Last checked at 30 Mar 2009 07:00
| For Immediate Release | 30 March 2009 |
Velti Plc
2008 RESULTS: STRONG, PROFITABLE GROWTH FROM GLOBAL EXPANSION
Financial Highlights
| Year ended 31 December 2008 €'000 | Year ended 31 December 2007 €'000 | Change % | |
| Revenue | 52,450 | 19,866 | 164% |
| Adjusted EBITDA | 12,759 | 7,975 | 60% |
| Adjusted operating profit | 8,774 | 5,441 | 61% |
| Adjusted profit before tax | 7,931 | 5,016 | 58% |
| Adjusted EPS (in eurocents) | 20.0 | 14.1 | 42% |
Adjusted figures stated before the (non-cash) cost of share based payments of €1.3 million (2007: €0.4 million) and the non-cash effect of foreign exchange translation losses of €1.1 million (2007: €0.1 million).
Operational highlights
Investment in building Velti's global footprint, in both developed and emerging economies, opening offices in Beijing, Dubai, Madrid, Moscow, New Delhi, San Francisco and Shanghai.
Strong organic growth from existing global operators, brands and ad agencies and new important new customer wins.
New Joint Venture in India: 35 percent share holding in HT Mobile Solutions, a new mobile marketing company set up with Hindustan Times Media, the second largest media group in India.
Acquired 33 per cent of CASEE (with an option to go to 50%), China's largest mobile ad exchange (achieved 85% revenue growth between Q3 and Q4 2008).
Solid performance from Ansible (joint venture with Interpublic Group) with accelerated growth in the second half of 2008.
Debt facilities of €10.0m have been secured for future working capital requirements.
Velti's sales and marketing capacity doubled from 25 to 50 in 2008.
Statement of the Chairman and Chief Executive Officer
Introduction
During the year ended 31 December 2008, Velti achieved strong, profitable growth, reflecting buoyant demand for our mobile marketing and advertising capabilities, from both existing and new customers, and the continued expansion of our global footprint.
Financial performance
Consolidated revenues for 2008 grew by 164 per cent to €52.4 million (2007: €19.9 million). After a €1.1 million translation loss (2007: €0.1 million) resulting from the depreciation of various currencies against the Euro, adjusted profit before tax rose by 58 per cent to €7.9 million (2007: €5.0 million). Adjusted earnings per share were up by 42 per cent to 20.0 eurocents (2007: 14.1 eurocents).
The growth in revenues and profits achieved during 2008 reflects the geographic expansion of the business and strong organic development with Velti continuing to win contracts from existing and new customers.
Velti's business model has evolved in line with the development of the mobile marketing and advertising market and the needs of brands, media, advertising agencies and network operators. This has involved the development of new types of campaigns for operators and we have seen strong growth in demand from major customers for software as a service (SaaS) and revenue share agreements instead of software licensing for mobile marketing and advertising activities. Whilst this reduced margins during 2008, it has resulted in faster revenue generation as well as establishing recurring revenues for the future.
The globalisation of Velti's business and revenues has resulted in an improvement, as anticipated, in working capital which in 2008 fell to 17 per cent of revenue (2007: 25 per cent). This improvement, combined with profits growth, resulted in a 36 per cent rise in cash flow from operations for the year to €4.6 million (2007: €3.4 million).
In order to establish a leading position in the mobile marketing and advertising market and to maximise growth opportunities, we have invested heavily in building a global footprint. Whilst this investment has had an impact on short-term margins, we expect that it will result in further growth in revenues and profits in 2009 and future years. Capital expenditure in 2008 increased by 141 per cent to €13.0 million (2007: €5.4 million); we anticipate that investment for the current year will be at a significantly lower level.
In order to ensure that the Company is comfortably able to meet its future working capital needs, capital expenditure was funded by €10.7 million of debt. At 31 December 2008, the Company had cash deposits of €10.3 million and net debt of €2.1 million (31 December 2007: net cash of €9.9 million).
Establishing a global footprint
Velti's expansion has been led by demand from customers who are increasingly allocating marketing and advertising budgets to the mobile channel on a global scale. In response to this demand, Velti has continued to expand its global presence, with important operations in Russia, India and China.
Growth across Western Europe has continued with Velti building on successful projects with customers such as Orange, Blyk, TMP Worldwide and Argos in the UK. The USA is also a key growth area for the Company where Ansible (our joint venture with Interpublic) and our offices in New York, Boston and San Francisco are growing to meet demand from operators, brands and agencies.
Strong organic growth
A major contributor to Velti's performance in 2008 was repeat business from existing customers (approximately two thirds of revenues) and winning new blue-chip customers (one third of revenues), including mobile network operators, media, brands and advertising agencies. Examples of achievements for 2008 include:
Winning new business from global brands such as Unilever, Friesland, Chrysler, Johnson & Johnson, Dixons, United Milk Company's Fibella and Procter & Gamble;
Winning repeat mobile marketing contracts with Argos, Wrigley's, MasterCard, TMP Worldwide, Pepsi, Coca Cola, Pernod Ricard, Clinique and Hewlett-Packard;
Renewing key operator contracts such as Vodafone, MTS, Orascom-WIND, Cosmote, MTEL, Vivatel, SingTel and Orange;
Continued progress from Ansible with client wins including Microsoft, Intel, Bayer, General Motors and Verizon; and
Building relationships with leading global advertising agencies including Ogilvy, BBDO, Adel Saatchi & Saatchi, McCann Erickson, Momentum, Draftfcb and Lowe Worldwide.
At Ansible, growth has accelerated significantly in the second half of 2008, with revenues being three times that of the first half. This success follows a period of building relationships with IPG agencies, educating their clients and developing new business opportunities, all of which has created a firm basis for further progress in 2009.
Current trading and Outlook for 2009
Despite the weak state of the global economy, we anticipate that the mobile marketing and advertising space will grow further in 2009 as budget allocation continues to shift from traditional media to measurable and targeted media, such as mobile, where costs of customer acquisition and retention can be significantly reduced.
We expect to see a significant financial benefit from the investment we have made in global expansion in Asia, the Middle East and South America, as well as from our joint ventures, Ansible and HT Mobile Solutions.
There are also opportunities to continue to grow in Western Europe, for example in the UK and Spain where active customers include Argos, TMP Worldwide, Microsoft and Unilever, and in North America where demand for targeted mobile spend, brand differentiation and value from customers such as Verizon, Microsoft, Intel, Bayer and General Motors will continue to generate revenues for Velti.
Headcount growth during 2008 has resulted in 'critical mass' with substantial scalability in the delivery of customer solutions. We believe further revenue improvement can be achieved with lower percentage headcount growth.
The management is confident that Velti will continue to achieve strong, profitable growth in 2009. Brands are shifting parts of their marketing budgets from non-measurable (TV, print, outdoor) to measurable media like mobile. Velti's solutions provide tangible results to its customers and more than two thirds of the company's revenues are performance-based. Against this background, the scalability of Velti's business, as demonstrated by improving revenue per employee, will benefit operating margins and cash flows.
Velti is taking a series of cost-controlling actions to offset the effects of the current global economic outlook and is approaching all aspects of its operations under the prism of prudent cash flow management. Therefore the Company will aim for:
Increased scalability in delivery of solutions - excellent progress has been made here between 2007 and 2008. While revenues grew by 164% between 2007 and 2008, revenue-servicing headcount (year-end) grew by only 22% and total technology headcount (including product development resources) increased by 38%. This shows the scalability of Velti's business and the positive effects that the past product development efforts of the company have on its operating margins. Velti aims to continue and even improve this trend in 2009, keeping technology headcount growth lower than previously projected;
Tight capex budget - the goal will be to focus investment in areas where there is immediate opportunity and effect on cash flow. The company feels it already has a very strong product portfolio, with the biggest breadth on the market and solid global presence with its five data centres in Europe, Asia and Americas; and
Overall budget evaluation and approval in monthly intervals and gradual release of budget according to results achieved.
Current trading is very encouraging with revenues in the first quarter of 2009 expected to be approximately 50% higher than in 2008. Furthermore, more than 75% of probability-adjusted revenues for the year are projected to come from existing customers.
Overall, we believe we have established a solid platform for further progress in 2009 and beyond.
David Mann, Non-Executive Chairman, commented:
"The continuing demand for Velti's services and solutions is remarkably strong and we will take forward the development of the business with prudent cash flow management. We are being selective in pursuing those opportunities that can be managed well within available financial resources. As a result we expect growth this year to be more moderate than last but still very strong."
Alexandros Moukas, Chief Executive Officer, said:
"We are very pleased with Velti's performance in 2008. The current economic climate is not having a major impact on the mobile channel, as marketers look to innovate and generate ROI using more measurable digital channels rather than traditional media. Velti's revenue success in 2008 has been underpinned by Software as a Service and performance based fees, both of which are particularly attractive to clients in the current economic climate. We see very good prospects in 2009 being another year of solid profitable growth."
Operational Review
Introduction
Velti's financial performance for 2008 reflects the leading position the Company has established in the mobile marketing and advertising market. Velti's reputation among mobile network operators, media organisations, brands and advertising agencies is the result of its deep understanding of their marketing and advertising needs and the proven capabilities of the Company's proprietary technology platform to execute global mobile campaigns reliably, quickly and cost-effectively.
During 2008, a key objective was to reinforce Velti's competitive position, in anticipation of rapid market growth over the next few years, by:
expanding its international operations through selected acquisitions, opening new offices and establishing strategic partnerships;
achieving rapid revenue growth through an aggressive sales and marketing effort targeting both existing and new customer relationships;
investing in the Mobile Marketing Platform (MMP) to ensure that it remains at the cutting edge of mobile marketing and advertising; and
attracting top quality people in all key areas of the business.
Between 2006 and 2008, Velti has seen a shift in requirements from customers seeking to reduce their infrastructure, operational staff and resources to facilitate mobile activities. As a result, with Velti's increased capabilities, more than half of the Company's business is now made up of performance-based and revenue share contracts and SaaS agreements.
Market development
The market in 2008 continued to be a disparate and fragmented one, with new entrants concentrating on all aspects of mobile provisioning, from ad serving to mobile applications. While smaller players occupy niches of the mobile arena, Velti's breadth of technology and global reach means that the Company has become the leading 'one stop shop' for operators, media companies, advertising agencies and brands, looking to deliver in any geographic region and across the full range of mobile activities including social networking and virtual worlds.
The following four driving factors are behind the growth of the company, resulting in significantly stronger sales, but lower gross and operating margins:
New types of mobile marketing campaigns for operators, similar to the deal with MTS in Russia which, although having inherently smaller gross margins than traditional contracts, result in revenues which ramp-up considerably faster and costs which are more predictable;
Major customers have shown a stronger preference than originally projected towards software as a service (SaaS) and revenue share models instead of software licensing. While this trend is initially lowering Velti's profit margins it provides a solid basis for growth and repeat revenue streams compared to software licence deals which increase short-term margins but result in lower recurring revenues;
The rapid expansion into new geographies required significant capital investment in infrastructure which has positioned Velti to capitalize on new opportunities revenue in a number of major new markets; and
Our sales and marketing capacity has grown from 25 to 50 people with senior managers appointed to support growth in the new regions and, whilst these expansion costs have been incurred in 2008, they are expected to generate revenues in 2009.
During 2008 Velti saw strong uptake in its services across all customer groups and geographies. Increasingly mobile marketing and advertising activity is being developed to gather consumer insights and information through opt-in databases which enable operators to create effective loyalty campaigns in future and improve ARPU, enhancing margins for Velti. Since the beginning of 2009 Velti has started similar projects which are currently underway in a number of new countries.
We anticipate that Velti's presence in emerging markets will benefit financial performance for 2009 as market penetration rates for mobile services continue to increase, with advertisers expected to increase overall spend on mobile campaigns. Recent business written in the Middle East with Du, demonstrates this trend and the opportunities.
Whilst there is a downturn in the global economy, mobile marketing and advertising is anticipated to grow in 2009. Pressured advertising budgets are moving towards measureable, digital media forcing brands to evaluate advertising based on the cost of acquisition (CPA) rather than the cost of impression (CPM). Both these factors are positive trends for Velti's future growth.
Expanding internationally
New offices
During 2008, Velti opened new offices in Beijing, Dubai, Madrid, Moscow, New Delhi, San Francisco and Shanghai to provide local sales, marketing and customer service support.
Strategic partnerships and joint ventures
In line with its stated priority of building a significant presence globally, Velti has established a new mobile marketing company, HT Mobile Solutions, with HT Media, owner of the Hindustan Times, to service large network operators, brands and advertising agencies, as well as smaller regional companies, in India. HT Mobile Solutions will plan, execute and monitor media campaigns across all media channels, including mobile, TV, online and print, using Velti's technology. The new company, in which Velti has a 35 per cent shareholding, will initially operate in New Delhi and Mumbai.
HT Media is the second largest media group in India with around 12 million daily users of its products; India itself is one of the fastest growing mobile markets in the world, with over 300 million1 mobile users at present, which is projected to grow to over 500 million in 20102.
Velti's investment in Casee (33 per cent with an option to increase its stake to 50 per cent) was completed in April 2008. Casee is China's largest mobile advertising exchange and continues to grow aggressively. At the time of investment, Casee was serving 400 million ads to mobile phones in China every month. Currently, it is serving around 1 billion ads every month for clients including British American Tobacco, General Motors, MSN, Google, Kodak, Nokia and China Mobile. Casee's revenues in the last quarter of the year grew by more than 85 per cent compared to the previous quarter.
Strong organic growth
Mobile network operators
Velti has excellent relationships with many mobile network operators, retained over a number of years, and the Company was successful during 2008 in securing new contracts with existing customers including Vodafone, Orascom-WIND, Cosmote, Cosmofon, MTEL, Vivatel, SingTel and Orange.
In Europe Orascom-WIND chose the MMP for the creation of its WIND Plus advertising portal to manage and offer advertising inventory to brands. The deal means WIND now offers over 200 services via the portal to mobile advertisers on its network including Hewlett-Packard and Jeep. Cosmote in Greece also utilized Velti technology to build its My View user portal which provides personalized lifestyle content including music, games, mobile TV, news, weather, sports, communities and maps.
In the UK Velti signed-up Blyk, the free mobile network for 16-24 year olds funded by advertising, as a new customer. The new set of services, launched in February 2009, allow members that join the Blyk network, to be profiled based on their lifestyle and personal interests. Velti's work with Orange in the UK continued in 2008, growing the Gigs and Tours service to provide users with priority tickets for their favourite music artists.
______________________________________________
1 Telecom Regulatory Authority of India (TRAI), October 2008
2 Informa Telecoms & Media, October 2008
Velti's progress in Eastern Europe has also been strong with a second deal, with a Telekom Austria Group subsidiary, delivering mobile marketing campaigns for Velcom in Belarus. The activity was very successful with 10 per cent of the total subscription base of Velcom participating in the campaign within just three months.
In June 2008, Velti announced its first contract in Russia with the country's largest mobile operator, Mobile TeleSystems (MTS) which has a total of 86 million subscribers in Russia and CIS countries. The relationship with MTS generated significant revenues for Velti during 2008 and was extended in the Ukrainian market in the third quarter of 2008.
In terms of new geographical reach, Velti has also recently won its first contract in Latin America with Entel Bolivia, which marks the company's first move into the region, with expansion plans and new sales staff in place for 2009. New territories also came in the shape of operator business won with du and Etalisat in the Middle East and China Mobile and Fujian China Unicom in Asia.
Advertising Agencies
Velti continued to develop advertising agency relationships with companies including Ogilvy, BBDO, Adel Saatchi & Saatchi, McCann Erickson, Momentum, Draftfcb and Lowe Worldwide. These relationships are now generating projects for Velti on a multi-national scale with brands such as Unilever.
New customer wins from the advertising agency channel included Unilever's Becel, Dove, and CIF brands, Friesland, Chrysler, J&J's o.b, Dixons, United Milk Company's Fibella, as well as a new contract with Procter & Gamble for the creation and management of mobile communities. Projects were also secured at the end of the year, which ran in Q1 2009, with Marlboro, Kinder and Hewlett-Packard.
The 'Text & Take Home' service of Argos in the UK continues to be one of the most successful and widely used mobile services in retail. The SMS reservation service continues to gain users every year with shoppers sending millions of messages, which translates into tens of millions of pounds worth of product revenue for Argos. Also in the UK, TMP Worldwide is also using Velti technology to connect with job candidates using the MMP, with several highly successful campaigns completed in 2008.
During 2008 Velti won repeat mobile marketing business with existing customers including Wrigley's, MasterCard, TMP Worldwide, Pepsi, Coca Cola, Pernod Ricard, Clinique and Hewlett-Packard. These ranged from QR code activities and mobile blogging through to shortcode activities integrated with traditional advertising channels.
Ansible
Ansible's success in the second half of the year was very strong with new client wins from Microsoft and other contracts from Intel, Bayer, General Motors and Verizon during 2008. Key to the overall success of the agency is the investment we have made in building relationships with IPG agencies, educating and enabling their clients to embrace mobile marketing. Since September 2008, there has been a marked acceleration in revenue growth, with second half revenues three times those for the first half. As Ansible's industry profile grows within the industry and its relationships with existing customers continue to strengthen, this reinforced growth trend is set to continue.
Other activities
Velti's platforms and services business segments performed well during 2008 with sales to enterprises increasing by 16% to €5.5 million and sales to operators expanding by 79% to €6.8 million. This line of business achieved growth in the areas of mobile internet portals for operators, self-service and broadband portals for operators and finally in the business process management area. Major customers include Vodafone, Orascom Group / Wind, Cosmote Group and various banks primarily Pireaus Bank and NBG. The growth and sustainability of this line of business has been proven every year and is based on repeat business, excellent customer service and the competitive advantage that comes with on-going successful projects. All these customers have continuous and foreseeable needs that reduce the risk of the business
Investing in Velti's proprietary mobile marketing platform (MMP)
Velti has maintained its investment expenditure on its MMP. Emphasis during the year was placed on enhancing targeted ad serving for mobile operators and agencies, improving the MMP's mobile CRM capabilities and increasing the evaluation and analytics engine to measure campaign impact and cost per action. In detail the following modules were expanded:
Mobile media planning and buying
Mobile web site creation
Mobile CRM
Analytics
Mobile templates and mobile communities
Other product development included modules for mobile internet and WAP site creation, sponsored person-to-person messaging and voice services, rewards schemes, couponing and downloadable mobile widgets.
In addition to MMP investment, operations business continuity and fault tolerance also received funding to ensure services are geographically independent and secure.
Financial Review
In 2008 Velti delivered a good financial performance with robust top line growth for the fourth consecutive year, strong profitability (despite significant foreign exchange losses and planned sales and marketing expenses), positive operating cash flows and entry into new geographic areas.
At the same time, net capital expenditure as a percentage of revenue stabilised. The investment programme of the Group remains focused on international expansion and the continuous development of its technology platforms in anticipation of the market need for SaaS type of projects and the substantial and rapid development in the mobile marketing and advertising market over the next few years.
Velti's consolidated revenues amounted to €52.4 million compared to €19.9 million in 2007, a growth of 164 per cent. This was the result of organic growth mainly from mobile marketing and advertising activities from brand awareness and loyalty mobile campaigns run for mobile operators in particular, with repeat business from existing customers, success in winning new clients and expansion into new territories all contributing. The traditional platforms and services segments continued their steady and profitable growth.
Adjusted EBITDA amounted to €12.8 million in 2008 compared to €8.0 million in 2007 while adjusted profit after taxes amounted to €6.7 million in 2008 compared to €4.2 million in 2007. Cash from operations amounted to €4.6 million compared to €3.4 million in 2007. Depreciation and amortisation charges amounted to €4.0 million in 2008, compared to €2.5 million in 2007, the significant increase reflecting a high level of capital expenditure which reached €13.0 million in 2008 (€5.4 million in 2007). Both capital expenditure and net capital expenditure figures remained at similar levels with 2007 when measured as a percentage of revenue.
Adjusted EPS grew 42 per cent to 20.0 eurocents from 14.1 eurocents in 2007 notwithstanding the dilutive effect of 11% of shares issued in the secondary offering at the end of 2007, the vesting of awards granted in 2006 and the issue of shares in consideration of M-Telecom.
In 2008, the EBITDA margin fell to 24 per cent from 40 per cent in 2007 as a result of new types of brand awareness loyalty and mobile campaigns run for mobile operators the emergence of the SaaS model instead of software licensing and the Company's expansion into new geographies. These mobile campaigns deliver lower profitability, however they are more scalable in terms of revenue generation while costs are easily estimated. Moreover, they enjoy a short cash conversion cycle. On the other hand, the SaaS model delivers initially lower profit margins, but the software licence revenue is spread over a period of time and hence provides a solid basis for growth and repeat revenue streams. The drop in EBITDA margin is also affected by a significant investment in sales and marketing capacity, which is expected to deliver a significant return in 2009.
Profit before taxes has been negatively impacted by share based payments of €1.3 million and foreign exchange non-cash losses of approximately €1.1 million, arising mainly from intercompany loans in Sterling, Russian Rubles and Ukrainian Hryvnia. The majority of the losses occurred during December 2008 when all three currencies depreciated significantly against the Euro.
Revenues from new geographies and from the mobile marketing and advertising segment have shortened the collection cycle and improved working capital. As a proportion of revenue, working capital fell from 25 per cent in 2007 to 17 per cent in 2008 which, combined with strong profitability, resulted into positive cash from operations of €4.6 million in 2008 (2007: €3.4 million).
The scalability of Velti's business model, which has been supported over the last few years by an active product development programme, is demonstrated by revenue per employee which has increased by approximately 40 per cent between years 2003 and 2008. Furthermore, net capital expenditure (annual capital expenditure less annual depreciation and amortisation charges), as a proportion of revenue, has fallen from 34 per cent in 2005 to 17 per cent in 2008.
Net assets grew significantly to €37.0 million at 31 December 2008 compared to €30.1 million at 31 December 2007.
The debt to equity ratio at 31 December 2008 was 34 per cent while net debt stood at €2.1 million (net cash €9.9 million at 31 December 2007). During 2008, the Company raised approximately €10.7 million of new debt in order to finance its capital expenditure program and to ensure that there is sufficient cash available to cover its working capital requirements during adverse market conditions.
The investment made over the past five years, which accelerated particularly during 2008, has involved focused acquisitions, forming strategic joint ventures and setting up new offices around the world, as well as the continuous development of Velti's proprietary technology and MMP. As a result, and with strong customer relationships and a solid balance sheet, Velti enters 2009 with an excellent platform from which to take full advantage of the opportunities, for rapid profitable growth, that the mobile marketing and advertising market will offer in the medium term. In the short term, the focus of the Group remains on sustaining profitable rates of growth within available financial resources.
CONSOLIDATED INCOME STATEMENT
| Year ended 31 December 2008 | Year ended 31 December 2007 | ||
| Notes | €'000 | €'000 | |
| Revenue | 2 | 52,450 | 19,866 |
| Cost of revenue | (30,466) | (7,535) | |
| Gross profit | 21,984 | 12,331 | |
| Other operating income | 133 | - | |
| Selling expenses | (7,812) | (4,594) | |
| Administrative expenses | (6,824) | (2,723) | |
| Operating profit | 2 | 7,481 | 5,014 |
| Net foreign exchange losses | (1,131) | (112) | |
| Finance expense | (884) | (383) | |
| Finance income | 102 | 136 | |
| Share of loss of associates | (61) | (178) | |
| Profit before tax | 5,507 | 4,477 | |
| Taxation | 8 | ||
| -Current tax | (763) | (126) | |
| -Deferred tax | (515) | (784) | |
| Total tax charge | (1,278) | (910) | |
| Profit after tax | 4,229 | 3,567 | |
| Attributable to: | |||
| Equity shareholders of the parent | 4,263 | 3,661 | |
| Minority interest | (34) | (94) | |
| Profit after minority interest | 4,229 | 3,567 | |
| Basic earnings per share (in Eurocents) | 6 | 12.7 | 12.3 |
| Fully diluted earnings per share (in Eurocents) | 6 | 12.1 | 11.7 |
CONSOLIDATED BALANCE SHEET
| As at 31 December 2008 | As at 31 December 2007 | ||
| Notes | €'000 | €'000 | |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 2,439 | 1,616 | |
| Intangible assets | 15,316 | 7,386 | |
| Investment in associates | 3,734 | 1,787 | |
| Goodwill | 7 | 2,704 | 2,899 |
| Deferred tax asset | 1,080 | 625 | |
| 25,273 | 14,313 | ||
| Current assets | |||
| Trade and other receivables | 31,145 | 15,861 | |
| Available-for-sale investment | - | 27 | |
| Cash and cash equivalents | 10,287 | 11,616 | |
| 41,432 | 27,504 | ||
| Total assets | 66,705 | 41,817 | |
| SHAREHOLDERS' EQUITY | |||
| Share Capital | 4 | 2,449 | 2,388 |
| Share premium account | 22,285 | 21,788 | |
| Share-based payment reserve | 1,564 | 398 | |
| Merger reserve | 1,071 | 1,071 | |
| Currency translation reserve | 737 | (251) | |
| Accumulated profit | 8,665 | 4,402 | |
| Total shareholders' equity | 36,771 | 29,796 | |
| Minority interest | 292 | 326 | |
| Total equity | 37,063 | 30,122 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Long -term borrowings | 3 | 2,550 | - |
| Other payables | - | 22 | |
| Retirement benefit obligations | 188 | 143 | |
| Deferred tax liability | 2,650 | 1,680 | |
| 5,388 | 1,845 | ||
| Current liabilities | |||
| Trade and other payables | 14,302 | 8,034 | |
| Current income tax liabilities | 134 | 102 | |
| Short - term borrowings | 3 | 9,818 | 1,714 |
| 24,254 | 9,850 | ||
| Total liabilities | 29,642 | 11,695 | |
| Total equity and liabilities | 66,705 | 41,817 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| Share capital €'000 | Share premium €'000 | Share based payment reserve €'000 | Merger reserve €'000 | Currency trans- lation reserve €'000 | Accum- ulated profits €'000 | Minority interests €'000 | Total €'000 | |
| Balance at 31 December 2006 | 2,125 | 11,613 | 66 | 1,071 | - | 741 | 663 | 16,279 |
| Profit for the year | - | - | - | - | - | 3,661 | (94) | 3,567 |
| Exchange differences on translation of foreign operations | - | - | - | - | (251) | - | - | (251) |
| Total recognised income and expense for the year | - | - | - | - | (251) | 3,661 | (94) | 3,316 |
| Minority interest due to change in status of subsidiary | - | - | - | - | - | - | (243) | (243) |
| Share capital increase, net of expenses | 263 | 10,175 | - | - | - | - | - | 10,438 |
| Issue of share awards | - | - | 332 | - | - | - | - | 332 |
| Balance at 31 December 2007 | 2,388 | 21,788 | 398 | 1,071 | (251) | 4,402 | 326 | 30,122 |
| Profit for the year | - | - | - | - | - | 4,263 | (34) | 4,229 |
| Exchange differences on translation of foreign operations | - | - | - | - | 988 | - | - | 988 |
| Total recognised income and expense for the year | - | - | - | - | 988 | 4,263 | (34) | 5,217 |
| Share capital increase, net of expenses | 61 | 497 | - | - | - | - | - | 558 |
| Issue of share awards | - | - | 1,166 | - | - | - | - | 1,166 |
| Balance at 31 December 2008 | 2,449 | 22,285 | 1,564 | 1,071 | 737 | 8,665 | 292 | 37,063 |
CONSOLIDATED CASH FLOW STATEMENT
| Year ended 31 December 2008 €'000 | Year ended 31 December 2007 €'000 | ||
| Cash flows from operating activities | |||
| Cash generated from operations | 4,556 | 3,349 | |
| Interest paid | (551) | (458) | |
| Tax paid | (951) | (50) | |
| Net cash generated from operating activities | 3,054 | 2,841 | |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (1,590) | (611) | |
| Purchase of intangible assets | (11,427) | (4,829) | |
| Purchase of associates | (2,315) | (1,639) | |
| Disposal of property plant & equipment | 133 | 30 | |
| Interest received | 101 | 136 | |
| Net cash used in investing activities | (15,098) | (6,913) | |
| Cash flows from financing activities | |||
| Long-term borrowings | 2,550 | - | |
| Net proceeds from issue of ordinary shares | 61 | 10,284 | |
| Short term borrowings | 8,104 | (232) | |
| Net cash from financing activities | 10,715 | 10,052 | |
| (Decrease) /Increase in cash and cash equivalents | (1,329) | 5,980 | |
| Movement in cash and cash equivalents | |||
| At beginning of the year | 11,616 | 5,867 | |
| (Decrease)/Increase | (1,329) | 5,980 | |
| 10,287 | 11,847 | ||
| Effect of exchange rate differences on cash held | - | (231) | |
| At end of year | 10,287 | 11,616 |
Notes
The financial information in this announcement does not constitute statutory financial statements as defined in section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2007 have been delivered to the Registrar of Companies. Copies of the Company's report and financial statements will be sent to shareholders shortly and will be available at the registered office of the company: 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 been prepared in accordance with the accounting policies set out in the financial statements for the year ended 31 December 2007.
The consolidated financial statements include the results of Velti plc and entities controlled by Velti plc (its subsidiaries) forming the Group (see note 5.). The results of Ansible Mobile LLC, a joint venture formed in 2007, are consolidated by using the proportionate consolidation method (IAS 31) on the basis of joint control.
2. Segment information
The Company's operations are segmented into three major areas:
a) Mobile Marketing and Advertising: Development of mobile marketing and advertising solutions for mobile operators, advertising agencies, brands and media groups. This includes business solutions and software platforms that enable Velti's customers to run integrated mobile marketing campaigns, monetise content and inventory in a multichannel strategy and advertise through the mobile channel. In this area, the revenue model has a fixed, set up fee component and a variable, activity based component, including performance-based and revenue share agreements.
b) Platforms and Services, Operators: The provision of platforms, integration and managed services to mobile operators. This includes software platforms, integration and managed services that enable content management and delivery to different multimedia channels and triple-play value added services. The revenue model comprises of license fees, professional services, reselling components and support services.
c) Platforms and Services, Enterprises: The provision of platforms, integration and managed services to financial institutions and other private and public sector enterprises. This includes content management and delivery to different multimedia channels, and process automation and mobile banking activities. The revenue model comprises of license fees, professional services, reselling components and support services.
Revenue by business segment:
| Year ended 31 December 2008 | Year ended 31 December 2007 | |
| €'000 | €'000 | |
| Mobile marketing and advertising | 40,122 | 11,283 |
| Platforms and services - enterprises | 5,542 | 4,757 |
| Platforms and services - operators | 6,786 | 3,826 |
| Total | 52,450 | 19,866 |
Operating profit by business segment:
| Year ended 31 December 2008 | Year ended 31 December 2007 | |
| €'000 | €'000 | |
| Mobile marketing and advertising | 5,504 | 3,200 |
| Platforms and services - enterprises | 527 | 464 |
| Platforms and services - operators | 1,450 | 1,350 |
| Total | 7,481 | 5,014 |
Revenue by geography:
| Year ended 31 December 2008 | Year ended 31 December 2007 | |
| €'000 | €'000 | |
| Europe | 44,282 | 18,459 |
| Asia | 5,544 | 1,000 |
| Americas | 2,624 | 407 |
| Total | 52,450 | 19,866 |
3. Borrowings
| 31 December 2008 €'000 | 31 December 2007 €'000 | |
| Long - term | ||
| Long - term bond loan | 2,250 | - |
| Long - term loans | 300 | - |
| 2,550 | - | |
| Current | ||
| Current portion of long-term debt (within 1 year) | 750 | 195 |
| Short-term loans | 9,068 | 1,519 |
| 9,818 | 1,714 | |
| Total borrowings | 12,368 | 1,714 |
4. Share capital
During the year, the Company issued 959,085 shares of 5p each. Of these shares, 70,567 were issued in lieu of compensation, 692,860 were issued as a result of the vesting of the deferred shares that were granted in 2006 and 195,658 were issued at a premium of 157.5p to satisfy part of the deferred consideration for the acquisition of M Telecom. The Company's issued share capital consists of 33,733,223 ordinary shares of 5p each.
5. Deferred shares award plan
The Group adopted a share incentive plan on 26 April 2006. Under this plan, any employed director or any employee of the Group is eligible to receive awards under the plan. The deferred shares award (DSA) entitles the participant to acquire shares when the DSA vests by paying an amount of no less than the nominal value per share. The vesting period is two years. Deferred shares are forfeited if the participant leaves the Group before the DSA vests.
Details of the awards outstanding at 31 December 2008 are as follows.
| Number of awards | Weighted average exercise price (in € ) | |
| Outstanding at the beginning of the year | 1,414,000 | 0.07 |
| Granted during the year | 1,096,272 | 0.07 |
| Exercised during the year | (692,860) | 0.07 |
| Forfeited during the year | (113,140) | 0.07 |
| Outstanding at the end of the year | 1,704,272 | 0.07 |
In the year ended 31 December 2008, the Group recognised a total expense in relation to the plan of €1,166,000 (year ended 31 December 2007: €332,000).
6. Earnings per share
| Year ended 31 December 2008 | Year ended 31 December 2007 | |
| Profit attributable to equity holders of the Company (€'000) | 4,263 | 3,661 |
| Weighted average number of ordinary shares in issue | 33,478,484 | 29,750,987 |
| Weighted average number of ordinary shares including dilutive effect of outstanding share awards | 35,182,756 | 31,210,987 |
| Basic earnings per share (Eurocents per share) | 12.7 | 12.3 |
| Diluted earnings per share (Eurocents per share) | 12.1 | 11.7 |
| Adjusted earnings per share (1) (Eurocents per share) | 20.0 | 14.1 |
(1) Figures stated before the cost of share based payments and the non-cash effect of foreign exchange translation losses
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 United Kingdom), 100% of Velti M-Telecom Limited (incorporated in the United Kingdom), the sole shareholder of Velti EOOD ( formerly M-Telecom EOOD incorporated in Bulgaria), 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 owns 79.51% 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 in Greece) which is consolidated on the basis of majority control of the Board of Directors. Velti Platforms and Services owns 100% of the share capital of Velti Mobile Marketing Technology LLC (incorporated in Russia), 100% of Velti Ukraine Mobile Marketing Services LLC (incorporated in Ukraine), 100% of Velti services Ltd (incorporated in the British Virgin Islands). Velti Services Ltd owns 100% of Velti Mobile Ltd (incorporated in the British Virgin Islands).
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Goodwill arising upon acquisition of subsidiaries and associates at year end amounted to €2,704,000. This comprises mainly the goodwill on the acquisition of Velti M-Telecom Limited of €1,993,000. The Directors have assessed the carrying value of goodwill at 31 December 2008 and consider no impairment is necessary.
8. Income tax
The effective tax rate of the Group on profit on ordinary activities is lower than the standard rate of UK corporation tax due to lower corporation tax rates prevailing in the operating territories of Group. Indicatively, Greece has a tax rate of 25% while Bulgaria and Cyprus have a tax rate of 10%.
9. Cash generated from operations
| Year ended 31 December 2008 €'000 | Year ended 31 December 2007 €'000 | |
| Net profit | 4,229 | 3,567 |
| Adjustments for: | ||
| Tax expense | 1,278 | 910 |
| Interest income | (102) | (136) |
| Interest expense | 884 | 495 |
| Depreciation | 547 | 346 |
| Amortisation of intangible assets | 3,438 | 2,188 |
| Share of loss of associates | 61 | 178 |
| Unrealised foreign exchange losses | 1,130 | 112 |
| Share based payments | 1,293 | 427 |
| Other non-cash provisions | 633 | 186 |
| 13,391 | 8,273 | |
| Changes in working capital: | ||
| Receivables and prepayments | (15,179) | (7,375) |
| Trade and other payables | 6,299 | 2,411 |
| Pensions and other post-retirement obligations | 45 | 40 |
| (8,835) | (4,924) | |
| Cash generated from operations | 4,556 | 3,349 |
END
For further information, please contact:
| Bankside Consultants Simon Bloomfield simon.bloomfield@bankside.com +44 (0) 207 367 8861 Steve Liebmann steve.liebmann@bankside.com +44 (0) 207 367 8883 Andy Harris andrew.harris@bankside.com +44 (0) 207 367 8866 | Velti Alex Moukas, Chief Executive Officer +44 (0) 20 7633 5000 Pantelis Papageorgiou, Finance Director +44 (0) 20 7633 5000 Nick Miles, PR Manager nmiles@velti.com +44 (0) 207 633 5034 |
| RBC Capital Markets Sarah Wharry sarah.wharry@rbccm.com +44 (0) 207 653 4667 |
About Velti
Velti's market-leading mobile marketing technology platform, coupled with its experience in the mobile advertising industry, enables clients around the world to deliver an extensive range of highly targeted marketing campaigns. With operations in 25 countries, and a mobile marketing joint venture with the Interpublic group, a top global holding group of advertising agencies, Velti has the ability to reach through its platform an estimated 1.4 billion consumers. Velti's unique Mobile Marketing and Advertising Platform manages the full cycle of planning, execution and monitoring of multiple campaigns across differing mobile formats and channels, offering customers more than 70 mobile marketing and advertising templates, which can be managed from one user interface. For more information, visit www.velti.com.