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 2016.

Financial Highlights

· Revenue of £3.4m (2015:£2.1m), representing growth of 63%

· Loss of £8.7m (2015: £10.5m), after non-operational and non-cash adjustments for share options and impairment of intangible assets

· Cash and cash equivalents at year end of £2.7m

· US revenue of £753k (2015:£7.6k)

· Average revenue per user in the UK of £12.50 for PAYM customers and £13.22 for PAYG customers

· Average revenue per user in the US of $22.00

· Average customer acquisition costs remain low at £5.70 in the UK and $22 in the US

Operational Highlights

· Operational on both the EE and Three networks in the UK

· Successful launch in June on the T-Mobile network in the US

· Operational on both T-Mobile and Sprint in the US

· Successful fund raising in December to bolster balance sheet

· Significant strengthening of Board

Current Trading

· Improved commercial terms in both the UK and US

· Gross revenues in the US in February (compared to December) increased by 25.6%.

· US ARPU of $20.94

· Further fundraising in January and in April in response to investor demand

· Appointment of Julia Simpson, Chief of Staff at IAG plc, as Non-Executive Director, subject to confirmation at the next AGM

Jimmy Wales, Executive Chairman, commented:

"This has been another year of growth for The People's Operator in challenging market conditions. Our successful launch in the US with our partner T-Mobile has greatly increased our reach and appeal across a wider social and geographical demographic. Our costs per acquisition remain far below the industry average in both our markets.

The recent rise in social awareness and responsibility, particularly in the US in the aftermath of the election, chimes precisely with our message of supporting good causes and our strategy of viral growth. I believe that our increased organic growth and strength in marketing will continue to attract new customers and spread the word among our target communities.

I was delighted to welcome Juliet Rosenfeld and Michael Butler to the Board as Non-Executive Directors. As announced previously, I will be stepping down as Chairman at the Annual General Meeting and Michael will be taking my place. I am also very pleased to announce the appointment today of Julia Simpson as a Non-Executive Director (subject to confirmation at the next AGM). Her considerable experience as Chief of Staff at IAG will be of huge value to the Company as we embark on the next stage of our growth."

Julia Simpson, proposed Non-Executive Director, commented:

"I am delighted to join the Board of The People's Operator. This Company is unique - offering customers an opportunity of supporting good causes while using their phone. TPO is a pioneering model of 'crowd giving'. Make a call, make a change. It is a privilege to be part of TPO. I look forward to contributing to the successful development of this brand."

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. 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

Chairman's Statement

2016 was a year of significant revenue growth for The People's Operator plc ('the Company') and subsidiaries ('the Group' or 'TPO'). Revenues grew to £3.4m compared with the 2015 figure of £2.1m, a rise of 63%. Group loss for the year was £8.7m compared to prior year losses of £10.5m.

Our Average Revenue Per User (ARPU), statistics remain encouraging. In the UK, Pay As You Go (PAYG) ARPU averaged £13.22 throughout 2016 and finished the year at £13.74 versus the 2015 average of £12. The Pay Monthly (PAYM), excluding offer period customers averaged £12.50 for 2016. In the UK, we continue to operate on the EE and Three networks.

In June 2016, TPO successfully launched on the T-Mobile network in the US, which operates alongside our agreement with Sprint.

The Group has always believed that our US ARPU would be higher than that of the UK and this supposition has been consistently upheld since our launch. Our US ARPU, excluding offer period customers for 2016 ran at an average of USD$22.09 and ended the year at USD$21.80. The majority of US customers are signed up to a Prepay system and consequently the Group has no material risk of bad debt in the US.

The Group has benefitted in a small way from the weakness in sterling subsequent to the Brexit vote. The movement in foreign exchange rates will remain relevant to the Group as a significant portion of its revenues are denominated in US dollars.

Our Cost per Acquisition (CPA), which measures the average cost of acquiring a customer, remains extremely low. In the UK the average CPA was £5.70 and in the US it was USD$22.00. These numbers relate to the last six months of 2016.

As announced at the interim stage, the Company raised further funds in December 2016. Along with external institutional investors, our major shareholder Juliet Rosenfeld, CEO Mark Epstein and I demonstrated our belief in the Group by committing substantial further investment at that point. I believe that this commitment will prove both appropriate and timely and that TPO will continue to show consistent revenue growth and profitability, while recognising working capital management remaining an important focus for the group too.

During the latter part of the year, James Rosenfeld, son of our founder Andrew Rosenfeld, resigned as a Non-Executive Director. We thank James for his efforts on behalf of the Group. We were delighted subsequently to welcome Mrs Juliet Rosenfeld, Andrew's widow and our largest shareholder, to the Board as a Non-Executive Director. The Group is grateful for her continued support and dedication to the development of the business.

At the beginning of 2017 we were extremely fortunate to welcome Michael Butler to the Board as a Non-Executive Director. Michael has a long and distinguished career in the telecoms industry and brings a wealth of valuable experience to the Board. As announced on 25 January 2017, it is the Company's intention to appoint Michael as Non-Executive Chairman at the Annual General Meeting.

This is my last statement as Chairman. As previously announced I will be stepping down at the Annual General Meeting and offering myself for election as a Non-Executive Director. It remains for me to thank our employees for their continued hard work and dedication to the Group. Without their considerable efforts the Group would not have achieved its notable growth over the past two years and I am grateful to each and every one of them.

J Wales

Chairman

Date: 21 June, 2017

Strategic Report

Principal activity

The principal activity of the Group is 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 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 mobile services to consumers; these are delivered in the UK by an operating infrastructure provided by Three and by EE. In the US, similar services are provided by Sprint and by T-Mobile. The business is comprehensively underpinned by a digital platform.

The Group's revenue is reported after donations that are collected on behalf of and passed on to nominated causes as part of our commitment that 10% of the customers' bill will be paid to the cause that the customer has nominated.

Loss for the year was £8.7m (2015 - £10.5m) and loss per share was £0.09 (2015 - £0.11) per share.

The Board's review of the performance of the Group is included within this Strategic Report whilst reference is also made to the Chairman's Statement which provides further review and analysis of the performance of the Group.

Review of the business and key performance indicators

2016 was a year of transition in which we launched on two new networks: T-Mobile in the US and Three in the UK. We also undertook an internal review of group's cost base and future value of key tangible and intangible assets and made appropriate changes and impairments where required.

Revenue (after donations) grew from £2.1m in 2015 to £3.4m in 2016, a factor of 1.6 times. The revenue increase was driven by the growth in the number of subscribers in both the UK and the US. UK Revenues grew from £2.1m to £2.7m (after donations). The US has seen revenue growth, from an immaterial amount in 2015 to £0.7m (US$1m) after donations.

As at 31 December 2016, the Group had cash and cash equivalents of £2.7m (2015: £8.0m), cash outflows from operating activities of £7.9m (2015: net cash outflow of £8.9m) and realised a loss for the year of £8.7m (2015: a loss of £10.5m) and thus a reduction of 17.1%. Total current assets are £3.3m (2015: £8.8m), with this reduction primarily being driven by an impairment of intangible assets, to re-align the intangible value with the group's business plans.

During the year the company sourced funding from Barclays Bank plc, to support working capital requirements and future business plans. The balance at the year end was £1m. At 31 December 2016 there was a technical breach of the EBITDA covenant contained within the Standard Terms of the facility. Since then, management have received confirmation from Barclays confirming the technical breach and confirming they waive the right to take any action.

A combination of the impairment of the legacy intangibles, reduction in cash, the reduction in receivables, increase in borrowing but a reduction in both trade and other payables, saw total net assets reduce to £0.6m (2015: £7m).

Furthermore, 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.

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 Trading

We are pleased to report that solid trading continues in the current financial year. As previously announced in January 2017, discussions with our network providers in the UK have led to considerably improved commercial terms for airtime costs.

Discussions with network providers also took place in the US and once again we will benefit this year from improved commercial terms. The US business has already demonstrated impressive growth. As previously announced on 9 March 2017, gross revenues in the US in February (compared to December) increased by 25.6%. The rate of growth slowed during March and April but the average ARPU for the year to date is $20.94.

We have been able to identify specific demographics and geographical areas within the US which are particularly attuned to the Company's message of social responsibility and charitable giving and we have seen notable activity within the TPO Community in these areas. The concept and potential of social responsibility has received widespread media coverage in the aftermath of the Presidential Election and TPO has enjoyed strengthened customer awareness as a result.

The Company successfully raised further funds in January 2017 for total of £0.2m as a response to investor demand and a further £1.5m in May 2017. The shares issued to satisfy this demand came with a warrant attached, offering the possibility of a further fund raise dependent on the attainment of certain share price milestones.

The Board believes that TPO is well-placed to continue the revenue and margin growth already seen this year and is confident that the Group will continue to show steady growth towards profitability.

We are delighted to welcome Julia Simpson to the Board as a Non-Executive Director subject to confirmation at the next AGM. Julia is Chief of Staff at International Airlines Group (IAG) with responsibility for, among other things, global communication. She holds Board positions at British Airways and Iberia. Her experience in corporate communications and high-level business relations will be invaluable to the Group.

TPO Projects in operation in 2016

TPO Community

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.

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

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.

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.

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

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 Member Get Member programme builds on this approach by rewarding all existing US and UK customers, as well as 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.

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, building 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.

Principal risks and uncertainties

Liquidity Risk

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

At the year-end the Group had £2.7m of cash and cash equivalents. The Group has a short customer payment cycle. In the US, the payment method for customers is via an automatically recurring pre-payment ("Autopay"), and the UK is scheduled to adopt the same model in due course. 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'.

In July 2016, the Group negotiated a £1,000,000 loan facility with Barclays Bank plc to help manage liquidity and allow for expansion. This loan and the additional equity funding received of £1,700,095 from issuance of subscription shares allow the Group to continue its strategic path to expansion and revenue growth, which has continued in 2017.

The loan facility has a two year term with an interest of 8.5% plus Base Rate.

The Group has undertaken a number of cost-cutting exercises during 2016 and is running a lean operation with resources deployed under ongoing review.

As the Group has a high volume of small outstanding balances, there is a risk of bad debt and a difficulty in collecting amounts. During 2016 the Group has recruited a credit controller to monitor and collect cash.

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, in particular in relation to intergroup funding and related group balances.

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, which include ensuring that that as far as is possible, sales and purchases are made in the local currency of each group entity.

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

Date: 21 June, 2017

Consolidated statement of comprehensive income for the year ended 31 December 2016

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 £7,270,081 (2015 - £8,528,204) and the weighted average number of shares for the year of 2016 - 78,944,328 (2015 - 77,099,059).

Consolidated statement of financial position at 31 December 2016

The financial statements were approved and authorised for issue by the Board of Directors on 21 June 2017 and were signed on its behalf by:

M Epstein

Director

 Consolidated statement of cash flows for the year ended 31 December 2016

Consolidated statement of changes in equity for the year ended 31 December 2016

Notes to the financial information

The financial information for the year ended 31 December 2016 and the year ended 31 December 2015 contained in these preliminary results does not constitute the company's statutory accounts for those years.

The auditors' reports on the accounts for 31 December 2016 and the year ended 31 December 2015 were unqualified, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. However, while the year ended 31 December 2015 did not draw attention to any matters by way of emphasis, the audit report for the ended 31st December 2016 contained a statement in respect of uncertainly over going concern, further details are included in note 2 below.

The financial information contained in these preliminary results has been prepared using the recognition and measurement requirements of 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 2015. New standards, amendments and interpretations to existing standards, which have been adopted by the Group for the year ended 31 December 2016, have not been listed since they have no material impact on the financial information.

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

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 directors have reviewed the forecasted performance of the intangible assets held by the Group and have deemed there to be uncertainty in respect of the ability of the assets to generate positive cash flows over their economic life. Accordingly the assets are deemed to be fully impaired at the year-end 31 December 2016 and an exceptional expense has been recognised for the impairment charge..

The exceptional expenses incurred in the prior year related to legal and professional service expenses associated with entry into the USA market. Specifically the legal costs related to advice for trading licences, group restructuring, 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 2016 (2015 - £Nil).

Factors affecting the tax expense

The Group incurred tax losses of approximately £8,571,339 during the year (2015 - £10,407,351) so has an estimated potential deferred tax asset of £4,236,326 (2015 - £2,758,001). 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.

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.