in Development and Integration revenue from £44.7m to £33.6m. Create was impacted by the change in management and the Americas business also saw a reduction in services revenues. This was offset by an improvement in the Content revenue which was up from £6.9m to £9.9m.
Gross Margin
The calculation of gross margin has been revised in the year to include media costs in the Content business that are variable with activity within cost of sales. These amount to £1.8m in FY 2016 and £1.1m in FY 2015 and were previously included in operating costs. There was no impact on EBITDA as a result of this reclassification.
Gross margin improved in the year from 50.6% to 57.5%. The improvement in gross margin results from the increasing contribution from our Content business, reduction in third party cost of sales and the completion of the large fixed price customised solution projects noted in last year's report.
EBITDA and Operating costs
The EBITDA loss in the year was £19.6m as compared to £41.8m in FY 2015, with the company reaching EBITDA profitability of £0.6m in H2 FY 2016. The significant improvement in EBITDA results from the restructuring and cost reduction exercise initiated towards the end of the first half of FY 2016. The operating costs in FY 2016 were £58.5m, a reduction of £28.7m from £87.2m reported in FY 2015. The reduction in cost for the year was predominantly headcount related with people costs reducing by £24.5m from £69.2m to £44.7m. Additional savings were made through a reduction in property costs as less space is required and a tightening of other costs generally.
In the second half of the year, benefiting from the restructuring exercise, operating costs reduced from £37.8m in H1 FY 2016 to £20.7m in H2 FY 2016, a reduction of £17.1m.
Headcount as at 30 June 2016 was 500 by comparison to 850 as at 30 June 2015.
In addition to the activity to reduce costs initiated in the first half of the year, during the second half we have continued the restructuring programme with the objective of converting fixed or semi-fixed costs of supporting our core Europe and Americas delivery organisations into a more variable form. This will enable the Group to further manage its cost base as existing long term contracts reach their natural end.
Other costs
Depreciation and Amortisation
Depreciation was £2.8m in the year (FY 2015: £4.2m). Amortisation in the year of £25.5m (FY 2015: £20.7m) includes amortisation of acquired intangible assets of £21.2m, capitalised development costs of £2.0m and purchased software licences of £2.3m. The useful economic lives of acquired intangible assets were reviewed in conjunction with the impairment review resulting in reduced lives for some customer and technology assets and a consequent increase in amortisation in the period to £21.2m (FY 2015: £11.7m).
Impairments
Impairments of £176.9m have been recorded relating to property, plant and equipment £3.3m, goodwill £162.7m, customer contracts £7.5m, and £2.5m of acquired technology and other assets and £0.9m of investment in joint ventures, reflecting the fact that no further investment is currently planned for the Santander joint venture which is not operationally active. £169.9m of these impairments were announced in the H1 FY 2016 results.
These impairments all relate to assets that do not drive sufficient economic returns in the near term to support their carrying values. The impairments reflect evolving market conditions, growth prospects for certain platforms, and changes in customers' approach to technology provision.
Share Based payments
The share based payments charge of £16.5m (FY 2015: £28.0m) is largely comprised of earn-out share based payments relating to the acquisitions of Grapple, Pozitron and Marko Media as well as Group employee share option grants. The fall in the charge when compared to FY 2015 is largely a result of options which lapsed as a result of people leaving the Group.
Exceptional costs
A net charge of £3.5m for exceptional items has been taken in the year (FY 2015: £34.2m). The make-up of the net charge is summarised as follows:
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| FY 2015 | FY 2016 |
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| £'m | £'m |
Exceptional income |
| - | (6.9) | |
Onerous contracts |
| 28.5 | (3.2) | |
Surplus property costs | 1.8 | 4.4 | ||
Contingent consideration adjustment | 1.3 | - | ||
Restructuring costs | 4.5 | 8.7 | ||
Other |
| (1.9) | 0.5 | |
Total |
| 34.2 | 3.5 | |
Exceptional income represents payments received following the restructuring of customer contracts which are not anticipated to recur. The credit in relation to the onerous contracts reflects the settlement of some of the obligations recognised in prior periods at amounts less than those provided. The surplus property provision relates to provision for excess property following the reduction in headcount in both the UK and US. The restructuring costs are the costs relating to the reduction in headcount and the associated activities to improve the variability of our cost base.
Loss before Tax
The Group reported a loss before tax of £243.1m compared to a loss of £227.4m in FY 2015.
Tax
A tax credit of £9.7m was recorded in the year (FY 2015: £3.9m) in both cases principally relating to non-cash movements on the un-winding of deferred tax recognised in relation to acquired intangible assets. The Group has an unrecognised deferred tax asset of £79.0m which is available for offset against future tax expenses in the companies in which these losses arose.
Statutory loss after tax
The statutory loss after tax for the year was £233.4m (FY 2015: £223.6m). The loss in the year is driven by an improved EBITDA resulting from cost reductions across the Group, lower share based payment charges and lower exceptional costs offset by higher impairment charges.
Loss per share
The basic and diluted loss per share was 10.5p (FY 2015: 10.8p).
Cash flow and funds
The Group ended the year with gross cash balances of £42.1m compared to £88.8m at 30 June 2015. A summary of the cash flows are as follows:
| FY 2015 | FY 2015 | FY 2015 | FY 2016 | FY 2016 | FY 2016 |
| H1 | H2 | Total | H1 | H2 | Total |
| £'m | £'m | £'m | £'m | £'m | £'m |
Cash used in operations | (38.0) | (12.3) | (50.3) | (22.3) | 0.4 | (21.9) |
Capex | (2.6) | (1.5) | (4.1) | (0.6) | (0.2) | (0.8) |
Capitalisation of intangibles | (23.3) | (17.6) | (40.9) | (6.9) | (1.3) | (8.2) |
Joint venture and other | 0.3 | (1.4) | (1.1) | (0.3) | 0.1 | (0.2) |
Free cash flow | (63.6) | (32.8) | (96.4) | (30.1) | (1.0) | (31.1) |
Exceptional items | (3.7) | (5.8) | (9.5) | (5.9) | (10.1) | (16.0) |
Other | 49.1 | (1.5) | 47.6 | (0.4) | (0.9) | (1.3) |
Total cash flow | (18.2) | (40.1) | (58.3) | (36.4) | (12.0) | (48.4) |
The reduction in costs during the period has led to a significant reduction in cash usage, in particular in the second half of the year reflecting the impact of the restructuring. The capital expenditure and in particular the capitalisation of internal activity were much reduced in the year as the core build of the FINKit® platform nears completion. In the future we plan to focus our development primarily towards specific customer requirements as opposed to generic builds, and hence would expect future cash flow in this regard to be lower than prior periods. The expenditure on exceptional items reflects both exit costs related to staff reductions of £5.3m, payments in relation to onerous contracts of £13.0m, and lump sum payments in relation to settlement of onerous contracts of £4.1m, offset by exceptional income of £6.1m.
Provisions
At 30 June 2016 the Group carries total provisions of £18.9m (FY 2015: £29.9m). These provisions comprise £16.7m for onerous contracts including provisions for surplus property and £2.2m in relation to the remaining cost base reduction. Of these provisions the restructuring costs are anticipated to be expended in FY 2017, whilst the timing of the cash flows in relation to the onerous contracts are subject to the timing of subletting or assigning surplus property, and the results of our efforts to negotiate settlements in relation to onerous supply contracts.
Consolidated statement of comprehensive income |
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for the year ended 30 June 2016 |
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| 2016 | 2015 | |
| Note | £'000 | £'000 | |
Revenue | 2 | 67,565 | 89,700 | |
Cost of sales |
| (28,706) | (44,280) | |
Gross profit |
| 38,859 | 45,420 | |
Operating costs before depreciation, amortisation, impairments and share-based payments1 |
| (58,482) | (87,220) | |
EBITDA2 |
| (19,623) | (41,800) | |
Depreciation, amortisation and impairments1 |
| (205,216) | (119,196) | |
Operating loss before share-based payments and exceptional items |
| (224,839) | (160,996) | |
Share-based payments1 |
| (16,468) | (27,977) | |
Other exceptional items1 | 3 | (3,492) | (34,151) | |
Operating loss | 3 | (244,799) | (223,124) | |
Finance income |
| 1,975 | 712 | |
Finance expense |
| (200) | (1,233) | |
Share of post-tax loss of joint ventures |
| (58) | (3,788) | |
Loss before income tax |
| (243,082) | (227,433) | |
Income tax |
| 9,711 | 3,882 | |
Loss for the year attributable to the owners of the parent |
| (233,371) | (223,551) | |
Other comprehensive income that may be reclassified subsequently to profit or loss: |
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Currency translation differences on consolidation |
| 8,889 | 8,150 | |
Total comprehensive expense for the year attributable to the owners of the parent |
| (224,482) | (215,401) | |
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Loss per share attributable to owners of the parent during the year (expressed in pence per share): |
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- basic and diluted | 4 | (10.5) | (10.8) | |
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1 | Total operating costs after depreciation, amortisation, impairments, share-based payments and exceptional expenses are £283,658,000 (2015: £268,544,000). | |||
2 | EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge. | |||
The comparative figures include a reclassification of marketing costs from operating expenses to cost of sales and net foreign exchange gains on financing activities have been reclassified from finance costs to finance income. | ||||
Consolidated statement of financial position |
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as at 30 June 2016 |
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| 2016 | 2015 | |
| Note | £'000 | £'000 | |
ASSETS |
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Non-current assets |
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Property, plant and equipment | 5 | 3,338 | 7,276 | |
Intangible assets | 6 | 36,155 | 216,273 | |
Investments in joint ventures |
| - | 500 | |
Other receivables |
| 370 | - | |
|
| 39,863 | 224,049 | |
Current Assets |
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Trade and other receivables |
| 15,970 | 27,824 | |
Current tax assets |
| 12 | - | |
Cash and cash equivalents |
| 42,089 | 88,801 | |
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| 58,071 | 116,625 | |
Total assets |
| 97,934 | 340,674 | |
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LIABILITIES |
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Current Liabilities |
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Trade and other payables |
| (21,627) | (34,494) | |
Current tax liabilities |
| - | (24) | |
Provisions | 9 | (10,864) | (14,658) | |
Financial liabilities |
| (1,002) | (10,036) | |
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| (33,493) | (59,212) | |
Non-current liabilities |
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Other payables |
| (950) | (3,936) | |
Provisions | 9 | (8,016) | (15,200) | |
Financial liabilities |
| (807) | (335) | |
Deferred tax liabilities |
| (1,021) | (10,208) | |
Total liabilities |
| (44,287) | (88,891) | |
Net assets |
| 53,647 | 251,783 | |
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EQUITY |
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Capital and reserves attributable to owners of the parent |
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Ordinary shares |
| 22,519 | 21,682 | |
Ordinary shares to be issued |
| 2,511 | 2,511 | |
Share premium |
| 383,721 | 383,721 | |
Foreign exchange translation reserve |
| 6,377 | (2,512) | |
Other reserves |
| 269,449 | 244,214 | |
Accumulated losses |
| (630,930) | (397,833) | |
Total equity |
| 53,647 | 251,783 | |
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Consolidated statement of changes in equity |
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for the year ended 30 June 2016 |
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| Ordinaryshares | Ordinaryshares to be issued | Share premium | Merger reserve | Reverse acquisition reserve | Share-based payment reserve | Accumulated losses | Foreign exchange translation | Totalequity |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance at 1 July 2014 | 19,448 | 2,511 | 336,990 | 221,539 | (25,321) | 20,823 | (182,019) | (10,662) | 383,309 |
Loss for the year | - | - | - | - | - | - | (223,551) | - | (223,551) |
Other comprehensive income | - | - | - | - | - | - | - | 8,150 | 8,150 |
Total comprehensive (expense)/income | - | - | - | - | - | - | (223,551) | 8,150 | (215,401) |
Issue of Ordinary shares (net of expenses) | 1,614 | - | 46,014 | - | - | - | - | - | 47,628 |
Issue of Ordinary shares relating to prior year business combinations | 458 | - | - | 7,133 | - | (151) | - | - | 7,440 |
Share-based payments | - | - | - | - | - | 27,928 | - | - | 27,928 |
Exercise of share options | 162 | - | 717 | - | - | (7,737) | 7,737 | - | 879 |
Balance at 30 June 2015 | 21,682 | 2,511 | 383,721 | 228,672 | (25,321) | 40,863 | (397,833) | (2,512) | 251,783 |
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Balance at 1 July 2015 | 21,682 | 2,511 | 383,721 | 228,672 | (25,321) | 40,863 | (397,833) | (2,512) | 251,783 |
Loss for the year | - | - | - | - | - | - | (233,371) | - | (233,371) |
Other comprehensive income | - | - | - | - | - | - | - | 8,889 | 8,889 |
Total comprehensive (expense)/income | - | - | - | - | - | - | (233,371) | 8,889 | (224,482) |
Issue of Ordinary shares relating to prior year business combinations | 791 | - | - | 9,511 | - | (470) | - | - | 9,832 |
Share-based payments | - | - | - | - | - | 16,468 | - | - | 16,468 |
Exercise of share options | 46 | - | - | - | - | (274) | 274 | - | 46 |
Balance at 30 June 2016 | 22,519 | 2,511 | 383,721 | 238,183 | (25,321) | 56,587 | (630,930) | 6,377 | 53,647 |
|
|
|
| ||||||
Cash flow statements |
|
|
|
| |||
for the year ended 30 June 2016 |
|
|
|
| |||
|
| 2016 | 2015 | ||||
| Note | £'000 | £'000 | ||||
Cash flows used in operating activities |
|
|
| ||||
Cash used by operations, before exceptional expenses | 7 | (21,869) | (50,345) | ||||
Exceptional expenses |
| (15,959) | (9,491) | ||||
Net income tax paid |
| (80) | (141) | ||||
Net cash used in operating activities |
| (37,908) | (59,977) | ||||
Investing activities |
|
|
| ||||
Investments in joint ventures |
| (500) | (1,244) | ||||
Interest received |
| 338 | 447 | ||||
Proceeds on disposal of property, plant and equipment |
| 35 | - | ||||
Purchases of property, plant and equipment |
| (894) | (4,135) | ||||
Purchase and capitalisation of intangible assets |
| (8,238) | (40,821) | ||||
Net cash (used in) from investing activities |
| (9,259) | (45,753) | ||||
Financing activities |
|
|
| ||||
Proceeds from issuance of ordinary shares (net of expenses) |
| - | 46,995 | ||||
Share options and warrants exercised |
| 85 | 879 | ||||
Interest paid |
| (122) | (164) | ||||
Repayments of finance lease liabilities |
| (1,155) | (277) | ||||
Net cash (used in)/from financing activities |
| (1,192) | 47,433 | ||||
Net decrease in cash and cash equivalents |
| (48,359) | (58,297) | ||||
Cash and cash equivalents at beginning of the year |
| 88,801 | 146,828 | ||||
Effect of exchange rate changes |
| 1,647 | 270 | ||||
Cash and cash equivalents at end of the year |
| 42,089 | 88,801 | ||||
|
|
|
| ||||
1. Basis of Preparation |
The financial information presented in this Preliminary Announcement is extracted from, and is consistent with, the Group's audited financial statements for the year ended 30 June 2016. |
The preliminary announcement for the year ended 30 June 2016 was approved by the Board of Directors on 7 September 2016. The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2016 or 2015 but is derived from those accounts. Statutory accounts for 2016 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. |
The Group's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. |
|
Going concern |
At 30 June 2016, the Group had cash of £42,089,000. The Directors have prepared a cash flow forecast, including reasonable sensitivities, which shows sufficient funding to see the Group through the forecast period. The forecast includes the benefits from the cost savings which are being made from the business optimisation programme, headcount rationalisation, exiting from non-core geographies and property rationalisation. Furthermore, capital expenditure is expected to continue at the substantially reduced level experienced during the year ending 30 June 2016 following the development and launch of the new platform. This new platform is expected to drive a new, higher margin revenue stream. The Directors therefore confirm that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future and accordingly these financial statements are prepared on a going concern basis. |
|
2. Segmental information |
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. During the year ended 30 June 2016, the Group changed internal reporting from one operating segment to six. The operating segment's operating results are reviewed regularly by the Board of Directors in order to make decisions about resources to be allocated to the segment and to assess its performance. |
|
Segment revenues and results
The following is an analysis of the Group's revenue and results by reportable segment for the year ended 30 June 2016:
| Americas | Europe | FINKit | Create | MEA | Content | Unallocated | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
External revenue | 19,088 | 29,001 | 463 | 4,218 | 5,160 | 9,635 | - | 67,565 |
Inter-segment revenue | - | 1,340 | - | 1,504 | 2,916 | 307 | (6,067) | - |
Total revenue | 19,088 | 30,341 | 463 | 5,722 | 8,076 | 9,942 | (6,067) | 67,565 |
|
|
|
|
|
|
|
|
|
EBITDA | (3,093) | (4,870) | (3,827) | (1,221) | 1,050 | 2,745 | (10,407) | (19,623) |
Depreciation, amortisation and impairments |
|
|
|
|
|
|
| (205,216) |
Other exceptional items |
|
|
|
|
|
|
| (3,492) |
Share of loss of joint ventures |
|
|
|
|
|
|
| (58) |
Share-based payments |
|
|
|
|
|
|
| (16,468) |
Net finance income |
|
|
|
|
|
|
| 1,775 |
Loss before income tax |
|
|
|
|
|
|
| (243,082) |
The following is an analysis of the Group's revenue and results by reportable segment for the year ended 30 June 2015:
| Americas | Europe | FINKit | Create | MEA | Content | Unallocated | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
External revenue | 25,603 | 45,311 | - | 7,447 | 4,731 | 6,608 | - | 89,700 |
Inter-segment revenue | 301 | 471 | - | 7,009 | 2,545 | 261 | (10,587) | - |
Total revenue | 25,904 | 45,782 | - | 14,456 | 7,276 | 6,869 | (10,587) | 89,700 |
|
|
|
|
|
|
|
|
|
EBITDA | (5,219) | (18,334) | (2,323) | 1,798 | 1,082 | 987 | (19,791) | (41,800) |
Depreciation, amortisation and impairments |
|
|
|
|
|
|
| (119,196) |
Other exceptional items |
|
|
|
|
|
|
| (34,151) |
Share of loss of joint ventures |
|
|
|
|
|
|
| (3,788) |
Share-based payments |
|
|
|
|
|
|
| (27,977) |
Net finance expense |
|
|
|
|
|
|
| (521) |
Loss before income tax |
|
|
|
|
|
|
| (227,433) |
Geographical disclosures |
|
|
|
|
|
In presenting information on the basis of geography, revenue is based on the location of the customers. Non-current assets are based on the geographical location of those assets. | |||||
|
| Revenues | Non-current assets | ||
|
| 2016 | 2015 | 2016 | 2015 |
|
| £'000 | £'000 | £'000 | £'000 |
United Kingdom |
| 41,878 | 54,511 | 17,798 | 63,153 |
Americas |
| 18,588 | 25,114 | 11,868 | 142,498 |
Turkey |
| 5,166 | 4,731 | 8,397 | 16,549 |
Europe |
| 1,476 | 2,787 | - | - |
Rest of World |
| 457 | 2,557 | 1,800 | 1,849 |
Total |
| 67,565 | 89,700 | 39,863 | 224,049 |
Products and services |
|
|
|
|
|
|
|
|
| Revenues | |
|
|
|
| 2016 | 2015 |
|
|
|
| £'000 | £'000 |
Product licences |
|
|
| 1,111 | 11,875 |
Platform supply and transactions |
| 32,830 | 33,089 | ||
User generated revenue |
|
|
| 33,941 | 44,964 |
Development and integration services |
|
|
| 33,624 | 44,736 |
Total |
|
|
| 67,565 | 89,700 |
|
|
|
|
|
|
Revenues derived from single customers whose revenues are 10% or greater than overall Group revenues in either the current, or prior, financial year are given below: | |||||
|
|
|
| 2016 | 2015 |
|
|
|
| £'000 | £'000 |
External customer |
|
|
| 15,943 | 15,855 |
External customer |
|
|
| 6,680 | 8,251 |
3. Operating loss |
|
|
|
|
|
|
|
This is stated after charging: |
| 2016 | 2015 |
|
| £'000 | £'000 |
Depreciation |
| 2,814 | 4,204 |
Impairment of property, plant and equipment |
| 3,268 | 1,501 |
Amortisation |
| 25,465 | 20,671 |
Impairment of intangible assets |
| 172,728 | 92,380 |
Impairment of investment in joint venture |
| 941 | 440 |
|
|
|
|
Exceptional items comprise: |
| 2016 | 2015 |
|
| £'000 | £'000 |
Exceptional income |
| (6,874) | - |
Onerous contracts |
| (3,190) | 28,475 |
Restructuring costs |
| 8,734 | 4,485 |
Surplus property costs |
| 4,382 | 1,817 |
Strategic Review and corporate development costs |
| 440 | 1,945 |
Adjustment to contingent consideration |
| - | 1,314 |
Release of acquisition-related liabilities |
| - | (3,885) |
|
| 3,492 | 34,151 |
|
|
|
|
The exceptional income relates to an amount received in respect of a revision to a customer contract.
The charge for onerous contracts relates to those contracts under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefit expected to be received under it. In particular, obligations associated with a number of contracts with a third party IT and business services provider have been provided. Additionally, a number of restructuring activities were undertaken which resulted in several onerous property lease contracts.
Restructuring costs are associated with a number of restructuring activities undertaken and principally relate to redundancy and termination costs.
Adjustments to contingent consideration reflect the recalculation of amounts owed to former shareholders of the acquired businesses based on performance related criteria in accordance with acquisition related contracts.
Strategic Review and corporate development costs related primarily to professional advisor fees incurred in respect of Monitise's review of its strategy and ownership structure announced on 22 January 2015 and costs associated with a number of corporate development projects.
The release of acquisition-related acquired liabilities relates to the settlement of a number of historic patent claims associated with the previous acquisition of Monitise Americas, Inc. (formerly Clairmail, Inc.).
4. Loss per share
Basic and diluted
Basic loss per share is calculated by dividing the loss attributable to owners of the parent by the weighted average number of Ordinary shares in issue during the year. As the Group is loss-making, any share options in issue are considered to be 'anti-dilutive'. As such, there is no separate calculation for diluted loss per share.
Reconciliations of the loss and weighted average number of shares used in the calculation are set out below:
| 2016 | 2015 | ||||
| Loss for the year | Weighted average number of shares | Loss per share | Loss for the year | Weighted average number of shares | Loss per share |
| £'000 | (thousands) | (pence) | £'000 | (thousands) | (pence) |
Loss attributable to owners of the parent | (233,371) | 2,215,733 | (10.5) | (223,551) | 2,069,164 | (10.8) |
5. Property, plant and equipment |
|
|
|
|
| Office | Computer | Leasehold |
|
| equipment | equipment | improvements | Total |
| £'000 | £'000 | £'000 | £'000 |
Cost |
|
|
|
|
As at 1 July 2014 | 1,124 | 9,386 | 5,137 | 15,647 |
Exchange differences | 143 | 14 | (23) | 134 |
Additions | 460 | 2,103 | 358 | 2,921 |
Disposals | (479) | (3,214) | (47) | (3,740) |
As at 30 June 2015 | 1,248 | 8,289 | 5,425 | 14,962 |
Accumulated depreciation and impairment |
|
|
|
|
As at 1 July 2014 | 416 | 4,299 | 797 | 5,512 |
Exchange differences | 152 | 34 | (1) | 185 |
Charge | 412 | 2,960 | 832 | 4,204 |
Impairment | - | 427 | 1,074 | 1,501 |
Disposals | (462) | (3,209) | (45) | (3,716) |
As at 30 June 2015 | 518 | 4,511 | 2,657 | 7,686 |
Net book value |
|
|
|
|
As at 1 July 2014 | 708 | 5,087 | 4,340 | 10,135 |
As at 30 June 2015 | 730 | 3,778 | 2,768 | 7,276 |
Cost |
|
|
|
|
As at 1 July 2015 | 1,248 | 8,289 | 5,425 | 14,962 |
Exchange differences | 138 | 435 | 159 | 732 |
Additions | 4 | 1,504 | 127 | 1,635 |
Disposals | (319) | (5,439) | - | (5,758) |
As at 30 June 2016 | 1,071 | 4,789 | 5,711 | 11,571 |
Accumulated depreciation and impairment |
|
|
|
|
As at 1 July 2015 | 518 | 4,511 | 2,657 | 7,686 |
Exchange differences | 79 | 139 | 4 | 222 |
Charge | 217 | 2,042 | 555 | 2,814 |
Impairment | 325 | 1,606 | 1,337 | 3,268 |
Disposals | (319) | (5,438) | - | (5,757) |
As at 30 June 2016 | 820 | 2,860 | 4,553 | 8,233 |
Net book value |
|
|
|
|
As at 1 July 2015 | 730 | 3,778 | 2,768 | 7,276 |
As at 30 June 2016 | 251 | 1,929 | 1,158 | 3,338 |
The impairment charge relates to the write-off of leasehold improvements associated with certain vacated property leases and computer equipment which had become redundant mainly as a consequence of the restructuring activities conducted. Fully depreciated and impaired assets have been treated as disposals as they have no residual value.
6. Intangible assets |
|
|
|
|
|
|
|
| Goodwill | Customer contracts | Intellectual property rights | Acquired technology | Purchased and acquired software licences | Capitalised development costs | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Cost: |
|
|
|
|
|
|
|
As at 1 July 2014 | 196,394 | 45,694 | 277 | 26,744 | 16,986 | 36,383 | 322,478 |
Exchange differences | 8,536 | 473 | - | 333 | (147) | 179 | 9,374 |
Additions | - | - | - | - | 3,051 | 29,611 | 32,662 |
Disposals | - | - | - | - | (2,007) | - | (2,007) |
As at 30 June 2015 | 204,930 | 46,167 | 277 | 27,077 | 17,883 | 66,173 | 362,507 |
Accumulated amortisation: |
|
|
|
|
|
|
|
As at 1 July 2014 | 1,546 | 7,997 | 222 | 6,936 | 4,164 | 13,846 | 34,711 |
Exchange differences | 1 | 368 | (1) | 226 | (146) | 31 | 479 |
Charge | - | 6,601 | 31 | 5,026 | 3,803 | 5,210 | 20,671 |
Impairment | 40,223 | 1,853 | - | 3,365 | 9,533 | 37,406 | 92,380 |
Disposals | - | - | - | - | (2,007) | - | (2,007) |
As at 30 June 2015 | 41,770 | 16,819 | 252 | 15,553 | 15,347 | 56,493 | 146,234 |
Net book value: |
|
|
|
|
|
|
|
As at 1 July 2014 | 194,848 | 37,697 | 55 | 19,808 | 12,822 | 22,537 | 287,767 |
As at 30 June 2015 | 163,160 | 29,348 | 25 | 11,524 | 2,536 | 9,680 | 216,273 |
|
|
|
|
|
|
|
|
Cost: |
|
|
|
|
|
|
|
As at 1 July 2015 | 204,930 | 46,167 | 277 | 27,077 | 17,883 | 66,173 | 362,507 |
Exchange differences | 25,226 | 5,743 | - | 2,352 | 305 | 1,257 | 34,883 |
Additions | - | - | - | - | 1,988 | 6,333 | 8,321 |
Disposals | (183,230) | (8,595) | (277) | (6,422) | (11,525) | (4,262) | (214,311) |
As at 30 June 2016 | 46,926 | 43,315 | - | 23,007 | 8,651 | 69,501 | 191,400 |
Accumulated amortisation: |
|
|
|
|
|
|
|
As at 1 July 2015 | 41,770 | 16,819 | 252 | 15,553 | 15,347 | 56,493 | 146,234 |
Exchange differences | 18,208 | 4,096 | - | 1,963 | 335 | 527 | 25,129 |
Charge | - | 15,162 | 15 | 6,017 | 2,253 | 2,018 | 25,465 |
Impairment | 162,738 | 7,464 | 10 | 2,200 | 316 | - | 172,728 |
Disposals | (183,230) | (8,595) | (277) | (6,422) | (11,525) | (4,262) | (214,311) |
As at 30 June 2016 | 39,486 | 34,946 | - | 19,311 | 6,726 | 54,776 | 155,245 |
Net book value: |
|
|
|
|
|
|
|
As at 1 July 2015 | 163,160 | 29,348 | 25 | 11,524 | 2,536 | 9,680 | 216,273 |
As at 30 June 2016 | 7,440 | 8,369 | - | 3,696 | 1,925 | 14,725 | 36,155 |
|
|
|
|
|
|
|
|
Impairment in the year
During the year the useful economic lives of intangible assets were reviewed within the Group accounting policies. As a result, an accelerated amortisation charge of £2,510,000 was recorded in respect of Acquired Technology and £9,148,000 in respect of Customer Contracts.
The Group has impaired intangible assets during the year following indications that impairments were required. Impairments comprise goodwill and other intangible assets relating to historic acquisitions as well as previously capitalised software and research and development costs where either these technologies or geographies are no longer core to Monitise's future technology strategy in the short term due to market readiness.
Goodwill acquired in a business combination is allocated at acquisition to the cash-generating unit ('CGU') that is expected to benefit from that business combination. The CGUs identified in the current year are the same as those identified in the prior year.
The carrying amounts of goodwill at 30 June, post impairment, and the CGUs to which they are allocated, are as follows:
| 2016 | 2015 |
| £'000 | £'000 |
Americas | - | 116,629 |
Content | 2,440 | 16,270 |
Create | 4,000 | 24,500 |
MEA | 1,000 | 5,761 |
| 7,440 | 163,160 |
7. Reconciliation of net loss to net cash used in operating activities |
|
|
| 2016 | 2015 |
| £'000 | £'000 |
Loss before income tax | (243,082) | (227,433) |
Adjustments for: |
|
|
Depreciation and impairments to property, plant and equipment | 6,082 | 5,705 |
Amortisation and impairments to intangible assets | 198,193 | 113,051 |
Impairment of investments in joint ventures | 941 | 440 |
Share-based payments | 16,468 | 27,977 |
(Profit)/loss on disposal of property, plant and equipment | (35) | 24 |
Finance (costs)/income - net | (1,775) | 521 |
Exceptional costs | 3,492 | 34,151 |
Share of post-tax loss of joint ventures | 58 | 3,788 |
Operating cash flows before movements in working capital | (19,658) | (41,776) |
Decrease/(increase) in receivables | 15,292 | 9,055 |
Decrease in payables | (19,100) | (16,968) |
Increase/(decrease) in provisions | 1,597 | (656) |
Cash used in operations | (21,869) | (50,345) |
|
|
|
8. Net funds |
|
|
|
|
|
| 2016 | 2015 |
| £'000 | £'000 |
Cash at bank and in hand | 42,089 | 88,801 |
Finance leases | (1,809) | (596) |
Net funds | 40,280 | 88,205 |
|
|
|
9. Provisions |
|
|
|
| Reorganisation | Onerous contracts | Total |
| £'000 | £'000 | £'000 |
As at 1 July 2015 | - | 29,858 | 29,858 |
Additional provisions in the year | 5,602 | 10,068 | 15,670 |
Release of provision | (34) | (8,227) | (8,261) |
Utilisation of provision | (3,393) | (15,493) | (18,886) |
Exchange differences | 28 | 471 | 499 |
As at 30 June 2016 | 2,203 | 16,677 | 18,880 |
|
|
|
|
|
| 2016 | 2015 |
|
| £'000 | £'000 |
Due within one year |
| 10,864 | 14,658 |
Due after one year |
| 8,016 | 15,200 |
|
|
|
|
The additional provision for onerous contracts relates to those contracts under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefit expected to be received under it. These include provision for surplus properties as a result of the reorganisations undertaken and obligations associated with a number of contracts with a third party IT and business services provider. Additionally, provision has been made for the ongoing costs of closing the Group's Far East investments and the finalisation of the restructuring activities.
The release of provision related to the successful renegotiation of onerous contracts which had been provided for in the prior year.