Monitise Regulatory News (MONI)

17 February 2015

MONITISE plc

Interim results for the six months to 31 December 2014

Business transformation and Strategy Review update, H1 FY 2015 results, Capital Markets Day

Monitise plc (LSE: MONI.L) ("Monitise", the "Company" or "Group") announces its unaudited interim results for the six months ended 31 December 2014.

· Monitise Central Platform will launch in April 2015 enabling cloud-based Mobile Money services

· With a global partner, Monitise has signed a Letter of Intent with a major European financial institution to deploy Monitise digital banking capabilities in multiple countries

· Re-iteration of EBITDA profitability in FY 2016, driven by cost initiatives and benefits of shifting to a product-centric model

· Positive discussions with market-leading players under Strategic Review underpins Board's confidence in the Company's strategy, unique positioning, future prospects and value

· Capital Markets Day begins 9:00am GMT today, 17 February 2015 and will be live webcast via www.monitise.com/investor_relations

Monitise Chairman Peter Ayliffe said:

"The announcement of our Strategic Review has led to many constructive discussions with market-leading players interested in our business and the role we play in the industry. These positive discussions and the strong support from our existing strategic partners and clients underpin the Board's confidence in the Company's strategy, unique positioning, future prospects and value." 

"As we focus on the second half, the momentum we are seeing in transforming our business also reinforces our confidence in becoming EBITDA profitable in FY16."

Business Transformation Update

· The Group will launch its first Mobile Money services on the new cloud-based Monitise Central Platform (MCP) in April 2015. Monitise is seeing interest from new and existing clients in its MCP offering based on the functionality they require to address their commercial needs.

Financial Summary H1 FY 2015

· Group revenue £42.4m (H1 FY 2014: £46.5m).

· EBITDA(1) loss of £30.8m (H1 FY 2014 loss: £10.2m).

· Adjusted loss after tax(2) of £38.5m (H1 FY 2014 loss: £16.4m) and adjusted loss per share of 1.9p (H1 FY 2014 loss: 1.0p). Statutory loss after tax of £56.8m (H1 FY 2014 loss: £22.0m) with loss per share of 2.8p (H1 FY 2014 loss: 1.4p).

· Gross cash £129m as at 31 December 2014, provides balance sheet strength to see Monitise through to cash flow breakeven and beyond.

(1) EBITDA is defined as operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.

(2) Adjustments comprise share-based payments, exceptional items, acquisition-related amortisation and impairments. A reconciliation is provided in note 13.

Operational Highlights

· Monitise's total user count now exceeds 82 million:

- Growth in registered end users from 30m in June 2014 to 33m at end December 2014.

- Further 49m-plus downloads of Monitise-designed high-engagement apps across multiple industry verticals and email subscribers to the Monitise Content consumer business.

· Live transactions were 5.1bn on an annualised basis as at end-December 2014, +50% on 3.4bn a year ago. Payments and transfers initiated via Monitise technology now worth $101bn on an annualised basis, +49% on $68bn a year ago.

· New partnerships and product launches included:

- Santander, Telefónica and MasterCard in aggregate made a £49.2 million investment in Monitise shares.

- A strategic partnership with Santander to develop and deploy a series of mobile banking innovations.

- IBM and Monitise announced an expanded, multi-year global alliance to deliver cloud-based mobile commerce solutions. IBM also agreed to deploy its cognitive computing engine, Watson, in support of Monitise's new technology platform.

- A new seven-year digital banking strategic partnership was entered into with Virgin Money in December.

- A five-year contract win with a leading Business Process Outsourcing provider entered into in December to launch Mobile Money services.

- A design partnership was entered into with Ziraat Bank, one of Turkey's most established financial institutions.

- Apple Touch ID fingerprint services being integrated for İşbank, Turkey's largest private bank for its digital banking app.

· Client app launch highlights included the mobile app created for Hub - Premier Inn's hotel where guests manage their entire stay via mobile, SmartBank, Santander UK's new mobile banking app designed for students, FIFA's fans' companion app for the 2014 World Cup, and mobile services for Turkish Airlines and Doddle, the new 'click and collect' parcel service. 

Post Year-End Highlights

· Partnership with the MoneyPass Network to offer a range of Mobile Money services and card control capabilities to card issuers in the United States. The network is operated by Elan Financial Services, a division of U.S. Bank.

· Following Monitise's enhancement of the Vantage platform to make Apple's TouchID authentication available, Webster Bank became the first bank to deploy this Vantage feature into its mobile banking app.

· Rene Ho joined Monitise as Chief Marketing Officer on February 2, 2015, reporting to co-CEO Elizabeth Buse. Prior to joining Monitise, Rene was based at Visa Inc. for ten years, where he led sales, marketing, product development technology, communications and innovation roles in the Americas and Asia Pacific.

Outlook and Guidance reiterated

· FY 2015 revenue is expected to be between £90-100m.

· FY 2016 total cost base to be materially lower than current consensus (which is approximately £180m).

· While the FY 2015 EBITDA loss is expected to be £40-50m (the "FY 2015 Profit Forecast"), Monitise reiterates its expectation to be EBITDA profitable in FY 2016 (the "FY 2016 Profit Forecast").

· Capex guidance reiterated at £35-45m in FY 2015. H1 FY 2015 cashflow capex was £25.9m.

· Guidance of 200m users and £2.50 ARPU by end FY 2018, based on the scale of the market opportunity and partnerships in place.

· More than 30% EBITDA margins by end FY 2018, underpinned by high operational leverage in the business.

Monitise is hosting a Capital Markets Day in London at 9:00am GMT today for analysts and institutional investors. A live webcast will be available on the Investor Relations page of the Monitise website www.monitise.com/investor_relations with a replay facility expected to be available within 24 hours of the presentation. A New York Capital Markets Day is scheduled for 24 February 2015.

About Monitise

Monitise (LSE: MONI) is a world leader in Mobile Money - banking, paying and buying with a mobile device. Leading banks, payments companies, retailers and mobile networks use Monitise's technology platforms and services to securely connect people with their money.

33 million consumers have registered for Monitise's patented technology to 'bank anywhere', 'pay anyone' and 'buy anything', accounting for $101bn of payments, purchases and transfers annually. Additionally, Monitise-designed high-engagement apps across multiple industry verticals and email subscribers to the Monitise Content consumer business total more than 49 million. More information is available at www.monitise.com. For views and insights from the Monitise team about the world of Mobile Money, visit www.monitise.com/insights.

BASIS OF PREPARATION OF AND ASSUMPTIONS FOR FY 2015 AND FY 2016 PROFIT FORECASTS

In accordance with Rule 28.1(c)(i) of the Code, the Board of Monitise confirms that the statements relating to FY 2015 and FY 2016 EBITDA herein have been properly compiled on the basis of the assumptions stated below and that the basis of accounting used is consistent with the Company's accounting policies.

Set out below is the basis of preparation in respect of the FY 2015 Profit Forecast and the FY 2016 Profit Forecast (together the "Profit Forecasts"), together with the assumptions on which they are based.

Basis of preparation

The FY 2015 Profit Forecast is based on the unaudited half year financial statements of Monitise for the six months ended 31 December 2014 and the management account forecasts for the six months ended 30 June 2015. The FY 2016 Profit Forecast is based on the management account forecasts for the 12 months ended 30 June 2016. The Profit Forecasts have been prepared on a basis consistent with the current accounting policies of the Company. The Profit Forecasts exclude any transaction costs applicable to the Strategic Review or any other associated accounting impacts as a direct result of the Strategic Review.

Assumptions

The Profit Forecasts are based on the following assumptions for the period to which they relate:

Factors outside the influence or control of the Monitise Board:

• There will be no material changes to prevailing global macroeconomic or political conditions.

• There will be no material changes to the conditions of the markets in which Monitise operates.

• The main exchange, inflation and tax rates in Monitise's principal markets will remain materially unchanged from the prevailing rates.

• There will be no material adverse events that will have a significant impact on Monitise's financial performance.

• There will be no material changes in legislation or regulatory requirements impacting on Monitise's operations or its accounting policies.

• The announcement of the Strategic Review will not result in any material changes to Monitise's obligations to customers.

Factors within the influence and control of the Monitise Board:

• The announcement of the Strategic Review will not have any material impact on Monitise's ability to negotiate new business.

• Successful realignment of the cost base with the transition to the new business model.

Forward Looking Statements

This announcement includes statements relating to the business, financial performance and results of the Company and/or the industry that the Company operates in which are forward-looking in nature (all statements other than statements of historical facts could be deemed to be forward-looking statements). These forward looking statements are based on the Company's or, as appropriate, the Company's directors', current expectations and projections about future events. These forward-looking statements speak only as of the date of this announcement and are subject to risks, uncertainties and assumptions about the Company and its subsidiaries and investments, including, among other things, the development of its business, trends in its operating industry and future developments in the m-commerce market. In light of these risks, uncertainties and assumptions, the events or circumstances referred to in the forward-looking statements may differ materially from those indicated in these statements, and you should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise. Save to the extent expressly stated herein in respect of the Profit Forecasts, none of the future projections, expectations, estimates or prospects in this announcement should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in this announcement.

None of the Company nor any other person guarantees that the assumptions that underpin any such forward-looking statements are free from errors, nor do they accept responsibility for the future accuracy of any of the opinions expressed in this announcement. These forward-looking statements speak only as at the date of this announcement and, except as required by the AIM Rules and applicable law, the Company undertakes no obligation to update or change any forward-looking statements to reflect events occurring after the date of this announcement.

Enquiries:

Moelis & Company is acting exclusively as financial adviser to Monitise and no one else in connection with the Strategic Review described in this announcement. In connection with such matters, Moelis & Company will not regard any other person as their client, nor will they be responsible to any person other than Monitise for providing the protections afforded to clients of Moelis & Company or for providing advice in connection with the Strategic Review described in this announcement or any matter referred to herein.

Financial Review

The Group's performance for the six months ended 31 December 2014 reflects a period of transition, with the Group moving away from large upfront licence revenue or engaging in new large scale development and integration led projects, but not yet benefiting from the release of the new platform and associated subscription revenue. As first announced in March 2014, Monitise is focusing on transitioning to a subscription based model and an evolved product architecture which will enable the Group to scale more rapidly.

Revenue

Group revenue fell 9% year-on-year to £42.4m in H1 FY 2015 from £46.5m in H1 FY 2014. The decline in licence revenue reflects the variable nature of this non-recurring revenue stream, in addition to the fact that Monitise is de-emphasising this line of business. Licence revenue peaked in H2 FY 2013. Licence revenue will continue to vary in the near term before becoming an immaterial part of the revenue mix in the long term. The sequential decline in Development & Integration revenue from £25.3m in H2 2014 to £21.8m in H1 2015 was predominantly due to a decline in billable work on certain large projects. We expect subscription revenue growth to accelerate in FY 2016, following the launch of the Monitise Central Platform.

Gross Margins

Group gross margin was 57% (H1 FY 2014: 73%), largely driven by the expected change in revenue mix. This transitional margin impact reflects the shift in the business model away from licence revenues. While we expect Subscription & Transaction revenues to increase in the near term, the lower margin Development & Integration revenues will have a disproportionate effect on Group gross margin over this transitional period. Licence and Subscription & Transaction segment gross margins were unchanged and their combined User Generated revenue gross margin was 89%, compared to 91% a year earlier. Higher margin Licence revenue fell from 24% to 10% as a percentage of User Generated revenue, and User Generated revenue as a percentage of the total fell from 59% to 48% of revenue compared to H1 FY 2014. Development & Integration margin in the period was impacted by certain large scale projects, where bulk price commitments were made on development work. There were also some instances where the scope of development work was underestimated. Note that these projects have future annuity upside opportunities.

EBITDA

The Group EBITDA loss was £30.8m in the period (H1 FY 2014: £10.2m). Operating costs of £55.0m (H1 FY 2014: £44.1m) predominantly reflects increased headcount following the acquisitions of Grapple, Pozitron and Markco Media.

As part of the re-shaping of our business and as previously stated, Monitise expects its FY 2016 total cost base to be materially lower than market consensus as at 22 January 2015 (approximately £180m), reflecting a number of initiatives commenced during the period, including the transition of UK professional services employees to IBM, and streamlining benefits of the shift to being a product-based business, which includes headcount reduction and a narrowing of development focus to core products. As a result, while the FY 2015 EBITDA loss is expected to be £40-50m (the FY 2015 Profit Forecast), Monitise reiterates its expectation to be EBITDA profitable in FY 2016 (the FY 2016 Profit Forecast).

Other Movements

Depreciation & Amortisation

Depreciation was £2.2m in the period (H1 FY 2014: £1.9m). Amortisation of £10.7m (H1 FY 2014: £7.4m) includes amortisation of acquired intangible assets of £7.1m and capitalised development costs of £2.4m.

Share-based Payments

The share-based payments charge of £12.1m in the period (H1 FY 2014: £3.1m, H2 FY 2014: £6.7m) includes share-based remuneration components relating to the acquisition of Grapple, Pozitron and Markco Media together with Monitise employee share options grants. The rise in share-based payments is mainly driven by the requirement to include certain acquisition related earn-outs as share-based payments in the income statement.

Exceptionals

£2.3m of exceptional costs were recorded in the period predominantly reflecting initial headcount reduction undertaken in the period as we move to a product-based business.

Loss Before Tax

Group loss before tax was £58.4m, compared to a loss in H1 FY 2014 of £23.3m.

Tax

A tax credit of £1.6m was recorded in the period (H1 FY 2014: £1.3m), principally relating to non-cash movements on the unwinding of deferred tax recognised on acquired intangible assets.

 The Group has unrecognised tax losses of approximately £255m which are available for offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses where it is the view of the Directors that future taxable profits are not deemed probable in the short-term to offset against these losses.

Attributable Loss

The reported loss after tax for H1 FY 2015 was £56.8m (H1 FY 2014: £22.0m). On an adjusted basis excluding share-based payments, exceptional items, impairments and acquisition-related amortisation, attributable loss after tax was £38.5m (H1 FY 2014: £16.4m).

Gain/Loss on Foreign Exchange

A £14.9m gain was recorded in the period (H1 FY 2014 loss: £9.4m). This is primarily driven by the translation of dollar assets including goodwill, other intangible assets and cash.

Loss Per Share

The basic and diluted loss per share was 2.8p (H1 FY 2014: 1.4p). On an adjusted basis excluding share based payments, exceptional items, impairments and acquisition-related amortisation, basic and diluted loss per share was 1.9p compared to 1.0p in H1 FY 2014.

Cash Flow and Funds

The Group ended the half year with a strong balance sheet, holding £128.3m of net funds at 31 December 2014 compared to £66.2m at 31 December 2013 and £146.0m at 30 June 2014. Free cash outflow was £63.6m, compared to £20.3m in H1 FY 2014. The main components of adjusted free cash outflow were capex of £25.9m, EBITDA of £30.8m and a negative working capital movement of £7.2m. For H2 FY 2015 Monitise guidance implies an EBITDA loss of £9.2m-£19.2m and capex of £9.1m-£19.1m, implying a cash outflow before working capital of £18.3m-£38.3m.

A net cash inflow of £48.6m, relating to the issuance of ordinary shares, was recorded in the period, including an aggregate net investment of £47.6m in Monitise by Santander Group, Telefónica Group and MasterCard Inc. in November 2014.

Capital spending increased from £9.1m to £25.9m as the Group accelerated its investment in the productisation of its technology platform. Capital spending included £2.6m (H1 FY 2014: £1.0m) of tangible asset purchases, and £23.3m (H1 FY 2014: £8.1m) of intangible asset purchases and capitalisation. The Group reiterates its capital spending guidance of £35-£45m for FY 2015.

Operational Review

These results reflect the first full interim reporting period following our announcement in March 2014 that we were embarking on a shift to a subscription-based commercial model and a configurable product set designed to cut down the time and cost it takes customers to onboard to our platforms and services. At this point in managing the business transformation, our efforts are resolutely focused on product development and roll-outs via our enhanced platform technology, digital innovation and broadening cross-industry collaborations with partners which connect to hundreds of millions of consumers.

Market demand and interest in leveraging Monitise's bank-grade products and capabilities were underscored by both new and deepened collaborations during the period with leading financial services businesses, payment providers, mobile network operators and retailers. These included the equity investments in the business by Santander, Telefónica and MasterCard announced in November 2014 and enhanced technology collaborations with IBM, the Group's alliance and resourcing partner.

Amid ongoing initiatives centred on optimising Monitise's global operations following the acquisitions of Grapple Mobile, Pozitron and Markco Media between September 2013 and June 2014, Monitise remained focused on its drive to simplify and rationalise resources across the business. These included the transfer of a little over 20% of Monitise's global employee base to IBM during the first half as part of the global alliance between the two companies. This initiative, now in full operation, involving Professional Services teams focused on development and integration work is designed to substantially increase Monitise's ability to handle larger custom projects globally. The transfer formally completed on 1 December 2014.

As part of the ongoing business model shift, Monitise is also re-engineering its cloud-based platform technology. The first services on the Monitise Central Platform, which is a cloud/SaaS/IaaS offering that can be integrated into via standard APIs, will launch in April. Other roll-outs are expected in June with more planned for later in the calendar year. Monitise is seeing interest from new and existing clients in its MCP offering, based on the functionality they require to address their commercial needs.

UK and Europe

In September 2014, Monitise announced a strategic partnership with Santander, led out of Europe, to develop and deploy a series of mobile banking innovations. Santander announced a deepening relationship and £33 million investment in Monitise in November 2014. Amid a number of initiatives in progress, the two companies have since collaborated on the launch of SmartBank, Santander UK's app designed for students. Santander has 103 million account holders across Brazil and Latin America, Spain, UK, Germany, Poland, Portugal and the US.

The partnership follows Monitise's collaboration with Santander on the launch of Yaap, the bank's Spanish mobile commerce joint venture with CaixaBank and Telefónica, which went live in June 2014.

Telefónica's plans to expand its commercial partnership with Monitise were announced in November 2014. The two companies remain focused on developing new products and services which leverage Telefónica's expertise and Monitise's capabilities, involving two country roll-outs in Latin-America during 2015, including Brazil, where the mobile network operator has almost 80 million mobile customers.

Virgin Money announced a seven-year strategic partnership agreement with Monitise in December 2014 to help develop elements of the bank's future digital banking services. The agreement builds on a commercial relationship that was first entered into in December 2013. During the same month, Monitise announced a five-year contract win with a leading Business Process Outsourcing (BPO) provider to launch Mobile Money services in 2015, for millions of consumers. The partnership has a contract value of several million pounds.

Monitise continues its work with clients such as RBS Group and National Australia Group Europe (NAGE) to enhance the mobile services they offer to consumers. RBS' own figures show customers using RBS and NatWest apps log in every day. Following Monitise's integration of Paym into their services, Clydesdale and Yorkshire Banks, which are owned and operated by NAGE, saw their apps used for over 33,000 payments worth more than £4.6 million in two weeks. On Black Friday in November 2014, the apps were used 57 times each second, 50% higher than peak use for ATMs on the same day.

Monitise continues to work with Visa Europe to deploy mobile services to its 3,000+ member banks and financial institutions across 37 countries, which constitute 509m Visa accounts, and includes the development and growth of the Visa Personal Payments service. Monitise's support for Visa Europe's innovation includes strategy, design, app development and operational hosting, delivered from offices in London and Istanbul. 

The Group's Content business, comprising the former Grapple Mobile Ltd (now Monitise Create) and Markco Media companies (acquired in September 2013 and June 2014 respectively), continues to invent winning mobile experiences and source contextual content to augment Monitise's mobile commerce products comprising offers, discount and loyalty programmes.

During the period Monitise Create entered new relationships with FIAT and Poten & Partners, and deepened its partnerships with clients including Eurasian Bank, AXA Wealth, Momondo Group, B&Q and The Post Office's First Rate Exchange Services.

Among the diverse and growing portfolio of Monitise Create clients drawing on the team's strategy, creative and engineering expertise, hotel group Premier Inn has launched its 'Hub' hotels where guests can manage their entire stay, as well as control room temperature, lighting and meals, via their mobiles. Premier Inn plans to open 11 properties under the new 'Hub' brand across London and Edinburgh over the next three years. FIFA's fans' companion app helped to transform the 2014 tournament - acknowledged as the "first truly mobile and social World Cup", and in the run up to Christmas, the team also worked with Doddle, the new 'click and collect' parcel service, to launch a mobile app to help customers manage and track their deliveries.

The Content team continues to grow and maintain its brand and retail relationships. The international retailer network within the Group business includes 60,000+ brands and retailers across dozens of industry verticals such as restaurants, music and media, DIY, travel, health and beauty and utilities. Brands within the network include Burger King, Pizza Hut, Sky, Spar, B&Q, Tesco, ticketmaster, M&S, Home Depot, Target, Waterstone's, Boots, The Body Shop, Primark, iTunes, Nintendo and many more. The team continues to provide location-aware, relevant consumer offers products across the retail, ticketing and experience/gifting space, which translate into a roadmap of compelling services for banks and other brands to provide to their customers.

Americas

Monitise's business in the Americas comprises both its partnership relationships with world-leading businesses in financial services, payments and technology as well as direct customer relationships, including eight of the top 20 North American financial institutions and financial services brands. Capabilities sold include Monitise's Vantage, a mobile-first omni-channel banking solution, and the Alerting+ messaging product and design and innovation work carried out by the business' US digital innovation and design studio for both financial and non-financial services clients.

In September 2014, Monitise announced it was establishing IBM hosting facilities across multiple sites to enhance its ability to serve global processors, banks and mobile network operators from a US-based hub capable of scaling to handle Mobile Money services for hundreds of millions of subscribers. Initial target markets are North and Central America as well as South American markets such as Brazil.

Monitise is also working with MasterCard on the joint development of new digital payment services. These include cross-border mobile remittance capabilities, mobile transfer solutions and cloud-based payments services for businesses globally such as financial institutions, merchants, digital service providers and public sector organisations. These services will be available as configurable components of the Monitise platform in future.

Visa Inc. announced in September 2014 that it was undertaking an assessment in its 5.5% stake in Monitise and during the period reduced its minority shareholding. This was line with Visa's policy of tapering its influence in emerging partner companies as they grow, and generally reducing its use of external resources. The two companies continue to work together via an agreement that runs through 2016.

Post period-end, Monitise announced it had partnered with the MoneyPass Network to offer a range of Mobile Money services and card control capabilities to card issuers in the United States. The network is operated by Elan Financial Services, a division of U.S. Bank. Additionally, following Monitise enhancing the Vantage platform to make Apple's TouchID authentication available, Webster Bank became the first bank to deploy this Vantage feature into its mobile banking app.

Turkey, Middle East and Africa

Monitise's business in MEA, which has operated out of Istanbul since the acquisition of Turkish mobile innovator Pozitron in February 2014, has continued to build a customer base of some of the region's biggest banks, service providers and retail brands in markets including Turkey, Saudi Arabia, Qatar and the UAE.

Adding to its stable of banking customers in the region, Monitise announced in November 2014 that it is working with Ziraat Bank - one of Turkey's most well-established financial institutions - on developing and launching its new mobile services.

As part of its long-standing relationship with Işbank, Turkey's largest private bank, Monitise executed Turkey's first integration of Apple's Touch ID into a Turkish banking app.

In addition to banking, during the period Monitise expanded its footprint in the travel sector with the launch of a new suite of mobile services for Turkish Airlines, which carries over 39 million passengers a year worldwide. Its existing services for Pegasus, Turkey's leading low-cost airline, have now been downloaded over one million times and remain the most popular travel app on the Turkish App Store.

Asia Pacific

During the period, Monitise and BlackBerry announced plans to expand their BBM Money service, developed in conjunction with PermataBank, to Indonesian consumers using BBM on Android and iPhone. The cross-platform services are set to fully launch in March this year. A recent MEF report identified Indonesia as the ultimate 'mobile-first' nation, with 80% of mobile users engaging in some form of mobile financial services.

Monitise's Chinese-language Mobile Money capabilities, implemented with Hong Kong mobile operator PCCW-HKT and Joint Electronic Teller Service (JETCO), the ATM switch in Hong Kong, are live with Bank of China (Hong Kong). Another major financial institution locally plans to implement the service following regulatory approval.

Industry Recognition

During the period, Monitise continued to be recognised by awards programmes worldwide for its innovations. Among the titles won were:

· Overall winner and Retail Payments Project of the Year winner at The Banker's Technology Project of the Year awards for BKM Express Mobile, which also won the Mobile Payments category at the Future Mobile Awards, selected by industry analysts Juniper Research for the company's work on BKM Express Mobile.

· Three titles at the International Best in Biz awards: Gold winner for Best New Service of the Year for RBS's 'Pay Your Contacts' service, Silver winner for Fastest-Growing Company of the Year (large) and Bronze winner for Company of the Year (large).

· Ranking in the top 15 of Deloitte's UK Technology Fast 50 for the fourth year running

· Named Best Mobile Banking in Western Europe at the Global Finance Awards for Yapi Kredi Bank's Nuvo service.

· Winner of the Stevie Award for Best New Product or Service of the Year (Consumer Services) for Isbank's IsCep service.

· Santander's SmartBank app, designed and developed the Monitise Create team, was named a winner in December's IAB Creative Showcase - the only financial product from a bank to make the cut throughout the year. IAB's Creative Showcase celebrates cutting-edge creativity and innovation within the digital space.

· Monitise Create's FIFA fans' companion app for the 2014 World Cup was named the Best Use of Technology at the 2014 Global Football Business Awards.

This recognition reflects both the global reach and diversity of Monitise's Mobile Money capabilities, and its shared successes with its partners.

Board and Appointments

During the period, Senior Independent Non-Executive Director David Dey announced his retirement from the Monitise Board, having been a member since the Group's admission to London Stock Exchange's Alternative Investment Market in June 2007. David handed over to Amanda Burton, who was subsequently appointed Senior Independent Non-Executive Director at the Group's AGM in November 2014.

Victor Dahir stood down from his role as Visa Inc.'s nominated Board director after one year of service, and Sushovan Hussain decided not to stand for re-election at the AGM, having served on the Board since January 2011.

Monitise Chief Information Officer Mike Keyworth stood down from his role as CIO and from the Board in September 2014 but has remained with the company as a technology adviser. Mike Keyworth joined Monitise in 2004 as the Delivery Director for the Group's flagship UK launch.

Appointments within the business have included Mike Dreyer, former Global Head of Technology at Visa Inc., who is now Chief Operating Officer and President, Americas at Monitise. Mike, who was appointed in August 2014, oversees the technology functions of the Group, and all sales activity in the US, Canada and Latin America.

Following the period end, Rene Ho joined Monitise as Chief Marketing Officer on February 2, 2015. Previously, Rene was based at Visa Inc. for ten years, where he led sales, marketing, product development technology, communications and innovation roles in the Americas and Asia Pacific. Previously, Rene spent 10 years at the Palo Alto-based management consultancy Strategic Decisions Group developing business strategies for both start-ups and multi-billion dollar companies.

Alastair Lukies and Elizabeth Buse

Co-CEOs, Monitise

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

* The comparative figures include the effects of adjustments to the acquisition accounting relating to prior year acquisitions.

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Cash Flow Statement

Notes to the Condensed Consolidated Financial Statements

1. General information

Monitise plc ('the Company'), and its subsidiaries (together 'the Group') is a technology group delivering mobile banking, payments and commerce networks worldwide. The Group is headquartered in the UK, operates ventures in the UK, US, Turkey, Asia Pacific and India.

The Company is a public limited company incorporated and domiciled in England and Wales whose shares are publicly traded on the Alternative Investment Market ('AIM') of the London Stock Exchange.

The condensed consolidated interim financial information was approved for issue by the Board on 16 February 2015.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2014 were approved by the Board on 12 September 2014 and delivered to the Registrar of Companies. The Auditors' report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed consolidation interim financial information is neither audited nor reviewed by the auditors and the results of the operations for the six months ended 31 December 2014 are not necessarily indicative of the operating results for future operating periods.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The policies have been applied consistently unless otherwise stated. They are the same as those used in preparing the consolidated financial statements at 30 June 2014.

2.1. Basis of preparation

The condensed consolidated interim financial information has been prepared under the measurement principles of International Financial Reporting Standards ('IFRS') as adopted by the European Union ('IFRS as adopted by the EU'), using accounting policies and methods of computation consistent, except as noted below, with those set out in the Company's 2014 Annual Report and Accounts. The financial statements have been prepared under the historical cost convention, as modified, where applicable, by the revaluation of financial assets and financial liabilities (including derivatives) at fair value through profit or loss. As permitted by AIM rules, the Group has not applied IAS

34 'Interim reporting' in preparing this interim report.

Based on projections prepared of the Group's anticipated future results, the Directors have reasonable expectations that the Group will have adequate resources to continue in existence for the foreseeable future. Therefore, the Directors continue to adopt the going concern basis in preparing this financial information.

2.2. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2014, as described in those annual financial statements. The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2014, but are not currently relevant to the Group, or have had no material impact:

• IFRS 10 "Consolidated financial statements"

• IFRS 11 "Joint arrangements"

• IFRS 12 "Disclosures of interests in other entities"

• IAS 27 (revised 2011) "Separate Financial Statements"

• IAS 28 (revised 2011) "Associates and Joint Ventures"

• Amendments to IFRS 10,11 and 12 on transition guidance

• IFRIC 21 "Levies"

• Amendments to IFRS 10, 12 and IAS 27: Investment entities

• Amendments to IAS 32: "Financial Instruments: Presentation" - Offsetting Financial Assets and Financial Liabilities

• Amendment to IAS 39 "Financial Instruments: Recognition and Measurement" - Novation of Derivatives and Continuation of Hedge Accounting

• Amendments to IAS 19: Defined Benefit Plans: Employee Contributions

• Annual Improvements to IFRSs 2010-2012

• Annual Improvements to IFRSs 2011-2013

• Amendments to IAS 36: Recoverable Amount Disclosures for Non-Financial Assets

There are currently no other new standards, amendments to standards and interpretations that are mandatory for the first time for the financial year beginning 1 July 2015.

The following new standards, amendments to standards and interpretations have been issued but will not be effective until financial years beginning on or after 1 July 2016:

The Group is currently assessing the impact of the other standards listed above on its results, financial position and cash flows.

The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed by the European Union and require adoption by the Group in future accounting periods.

The preparation of the financial statements requires the Group to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Directors base their estimates on historical experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

In the process of applying the Group's accounting policies, management has made a number of judgements and estimations, which have been consistent with those set out in the Company's 2014 Annual Report and Accounts.

3.1. Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services provided within the Group's ordinary activities, net of discounts and sales taxes. It comprises user generated revenues, product licences and development and integration services.

User generated revenue relates to revenue generated from all types of end-user activity and may take various forms including per user fees, click fees, commissions and revenue share, and includes associated managed services. This revenue is recognised as the services are performed.

Product licences are sales where the customer has the ability to exploit the licenced functionality upon delivery and include both certain term-based and perpetual licences.

• the Group has transferred to the buyer the significant risks and rewards of ownership of the licence;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue relating to development and integration services contracted on a time and materials basis is recognised as the services are performed. Revenue relating to development and integration services identified as a service contract, provided over a specified time period, is recognised on a straight-line basis. Development and integration service revenue delivered under a fixed price contract is recognised on a percentage-of-completion basis, based on the extent of work completed as a percentage of overall estimated project cost, when the outcome of a contract can be estimated reliably. Determining whether a contract's outcome can be estimated reliably requires management to exercise judgement and estimates are continually reviewed as determined by events or circumstances. Provision is made as soon as a loss is foreseen.

Typically, a number of the above elements may be sold together as a bundled contract. Revenue is recognised separately for each component if it is considered to represent a separable good or service and a fair value can be reliably established. The Group may derive fair value for its services based on a reliable cost estimate plus an appropriate market-based margin. Where a product licence is included within a bundled arrangement, the residual value of the contract is ascribed to the product licence after a fair value has been allocated to all other components.

Amounts which meet the Group's revenue recognition policy which have not yet been invoiced are accounted for as accrued income whereas amounts invoiced which have not met the Group's revenue recognition criteria are deferred and are accounted for as deferred income until such time as the revenue can be recognised. Management makes an assessment of the certainty of any accrued revenue amounts in determining how much revenue to recognise.

3.2. Share-based payments

Judgement and estimation is required in determining the fair value of shares at the date of award. The fair value is estimated using valuation techniques which take into account the award's term, the risk-free interest rate and the expected volatility of the market price of the Company's shares. Judgement and estimation is also required to assess the number of options expected to vest.

3.3. Going concern

The Directors have prepared projections of the Group's anticipated future results based on their best estimate of likely future developments within the business and therefore believe that the assumption that the Group is a going concern is valid. The financial information has therefore been prepared on the 'going concern' basis.

3.4. Development costs

The Group has capitalised internally generated intangible assets as required in accordance with IAS 38. Management have assessed expected contribution to be generated from these assets and deemed that no adjustment is required to the carrying value of the assets. The recoverable amount of the assets has been determined based on value in use calculations which require the use of estimates and judgements. Management reviews the assets for impairment on a regular basis.

3.5. Impairment of assets

IFRS requires management to undertake an annual test for impairment of assets with indefinite lives, including goodwill and, for assets with finite lives, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the fair value less costs to sell or net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of growth and discount rates. Changing the assumptions selected by management could significantly affect the Group's impairment evaluation and, hence, results. The Group's review includes the key assumptions related to sensitivity in the cash flow projections.

3.6. Deferred tax

Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration given to the timing and level of future taxable income.

3.7. Acquisition accounting and goodwill

Where the Group undertakes business combinations, the cost of acquisition is allocated to identifiable net assets and contingent liabilities acquired and assumed by reference to their estimated fair values at the time of acquisition. The remaining amount is recorded as goodwill. Identifiable net assets are valued using external valuation providers and involve an element of judgement related to projected results. Fair values that are stated as provisional are not finalised at the reporting date and final fair values may be determined that are materially different from the provisional values stated.

3.8. Fair value estimation for financial instruments

The fair value of financial instruments that are not traded in an active market, for example over-the-counter derivatives and contingent consideration liabilities, are estimated using valuation techniques. Management uses judgement to select a variety of methods and make assumptions that are based on market conditions existing at the end of the reporting period as well as internal information regarding a variety of probable outcomes. Holding trade receivables and payables at their amortised cost less impairment provision for trade receivables is deemed to approximate their fair values.

3.9. Provisions

Management uses judgement to estimate the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

4. Segmental information

Reportable segment

Monitise's operating segment is reported based on the information reviewed by the chief operating decision maker for the purposes of allocating resources and assessing performance. The Board of Directors is the Group's chief operating decision maker.

The Board of Directors considers revenue, cost of sales, operating costs, exceptional costs and a measure of adjusted EBITDA of the Group as a whole when assessing the performance of the business and making decisions about the allocation of resources. In addition, the Board reviews revenue split by products and geographies to assist with the allocation of resources. Accordingly, the Group had one reportable operating segment. The operating segment derives revenues from delivering mobile banking, payments and commerce networks worldwide.

Product licences are sales where the customer has the ability to exploit the licensed functionality upon delivery and include certain term-based and perpetual licences.

5. EBITDA

EBITDA is defined as Operating loss before exceptional items, depreciation, amortisation, impairments and share-based payments charge.

6. 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:

* The comparative figures include the effects of adjustments to the acquisition accounting relating to prior year acquisitions.

8. Net funds

9. Financial liabilities

Financial liabilities include amounts in respect of contingent consideration on acquisitions, which are determined on certain performance criteria.

10. Ordinary shares, share premium and other reserves

Allotted and fully paid £0.01 nominal value shares

11. Reconciliation of net loss to net cash used in operating activities

12. Commitments, contingencies and guarantees

Legal contingencies

Except as set out below, no member of the Group is or has been involved in any governmental, legal or arbitration proceedings and the Directors are not aware of any such proceedings pending or threatened by or against the Group during the 12 months preceding the date of these financial statements which may have or have had, in the recent past, a significant effect on the financial position or profitability of the Group.

Mobile VPT Limited has issued a UK patent infringement claim against Monitise International Limited (formerly known as Monitise Limited) ("MIL") and other related parties. Following advice from leading counsel, the Directors believe that Monitise's business activities in the UK do not infringe any valid claim of Mobile VPT's patent and that the Mobile VPT patent may be invalid. Monitise continues to monitor the status of the proceedings since they were stayed in October 2007 but to date, and in light of the advice received from leading counsel, no provision has been reflected in the financial statements.

The Group is also defending a customer of MIL's in the US against claims for patent infringements arising out of its customers' use of Monitise's technology. The Directors believe that each of the claims which are being asserted may be invalid and/or that Monitise's business activities in the US do not infringe any valid claim of any of these patents. To date, no provision has been reflected for non-recoverable legal fees as this amount cannot currently be reliably estimated.

Guarantees

As part of the joint venture arrangements entered into by the Group and in other agreements, there are a number of operational and financial guarantees given by certain subsidiary companies on behalf of other subsidiary entities as part of the contractual terms of the joint venture agreements.

Certain guarantees have also been given by parent companies on behalf of subsidiaries as part of facility arrangements.

As part of the joint venture arrangements, the Group is also committed to provide funding with the joint venture partners in line with the agreed business plans.

13. Reconciliation of GAAP to non-GAAP items

14. Acquisitions

During the period, the provisional fair values in respect of acquisitions made in the prior year have been adjusted. The effect was to increase the value of customer contracts by £3,448,000, acquired technology by £1,269,000, deferred tax liabilities by £74,000 and to decrease goodwill by £4,643,000.