Last checked at 9 Sep 2008 07:00
| For Immediate Release | Tuesday, 9th September 2008 |
Velti plc
RESULTS FOR H1 2008: STRONG REVENUE AND PROFIT GROWTH
Financial Highlights
| Six months ended 30 June 2008 (unaudited) €'000 | Six months ended 30 June 2007 (unaudited) €'000 | % Change | |
| Revenue | 15,922 | 7,408 | 115% |
| EBITDA | 3,881 | 2,338 | 66% |
| Adjusted EBITDA | 4,468 | 2,520 | 77% |
| Operating profit | 2,013 | 1,219 | 65% |
| Adjusted operating profit | 2,600 | 1,401 | 86% |
| Profit after tax | 1,236 | 952 | 30% |
| Adjusted profit after tax | 1,823 | 1,134 | 61% |
| Basic EPS (in eurocents) | 3.7 | 3.3 | 12% |
| Adjusted EPS (in eurocents) | 5.5 | 3.9 | 41% |
| Operating Cash Flows | 3,383 | 1,055 | 207% |
Profit after tax and adjusted profit after tax are attributable to the equity shareholders of the Company (after minority rights). Adjusted figures stated before cost of share based payments.
Operational Highlights
Strong revenue growth especially from mobile marketing and advertising activities
Positive operating cash flows of €3.4m (2007: €1.05m)
Product Development
Expanded global capabilities in terms of operator connectivity and ability to execute campaigns. Velti now has connectivity with more than 70 mobile operators across Europe, North-America, the Middle East and Asia, and has an estimated reach of over 1.4 billion consumers
Focused on automating new activities in mobile marketing that have significant demand from Ansible and other marketing agencies
Increased offering in mobile social network applications and brand loyalty applications that expand operator's advertising capabilities
David Mann, Chairman of Velti, commented: "The Board is delighted with another period of growth, in what is traditionally the Company's quieter half of the trading year. In the second half of the year Velti is maintaining good progress in winning new customers and growing business with existing ones. This gives us a high level of confidence in meeting expectations for the full year and having a sound foundation for significant further growth next year."
Alexandros Moukas, Chief Executive, added: "We are very pleased to have experienced another period of expansion and profitability. Year-on-year we set ambitious targets for Velti and we're on track to meet our goals. This success is based on renewed contracts with key global operators, as well as new in-roads into the Russian market with MTS. Velti has also strengthened its position in China with the acquisition of up to 50% of CASEE, China's biggest mobile ad exchange, and several new offices in Asia, the US and Europe."
Chairman and Chief Executive's Statement
During the six months ended 30 June 2008, Velti achieved strong organic growth in revenues and profits, whilst continuing to expand its global footprint in anticipation of substantial and rapid development in the mobile marketing and advertising market over the next few years.
The group more than doubled revenues to €15.9 million compared to the same period in 2007 and it increased profit before tax to €1.6 million from €1.2 million, whilst increasing operating cash flow to €3.4 million from €1.1 million.
Growth in the first half of 2008 has been driven by mobile marketing and advertising which increased revenues by 164% to €10.0 million. The European market was particularly strong and there were also mobile operator, advertising agency and brand engagements in the US and Asia. Velti has expanded its services and customer base in Europe by renewing contracts with WIND, Vodafone, Cosmote, Cosmofon, MTEL, Vivatel, SingTel and Orange. Following the launch of its new Mobile Marketing and Advertising platform (MMP) version 4.0 in February, Velti is also executing mobile marketing projects for brands such as Verizon, Intel, Bayer and General Motors through Ansible in its New York office, and has won new customers such as Wrigley's, MasterCard and TMP Worldwide in Europe.
Velti's platforms and services segments also performed well with sales to enterprises increasing 48% to €3.3 million and sales to operators expanding by 88% to €2.6 million. The first segment focuses on enterprises in the public sector and financial institutions including NBG, ATE Bank, Eurobank EFG and Bank of Piraeus. The second of these segments focuses on the provision of software platforms, systems integration and managed services for mobile operators, including some of those referenced above.
Ansible, Velti's joint venture with the Interpublic Group (IPG), made excellent progress in developing relationships with agencies in the IPG network, educating its clients about the full potential of the mobile channel and developing new business opportunities. The implementation of contracts through Ansible has been slower than originally expected. However, the Board is pleased with progress in the third quarter and sees very good prospects for the last quarter of 2008 and for next year.
An important step in expanding Velti's global footprint was the agreement in April to acquire up to 50 per cent of CASEE, China's largest mobile advertising exchange, for an investment of up to US $6 million. CASEE was serving 500 million adverts per month to mobile phones in China early this year; that figure currently stands at more than 750 million, an increase of 50 per cent. The Board is very encouraged by progress to date, which includes opening offices in Shanghai and Guangzhou, as it continues to expand the team in the region. CASEE is also planning to increase its presence across China during the remainder of 2008.
Another important part of Velti's international expansion is to develop a presence in the other BRIC countries (Brazil, Russia, India and China). On July 1st, it announced a multi-million Euro contract with Mobile TeleSystems (MTS), the largest mobile operator in Russia and CIS with 85 million subscribers; the deal was Velti's first major contract in Russia. The MTS deal is also a great example of the concerted sales efforts in the first half of the year that have produced solid results and will continue to deliver more during the second half of 2008.
Overall, during the first half of the financial year Velti has opened new offices in the US, France, Germany, China and Russia, and further presence in the BRIC region is planned before year end.
These activities have reinforced the Board's view that global brands are beginning to see the mobile channel as an integral part of their marketing and advertising strategies, to which they are allocating substantial budgets on an increasingly global basis.
In response, Velti has invested in extending its international footprint as well as continuously developing its market leading MMP. This involved net capital expenditure (capital expenditure less depreciation and amortisation) of €5.2 million during the period. Net investment in the second half will be at a lower level.
The following four driving factors are behind the growth of the company, resulting in significantly stronger sales, but slightly lower gross and operating margins:
The Board is very pleased with Velti's performance in the first half. The company has achieved considerable momentum and the Directors believe this will be maintained during the traditionally stronger second half. The outlook for earnings in the current year is in line with current expectations and there is a high degree of confidence in meeting these. At the same time the rapid development of the new streams of business is expected to give revenues well ahead of current expectations.
David Mann Alexandros Moukas
Non-Executive Chairman Chief Executive Officer Operational review
Market Development
One of the latest analyst forecasts for the mobile advertising industry is that of more than 100% growth. Strategy Analytics is predicting that advertisers worldwide will spend US $2.4 billion on mobile in 2009, up from US $1 billion this year. As operators, agencies and brands further embrace the mobile channel to drive these projected increases in market spend, the opportunities are clear for Velti to increase activity with existing customers and secure new business across all sectors.
Geographically the BRIC group of countries constitute the next great growth curve for mobile telecommunications. BRIC encompasses over 40% of the world's population and it has a new, emerging middle class that is beginning to have a profound effect on mobile phone usage and the businesses associated with it.
Ansible moves into its second year having acquired new clients including Intel, Bayer, General Motors and Verizon. Ansible has developed key relationships with IPG companies to leverage its agency network and client portfolio over the remainder of 2008 and into 2009.
The opportunity IPG presents is a bold one; it is one of the world's leading groups of advertising agencies and marketing services companies with offices in over 100 countries. The group now employs approximately 43,000 marketing professionals and in 2007 had revenues of $6.55 billion.
Customer growth
There were also notable successes with mobile operators, advertising agencies and brands in the US and Asia. Companies such as Wrigley's, MasterCard and TMP Worldwide have all delivered campaigns using Velti technology during the first half of 2008.
Geographic development
The global mobile market presents several interesting areas of growth and with it opportunities to deliver marketing and advertising campaigns to new and evolving audiences. The BRIC countries make up one of these key growth areas, and as such, it is an area that Velti is building presence. During the year Velti's first office in Moscow was opened and in July the Company announced its largest deal in Russia, a multi-million Euro deal with MTS.
Another BRIC country that Velti has moved into is China with the acquisition of up to 50% of CASEE, China's largest mobile advertising exchange. CASEE grew the number of ads it is serving from 500 million to more than 750 million since the beginning of the year; with all of the company's revenue being generated from advertisers, including brands such as Kodak and General Motors.
On top of the activity in the BRIC countries, Velti has expanded in more established markets with new offices in San Francisco, Boston, Munich and Paris.
Investment in technology and customer services
Velti's MMP is now in its fourth generation, allowing companies to bring the mobile phone into the wider marketing mix more than ever. The capabilities to create, execute, monitor and report on activities and campaigns are highly accessible, providing the flexibility and scale to match all of our customer and prospect needs. This latest version of the MMP features enhanced methods to reach consumers through new interactive mobile mediums including mobile communities, social networks, games and applications. The maxim behind Velti's approach has not changed, with the Company able to achieve a very fast time to market, while continuing to decrease operational costs as a proportion of revenue.
For operators the trend has been towards major mobile marketing loyalty projects, with the objective of reducing churn and creating opt-in communities that fuel advertising potential. In most of these projects Velti is acting as an on-going partner for the operator rather than as a platform license vendor.
There is strong demand from advertising agencies for fully integrated solutions, in terms of capabilities and geographical reach. The major brands embracing mobile are placing emphasis on a combination of advertising placement on multiple channels with capabilities varying from text, to interactive outdoor digital environments that interact with mobile phones. One common theme linking brands and advertising agencies is the requirement to execute both advertising and marketing activities globally, with some brands looking to launch campaigns simultaneously in multiple major markets.
Velti's sales geographies are highly fragmented markets, which suits the Company's business model and approach. Velti's geographical reach is expanding both in terms of what the MMP can offer cross-borders, as well as having a physical presence in an increasing number of countries to meet customers' sales support requirements, and deliver uncompromised customer service, to world class mobile operators, advertising agencies and brands.
Financial Review
In the first half of 2008 Velti delivered a robust financial performance that is reflected in strong revenue growth, resilient profit margins, positive operating cash flows and reduced working capital requirements. The Company continued investing in development and infrastructure projects in support of revenue growth and geographical expansion. Through its investment programme, the Company has put in place data centre infrastructure that offers industry leading 99.99 per cent service-level agreements while the development of the MMP offers the ability to create more than 1,000 integrated mobile campaigns.
In the six month period ended 30 June 2008 revenue reached an amount of €15.9 million posting a growth rate of 115 per cent compared to the respective period in 2007 (€7.4 million). The increase in revenue stemmed both from mobile marketing and advertising activities and the traditional platforms and services segments. Moreover, there was significant positive contribution from the first time consolidation of the 100 per cent Russian subsidiary Velti MMT, as of 3 April 2008 while repeat business with existing clients remained strong.
The gross profit increased by 76 per cent to €7.23 million (€4.10 million during the first half of 2007) delivering a margin of 45 per cent (55 per cent in 2007). The drop in the gross margin figure reflects the entry into new geographies and the increased contribution into the revenue mix of brand awareness and loyalty mobile campaigns run for mobile phone operators. These projects are integrated across multiple media channels having text messaging, mobile internet, web-interactive and TV components.
For these types of project, Velti charges a competitive fixed set-up fee to originate and launch the campaign and then it shares the resulting revenues based on mobile subscriber interactions. These projects deliver lower profit margins, however, revenues ramp up and get converted into cash significantly faster and costs - which include partner costs, prizes and promotional activities -are easily estimated. The recent contract win with Russia's Mobile Telesystems (MTS) is a great example of this model and how it delivers mutually beneficial results for Velti and the operator.
It is becoming evident that such mobile phone operator contracts currently play a significant role in the current state of the mobile marketing and advertising market and are expected to be a significant contributor of revenue during the next eighteen months.
Operating profit, after the recognition of share based payments of €0.59 million, increased by 65 per cent to €2.01 million (€1.22 million during the first half of 2007) delivering a margin of 13 per cent (16 per cent in 2007). The share based costs include an extra cost of €0.33 million that resulted from the vesting of the share awards that were granted in 2006. Adjusted operating profit, before the recognition of share based payments, increased by 86 per cent to €2.60 million (€1.40 million during the first half of 2007). The ratio of administrative expenses to revenue dropped to 12 per cent (19 per cent in 2007). The gross capital expenditure reached €7.0 million reflecting the continuation of significant product development and infrastructure projects while net capital expenditure reached €5.2 million. The investment programme of the Company remains focused on international expansion and the continuous development of its market leading MMP. During the second half of the year, planned net capital expenditure is expected to slowdown and to be lower in absolute terms compared to the first half.
Profit after tax and after minorities reached an amount of €1.24 million, posting an increase of 30 per cent over the respective period of 2007 (€0.95 million). On an adjusted basis, profit after tax and after minorities increased by 61 per cent to €1.82 million (€1.13 million during the first half of 2007). The taxation charge of the period was calculated at a tax rate of 23 per cent, which represents the estimated effective tax rate for the whole year. Adjusted basic earnings per share grew by 41 per cent to 5.5 eurocents (3.9 eurocents in 2007). This was achieved notwithstanding the dilutive effect of shares issued in the secondary offering at the end of 2007 and the vesting of awards granted in 2006.
Significant profitability coupled with balanced working capital requirements resulted in an operating cash inflow of €3.38 million compared to an inflow of €1.10 million in 2007. The improvement in the working capital balance resulted from the significant drop in the ratio of accounts receivable and prepayments over revenue. As at 30 June 2008, the respective ratio based on 12 months trailing revenue stands at 69 per cent (80 per cent as at 31 December 2007).
Velti's balance sheet, as at 30 June 2008, reflects a strong net asset position of €31.88 million and a net cash position of €4.26 million.
| | |||
| CONSOLIDATED INCOME STATEMENT | |||
| | |||
| | Six months ended 30 June, 2008 (unaudited) €’000 | Six months ended 30 June, 2007 (unaudited) €’000 | Year ended 31 December, 2007 (audited) €’000 |
| | | | |
| Revenue | 15,922 | 7,408 | 19,866 |
| Cost of revenue | (8,697) | (3,307) | (7,535) |
| | | | |
| Gross profit | 7,225 | 4,101 | 12,331 |
| | | | |
| Other operating income | 50 | - | - |
| | | | |
| Selling expenses | (3,382) | (1,452) | (4,594) |
| | | | |
| Administrative expenses | (1,880) | (1,430) | (2,723) |
| | | | |
| Operating profit | 2,013 | 1,219 | 5,014 |
| | | | |
| Finance costs | (359) | (143) | (495) |
| | | | |
| Finance income | 161 | 53 | 136 |
| | | | |
| Share of loss of associates | (221) | 27 | (178) |
| | | | |
| Profit before tax | 1,594 | 1,156 | 4,477 |
| Tax | (371) | (313) | (910) |
| Profit after tax | 1,223 | 843 | 3,567 |
| | | | |
| Attributable to: | | | |
| Equity shareholders of the parent | 1,236 | 952 | 3,661 |
| Minority Interest | (13) | (109) | (94) |
| | 1,223 | 843 | 3,567 |
| | | | |
| Basic Earnings per share ( in Eurocents): | 3.7 | 3.3 | 12.3 |
| Diluted Earnings per share ( in Eurocents): | 3.6 | 3.1 | 11.7 |
CONSOLIDATED BALANCE SHEET
| | 30 June 2008 (unaudited) €’000 | 30 June 2007 (unaudited) €’000 | 31 December 2007 (audited) €’ 000 |
| ASSETS | | | |
| Non –current assets | | | |
| Property, plant and equipment | 2,101 | 1,471 | 1,616 |
| Intangible assets | 12,074 | 5,648 | 7,386 |
| Investments in associates | 3,695 | 704 | 1,787 |
| Goodwill | 2,899 | 2,492 | 2,899 |
| Other assets | - | 138 | - |
| | 20,769 | 10,453 | 13,688 |
| Current assets | | | |
| Receivables and prepayments | 19,713 | 11,435 | 15,861 |
| Restricted investments | 27 | 27 | 27 |
| Cash and cash equivalents | 10,021 | 4,585 | 11,616 |
| | 29,761 | 16,047 | 27,504 |
| TOTAL ASSETS | 50,530 | 26,500 | 41,192 |
| | | | |
| SHAREHOLDERS’ EQUITY | | | |
| Share capital | 2,432 | 2,125 | 2,388 |
| Share premium account | 21,788 | 11,610 | 21,788 |
| Share-based payment reserve | 910 | 248 | 398 |
| Merger reserve | 1,071 | 1,071 | 1,071 |
| Currency translation reserve | (312) | - | (251) |
| Accumulated profit /(losses) | 5,638 | 1,693 | 4,402 |
| Total shareholders’ equity | 31,527 | 16,747 | 29,796 |
| Minority interest | 353 | 893 | 326 |
| Total Equity | 31,880 | 17,640 | 30,122 |
| | | | |
| LIABILITIES | | | |
| Non-current liabilities | | | |
| Borrowings | 3,315 | 42 | - |
| Retirement benefit obligations | 165 | 120 | 143 |
| Deferred tax liabilities | 1,076 | 583 | 1,055 |
| Other liability | - | 562 | 22 |
| | 4,556 | 1,307 | 1,220 |
| Current liabilities | | | |
| Trade and other payables | 11,221 | 5,265 | 8,034 |
| Current income tax liabilities | 428 | - | 102 |
| Borrowings | 2,445 | 2,288 | 1,714 |
| | 14,094 | 7,553 | 9,850 |
| Total liabilities | 18,650 | 8,860 | 11,070 |
| TOTAL EQUITY & LIABILITIES | 50,530 | 26,500 | 41,192 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| | Share Capital | Share Premium | Share Based Payment Reserve | Merger Reserve | Currency Translation reserve | Accumulated Profits /(Losses) | Total shareholders’ equity | Minority Interests | Total |
| | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 |
| Balance at 1 January 2007 (audited) | 2,125 | 11,613 | 66 | 1,071 | - | 741 | 15,616 | 663 | 16,279 |
| Minority interest | - | - | - | - | - | - | - | 339 | 339 |
| Cost of share issue | - | (3) | - | - | - | - | 182 | - | (3) |
| Issue of share awards | - | - | 182 | - | - | - | (3) | - | 182 |
| Profit/(loss) for the period | - | - | - | - | - | 952 | 952 | (109) | 843 |
| Balance at 30 June 2007 (unaudited) | 2,125 | 11,610 | 248 | 1,071 | - | 1,693 | 16,747 | 893 | 17,640 |
| Share capital issued, net of expenses | 263 | 10,178 | - | - | - | - | 10,441 | - | 10,441 |
| Minority interest | - | - | - | - | - | - | - | (582) | (582) |
| Translation reserve | - | - | - | - | (251) | - | (251) | - | (251) |
| Issue of shares awards | - | - | 150 | - | - | - | 150 | - | 150 |
| Profit for the period | - | - | - | - | - | 2,709 | 2,709 | 15 | 2,724 |
| Balance at 31 December 2007 (audited) | 2,388 | 21,788 | 398 | 1,071 | (251) | 4,402 | 29,796 | 326 | 30,122 |
| Share capital issued | 44 | - | - | - | | - | 44 | - | 44 |
| Minority interest | - | - | - | - | - | - | - | 27 | 27 |
| Issue of share awards | - | - | 512 | - | - | - | 512 | - | 512 |
| Translation reserve | - | - | - | - | (61) | - | (61) | - | (61) |
| Profit for the period | - | - | - | - | - | 1,236 | 1,236 | - | 1,236 |
| Balance at 30 June 2008 (unaudited) | 2,432 | 21,788 | 910 | 1,071 | (312) | 5,638 | 31,527 | 353 | 31,880 |
| CONSOLIDATED CASH FLOW STATEMENT |
| | Six months ended 30 June 2008 (unaudited) €’000 | Six months ended 30 June 2007 (unaudited) €’000 | Year ended 31 December 2007 (audited) €’000 |
| Cash flows from operating activities | | | |
| Cash generated from operations | 3,700 | 1,147 | 3,349 |
| Interest paid | (309) | (82) | (458) |
| Tax paid | (8) | (10) | (50) |
| | | | |
| Net cash (used in)/generated from operating activities | 3,383 | 1,055 | 2,841 |
| | | | |
| | | | |
| Cash flows from investing activities | | | |
| Purchase of property, plant and equipment | (754) | (294) | (611) |
| Purchase of Intangible Assets | (6,837) | (1,778) | (4,829) |
| Acquisition of subsidiaries and associates net of cash acquired | (2,187) | - | (1,639) |
| Disposal of property, plant and equipment | 550 | (736) | 30 |
| Interest received | 161 | 53 | 136 |
| | | | |
| Net cash used in investing activities | (9,067) | (2,755) | (6,913) |
| | | | |
| Cash flows from financing activities | | | |
| Long-term borrowings | 4,264 | - | 2,526 |
| Net proceeds from issue of ordinary shares | 43 | - | 10,284 |
| Net payment of borrowings | (218) | 418 | (2,758) |
| | | | |
| | | | |
| Net cash from financing activities | 4,089 | 418 | 10,052 |
| | | | |
| (Decrease) /Increase in cash and cash equivalents | (1,595) | (1,282) | 5,980 |
| Movement in cash and cash equivalents | | | |
| At beginning of period | 11,616 | 5,867 | 5,867 |
| (Decrease)/ Increase | (1,595) | (1,282) | 5,980 |
| Effect of exchange rate fluctuations on cash held | - | - | (231) |
| At end of period | 10,021 | 4,585 | 11,616 |
Notes
1. Accounting policies and basis of preparation
The interim condensed consolidated financial information of Velti plc (the Company) has been prepared in accordance with International Accounting Standard 34 Interim financial reporting, under the historical cost convention and in accordance with the accounting policies set out in the financial statements for the year ended 31 December 2007. The interim condensed consolidated financial information does not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985. The interim condensed consolidated financial information include the results of Velti plc and entities controlled by Velti plc (its subsidiaries) forming the Company (see note 6.).
2. Segment information
The Company's operations are segmented into three major areas:
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.
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.
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:
| | Six months ended 30 June 2008 (unaudited) €’000 | Six months ended 30 June 2007 (unaudited) €’000 | Year ended 31 December 2007 (audited) €’000 |
| | | | |
| Mobile marketing and advertising | 10,005 | 3,785 | 11,283 |
| Platforms and services - enterprises | 3,275 | 2,214 | 4,757 |
| Platforms and services - operators | 2,642 | 1,409 | 3,826 |
| | | | |
| Total | 15,922 | 7,408 | 19,866 |
Operating profit by business segment:
| | Six months ended 30 June 2008 (unaudited) €’000 | Six months ended 30 June 2007 (unaudited) €’000 | Year ended 31 December 2007 (audited) €’000 |
| | | | |
| Mobile marketing and advertising | 1,513 | 833 | 3,201 |
| Platforms and services - enterprises | 61 | 55 | 459 |
| Platforms and services - operators | 439 | 331 | 1,354 |
| | | | |
| Total | 2,013 | 1,219 | 5,014 |
3. Borrowings
| | 30 June 2008 (unaudited) €’000 | 30 June 2007 (unaudited) €’000 | 31 December 2007 (audited) €’000 |
| Current | | | |
| Current portion of long-term debt (within 1 year) | - | 510 | 195 |
| Short-term loans | 2,445 | 1,778 | 1,519 |
| | 2,445 | 2,288 | 1,714 |
| Non – current | | | |
| Long-term portion of long-term debt | - | 42 | - |
| Long-term loans | 3,315 | - | - |
| | 3,315 | 42 | - |
| Total borrowings | 5,760 | 2,330 | 1,714 |
During 2008, the Company entered into two long term loan agreements of a total value of €3,300,000. The first has a nominal value €3,000,000 with a tenure of four years. It is both a revolving and term credit facility, payable in eight installments of €375,000 each. The first payment is due on January 2009. The interest is calculated based on three month Euribor plus a spread of two hundred basis points.
The second facility is bullet loan with a nominal value of €300,000 and a tenure of five years. The interest on the loan is calculated based on six month Euribor, plus a spread of two hundred basis points.
4. Deferred shares award plan
The Company adopted a share incentive plan on 26 April 2006. Under this Plan, any employed director or any employee of the Company 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 Company before the DSA vests.
Details of the awards outstanding at the end of the period are as follows:
| Number of awards | Weighted average exercise price in € | |
| Outstanding at the beginning of period | 1,414,000 | 0.07 |
| Granted during the period | 732,846 | 0.07 |
| Forfeited during the period | 56,640 | - |
| Exercised during the period | 692,860 | - |
| Expired during the period | - | - |
| Outstanding at the end of the period | 1,397,346 | 0.07 |
In the period ended 30 June 2008, the Company recognized a total expense of €512,000. The expense for the period ended 30 June 2007 was €182,000.
5. Earnings per share
| | 30 June, 2008 (unaudited) €’000 | 30 June, 2007 (unaudited) €’000 | 31 December, 2007 (audited) €’ 000 |
| Profit attributable to equity holders of the Company | 1,236 | 952 | 3,661 |
| Weighted average number of ordinary shares in issue | 33,219,523 | 29,091,335 | 29,750,987 |
| Weighted average number of ordinary shares including dilutive effect of outstanding share awards | 34,616,869 | 30,599,335 | 31,106,557 |
| Basic earnings per share (Eurocents per share) | 3.7 | 3.3 | 12.3 |
| Diluted earnings per share (Eurocents per share) | 3.6 | 3.1 | 11.7 |
| Adjusted earnings per share1 (Eurocents per share) | 5.5 | 3.9 | 13.7 |
(1) Figures stated before cost of share based payments
6. Subsidiaries and Associates
Subsidiaries are consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. Goodwill arising upon acquisition of subsidiaries and associates during the period amounted to €2.89 million.
During the period ended 30 June 2008, Velti Plc utilized €1.94 million in respect of the acquisition in China.
In April 2008, Velti Plc acquired 19% of share capital of CASEE (Cellphone Ads Serving E-Exchange) a company incorporated in China. The Company has the ability to acquire up to 31 December 2008, an additional percentage of share capital in order to increase its ownership to 50%. This has been treated as an associate and accounted for using the equity method.
| Companies | Proportion Held | Country of Operation | Nature of Activities |
| Velti SA | 100.00% | Greece | Mobile value added services |
| Velti dR Limited | 100.00% | UK | Mobile value added services |
| Velti M-Telecom Limited | 100.00% | UK | Mobile value added services |
| M-Telecom EOODD | 100.00% | Bulgaria | Holding company |
| Velti North America Holdings Inc | 100.00% | USA | Holding company |
| Ansible Mobile LLC | 50.00% | USA | Mobile marketing & advertising |
| Velti Platforms & Services Limited | 100.00% | Cyprus | Project management & consulting |
| VCI SA | 100.00% | Greece | Incubator |
| VNA Inc | 79.51% | USA | Mobile value added services |
| Mpoint SA | 50.00% | Greece | Location based services |
| CASEE | 19.00% | China | Mobile advertising exchange network |
7. Cash Generated From (Used in)/ Operations
| Six months ended 30 June, 2008 (unaudited) €'000 | Six months ended 30 June, 2007 (unaudited) €'000 | Year ended 31 December, 2007 (audited) €'000 | |
| Net profit before tax | 1,223 | 843 | 3,567 |
| Adjustments for: | |||
| Tax expense | 371 | 313 | 910 |
| Interest income | (162) | (53) | (136) |
| Interest expense | 359 | 143 | 495 |
| Depreciation | 270 | 177 | 346 |
| Amortisation of intangible assets | 1,598 | 941 | 2,188 |
| Foreign exchange gain | 2 | 3 | - |
| Share of (profits)/loss of associates | 221 | (27) | 178 |
| Non cash provisions | 573 | 176 | 765 |
| 4,455 | 2,516 | 8,313 | |
| Change in working capital: | |||
| Receivables and prepayments | (3,864) | (2,605) | (7,375) |
| Trade and other payables | 3,087 | 1,219 | 2,369 |
| Pensions and other post-retirement obligations | 22 | 17 | 41 |
|
| (755) | (1,369) | (4,965) |
| Cash generated from operations | 3,700 | 1,147 | 3,348 |
CONTACTS
| Velti: | |
| Alexandros Moukas, Chief Executive Officer | +44 (0) 20 7633 5000 |
| Pantelis Papageorgiou, Director of Finance | |
| Bankside: | +44 (0) 20 7367 8888 |
| Simon Bloomfield or Steve Liebmann | |
| RBC Capital Markets: | +44 (0) 207 653 4667 |
| Sarah Wharry |
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 18 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 (version 4.0) 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.