MPM.L Regulatory News (MPM)

30 September 2019

Mporium Group plc

("Mporium", the "Company" or the "Group")

Half-year Results

Mporium Group plc (AIM:MPM), the technology company delivering event-driven digital marketing, today announces its results for the six months ended 30 June 2019.

Financial Highlights

·; Group revenue increased to £18.5 million (restated H1 2018: £0.55 million), driven by Payment Protection Insurance ("PPI") lead generation arising from the Group's relationship with Allay. There is no expectation for this revenue to continue as the deadline for the mis-selling of PPI passed on 29 August 2019.

·; Adjusted operating loss increased to £13.7 million (restated H1 2018: £3.1 million) largely driven by depreciation and the amortisation of ongoing capitalised development costs prior to the restructuring.

·; Before adjusting for an exceptional non-cash charge of £10.5 million in relation to share awards for the Allay exclusivity strategic partnership running until September 2020 and the costs of restructuring, operating loss for the period is £2.9 million (restated H1 2018: £3.1 million).

·; Cash and cash equivalents at the end of the period of £0.4 million (restated H1 2018: £0.8 million).

Operational Highlights

·; Company restructuring commenced in June 2019 due to significant market challenges with Mporium's Agency division offering through late 2018 and early 2019

·; Tom Smith appointed Chief Executive Officer, with Nelius De Groot and Barry Moat exiting their roles as Chief Executive Officer and Executive Chairman respectively

·; Expanded operations across multiple global markets with some of Mporium's largest clients

Post Period Highlights

·; Appointment of Charles Pendred as Non-Executive Chairman in July 2019

·; Completion of restructuring in July 2019, including the divestment of the digital marketing agency Fast Web Media

·; Refocus on performance-led division and licensing of self-serve solutions is showing early signs of traction

·; Performance marketing division has continued to develop, including a commercial deal with one of the world's largest sports media rights owners

·; Expansion of customer lead generation beyond PPI has begun, as shown by the Click Labs joint venture with a leading legal and claims management company

·; Mporium has entered into non-binding Heads of Terms to acquire the Click Labs Group, for a maximum consideration of £5.5 million, of which £3 million is a deferred earn-out consideration over the 24 months from completion.

Tom Smith, Chief Executive Officer of Mporium, commented:

"The Group's leaner business model and focus on performance marketing and technology licensing has opened up the opportunity for future scaling of the business within specific sectors including sports streaming, sports betting, and consumer-regulation in the post-PPI market.

"Agreements signed - both in the period and post period end - demonstrate the applicability of our IMPACT technology across these sectors. The recent Click Labs agreement and subsequent potential acquisition will further accelerate the development of the lead generation division.

"Mporium has unique technology, endorsed by strong partners, major advertising agencies and blue-chip brand names. We believe the Group is well placed commercially to take advantage of the large and fast-growing digital advertising market, providing customers with a significant edge and superior campaign returns in this highly competitive market.

"Our business remains in a growth phase and, with the potential acquisition of Click Labs, we have identified a pathway to break-even in the medium term. The fundraising announced today is a clear sign of investor confidence in our business model and will provide us with working capital for at least the remainder of the year."

"The Group now has a strong, commercially driven team and is focused on a strategy for sustained growth. This provides the Board with confidence as we look to the remainder of the year and beyond."

Enquiries

Mporium: 020 3841 8402

Tom Smith, Chief Executive Officer

finnCap: 020 7220 0500

Henrik Persson / Kate Bannatyne (Corporate Finance)

Andrew Burdis (Corporate Broking)

Chief Executive's Statement

Overview

Mporium commenced a complete review and restructuring of the Company at the end of the period in response to the significant market challenges faced by the agency division in late 2018 and the first half of 2019.

Revenues in the period grew to £18.5 million (restated H1 2018: £0.55 million), boosted by PPI lead generation arising from the Group's relationship with Allay. Most of this revenue had insignificant gross profit contribution and there is no longer an expectation for this revenue to continue, due to the PPI deadline on 29 August 2019. The Company expects new consumer claims verticals to be a main revenue and profit driver in the future, together with sports, and technology licensing.

Adjusted operating loss increased to £13.7 million (restated H1 2018: £3.1 million) largely driven by depreciation and the amortisation of ongoing capitalised development costs prior to the restructuring. This loss is adjusted for an exceptional non-cash charge of £10.5 million in relation to share awards for the Allay exclusive strategic partnership which runs until September 2020 (announced 25 Jan 2019). In addition, the Company recorded £0.2 million of restructuring costs in relation to redundancies.

Cash and cash equivalents at the end of the period of £0.4 million (restated H1 2018: £0.8 million) including early receipt of some proceeds from its fundraising completed shortly after the period end. The remaining £1.2 million of new funding was received after the period end.

A fundraising is required in October 2019 to support the Group in meeting its short-term working capital requirements. The Company has proposed a Placing of £1.25 million shares, conditional upon completion of the acquisition and shareholder approval among other things to provide funding for the initial cash consideration of Click Labs and working capital for the Group's operations.

Business Review

The Group's renewed focus on applying its performance-based marketing technology has helped the business move forward, with a number of commercial agreements signed for use of Mporium's IMPACT platform.

In January 2019, an agreement was signed with claims management group, Allay, providing Mporium access to the closing stages of the PPI market, ahead of the August 29 deadline.

Further, in February 2019, MporiumX signed a direct-to-brand agreement with a major sports media business, representing a significant milestone for the performance marketing division. Under the agreement, sporting events are used to drive subscriptions for online sports streaming through the deployment of IMPACT Sports Syncing technology. This deal was subsequently extended further in March 2019.

Despite the challenges, the agency side of the business saw a number of agreements signed. These included commercial agreements with a market leader in human resources and workforce management (13 March 2019), and a commercial sports agreement with the second largest media agency in the world (28 August 2019).

Restructuring

Mporium has recently undergone a major restructuring in response to the significant market challenges faced by the agency division. These included a high cost base at a time of decreasing revenue, due to some brands bringing marketing capabilities in-house, which meant the business model became unsustainable.

The restructuring focused on reducing operating expenditure, whilst refocusing the Group's efforts primarily on performance-led marketing and automation in the sports and consumer regulation sectors. Further, the technology licensing was remodelled as a scalable self-service solution. This led to a substantial working headcount reduction from 55 from December 2018 to 20 people by July 2019, while maintaining revenue momentum.

Tom Smith was appointed Chief Executive Officer and Charles Pendred was appointed Non-Executive Chairman, with Nelius De Groot and Barry Moat exiting their roles as Chief Executive Officer and Executive Chairman respectively.

Mporium concluded the restructuring process with the divestment of Fast Web Media, leaving a core team to build a scalable, commercially focused performance marketing and license-based business.

Outlook

The Group's leaner business model and focus on performance marketing and technology licensing has opened up the opportunity for future scaling of the business within specific sectors such as sports streaming, sports betting, and lead generation in a post-PPI market including Packaged Bank Account claims.

Agreements signed in the period to June 2019, and post period, demonstrate the applicability of our IMPACT technology across these sectors. The recent Click Labs agreement and subsequent potential acquisition gives Mporium a tremendous opportunity in consumer regulation lead generation.

Mporium has unique technology, endorsed by strong partners, major advertising agencies and blue-chip brand names. We believe the Group is well placed to take advantage of the large and fast-growing digital advertising market, providing customers with a significant edge and superior campaign returns in this highly competitive market. The Group now has a strong, commercially driven team and focused on a strategy for sustained growth, as evidenced by the new agreements signed. This provides the Board with confidence as we look to the remainder of the year and beyond.

Consolidated financial statements Mporium Group plc

Consolidated interim statement of total comprehensive income for the period ended 30 June 2019

Consolidated financial statements Mporium Group plc

Consolidated interim statement of financial position as at 30 June 2019

Consolidated financial statements Mporium Group plc

Consolidated interim statement of changes in equity for the period ended 30 June 2019

Consolidated financial statements Mporium Group plc

Consolidated statement of cash flows for the period ended 30 June 2019

Notes to the consolidated interim financial statements

1 Basis of preparation

The financial statements are prepared under the historical cost convention and presented in Pounds Sterling, the Group's presentational currency and the Company's functional currency. The accounting policies have been applied consistently by the Group to all periods presented in these financial statements.

The preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in Note 3.

The Group financial statements consolidate the financial statements of the Company and its subsidiaries. They do not include all the information required in annual financial statements in accordance with IFRS. The interim financial statements were approved by the Board 28 September 2019. The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The comparative figures for the year ended 31 December 2018 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.

Going Concern

The Group incurred a net loss before tax of £13,679,803 during the period ended 30 June 2019. The Directors have prepared a cash flow forecast for the going concern period. The financial statements have been prepared assuming the Group and Company will continue as a going concern. In assessing whether the going concern assumption is appropriate, management has considered the Group's and Company's existing working capital position and the current proposed fundraise of £1.25m and a further fundraising within the going concern period.

The Directors have a reasonable expectation that the fundraising announced on 27 September 2019 will be successful. Whilst it remains subject to (inter alia) shareholder approval, current discussions with major shareholders indicate support. Should the fundraising not complete as expected, the Company would need to urgently consider alternative options. The Company believes, based on the current expected trading performance and growth initiatives of the Group (together with the benefits and costs associated with the Potential Acquisition), that it has adequate working capital for at least the remainder of the financial year. The Company is currently loss making and is dependent on external investment and may require further support in the future. The Company has a reasonable expectation, on the basis of past and current indications from existing shareholders, that such a fundraising would complete.

On the basis of the above, the directors consider that Mporium will have adequate resources to continue in operational existence throughout the going concern period. Thus, they have adopted the going concern basis of accounting in preparing the interim financial statements.

The financial statements have been prepared assuming the Group and Company will continue as a going concern. In assessing whether the going concern assumption is appropriate, management has considered the Group's and Company's existing working capital position and the current proposed fundraise of £1.25 million and a further fundraising within the going concern period. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. It is noted that the 27 September 2019 potential fundraise is required to support the short-term working capital requirements of the Group to enable it to continue as a going concern. If this additional funding is not available then the Group and Company would be unlikely to be able to continue as a going concern. These circumstances indicate the existence of a material uncertainty which may cast significant doubt about the Group's and Company's ability to continue as a going concern and therefore may be unable to realise assets and discharge liabilities in the normal course of business.

2 Significant accounting policies

The principal accounting policies and presentation followed in the preparation of this interim report have been consistently applied to all periods in these financial statements and are the same as those applied in the Group's annual accounts for the year ended 31 December 2018. The accounts for the Group can be obtained from the Company's website.

3 Critical accounting judgements and key estimation of uncertainty

The preparation of financial statements in conformance with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are made in the period in which they are recognised. The critical accounting judgements made in preparing this interim report are the same as those in preparing the annual accounts for the Group for the year ended 31 December 2018 which can be obtained from the Company's website.

4 Business segments

Mporium Group plc's operations are centred on providing a software as a service and supporting services. Management therefore considers there to be one reporting segment covering the entire Group.

A supplementary analysis of revenue is as follows:

Amounts as at 30 June 2018 have been restated from those previously reported in recognition of an adjustment to revenue that was posted later in 2018, and as disclosed in the year end financial statements. The effect of the restatement has been to reduce previously reported revenue and net assets by £607,500.

5 Exceptional administrative expenses

The exceptional impairment of an intangible asset relates to management's decision to pro-actively write down the value of the intangible asset created through the previously announced Strategic Collaboration Agreement with Allay running until September 2020. Now that the PPI mis-selling deadline on August 29 2019 has passed, future economic benefits are uncertain.

Exceptional restructuring costs relate to the major restructuring of the business previously announced, and those costs attributable to the six month period to 30 June 2019. Total project costs are currently anticipated to be £0.4m.

6 Staff Numbers

7 Interim Report

The Group's interim report will be available from the Company's registered office and on the Company's website www.mporium.com.