The Peoples Operator Regulatory News (TPOP)

The People's Operator plc

("TPO" or the "Company")

Full Year Results

The People's Operator (AIM: TPOP), the cause-based commercial mobile virtual network operator ("MVNO"), is pleased to announce its full year results for the period ended 31 December 2015.

Financial Highlights

· Revenue of £2.1m (2014:£432,000), representing growth of 386%

· Loss of £10.5m (2014: £2.3m), reflecting investments made in the growth of the business over the financial year

· Cash and cash equivalents at year end of £8m

· UK subscriber numbers at year end 69,000, up 390% from 14,000 as at year end 2014

· Average revenue per user in the UK of £14 for PAYM customers and £12 for PAYG customers

· Average customer acquisition costs considerably below industry standards at under £5 versus industry average of £68.

· Low monthly subscriber churn rate of approximately 4%

Operational Highlights

· Agreement to transfer to Three network in UK

· Launch in US on the Sprint Network in July

· Agreement to launch with T-Mobile in the US

· Social Platform tpo.com launched successfully with over 20,000 members in 157 countries

Current Trading

· Landmark total of 100,000 subscribers

· 80,000 subscribers in UK

· 21,000 subscribers in the US

· Almost 10% of subscribers come from the social platform

· Launch of 4G in UK

· Major partnership deal with Sony Music America

· Groundbreaking distribution deal into China

· Partnerships with over 3,000 charities and good causes

· 90% of US subscribers during March came through partners

· Launch of stand-alone giving platform to enable commission-free donations

Jimmy Wales, Executive Chairman, commented:

"This was a solid year of growth for The People's Operator. Our subscriber numbers continue to rise and we are seeing excellent traction following our launch in the US. Our large numbers of charity and good cause partnerships, coupled with our popular and active social platform, mean that we are gaining more and more subscribers attracted by our giving proposition. This proves the strength and viability of our model for viral growth allied with low marketing spend and firm cost control.

I believe that the social platform will attract growing numbers of subscribers and will fulfil our original vision of becoming a major force in charitable giving, whilst enabling us to grow our subscriber numbers organically. I remain very optimistic for our future in both the UK and the US."

For further information

About The People's Operator

The Company was founded in 2012 and currently offers customers pay monthly ("PAYM") and pay-as-you-go ("PAYG") mobile contracts. These contracts are competitively priced and allow users to direct 10% of their monthly bill to a cause of their choosing at no additional cost to themselves. In addition, The TPO Foundation, a UK registered charity, will receive 25% of the UK trading profits generated by The People's Operator LLP. A similar structure is proposed to be adopted in other countries.

 The strategy of the Group is to maintain a low fixed-cost base, small staff numbers and lower levels of advertising and marketing expenditure than its competitors. In addition, as TPO operates as an MVNO, the Group is not expected to be exposed to the high infrastructure costs and large capital investment charges that traditional mobile operators can incur. This strategy is expected to enable the Group to offer customers a highly competitive pricing model with a high quality of service, whilst generating an attractive return to shareholders after donations to causes.

 TPO has developed partnerships with community organisations and causes who promote TPO's products to their supporters. Under the direction of Jimmy Wales, the founder of the online encyclopaedia Wikipedia, the Company is also developing an online viral community to expand the global network of mobile phone customers who share in the common belief of supporting causes.

 The Directors believe that this strategy is scalable into new markets around the world which offer competitive wholesale mobile network bandwidth prices and where subscriber acquisition and revenue growth can be driven quickly at a low incremental cost once network agreements have been concluded with local network operators. 

Chairman's Statement

2015 was a year of steady growth for The People's Operator. The number of subscribers in the UK grew solidly during the year and we signed a key wholesale agreement with the Three network which will significantly enhance our product offering in 2016 and beyond. In the US, we signed a major wholesale agreement with Arterra to provide GSM (Global System for Mobile Communications) services on T-Mobile, the fastest nationwide 4G LTE (Fourth Generation Long Term Evolution) network, which will operate alongside our existing agreement with Sprint. These agreements offer us access to the entire US mobile market of some 350 million subscribers.

UK subscriber numbers grew during 2015 from approximately 14,000 at 31 December 2014 to 69,000 at 31 December 2015 - an increase of approximately 390%. This growth has continued into the current year with subscriber numbers reaching 80,489 as at 31 March 2016.

On 21 July 2015 TPO successfully launched in the US and received considerable media acclaim and attention. As announced in our statement of 20 November 2015 we experienced a number of difficulties in on-boarding new customers, primarily due to the need for software improvements within our partners' systems. Subsequent to this announcement and the partnership with T-Mobile, we have fine-tuned and adapted our offerings in the US and we believe we are well placed to achieve significant subscriber and revenue growth over the course of 2016. Indications are extremely promising, with 21,000 subscribers at the end of March 2016. Our goal of viral growth is supported by the fact that 90% of these customers have come from our community partners.

The TPO proposition is underpinned by our appeal to consumers, centring on wide network coverage, competitive pricing, and the opportunity to direct 10% of a customer's bill to a good cause of their choice.

We believe that the TPO business model has the following key strengths:

· Significant potential for growth, where we are aiming for up to 2% penetration of the UK and US markets by 2021.

· A distinctive and differentiated sales proposition.

· A business model that is markedly different to those of our competitors, based on our revolutionary digital platform.

· Our product offering is based on low fixed costs, minimal advertising, and the development of an online viral cause based community. We therefore intend to ensure that the cost of customer acquisition is lower than our competitors and industry standards.

As we review the past year, our thoughts turn again to our late Chairman and co-founder Andrew Rosenfeld, as well as to his family. Andrew's contribution to TPO was immeasurable, and we continue to strive for success on the lines of the strategy we developed as a team. We are grateful for the ongoing support of his widow and children.

Finally, I would like to extend my gratitude to all the employees of TPO, who have worked extremely hard during this year to develop the products and services we offer, to deliver the Group's achievements to date, and to continue to build the foundations of the future for TPO.

J Wales

Chairman

Strategic Report

Principal activity

The principal activity of the Group is that of the provision of mobile phone services. We believe that subscribers find TPO appealing due to the combination of wide network coverage, competitive pricing, and the opportunity to direct 10% of their bill to a good cause. The Group believes that its customer acquisition model, through viral networking and online communities, means that customers can be acquired at a lower cost per user than the market norm and retained for longer than the market average through a strong attachment to their chosen causes, whilst achieving a market average revenue per user.

The Group has developed, marketed and operates a mobile phone business that provides consumers with an attractive alternative to traditional providers. The Group is financially prudent and operates a low cost model to generate the best return on investment. The Group has the ambition to grow the business into a profitable operation with 2% penetration into the UK and US by 2021.

TPO sells to consumers mobile services that are delivered in the UK by an operating infrastructure provided currently by EE. As announced on 3 November 2015, this will soon switch to Three. In the US, similar services were originally provided by Sprint and are now additionally offered by T-Mobile. The business is underpinned by a digital platform, the development of which has been led by Jimmy Wales.

Loss for the year was £10,454,176 (2014 - £2,328,399) and loss per share was £0.11 (2014 - £0.02 per share).

Review of the business and key performance indicators

Our key performance indicators are revenue and subscribers added to our network.

Revenue grew from £432,391 in 2014 to £2.1m in 2015, a factor of 4.8 times. The revenue increase was driven by the growth in the number of subscribers. We offer two types of service plans to our UK subscribers, a Pay Monthly plan (PAYM) and a Pay As You Go plan (PAYG).

TPO ended 2015 with over 69,000 subscribers in the UK, well ahead of the Group's initial expectations, and a substantial increase on the 14,000 subscribers at the end of 2014, and the 35,122 subscribers at 30 June 2015. We maintain confidence in our forecast subscriber numbers over the coming years.

The Group ended the year with a cash balance of £8m. The Directors consider that the Group will be able to pay all creditors from existing cash reserves during the current financial year.

During the year the directors made a provision for impairment against investments in the company's statement of financial position, the investment value is linked to the company's share price at the reporting period end.

The Executive Directors assess the fair value of all investments held at reporting date and expect these provisions for impairment to be recoverable in the medium term as the business grows.

We remain confident that the business model and platform are capable of international transposition in line with our stated strategy, and we continue to investigate markets outside the UK and US for future expansion.

Current UK Trading

We are pleased to report that solid trading has continued into the current financial year and as at 31 March 2016, subscriber numbers in the UK were 80,489, an increase of 16.6% on the total at 31 December 2015. These subscriber numbers consist of 22,595 on PAYM and 57,894 on PAYG. We are encouraged by our continued ability to transition customers from PAYG to PAYM.

Revenues from PAYM customers have increased by 370% since 31 December 2014, translating to a monthly run rate of approximately £301,000*. We currently have an average revenue per user run-rate of £12 for PAYG and £14 for PAYM customers, excluding offer period customers, compared with £9 and £13 respectively as at 31 December 2015.

Customer Acquisition Costs (CPA) remain very low by industry standards at an average £5, compared with £8 as at 30 June 2015, whilst our churn rate is similarly very low and remaining steady at approximately 4%.

*Assuming that subscribers currently on introductory offers transition to a full rate in line with current churn rates.

US Expansion

The Group launched its US product on 21 July 2015, following a number of months' soft testing. The initial launch was structured through a partnership with Sprint's Nationwide 4G LTE Network.

The customer base was offered the choice of pre-paid or post-paid packages.

The launch itself received considerable media attention, with over 550 million visits to over 200 publications. Both the Chairman and the Chief Executive were interviewed on a number of media channels, including Fox News and Bloomberg.

The Group began to bring subscribers onto the network on a phased basis during Q3 and Q4. On 20 November 2015, the Group was pleased to announce Heads of Terms for the launch of its services on the T-Mobile GSM network by the end of Q1 2016. This has now been achieved. This agreement gives the Group immediate access to the 50% of mobile users in the US who use GSM, in addition to the other 50% who use CDMA (Code Division Multiple Access) technology and is covered by the existing contract with Sprint. The Group's potential customer base as at year end had consequently expanded to include the full range of some 350 million mobile users in the US.

To date in 2016, the Company has over 21,000 subscribers in the US. We are delighted that 90% of these have joined us via our charity partners. Margins on our US customers are 10% ahead of our forecasts and it is clear that our confidence in the economic potential of this market is well placed. Our churn rate is extremely low and, by nature of the Autopay monthly payment which is customary in the US, we have no bad debtors.

TPO Community

The TPO Community (www.tpo.com) was launched in beta state in February and rolled out contemporaneously with the US launch in July. The Community offers members, charities and other non-profit organisations a social network and a fully functional donation platform. This succeeds on three levels: it maximises fundraising opportunities for the cause; it combines this with social sharing to help continue and develop the conversation; and it offers an easy to use communication tool to reach a broad and like-minded audience already disposed towards and familiar with charitable giving.

The Community currently comprises some 20,000 individuals from 157 countries. The Company has forged links with over 3,000 charitable organisations in the UK and 42 in the US.

Outlook

TPO has now passed the landmark milestone of 100,000 subscribers and the business continues to grow. We are launching five key initiatives this month which we believe will prove significant drivers of growth.

Fundraising Platform (TPO Giving)

The fundraising platform is live on the TPO website (www.tpo.com/giving). The platform allows people to donate to charities and other good causes without incurring the commission charges imposed by competing organisations. Our only charge for a donation is the fee levied by the banks for processing donations. While other donation websites charge up to 9% in commission, we believe that donors will appreciate the opportunity to have more of their money passing directly to the cause they support.

We are developing tools which help to integrate the donation functionality into the good cause's own website. This will help causes collect donations easily and safely and will also help to build the number of customers joining and nominating them.

Partner Sales Platform and Distribution Platform

There are over 963,000 IRS-registered non-profit organisations in the US and over 160,000 registered charities in the UK.

The partner sales platform is the extension and automation of collaboration tools available to TPO partner causes. The tools and programmes are delivered to partners via an online portal linked to the UK and USA store sites. Depending on the depth of collaboration with TPO, partners are categorised as Gold, Silver or Bronze and have the corresponding ability to unlock additional services and benefits.

Platform tools and programmes include: tailored and discounted co-branded mobile airtime; digital collaboration tools including access to the TPO Community, social media, SEO (Search Engine Optimisation), email and SMS (Short Message Services) capabilities; access to the TPO giving platform with the option to deploy a TPO Giving widget; and, of course, receipt of 10% of TPO Mobile customers spend.

The platform will include a secure login area where partners can monitor their TPO programmes and income.

TPO has built its success, in part, on its ability to develop close partnerships with non-profit causes. TPO partners' initial engagement is via the Partner Sales Platform, after which TPO and the partner can jointly enter into a range of activities.

In the UK, for example, TPO is working with The Trussell Trust, the UK's largest food bank operator, in support of their More Than Food initiative. TPO is providing SIM cards with inclusive mobile airtime to help people contact employers and essential services in their time of need.

In the USA, we are delighted to announce a partnership with Sony Music America, who will be distributing TPO SIM cards to seventy higher education colleges across the country as part of their College Ambassador Program, which promotes culturally disruptive innovation. Sony recognises TPO as a culturally disruptive brand and is joining with us to change the way mobile services are sold across the US. Sony is distributing our SIMs in conjunction with a number of other promotional activities within music and other media aimed at college students. This is an ideal demographic for us and we believe that Sony's media presence will gain broader recognition of the TPO brand as well as bringing us new subscribers who want to spread goodness in their daily lives.

Member Get Member

Customer relationship management to encourage customer referrals has been part of TPO's acquisition strategy since its inception. For example, historically in the UK 10% of all new TPO Pay Monthly customers joined through an existing customer referral.

TPO's new Member Get Member programme builds on this approach by rewarding all existing US and UK customers, and the individuals who join TPO as a result of their recommendation, with bonus mobile airtime credits.

The programme is administered online and supported by customised SIM (Subscriber Identity Module) packs with tear-off slips to make it easy for customers to recommend their family and friends to TPO.

TPO's Member Get Member programme will aid the Group in its goal to achieve viral growth while minimising cost per acquisition.

Super Recruiter

TPO's new Super Recruiter programme is another major innovation in customer acquisition, bypassing traditional mobile phone sales channels by going to community influencers.

These community influencers or Super Recruiters are rewarded for each customer joining TPO citing the Super Recruiter's unique reference code.

Super Recruiters act in a variety of communities and use a combination of online promotion, word of mouth and other methods to help TPO acquire customers.

TPO is delighted to announce that it has signed an exclusive agreement with one of the most experienced super recruiters in the People's Republic of China to supply TPO SIM cards to students coming from the PRC to study at colleges in the US.

In the 2014/15 academic year there were over 300,000 students from mainland China studying at US universities, up 10% year on year, and Chinese students now make up more than 30% of all international students in the US. This is a firmly established avenue for further education in China and the ability to have a telephone contract and connection set up before leaving home is very popular with Chinese students and parents alike. We believe that this will become a significant channel for new subscriptions in the future.

Community (Help and Support)

We continue to build engagement with the community, using regular "Super Users" to contribute to discussions and provide support for mobile customers.

We are developing the Help and Support segment within the community to encourage interaction and self-support. This will allow for better SEO, will build authority for TPO and www.tpo.com around mobile search terms and will deliver non-branded organic traffic, with general enquiries about handset functionality and comparison.

Having an active help community where customers effectively support each other allows a lower cost of service, decreased acquisition costs and enhances our ambition of offering a 24-hour service.

These initiatives will underpin subscriber and revenue growth and serve to heighten our profile by viral engagement on social media. We look forward to a year of opportunity in the US as well as in the UK and we are confident of achieving our forecasts of 140,000 UK and 75,000 US subscribers by the end of 2016. We maintain our revenue forecast of at least £8m for the year to 31 December 2016.

Principal risks and uncertainties

Liquidity Risk

Liquidity risk is the risk that the Group may have difficulty in obtaining funds in order to meet the day-to-day operating requirements.

At the year-end the group had £8m of cash and cash equivalents. The Group has a short customer payment cycle. In the US, the payment method is via an automatically recurring pre-payment ("Autopay"), and the UK is scheduled to adopt the same model in due course. Recent enhancements to billing systems have allowed the Group to bill UK customers daily, upgrading from the previous monthly model. The cash collections cycle is accordingly enhanced, increasing cash efficiencies. Bad debts are routinely monitored and actively pursued. Working capital management remains at the forefront of the Directors' areas of focus.

Cash and cash flow forecasts are reviewed by the Executive Directors on a daily basis and the Group constantly monitors these to ensure, among other scenarios, that the Group meets its liabilities as they fall due. This area is considered further in the report of the directors and the accounting policies under 'Going concern'.

Foreign Exchange Risk

Expansion into the US market has involved foreign currency transactions, exposing the Group to the risks of unfavourable movements in foreign exchange markets.

The Executive Directors approve and monitor all transactions settled in foreign currency and regularly assess the need to mitigate foreign exchange risk via hedging solutions.

Exchange rate movements have not had a material impact on these financial statements.

Taxation Risk

The Group is exposed to a minor taxation risk in the US markets from using the existing tax structure. This structure allows the Group to minimise taxation in the medium term.

Taxation was applicable in the US during the financial year but the amounts incurred were not material to the financial statements. The Executive Directors have made use of certain tax strategies in the US which see a small liability incurred within the US entities but which will reduce the overall tax burden for the Group.

The Directors are continually assessing the Group's exposure to taxation and will act accordingly to minimise the risk where applicable in line with local laws.

Financial Reporting Risk

Financial reporting risk during the current year relates to maintaining appropriate staff levels and procedures.

At the end of the financial year a permanently staffed finance team was in operation providing management with real time financial reporting and planning with comprehensive visibility over group operations.

Management is committed to ensuring there is continuity in the finance team and that there are staffing levels appropriate to Group needs.

Approved by the board and signed on its behalf

M Epstein

Chief Executive Officer

Consolidated statement of comprehensive income for the year ended 31 December 2015

Loss per share

The loss per share calculation is based on the group's retained loss attributable to the shareholders of the parent for the year of £8,528,204 (2014 - £1,746,299) and the weighted average number of shares for the year of 77,099,059 (2014 - 77,099,059).

There were no other material recognised income or expenses other than those shown above.

Consolidated statement of financial position at 31 December 2015

The financial statements were approved and authorised for issue by the Board of Directors on 15 April 2016 and were signed on its behalf by:

M Epstein

Director

Consolidated statement of cash flows for the year ended 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December 2015

Retained earnings represent the cumulative loss of the group.

.

Notes forming part of the financial statements for the year ended 31 December 2015

The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements.

The financial information set out in this document does not constitute the Group's statutory financial statements for years ended 31st December 31 2015 and 2014. The annual report and financial statements for the year ended 31 December 2014 were approved by the Board of Directors on 15 April 2016 along with this preliminary announcement. The financial statements for the year ended 31 December 2015 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for the year ended 31 December 2015 was unqualified, did not contain a statement under 498(2) or 498(3) of the Companies Act 2006 and did not draw attention to any matters by way of emphasis.

The financial information set out in these preliminary results has been prepared using International Financial Reporting Standards (IFRSs) as adopted by the EU. The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2014. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2015. New standards, amendments and interpretations to existing standards, which have been adopted by the Group, have not been listed since they have no material impact on the financial statements

The Group supplies communication services and products to the UK market, through a mobile virtual network. This is considered to be a single group of services and products provided by a single supplier, to one geographical area. The Group has focused on managing the services provided through this network in a unitary manner.

 The Group entered the US during 2015 and revenue is not broken into geographical segments as US revenue came within the threshold required for segmental reporting.

For customers who choose to nominate a charity or cause, below we break out the relevant 10% of their billings that is passed on by TPO:

The group incurred non-recurring legal and professional service expenses associated with entry into the USA market during the financial year. Specifically the legal costs related to advice for trading licences, group structuring, taxation and customer contractual requirements.

The following items have been included in arriving at the operating loss.

Analysis of tax expense

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2015 (2014 - £Nil).

Factors affecting the tax expense

The group incurred tax losses of approximately £10,454,176 during the year (2014 - £2,256,110) so has a potential deferred tax asset of approximately £2,758,001 (2014 - £735,386). This has not been recognised as there is uncertainty as to the timing of future profits that will arise in future accounting periods against which these losses could be offset. The losses are available for use against profit from the same trade.

No shares were issued during the year ended 31 December 2015

The People's Operator has made forward-looking statements in this press release, including statements about the market for and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties and business strategies. These statements about future events are subject to risks and uncertainties that could cause The People's Operator's actual results to differ materially from those that might be inferred from the forward-looking statements, The People's Operator can make no assurance that any forward-looking statements will prove correct.