Monitise Regulatory News (MONI)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

22 January 2015

Monitise plc

Trading Update & Initiation of Strategic Review

(including commencement of offer period under the Takeover Code)

Transition of business model supported by major partners

Monitise reiterates its guidance to achieve EBITDA profitability in FY 2016

31 December 2014 gross cash £129m ($195m) and debt free

H1 FY 2015 revenue £42.4m/$64.1m (H1 2014: £46.5m/$70.3m)

Monitise revises revenue guidance for FY 2015 to £90-100m/$136-151m

Monitise appoints Moelis & Company to conduct review of all strategic options to maximise value for shareholders

Monitise plc (LSE: MONI.L) ("Monitise", the "Company" or "Group") announces an unaudited trading update following its 31 December 2014 half-year results period end.

As announced in March 2014, Monitise is undertaking a transition in its business to a product-based recurring revenue model. This transition continues in 2015.

The support for this transition from clients and partners is reflected in the major partnership announcements in H1 FY 2015.

Monitise is planning to host a Capital Markets Day for institutional investors in central London on the morning of 17 February 2015, following the publication of its FY 2015 interim results, and a follow-up Capital Markets Day in New York on 24 February 2015.

Financial and metrics update

· H1 FY 2015 revenue of £42.4m/$64.1m comprised subscription & transaction revenue of £16.2m/$24.5m, up 8% sequentially, licence revenue of £4.4m/$6.7m down 47% sequentially, and development & integration revenue of £21.8m/$33.0m down 13% sequentially. The change in revenue mix is consistent with Monitise's business model transition.

· Gross cash at 31 December 2014 of £129m/$195m provides balance sheet strength to see Monitise through to cash flow breakeven and beyond.

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

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

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

· Further growth in live transactions in December 2014 with 5.1bn transactions on an annualised basis, +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.

Guidance

· FY 2015 revenue is expected to be between £90-100m/$136-151m (FY 2014: £95.1m/$143.7m) compared with previous guidance of at least 25% growth. Driven by the effects of our business transition, including lower one-off licence revenue, guidance is based on committed revenues and those that Monitise has high confidence in booking within the financial period.

· As part of the re-shaping of our business, Monitise expects its FY 2016 total cost base to be materially lower than current consensus (which is approx. £180m/$272m) 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. As a result, while the FY 2015 EBITDA loss is expected to be £40-50m/$60-76m (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/$53-68m in FY 2015.

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

· Monitise also reiterates guidance of more than 30% EBITDA margins by end FY 2018, underpinned by high operational leverage in the business.

Highlights

· Strengthened relationships with Santander, Telefónica, MasterCard and IBM, supporting the Company's transition to its new business model. These partnerships bring hundreds of millions of consumers globally to our addressable market.

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

· New partnerships and product launches including:

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

- 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 iOS mobile app created for Doddle, the new 'click and collect' parcel service, and SmartBank, Santander's new mobile banking app designed for students.

Strategic Review

In light of recent share-price weakness, shareholder feedback and industry developments, Monitise announces that it is commencing a review of all options open to the Company to maximise value for shareholders (the "Strategic Review"). The Board of Directors (the "Board') has appointed Moelis & Company UK LLP ("Moelis & Company") as financial adviser and Canaccord Genuity as Nomad and Broker in connection with the Strategic Review. The Board believes that the Company has an exciting future as an independent business, however it recognises that there may be other businesses which could leverage Monitise's capabilities for digital commerce enablement to significantly accelerate the growth of the business and take maximum advantage of the growth opportunities in the market today. The Strategic Review is expected to be all encompassing and will include consideration of corporate transactions and stock market listing options.

Monitise co-CEOs Alastair Lukies and Elizabeth Buse said: "We are successfully transitioning our business to a product-led, recurring revenue digital technology company. Partner and client support for this was underscored by major partnership updates during the first half, and the many services we developed and helped to launch across Europe, the Americas and Asia."

They added: "We have a winning formula based on a combination of world-class design serving a wide range of sectors, configurable products for omni-channel solutions via API delivery, an extraordinary range of partners and the exceptional talent and experience of our teams. In our business and the review we are now embarking on, we remain focused on ensuring the best possible outcome for all Monitise stakeholders."

Takeover Code Implications

Any discussions in relation to a merger with a third party or a sale of the Company will take place within the context of a "formal sale process" as defined in The Takeover Code (the "Code") in order to enable conversations with parties interested in making such a proposal to take place on a confidential basis.

Parties with a potential interest in making an offer for, or merging with Monitise should contact Moelis & Company (contact details as set out below). Any interested party will be required to enter into a non-disclosure agreement with the Company on terms satisfactory to the Board and on the same terms, in all material respects, as the other interested parties, before being permitted to participate in the process. The Board reserves the right to alter any aspect of the process or to terminate it at any time and will make further announcements as appropriate. The Board reserves the right to reject any approach or terminate discussions with any interested party or participant at any time.

The Takeover Panel has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Code such that any interested party participating in the formal sale process will not be required to be publicly identified as a result of this announcement (subject to note 3 to Rule 2.2 of the Code) and will not be subject to the 28 day deadline referred to in Rule 2.6(a), for so long as it is participating in the formal sale process. Interested parties should note Rule 21.2 of the Code, which will prohibit any form of inducement fee or other offer-related arrangement, and that the Company, although it may do so in the future, has not at this stage requested any dispensation from this prohibition under Note 2 of Rule 21.2.

This announcement is not an announcement of a firm intention to make an offer under Rule 2.7 of the Code and there can be no certainty that an offer will be made, nor as to the terms on which any offer will be made.

Following this announcement, the Company is now considered to be in an "offer period" as defined in the Code, and the dealing disclosure requirements listed below will apply.

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.

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

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 draft 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 contains (or may contain) forward-looking statements. Whilst these forward-looking statements are made in good faith they are based upon the information available to Monitise at the date of this announcement and upon Monitise's or, as appropriate, Monitise's Directors' current expectations, projections, market conditions and assumptions about future events. These forward looking statements are subject to risks, uncertainties and assumptions about Monitise and its Group, including, among other things, the development of its business, trends in its operating industry, and future capital expenditure. 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 herein. None of the projections, expectations, estimates or prospects set out 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. Accordingly these forward-looking statements should be treated with an appropriate degree of caution and you should not place undue reliance on any forward-looking statements as a prediction of actual results or otherwise. None of Monitise, its Group, nor any of its directors, their respective affiliates, or individuals acting on their behalf undertake to publicly update or revise any such forward-looking statements set out in this announcement, whether as a result of new information, future events or otherwise. Other than the Profit Forecasts, no statement in this announcement is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Group for the current or future financial years will necessarily match or exceed the historical or published earnings of the Group. Past performance is no guide for future performance and persons reading this announcement should consult an independent financial adviser.

US RECIPIENTS

This announcement is being issued outside the United States pursuant to and in accordance with Rule 135e under the U.S. Securities Act of 1933, as amended (the "Securities Act"). This announcement shall not constitute or form a part of any offer of, or solicitation to purchase or subscribe for, any securities, nor shall there be any sale of any securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. The securities referred to in this announcement have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as such term is defined in Regulation S under the Securities Act), except pursuant to an exemption from the registration requirements of the Securities Act. No public offering of securities will be made in the United States or in any other jurisdiction where such an offering is restricted or prohibited.

Enquiries:

A copy of this announcement will be available on the Company's website at www.monitise.com as soon as possible. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Moelis & Company is acting exclusively as financial adviser to Monitise and no one else in connection with the matters 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 matters described in this announcement or any matter referred to herein.

Canaccord Genuity Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as NOMAD and Broker to Monitise and is acting for no-one else in connection with the transactions herein and will not be responsible to anyone other than Monitise for providing the protections afforded to clients of Canaccord Genuity Limited nor for providing advice in connection with the transactions or any other matter referred to herein.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise. The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Rule 2.10 Disclosure

In accordance with Rule 2.10 of the Code, Monitise confirms that it has 2,135,912,081 ordinary shares of 1 pence each in issue and admitted on the Alternative Investment Market of the London Stock Exchange under the UK ISIN Code: GB00B1YMRB82.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Further information: Any figures in this announcement expressed in $ or US Dollars have been calculated on the basis of GBP:USD spot rate of 1.5115 as shown on Bloomberg as at 5:00pm (GMT) on 21 January 2015.