Velocity Comp Regulatory News (VEL)

17 Mar 2008 07:01

Velti PLC17 March 2008 Velti plc FOR IMMEDIATE RELEASE 17 March 2008 Velti plc RESULTS FOR 2007: STRONG REVENUE AND PROFIT GROWTH Year ended 31 Year ended 31 Change December 2007 December 2006 % •'000 •'000Revenue 19,866 10,816 84%EBITDA 7,548 4,313 75%Adjusted EBITDA 7,975 4,379 82%Operating profit 5,014 3,009 67%Profit after tax 3,661 2,246 63%Adjusted profit after tax 4,088 2,312 77%Basic EPS (in eurocents) 12.3 8.7 41%Adjusted EPS (in eurocents) 13.7 9.0 54% Profit after tax and adjusted profit after tax are attributable to the equityshareholders of the company (after minority rights.) Adjusted figures statedbefore the (non-cash) cost of share awards. The EPS figures incorporate theincreased number of shares that was a result of the October 2007 fundraising. Operational Highlights • Formed Ansible, a joint venture with one of the world's largest advertising organisations - Interpublic Group. Ansible is the first global mobile marketing agency. • Expanded UK operation and opened new offices in San Francisco and Moscow. • Successful integration of Digital Rum (UK) and M-Telecom (Bulgaria) which both contributed positively to 2007 profits. • Extended geographical footprint with key customer wins in Europe, North America and Asia. • Won key operator contracts from Vodafone, Orange, Orascom's Wind, Cosmote, Austria telecom's MTEL, SingTel's Globe and AT&T. • Stable revenues from financial services institutions as well as the public sector for innovative mobile and broadband initiatives • Won mobile marketing contracts from global brands such as Microsoft, General Motors, Coca Cola, Verizon, Bayer, Johnson and Johnson, Vogue Magazine, Mastercard, Colgate-Palmolive, Ferrero, Bacardi, LVMH's Hennessy and Pepsico's Tasty Foods. • Won mobile marketing contracts with key media organisations including MTV, Disney, Associated Press, Fox Networks CBS and Real. • Senior managers recruited in the US and UK with start dates commencing January 2008. Product Development • Launched version 3.5 of Mobile Marketing Platform (MMP) that features enhanced advertising and marketing templates for advertising agencies, media companies and mobile operators. • Introduced version 4.0 of MMP to key customers. • Expansion of mobile content management capabilities by providing self service tools for media groups to manage their own mobile internet sites. • Velti is assisting operators strategically in their move towards convergence and triple play. Successful placing of shares in October 2007 • A very positive response from both new and existing shareholders • Raised €10.7 million before expenses to accelerate the development of Ansible and to support rapid organic growth. David Mann, Chairman, stated: "2007 has been a very successful year for Velti with strong revenue growth,excellent profit generation and a significant increase in net cash In 2008 Veltiwill continue to maintain its primary focus on providing mobile marketing andadvertising solutions for mobile operators, advertising agencies and mediagroups. Since its flotation in 2006, Velti has become a very internationalcompany operating in what is emerging as a dynamic and fast-growing globalmarket. The Board believes the company is extremely well placed to continue itshighly profitable expansion." Alexandros Moukas, Chief Executive Officer added: "We are delighted to report a further year of strong growth driven by newbusiness across all client categories, the further development of existingcustomer relationships and the expansion of our operations in new territories.Our Mobile Marketing Platform is being adopted successfully by several of theworld's largest operators and brands, while Ansible, our joint venture withInterpublic Group has demonstrated significant traction in the marketplace,working directly with global brands that wish to embrace mobile as the newmarketing medium. In 2008 we expect to see accelerated demand for our servicesas mobile marketing and advertising budgets continue to grow significantly. Wewill continue the expansion of our sales capabilities across Europe, NorthAmerica and Asia and we are in the process of opening sales offices in Dubai,Mumbai and Beijing". CONTACTS Velti: Alexandros Moukas, Chief Executive Officer +44 (0) 20 7633 5000Pantelis Papageorgiou, Finance Director Bankside: +44 (0) 20 7367 8888Simon Bloomfield or Steve Liebmann Royal Bank of Canada: +44 (0) 20 7653 4667Sarah Wharry About Velti Velti's market-leading mobile marketing technology platform, coupled with itsexperience in the mobile advertising industry, enables clients around the worldto deliver an extensive range of highly targeted marketing campaigns. Withoperations in 16 countries, Velti has implemented projects reaching an estimated570 million consumers. Velti's unique Mobile Marketing Platform (version 4.0) manages the full cycle ofplanning, execution and monitoring of multiple campaigns across differing mobileformats and channels, offering customers more than 70 above and below-the-linemobile marketing and advertising templates, which can be managed from one userinterface. Velti is a publicly traded company listed on the London Stock Exchange (AIM),with sustainable growth in revenue and profits. The company is heavily investingin its customers' future needs, especially in the mobile advertising and mobilecontent enablement market. For more information please visit www.velti.com CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT Introduction We are pleased to announce our final results for the year ended 31 December 2007which was another very successful year for Velti. The Group continued its globalexpansion in terms of customer wins and strategic alliances and achieved stronggrowth in revenues and profits. Results and Financial Position During 2007 Velti's revenue grew by 84 per cent to €19.9 million (2006: €10.8million), profit before tax rose by 64 per cent to €4.5 million (2006: €2.7million) and profit after tax and minorities increased by 63 per cent to €3.6million (2006: €2.2 million). Basic earnings per share were 12.3 eurocents(2006: 8.7 eurocents). The key drivers of this very positive performance were successful repeatbusiness from major customers, new business growth across all client groups, theprofitable integration of new acquisitions, and the extension of ourgeographical footprint. The results are all the more impressive having beenachieved with heavy investment in new international offices, product developmentand sales and marketing resources. These costs reflect the Group's aim toachieve rapid global expansion. In October 2007 Velti raised €10.7 million before expenses via a share placingto institutional investors, further strengthening its balance sheet. This hasenabled Velti to accelerate the development of Ansible, further enhance itsproducts and operating infrastructure and fund working capital needs stemmingfrom rapid growth in its business with mobile operators in mobile marketing andadvertising. Year end net cash was €9.9 million (2006: €4.0 million). Market and Positioning The market grew significantly in 2007 and it proved to be the year when globalmobile marketing took centre stage as the next major business opportunity inmobile services. The market is forecast to reach US$19 billion by 2011 (ABIResearch). The market continued to remain fragmented with many new entrants focused solelyon banner ad serving technologies. In comparison Velti's positioning as 'a onestop shop' for operators, media companies, advertising agencies and other publicand private sector organisations supports the whole spectrum of mobile marketingfrom simple banner ads through sophisticated triple-play and integratedcampaigns. The enablement of the mobile channel for operators, brands, and media companiesrequires significant expertise and managed services capabilities. Velti expectsto see accelerated demand for its services, particularly in the areas of socialnetworking, mobile communities and user generated content. These capabilitiesare supported by the recently introduced Version 4.0 of the Mobile MarketingPlatform. Velti is continuing to focus on generating repeatable revenue from establishedand profitable services whilst also investing in new services and geographicexpansion to drive future growth. Revenue growth is going to be driven bysoftware license sales, software integration services, managed services andVelti's Software-as-a-Service offering which was introduced last year. By being at the intersection of operators, advertising agencies and mediagroups, Velti is uniquely placed to benefit from the growth in mobile marketingas mobile becomes a massive, brand marketing and advertising sponsored medium. Joint Venture Central to Velti's strategy of offering comprehensive mobile marketingsolutions, 2007 saw the creation of Ansible, a joint venture between Velti andInterpublic Group, one of the world's leading advertising organisations. Basedin New York, Ansible was launched as the first global mobile marketing agency.The agency works directly with brands, agencies and content providers to developand deploy mobile advertising and marketing campaigns. Ansible utilises Velti'sproprietary services and mobile marketing technology in all geographies. There has been a very positive response to the launch of Ansible with keycustomer wins within a very short period of time and the board believes that thejoint venture will be a significant driver for future growth and profitability. Strategy and Business Development The Group's core strategy remains: to increase repeat business, to continue theexpansion of its geographical footprint and to position itself as aninternational provider of mobile marketing solutions. In support of this strategy, investment in data centre infrastructure andproduct development has been a major feature of the past three years andunderpins Velti's continued growth in 2008. In 2007 Velti completed the rollout of four enterprise-class data centreslocated in Dallas, London, Athens and Sofia. This improved infrastructure allowsVelti to fully support the Software as a Service (SaaS/ASP) model, allowingcustomers to reduce their infrastructure and operational staff costs. Velti willcontinue to develop and enhance this model in 2008 in order to support itscustomers and maintain its market leading position. Mobile Marketing Platform 2007 saw the launch of Version 3.5 of Velti's Mobile Marketing Platform (MMP)and the introduction of Version 4.0 to key clients. The continued development ofthe platform is vital to ensure that Velti remains at the forefront of mobilemarketing technology and to support future customer needs. Further details are provided in the Operational Review. Customers Significant business wins drove strong organic growth and included theimplementation of innovative mobile marketing campaigns for major brands such asJohnson and Johnson, General Motors, Microsoft, Verizon, Associated Press,LVMH's Hennessey, Pepsico, Colgate Palmolive, Ferrero, Bacardi, MTV, CBS,Disney, Vogue Magazine and Mastercard as well as the launch of brand loyalty andmobile community applications for operators such as Singtel's Globe Telecom,Austria's MTEL and Cosmofon. Revenue growth was further driven by repeat business that Velti secured with anumber of major network operators in Europe, namely Vodafone, Orange, Cosmote,Orascom's Wind and Q-Telecom as well as with financial institutions and publicsector organisations. Outlook In 2008 Velti will maintain its primary focus on providing mobile platforms andservices for mobile operators, advertising agencies, media companies and otherlarge enterprises. The Group expects to see accelerated demand for its services,particularly in the areas of mobile loyalty and mobile communities. Velti willcontinue the expansion of its sales capabilities across Western Europe, NorthAmerica and Asia, and open sales offices in Dubai, Mumbai and Beijing. It willalso continue to investigate opportunities in the BRIC region (Brazil, Russia,India and China) where it sees strong growth potential. The board sees excellent prospects for delivering a further year of very stronggrowth. David Mann Alexandros MoukasNon-Executive Chairman Chief Executive Officer OPERATIONAL REVIEW Key accomplishments in 2007 Business Model While the license model is still proliferating for certain operators, a growingnumber are looking to managed services and hosted software as a service (SaaS/ASP) models to drive mobile marketing and advertising forward. This has becomeevident in Western and Eastern Europe, Asia and the US. In 2007 a significantportion of revenue was derived from SaaS/ASP and revenue share agreements, forinstance SingTel, Wind and MTEL. Velti believes this to be a very positive trendas an installed base generates repeatable and more predictable revenue streams.Media companies are also beginning to follow this trend in particular Fox TV,Disney and Liberis Publications. In support of these developments, in 2007 Velti completed the rollout ofinfrastructure in 4 enterprise-class data centres located in Dallas, London,Athens and Sofia. The data centre infrastructure offers industry leading 99.99%reliability stated in Velti's Service Level Agreements (a maximum of 52 minutesdowntime per year). This allows Velti to fully support the SaaS/ASP model,allowing customers to reduce their infrastructure and operational staff costs,whilst maintaining their desired security, support, operational and integrationrequirements. Moving forward to 2008, Velti will continue to extend theirSoftware-as-a-Service business model delivering applications over the Web. A newdata centre Is planned for China, as well as further investment in disasterrecovery, ensuring services are geography independent. Ansible's business is more focused towards the traditional advertising agencymodel of fees charged per campaign. However the company is increasingly actingas advisor to global brands wishing to incorporate mobile marketing andadvertising as part of their future brand and marketing strategy. Velti and Ansible's relationship is unique. Together they support the needs ofsuppliers (media groups and operators) and customers (brands and ad agencies).This relationship provides flexibility, global reach and an in depthunderstanding of the future for mobile marketing. Customers and organic development Velti has strategically targeted three key audience groups: operators,advertising agencies and brands and media groups and publishers: Operators: Velti is providing innovative business solutions and software platforms toenable mobile marketing and advertising through mobile operator branded or whitelabelled mobile internet sites, mobile TV, as well as MMS and SMS media. Thesesolutions also allow operators to enhance customer retention and brand loyalty,resulting in increased data ARPU, new revenue streams from mobile advertisingand strong customer retention and acquisition. The greater the level of consumerengagement in mobile campaigns the higher the likely revenue for Velti. Velti was awarded key contracts with Orange (UK), Orascom Group (Wind Greece),Vivatel (Bulgaria) and SingTel's Globe Telecom (Philippines). New business has also been generated from operators that require the developmentand management of content portals, namely Vodafone Live, Wind Plus, Cosmote, andMTEL. Velti is assisting operators strategically in their move towards convergence and'triple play'. Two examples that serve to illustrate this are the VodafoneOnline Program and Orange Gigs and Tours campaign. The latter being a campaigndesigned by Velti that allowed Orange to promote its broadband services throughan online mobile music community, offering priority mobile ticketingnotification and purchase. Operators are quickly realising the potential of mobile marketing as a means tomonetise new data services. Velti won significant business in developing mobilecampaigns for Wind, Orange UK, MTEL, Cosmofon, Q-Telecom, Verizon and SingTel'sGlobe Telecom. For example, Globe Telecom wanted to increase brand loyaltyamongst its 16.5 million strong subscriber base and create a database of theirpre paid customers. Velti's mobile marketing campaign delivered outstandingresults with over 18 million interactions. Velti also secured repeat business with major network operators in 2007, namelyCosmote, Orange, Vodafone, Wind and Q-Telecom Advertising agencies and brands: The global media industry is looking at mobile marketing as the next majoradvertising platform being largely driven by brands, agencies and operators whoare demanding new ways to engage with consumers. Velti is driving the marketforwards, bringing social networking, user generated content and digitalcommunities into the mobile marketing mix while also enabling customers tomaximise their investment in traditional media. In 2007 Velti launched a wide variety of mobile marketing and advertisingcampaigns for global brands including Lays, Ferrero, LVMH's Hennessey, Pepsico,HP, Argos, Colgate Palmolive, Bacardi, Vogue Magazine and Mastercard. Ansible In September 2007, Velti and the Interpublic Group (NYSE:IPG), one of theworld's leading marketing services conglomerates, entered into a joint ventureto form Ansible, a full-service global mobile marketing agency. Ansible isheadquartered in New York, with offices in London, Athens, Detroit, and SanFrancisco, as well as plans to open offices jointly with Velti in Beijing, Miami, Dubai, and Moscow later in 2008. Ansible is the first truly global mobile marketing agency, working directly withbrands, agencies and content providers to develop and deploy mobile advertisingand marketing campaigns utilising Velti's Mobile Marketing Platform andexpertise. In 2007 Ansible made significant progress working alongside advertising agenciessuch as Universal McCann, Lowe, Initiative, McCann Erickson, Weber Shandwick,Jack Morton, Momentum and MRM to win new business from Johnson and Johnson,Microsoft, General Motors, Intel, and Bayer. Ansible's work with Johnson &Johnson for example, included an innovative mobile advice-based community formothers-to-be; in this case the Velti MMP was used to design and execute anintegrated opt-in mobile marketing and advertising campaign targeting theHispanic US market. The campaign consisted of a Mobile Internet site to enableaccess to the Babycenter website, sponsored alerts delivering weekly content,mobile communities and text to win competitions. This campaign was profiled byAdweek, and will now be launched in the U.S. English market, as well as tailoredto new developing markets such as India and China. Mirroring Velti's strategy, Ansible's aim in 2008 is to expand internationallywith a focus on BRIC countries (Brazil, Russia, India and China), and in concertwith client demand. In parallel, through its alliance with IPG, Ansiblerecognise a strategic opportunity in developing its mobile media buyingcapability, securing mobile media ad spend for major brands. The significant progress made by Ansible and Velti has resulted in bothcompanies being individually recognised as two of the 'Top 7 mobile marketingcompanies to watch' (AdWeek, 25 February 2008). Media groups and publishers: Through its SaaS/ASP model Velti brings media groups the promise of mobilemarketing and advertising that delivers proven ROI. Major media companies areable to utilise Velti's results driven infrastructure to replicate the adsponsored model they have implemented across their traditional and interactiveassets. With Velti's global connectivity capabilities, mobile technologyexpertise and the pioneering MMP platform they can deliver a complete ASPservice to media companies. Through Velt's office in San Francisco the Companyis also developing alliances with Web2.0 media companies to provide Mobile ASPservices. Velti is giving media companies a new channel through which to maximise revenuesfrom their intellectual property and captive audiences. In 2007 Velti wonbusiness from MTV, CBS, Disney, Real Networks, Associated Press and FoxNetworks. MTV partnered with Velti to launch two new television channels. Themobile campaign consisted of text to win sweepstakes, a message broadcast fortheir opted- in viewers and free mobile downloads that users could forward tofriends. Other major customers: Velti has been supporting mobile VAS for South East European banks. 2007 sawrepeat business from the National Bank of Greece, ATE Bank and Eurobank EFG andwon new business from Bank of Piraeus. Public sector contracts continue to be astable source of income for the group. The percentage of revenues contributedfrom this source was reduced from approximately 30% in 2006 to 15% in 2007. Weexpect the contribution from this source to reduce in terms of percentage ofrevenues for 2008 and beyond, in line with the rapid growth of the group's otheractivities. Acquisitions In addition to achieving strong organic growth, management's strategy in 2007was to expand through carefully targeted acquisitions. In March 2007, Velti acquired M-Telecom, Bulgaria's leading independent mobile value added services provider, establishing the company's footprint in an important market in Central and Eastern Europe. The acquisition of Digital Rum (UK) in October 2006 established Velti's presence in the UK with clients including Argos, BAA and Vodafone. Since then, Velti has won new contracts withexisting and new clients. Both M-Telecom (Bulgaria) and Digital Rum (UK) have successfully been integratedinto the Group and have made a positive contribution to profit for 2007. Product Development Velti has made significant investment in software technology that automates,executes and assures ease of use and quality of output in the creation of mobilemarketing and advertising campaigns. 2007 saw the launch of version 3.5 of the Mobile Marketing Platform and theintroduction of version 4.0 to key customers. The platform now includes thecomplete campaign cycle from planning through to execution and monitoring forany advertising or marketing mobile campaign. Velti's open architecture allows for third party products and services to beseamlessly integrated into the platform and to be included in the MMP campaigncycle. Therefore operators that use third party mobile search solutions, gameplatforms, proximity marketing, mobile coupons, picture and barcode recognitionand other niche mobile media are now able to bring all of them under a singlemarketing revenue scheme which is transparent for advertising and media buyingagencies. Essentially Velti's platform allows innovative mobile marketingsolutions to be monetised quickly and efficiently. The MMP now features over 70 enhanced advertising and marketing templatesenabling Velti's customers to reach consumers through new interactive mobilemediums. Building on more than seven years of experience in mobile advertisingtechnology development, the Platform allows advertisers and operators to createcampaigns that offer consumers a unique interactive mobile marketing experience.Loyalty schemes, mobile coupons, social networks and other interactive templatescan now be easily designed, deployed and measured giving marketers new ways toreach customers through their mobile phones and other portable devices. Velti's partnership with MTEL serves to illustrate the interactivity that can beachieved through mobile campaigns. The Bulgarian operator ran a knowledge quizcampaign to their subscriber base. Consumers had to opt- in by sending a uniquecode to enter the competition and collected bonus points for each correctanswer. These bonus points were entered into a daily prize draw for a VW Golfcar. An incredible 12 million interactions with consumers were achieved duringthe 12 week promotion from a subscriber base of only 4.5 million. The Platform also includes a new version of the Personalisation Engine, capableof retrieving and processing real time data from consumer behaviour resulting indynamic segmentation and user-targeting. Velti is also expanding its mobile content management capabilities by providingself service tools to media groups that wish to manage their own mobile internetsites. Whilst these capabilities have existed within Velti's content managementplatform for the last 5 years, the focus in 2007 has been the evolution of userinterfaces towards full self service usability by non technical staff. Growth and Market Potential Attention and investment in expanding Velti's geographical footprint is a directresult of Velti's conviction that significant growth opportunities exist.However growth is not only limited to the advanced areas of Western Europe andNorth America, Velti sees strong traction in the BRIC countries. The number ofmobile phones in China and India far surpasses the number of PCs and thereforeinteractive marketing will be driven by mobile rather than the PC. China has 500million mobile users which is due to grow to 600 million by 2008 (Digital MediaResearch Institute, University of China, 2006). India had over 217 millionmobile subscribers by the end of 2007 and this was increasing by 8 million permonth. (TRAI, COAI, AUSPI, BDA Analysis). In 2008, Velti will incur additional costs extending its geographical reach intothese areas. However we believe in the medium term the potential return will behighly attractive. The global market is one in which operators, media companies and advertisingagencies meet and there is need for each to understand the other's businessmodels. Velti is at the intersection of these groups. With over 7 yearsexperience of delivering mobile VAS and through Ansible's relationship with adagencies worldwide, it is uniquely placed to benefit from the global growth inmobile marketing. New Appointments Velti and Ansible made a number of key strategic appointments during the fourthquarter of 2007, with individuals commencing employment in early 2008. Aris Hadjiaslani joins as General Manager Velti UK. He brings 20 yearsexperience of the mobile and VAS market, most recently with Vodafone Group asGlobal Director for Future Products (including mobile marketing and advertising)in the Newbury Headquarters. Clare Grant joins Velti as Marketing Director, based in the UK office. Clarebrings over 15 years business to business marketing and senior managementexperience, latterly with ntl:Telewest Business and Sony Corp. Paul Cheng joins Velti as VP of Corporate Development in the San Franciscooffice, responsible for identifying and managing relationships with strategicpartners. Paul has extensive business development experience as co founder ofAsylum Telecom, Klarium (mobile payments) and Adero Inc. Kimberley Obremski joins the Velti US team as VP Sales, North America. Kimberleybrings over two decades of sales, marketing, and management experiencepreviously holding the position of Executive Vice President of Sales & Marketingfor Boston Communications, Inc. Julie Preis - joins Ansible as VP of Managed Services responsible for projectmanagement. Julie has over 10 years experience of new media and 5 yearsexperience in the mobile industry building industry leading teams at Motricity.. Nick Wiggin - joins Ansible as Managing Director for EMEA . Nick has over 15years media experience and over the last 6 years he has developed a stronginternational reputation as an expert in mobile marketing, having Chaired theMobile Marketing Association from 2005to 2007 and advised WPP and the GSM Association on global mobile advertising strategy at a senior level. FINANCIAL REVIEW In the financial year ended 31 December 2007 the Group posted robust growth inrevenue which reached €19.9 million, a 84 per cent increase compared to 2006revenue (€10.8 million). This growth demonstrates the strength of our coremarkets, mobile marketing and advertising, across mobile operators, advertisingagencies and media groups. Repeat business across all sectors includingoperators, advertising agencies, brands, media and other public and privatesector organisations, the addition of new clients and expansion into newterritories fuelled the Group's organic growth while Ansible and M Telecomcontributed substantially to the overall performance. Software licenses andintegration services account for 43% of revenue, while mobile marketing andvalue-added services activities for 57% (2006: 73% and 27% respectively). Gross profit increased 78 per cent and reached €12.3 million (2006: €6.9million), delivering a gross margin of 62 per cent (2006: 64 per cent). Sellingexpenses grew by 133 per cent to €4.6 million (2006: €2.0 million) in support ofrevenue growth and anticipated global expansion. Administrative expenses grew by40 per cent to €2.7 million (2006: €1.9 million) while decreasing to 14 per cent(2006: 18 per cent) as a percentage of revenue. Cost of sales and operating expenses include depreciation and amortisationcharges of €2.5 million, (2006: €1.3 million) and share awards of €0.4 million(2006: €0.1 million). Increased depreciation and amortisation charges resultedfrom the Group's planned capital expenditure on technology and data centreinfrastructure which reached €5.4 million (2006: €4.9 million) .These costs havebeen central to the Group's ability to support and serve customers globally andto facilitate Ansible's roll out and integration. Net capital expenditure was€2.9 million, 19 per cent lower than 2006. (2006: €3.6 million) while falling asa percentage of revenue to 15 per cent (2006: 33 per cent). Overall, operating profit grew by 67 per cent reaching €5.0 million (2006: €3.0million), delivering an operating margin of 25 per cent (2006: 28 per cent).This was achieved notwithstanding the infrastructure and business developmentcosts incurred in relation to Ansible's roll out. Profit before tax reached €4.5 million representing an increase of 67 per centcompared with last year (2006: €2.7 million). The tax charge for the year,including deferred tax expense of €0.8 million, was €0.9 million, calculated atan effective tax rate of 20 per cent (2006: 25 per cent). The effective tax ratedecreased due to lower tax rates prevailing in the new operating territories. Velti's balance sheet at 31 December 2007 remains strong with a net assetposition of €30.1 million (2006: €16.3 million) and a net cash position of €9.9million (2006: €4.0 million). Total assets were €41.1 million at 31 December2007 (2006: €22.1 million). The balance sheet of the Group was enhanced by ashare placing in October which successfully raised €10.7 million beforeexpenses. Accounts receivable and prepayments increased by €6.9 million to €15.9 million(2006: €9.0 million) including significant fourth quarter revenue resulting froma very successful brand loyalty mobile campaign that took place in SoutheasternEurope. Subsequent to the year end approximately 85% of this revenue has beencollected. Improved profitability and working capital resulted in an enhanced operatingcash inflow of €2.8 million (2006: €1.2 million outflow) while cash outflowafter investment activities was €4.1 million (2006: €6.6 million outflow)reflecting the significant investments in product development and infrastructureand the acquisition cost of M-Telecom. CONSOLIDATED INCOME STATEMENT ------------ ------------ Notes Year ended Year ended 31 December 31 December 2007 2006 •'000 •'000 ------------ ------------ Revenue 2 19,866 10,816Cost of revenue (7,535) (3,907) Gross profit 12,331 6,909 Other income 4 25 Selling expenses (4,594) (1,974) Administrative expenses (2,727) (1,947) Other expenses - (4) Operating profit 2 5,014 3,009 Finance expense, net (359) (169)Share of loss of associates (178) (108) Profit before tax 4,477 2,732Tax 9 (910) (603)Profit after tax 3,567 2,129 Attributable to:Equity shareholders of the company 3,661 2,246Minority interest (94) (117) 3,567 2,129 Basic earnings per share (inEurocents): 6 12.3 8.7Diluted earnings per share (inEurocents): 6 11.7 8.5 CONSOLIDATED BALANCE SHEET Notes As at As at 31 December 31 December 2007 2006 •' 000 •' 000ASSETSNon -current assetsProperty, plant and equipment 1,616 1,342Intangible assets 7,386 4,841Investments 1,787 448Goodwill 8 2,899 599 13,688 7,230Current assetsReceivables and prepayments 15,861 8,968Restricted investments 27 27Cash and cash equivalents 11,616 5,867 27,504 14,862Total assets 41,192 22,092 SHAREHOLDERS' EQUITYShare capital 4 2,388 2,125Share premium account 21,788 11,613Share-based payment reserve 398 66Merger reserve 1,071 1,071Currency translation reserve (251) -Accumulated profit 4,402 741Total shareholders' equity 29,796 15,616Minority interest 326 663Total equity 30,122 16,279 LIABILITIESNon-current liabilitiesRetirement benefit obligations 143 102Deferred tax liabilities 1,055 229Other liabilities 22 - 1,220 331Current liabilitiesTrade and other payables 8,136 3,651Borrowings 3 1,714 1,831 9,850 5,482Total liabilities 11,070 5,813Total equity and liabilities 41,192 22,092 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Accum- Share Share Share Merger Currency ulated Minority Total capital premium Based reserve Translation Profits interests •'000 •'000 •'000 Payment •'000 reserve (losses) •'000 reserve •'000 •'000 •'000 Balance at31/21/05 1,375 - - 1,071 - (1,481) - 965Minorityinterest - - - - - - 780 780Deferredtax - - - - - (24) - (24)adjustmentSharecapitalincrease, 750 11,613 - - - - - 12,363netof expensesIssue ofshare - - 66 - - - - 66awardsNet profitfor - - - - - 2,246 (117) 2,129the yearBalance at31/12/2006 2,125 11,613 66 1,071 - 741 663 16,279Minorityinterest - - - - - - (243) (243)Sharecapitalincrease, 263 10,175 - - - - - 10,438netof expensesIssue ofshare - - 332 - - 332awardsNet profitfor - - - - - 3,661 (94) 3,567the yearCurrencytranslationreserve - - - - (251) - - (251)Balance at 2,388 21,788 398 1,071 (251) 4,402 326 30,12231 December2007 CONSOLIDATED CASH FLOW STATEMENT Notes Year ended Year ended 31 December 31 December 2007 2006 •'000 •'000Cash flows from operating activitiesCash generated from used in operations 10 3,349 (713)Interest paid (458) (348)Tax paid (50) (178) Net cash generated from (used in) operatingactivities 2,841 (1,239) Cash flows from investing activitiesPurchase of property, plant and equipment (611) (1,181)Purchase of intangible assets (4,829) (3,747)Purchase of available-for sale investments (1,639) (556)Disposal of intangible assets 30Interest received 136 148 Net cash used in investing activities (6,913) (5,336) Cash flows from financing activitiesLong-term borrowings - (1,681)Net proceeds from issue of ordinary shares 10,284 12,521Short term borrowings (232) (865) Net cash from financing activities 10,052 9,975 (Decrease) /Increase in cash and cashequivalents 5,980 3,400Movement in cash and cash equivalentsAt beginning of the year 5,867 2,467Increase 5,980 3,400 11,847 5,867Effect of exchange rate differences on cashheld (231) -At end of year 11,616 5,867 Notes The financial information in this announcement does not constitute statutoryfinancial statements as defined in section 240 of the Companies Act 1985. Theauditors have indicated that they intend to give an unqualified report, and willnot contain any statement under section 237(2) or (3) of the Companies Act 1985,on the statutory financial statements for the year ended 31 December 2007.Copies of the Company's report and financial statements will be sent toshareholders shortly and will be available at the registered office of thecompany: 2 Paris Gardens, London, SE1 8ND, United Kingdom 1. Accounting policies and basis of preparation The consolidated financial statements of Velti plc (the Company) have beenprepared in accordance with the accounting policies set out in the financialstatements for the year ended 31 December 2006. The consolidated financial statements include the results of Velti plc andentities controlled by Velti plc (its subsidiaries) forming the Group (see note6.). The results of Ansible Mobile LLC, a joint venture formed in 2007, areconsolidated by using the proportionate consolidation method (IAS 31) on thebasis of joint control. 2. Segment information Velti's emphasis in the "Telco, Agencies, Brands, Media and Government" is onsoftware licenses, services, integration, managed services, revenue-shareservices and software as a service / application service provision. For the"Other Public and Private Enterprises" segment the emphasis is narrower, onsoftware licenses and integration. Revenue by business segment: Year ended Year ended 31 December 31 December 2007 2006 •'000 •'000 Telco, Agencies, Brands Media andGovernment 16,440 7,586Other Public and Private Enterprises 3,426 3,230 Total 19,866 10,816 Operating profit by business segment: Year ended Year ended 31 December 31 December 2006 2006 •'000 •'000 Telco, Agencies, Brands Media andGovernment 4,599 2,711Other Public and Private Enterprises 411 277Unallocated operating income 4 21 Total 5,014 3,009 3. Borrowings 31 December 31 December 2007 2006 •'000 •'000Current Current portion of long-term debt(within 1 year) 195 750Short-term loans 1,519 1,081 1,714 1,831Total borrowings 1,714 1,831 4. Share capital During the year, the Company issued 3.682.803 shares of 5 p each, at a premiumof 2,05 p per share The Company's issued share capital consists of 32,774,138ordinary shares of 5 p each. 5. Deferred shares award plan The Group adopted a share incentive plan on 26 April 2006. Under this plan, anyemployed director or any employee of the Group is eligible to receive awardsunder the plan. The deferred shares award (DSA) entitles the participant toacquire shares when the DSA vests by paying an amount of no less than thenominal value per share. The vesting period is two years. Deferred shares areforfeited if the participant leaves the Group before the DSA vests. Details of the awards outstanding at 31 December 2007 are as follows. Number of Weighted awards average exercise price (in •)Outstanding at the beginning of period 810,000 0.07Granted during the period 744,500 0.07Forfeited during the period (94,500) 0.07Outstanding at the end of the period 1,470,000 0.07 In the year ended 31 December 2007, the Group recognised a total expense inrelation to the plan of €332,000 (year ended 31 December 2006: €66,000). 6. Earnings per share Year ended Year ended 31 December 31 December 2007 2006Profit attributable to equity holders ofthe Company (•'000) 3,661 2,246Weighted average number of ordinaryshares in issue 29,750,987 25,721,472Weighted average number of ordinaryshares including dilutive effect ofoutstanding share awards 31,210,987 26,531,472Basic earnings per share (Eurocents pershare) 12.3 8.7Diluted earnings per share (Eurocentsper share) 11.7 8.5Adjusted earnings per share (1)(Eurocents per share) 13.7 9.0 (1) Figures stated before cost of share awards 7. Subsidiaries Velti Plc owns 100% of the share capital of Velti SA (incorporated in Greece),100% of the share capital of Velti DR Limited (incorporated in the UnitedKingdom), 100% of Velti M-Telecom Limited (incorporated in the United Kingdom),the sole shareholder of Velti EOOD ( formerly M-Telecom EOOD incorporated inBulgaria), 100% of Velti North America Holdings Inc (incorporated in the USA)that in turn holds 50% of Ansible Mobile LLC (incorporated in the USA) and 100%of Velti Platforms and Services Limited (incorporated in Cyprus). Velti SA owns79.51% of the share capital of Velti North America Inc (incorporated in the USA)and 100% of the share capital of Velti Center for Innovation S.A. ("VCI")(incorporated in Greece). VCI has a 50% holding in mPoint SA (incorporated inGreece) which is consolidated on the basis of majority control of the Board ofDirectors. During the year ended 31 December 2007 the post-acquisition profit ofsubsidiaries acquired during the period was €3,296,000. Subsidiaries are consolidated from the date on which control is transferred tothe Group. They are de-consolidated from the date that control ceases. Goodwillarising upon acquisition of subsidiaries and associates during the periodamounted to €2,624,000. This comprised mainly the goodwill on the acquisition ofM-Telecom Limited of €2,473,000 (see note 8). The Directors have assessed thecarrying value of goodwill at 31 December 2007 and consider no impairment isnecessary. 8. Acquisition of Velti M-Telecom Limited On April 2007, the Company, acquired 100 per cent of the issued share capital ofM-Telecom for deferred consideration of €2,44 mllion. This transaction has beenaccounted for by the purchase method of accounting. Book Value Fair ValueNet assets acquired •'000 •'000 ------------ ------------- Property, plant and aquipment 12 12Receivables and prepayments 111 111Cash and cash equivalents 13 13Borrowings (78) (78)Trade and other payables (91) (91) Total (33) (33) Goodwill 2,473 2,473 Total consideration 2,440 2,440 Cash 480 480Directly attributable costs 40 40Deferred consideration 1,920 1,920 Goodwill arising on the acquisition of M-Telecom is attributable to theanticipated profitability of the distribution of the Group's products in the newmarkets and the anticipated future operating synergies from the combination. 9. Income tax The effective tax rate of the Group on profit on ordinary activities is lowerthan the standard rate of UK corporation tax due to lower corporation tax ratesprevailing in the operating territories of Group. Indicatively, Greece has a taxrate of 25% while Bulgaria and Cyprus have a tax rate of 10%. 10. Cash generated from / (used in) operations Year ended Year ended 31 December 31 December 2007 2006 •'000 •'000 Net profit 3,567 2,129Adjustments for:Tax expense 910 603Interest income (136) (148)Interest expense 495 348Depreciation 346 151Amortisation of intangible assets 2,188 1,151Amortisation of grants - (666)Share of loss of associates 178 108Non cash provisions 725 349 8,273 4,025 Changes in working capital:Receivables and prepayments (7,375) (6,274)Trade and other payables 2,411 1,497Pensions and other post-retirementobligations 40 39 (4,924) (4,738) Cash generated from / (used in)operations 3,349 (713) This information is provided by RNS The company news service from the London Stock Exchange