Velocity Comp Regulatory News (VEL)

11 Sep 2006 07:01

Velti PLC11 September 2006 Velti 2006 maiden interim results Financial Highlights • Revenues grew 117% to €4.04m (2005: €1.87m) • Gross profit grew 130% to €2.13m (2005: €0.93m) • EBITDA grew 144% to €1.35m (2005: €0.55m) • Operating profit grew 159% to €0.84m (2005: €0.32m) • Profit before tax grew 182% to €0.71m (2005: €0.25m) • Earnings per share (EPS) were €0.0216 (€0.0005 in 2005) • Significant customer pipeline and momentum in Velti's traditionally stronger second-half Operational Highlights • Signed a major contract with CosmOTE for mobile content management and operation (operator with presence in 7 countries in South Eastern Europe and around 10m subscribers) • Launched an exclusive value-added services relationship with Q-Telecom (operator with almost 1m consumers) • Won key new contracts in Vodafone and Telecom Italia Mobile Hellas • Growing footprint in South Eastern Europe Product Development • Release of version 3.5 of Messaging, Content Aggregation and Syndication Platforms • Introduction of new version of Mobile Marketing Platform for Advertising Agency ASP customers Successful IPO in May 2006 • Raised €12.5m to support company growth • Improved company profile has had positive effect on sales cycle David Mann said: "I am delighted that in our first results announcement as apublic company we have exceeded the market expectations set at the time of theIPO, in spite of the significant amount of management time necessarily devotedto that process." Alexandros Moukas added "We have made considerable progress in the first half ofthe year. As we come to the end of the third quarter we see good prospects forachieving our goals for the year. There are a growing number of opportunitieswith new clients and we are putting emphasis on expansion outside Greece." Chairman's and Chief Executive's Statement During the first half of 2006, Velti made substantial progress towards achievingits strategic goals as well as continuing to deliver a strong financialperformance. Velti is a one-stop-shop software and service provider that enables mobilecontent, advertising and marketing. Velti's portfolio includes solutions forMobile Operators, Media & Content Providers and Advertising Agencies, primarilyin South Eastern Europe and the Balkan region. Velti's business model focuses onproviding solutions to such organisations rather than marketing servicesdirectly to consumers. In May, the company successfully floated on AIM, raising approximately €12.5million, net of expenses, to pay off debt and fund expansion. As a consequence,Velti is one of the best capitalised companies in its field operating in SouthEastern Europe and the Balkan region. Overall financial performance for the six month period ended 30 June 2006 was atthe top end of management's expectations, reflecting strong demand for ourproducts and services. The company achieved revenue growth of 117% to €4.04million whilst profit before tax grew by 182% to €0.71 million and the net cashbalance at the end of the period was €7.63 million. Since the beginning of the year Velti has expanded its business with existingmobile operator customers including Vodafone and TIM Hellas. It has won key newcustomers such CosmOTE, which has a presence in 7 countries, and Q-Telecom. Ithas secured a new contract for providing cross-operator traffic location-basedservices. In cooperation with advertising agency partners like BBDO and LiberisGroup it has run more than 20 mobile content and marketing campaigns since thebeginning of the year. Velti's activities outside Greece grew stronger withestablished customers in Turkey, Cyprus, Bulgaria, Romania, Armenia and Bosnia. A major emphasis in product development was on expanding Velti's MobileMarketing platform. This software allows Velti to serve as a one-stop shop foradvertising agencies whose clients are pushing promotion and advertising budgetsto the mobile channel. Velti has a combination of a strong financial position, a highly qualified workforce and, through the bulk of operations being carried out in Greece, a lowcost structure. This has played a significant part in its success and shouldenable Velti to continue to compete effectively in its chosen markets. Velti's revenues have traditionally been much stronger in the second half andthe directors see good prospects for this seasonality to continue and for thecompany to meet its financials targets for the year. The longer-term prospectsremain very exciting. Non-Executive Chairman Chief ExecutiveDavid Mann Alexandros Moukas Operational Overview Mobile Operators & Banks Velti strives to be the primary on-portal managed platform and service providerfor their value-added services offerings. This is an area where Velti has seenstrong growth and is currently managing five portals for operators in theregion. Under these agreements Velti provides exclusively all value addedservices, leveraging content from third party providers in exchange for revenueshare fees. In addition, there is strong growth potential in the field of providing mobilemarketing and promotion solutions for own operator needs. Velti has already runvery successful campaigns for operators in Greece and we plan to expand thisactivity across the country. During the first half of 2006, we won contracts with Q-Telecom and CosmOTE,making Velti the preferred supplier of value added services platforms andmanaged services for all four mobile operators in Greece. CosmOTE is the biggestmobile operator in the region with a presence in seven countries and almost 10million customers. Velti won the strategically important bid for CosmOTE's newContent Management System. The contract with Q-Telecom, which we won just before flotation, allows Velti tobe the exclusive provider of Value-Added Services for Q Telecom's almost onemillion subscribers. Velti launched the services in early July and has beensupported by a significant advertising spend by Q-Telecom since the end ofAugust. Vodafone continued to be the company's most significant client and Velti has wonnew managed services and platform contracts. In addition, a key new project waswon by Velti to develop the Vodafone Online Sales and Services Portal. This is aVodafone initiative which is attracting a lot of interest with regards toVodafone's future value added services strategy. The relationship with TIM Hellas that began less than a year ago is expandingrapidly in new areas like mobile TV, ring-back tones and business intelligencesystems for targeting mobile content and advertising. Velti won a very significant mobile transportation contract for building andmanaging a system that provides location-based traffic information in Athens andother large Greek cities through all mobile networks. Velti is also deploying asystem for optimising mobile content and downloads for Intralot (the world'sthird largest gaming and lottery systems provider). Our non-telecom business in Greece is increasing steadily with new contracts andextensions with two of the biggest banks in Greece, National Bank of Greece(which recently bought the Turkish Bank, FinansBank) and ATE Bank. Advertising agencies & media groups Velti is a one-stop shop providing a full worldwide solution enablingadvertising agencies to plan, manage and monitor hundreds of simultaneouscampaigns through the mobile channel and to integrate with non-mobile campaigns.As an applications services provider, Velti is able to handle all the complexityrequired for launching such campaigns across hundreds of devices and operatorswith different standards and guidelines in a way that is consistent with bestbusiness practices. For media groups, Velti provides services to major brand names for monetisingthe mobile channel. Velti offers a multitude of services such as on-deck mobileoperator placement, or on off-deck portals promoted by the media players andadvertised across all operators. These services are offered on a managedservices or revenue share basis with Velti not incurring any advertising costs. Building upon its partnership with the BBDO advertising agency and two of thebiggest media companies in Greece (publishing more than 30 magazines) Velti hasdelivered more than 22 mobile content and marketing campaigns to its advertisingagency and media customers. Geographical Expansion Mobile penetration in the region continues to grow rapidly and Velti isexploiting its unique relationships with existing customers and partners toexpand its business. In Cyprus, the cooperation with CYTA continues strongly,with managed services being offered for the introduction and operation ofVodafone Live in Cyprus. In Turkey, Velti successfully completed its firstcontract for Turkcell in the area of mobile content rendering. Velti isleveraging this success by establishing a sales office in Turkey andstrengthening its relationships with Turkcell and the other two mobileoperators, Telsim (recently acquired by Vodafone) and Avea. In Armenia, our exclusive deal with Armentel is bringing in significant revenue,where our value-added services content offering is complemented by competitionsand other mobile marketing activities. In Bulgaria, our efforts for establishingpartnerships with the two largest operators Globul (a CosmOTE subsidiary) andM-Telecom are progressing well. In Romania, we started bidding for mobileoperator business. In Bosnia, Velti has implemented a project with the BHTelecom group, the country's largest network operator. Finally, in the US, salesefforts have been generating new contracts that are being serviced out of ourcommon data centre in Greece. Product Development Velti has extensive experience gained from implementing a wide variety ofprojects with deep customer relationships established over many years. As aresult, Velti is able to ensure that its product development activities arebased on the latest standards and market needs. Mobile operators Velti is continuously upgrading its Media Content Delivery and MessagingServices platforms to enable efficient handling of new types of content such asMobile TV, Video on Demand, Ringback Tones, and Full Track Music Downloads.Personalisation software based on business intelligence infrastructureconstitutes one of the key elements of Velti's product offering. Such softwareenables operators both to target content accurately and to facilitate theadvertising on operator driven portals. The company is also investing in newservices focusing primarily on user-generated content applications as well aslocation based services that operators will launch in the next years.Media Companies Velti's work as a platform and managed services provider for Operators providesthe company with a solid infrastructure ahead of the competition for providing aone-stop shop for enabling the mobile channel to media companies. After one yearin this market Velti is already providing managed services for five OperatorPortals and in all cases any content provider or service provider that wants toprovide new or existing services is going through Velti's platforms installed atOperators.Advertising Agencies Velti's major product development emphasis following the IPO in May has focusedon expanding its Mobile Marketing platform, the software centerpiece that willallow Velti to serve as a one-stop shop for Advertising Agencies that want topush promotion and advertising budgets of their clients to the mobile channel.While this platform has been available and expanded for four years and isenabling the creation of new campaigns in minutes, Velti's new efforts are aimedtowards providing a business intelligence, planning and monitoring layer for adagencies. This layer, an extranet from which advertising agencies can runefficiently many campaigns at the same time, is the essential infrastructure forproviding the confidence and transactional visibility necessary to advertisingagencies if they were to commit significant budgets in mobile advertising. Inaddition to the above Velti is incorporating in all its products the featuresnecessary to hide complexity so that its partners are enabled in hours ratherthan months. The company is continuously upgrading its infrastructure to handlemore than 900 devices (and the more than 100 devices added every year),different standards and compliance with the mobile operators and mobilemarketing association best practices. Financial Review In the six month period ended 30 June 2006 sales reached an amount of €4.04million posting an increase of 117 per cent compared to the respective period in2005 (€1.87million). The increase in sales resulted from organic growth in bothtelco and non-telco segments which in turn was fuelled by repeat business withexisting clients and addition of new key clients. Repeat business arose fromrevenues-shared, managed services and support contracts with existing clients,and migration to new versions of our platforms. During the period telco salesincreased by 121 per cent to €3.35 million (€1.52 million in 2005) and non-telcosales increased by 96 per cent to €0.69 million (€0.35 million in 2005). Gross profit increased by 130 per cent to €2.13 million (€0.93 million in firsthalf of 2005) delivering a margin of 53 per cent. The improved margin in grossprofit reflects the scaleability of Velti's business model. Operating profit increased by 159 per cent to €0.84 million (€0.32 million in2005) delivering a margin of 21 per cent (17 per cent in 2005). The increase inoperating margin reflects the positive impact of increased trading activity inboth telco and non-telco segments. During the period operating profit from telcosales increased by 45 per cent to €0.81 million (€0.56 million in 2005) whileoperating profit from non-telco sales was €0.03 million (€0.24 million operatingloss in 2005). Profit before tax reached €0.71 million an increase of 182 per cent over 2005(€0.25 million). Basic earnings per share were €0.0216 (€0.0005 in 2005). The accelerated growth in sales created increased working capital requirementswhich, despite significant profitability during the period, resulted in anoperating cash outflow of €0.85 million. Velti's balance sheet was substantially strengthened as a result of raising€12.50 million net when we floated on AIM. At the end of the first half of 2006part of these funds were used to repay €2.71 million of high coupon debt and tofinance increased working capital requirements. At 30 June 2006 the net cashposition stood at €7.63m compared to a net debt position of €1.91m as at 31December 2005. The company is gradually repaying its debt: at 30 June 2006 totaldebt stands at €1.67 million compared to €4.38 million at 31 December 2005. Velti fully consolidates its wholly-owned subsidiaries VNA and VCI. Two of VCI'scompanies, Amplus and N-squared are consolidated into VCI as subsidiaries on thebasis of majority board of directors control. The third VCI company, Evorad, istreated as an associate. During this period, Velti has been in the process of strengthening its financialmanagement team and reporting systems in keeping with the Company's status as alisted Company. Baker Tilly, the reporting accountants for the IPO, have beenappointed as auditors to the Group for this year. CONSOLIDATED INCOME STATEMENTS Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) •'000 •'000 •'000 Sales 4,041 1,866 4,884Cost of sales (1,910) (940) (1,892) Gross profit 2,131 926 2,992 Other operating income 36 - - Selling expenses (562) (286) (537) Administrative expenses (719) (267) (1,077) Other operating expenses (48) (50) (7) Operating profit 838 323 1,371 Finance expense (127) (65) (282)Share of loss of associates - (6) (6) Profit before tax 711 252 1,083Tax (277) (244) (356)Profit after tax 434 8 727 Minority Interest 46 - -Profit after minority interest 480 8 727 Basic Earnings per share ( in 0.0216 0.0005 0.0421Euro): CONSOLIDATED BALANCE SHEETS 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) •'000 •'000 •' 000ASSETSNon -current assetsProperty, plant and equipment 592 176 307Intangible assets 3,197 939 1,773Investments 180 6 -Goodwill 963 - -Restricted available-for-sale - - 229investmentDeferred tax assets 121 287 - 5,053 1,408 2,309Current assetsReceivables and prepayments 4,797 3,274 3,231Available for sale investment 26 47 26Cash and cash equivalents 9,301 4 2,467 14,124 3,325 5,724 Total assets 19,177 4,733 8,033 SHAREHOLDERS' EQUITYShare capital 2,125 2,224 2,446Share premium account 11,772 - -Fair value and other reserves - 39 -Minority interest 726 - -Merger reserve 1,071 - -Accumulated losses (1,002) (2,108) (1,482) Total shareholders' equity 14,692 155 964 LIABILITIESNon-current liabilitiesBorrowings 750 918 2,431Retirement benefit obligations 88 59 65 838 977 2,496 Current liabilitiesTrade and other payables 2,559 1,981 1,921Deferred Income - - 666Current income tax liabilities 170 63 40Borrowings 918 1,557 1,946 3,647 3,601 4,573 Total liabilities 4,485 4,578 7,069 Total equity and liabilities 19,177 4,733 8,033 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Fair Value & Share Share Other Minority Merger Accumulated Capital Premium Reserves Interests Reserve Losses Total •'000 •'000 •'000 •'000 •'000 •'000 •'000 Balance at 2,224 - 39 - - (2,122) 1411 January 2005 (audited)Deferred tax adjustment - - - - - 6 6Profit for the period - - - - - 8 8 Balance at 2,224 - 39 - - (2,108) 15530 June 2005 (unaudited)Share options exercised 222 - - - - - 222Transfer to - - (39) - - 39 -retained earningsDeferred tax adjustment - - - - - 11 11Share issue expenses - - - - - (143) (143)net of deferred taxesProfit for - - - - - 719 719the period Balance at 2,446 - - - - (1,482) 96431 December 2005(audited)Acquisition of Velti SA (2,446) - - - 1,071 - (1,375)Share capital issued 2,125 11,772 - - - - 13,897Minority interests on - - - 772 - - 772acquisition ofsubsidiariesProfit for the period - - - (46) - 480 434Balance at 2,125 11,772 - 726 1,071 (1,002) 14,69230 June 2006 (unaudited) CONSOLIDATED CASH FLOW STATEMENTS Six month ended Six month ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 unaudited) (unaudited) (audited) •'000 •'000 •'000Cash flows from operating activitiesCash generated from operations (850) 709 899Interest paid (127) (65) (243)Tax paid (159) (8) (255) Net cash (used in)/generated from operating (1,136) 636 401activities Cash flows from investing activitiesPurchase of property, plant and equipment (339) (61) (230)Purchase of Intangible Assets (1,304) (882) (1,987)Purchase of available-for sale investments (199) (57) -Disposal of available-for sale investments - 57 31Interest received - - 6Government grants received - - 1,250 Net cash used in investing activities (1,842) (943) (930) Cash flows from financing activitiesLong-term borrowings (1,681) 20 -Net proceeds from issue of ordinary shares 12,521 - 222Borrowings (1,028) 177 2,675Finance lease payments - - (15) Net cash from financing activities 9,812 197 2,882 Increase/(decrease) in cash and cash 6,834 (110) 2,353equivalentsMovement in cash and cash equivalentsAt beginning of year 2,467 114 114Increase/(decrease) 6,834 (110) 2,353At end of year 9,301 4 2,467 Notes 1. Accounting policies and basis of preparation The interim consolidated financial statements of Velti plc (the Company) havebeen prepared in accordance with International Accounting Standard 34 Interimfinancial reporting, under the historical cost convention and in accordance withthe accounting policies set out in the financial statements of Velti SA for theyear ended 31 December 2005. The interim consolidated financial statements donot constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The consolidated financial statements include the results of Velti plc andentities controlled by Velti plc (its subsidiaries) forming the Group (see note6.). 2. Segment information The Group's main sources of revenue are: •Development of platforms/applications and managed services serving customers in the telecommunications industry (telco) and other sectors such as banking and e-government (non-telco) •Joint venture or partner driven revenue share deals with mobile carriers and media companies As of 1 January 2006, the Group assumed a more active part in the mobile contentvalue chain as a mobile aggregator that uses its platforms and services to offersolutions to customers and partners. The revenue from this activity is includedin the "Telco" segment. Segment information of these businesses is presentedbelow: Revenue by business segment: Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) •'000 •'000 •'000 Telco 3,354 1,515 3,460Non - Telco 687 351 1,424 Total 4,041 1,866 4,884 Operating profit / (loss) before financial expenses by business segment: Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) •'000 •'000 •'000 Telco 806 557 1,297Non - Telco 32 (254) 74 Total 838 303 1,371 3. Borrowings 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) •'000 •'000 •'000 Current Current portion of long-termdebt (within 1 year) 80 - 427 Short-term loans 838 1,557 1,519 918 1,557 1,946 Non - current Long-term portion of long-termdebt 750 - 1,286 Long-term loans - 918 1,145 750 918 2,431 Total borrowings 1,668 2,475 4,377 During the six months period 30 June 2006 the Company repaid: a) the long-termloan agreement with EFG-Eurobank for an amount of €1,145,000 which was obtainedin 2005 to finance the investment in the VCI project (see note 6.), b) themezzanine loans amounting to €804,000, plus accrued interest, which wereobtained in December 2005 from shareholders to finance operations and c) variousshort term credit facilities amounting to approximately €760,000. 4. Earnings per share 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) •'000 •'000 •'000Profit attributable toequity holders of theCompany 480 8 727Weighted average numberof ordinary shares inissue 22,241,557 17,290,318 17,290,318Basic earnings per share(• per share) 0.0216 0.0005 0.0421 There are no dilutive or potentially dilutive instruments in issue. 5. Share Capital On 13 April 2006, each issued and unissued ordinary share of £1 (€1.45) wassubdivided into 20 ordinary shares of 5 pence (€0.07) each and the authorisedshare capital of the Company was increased from £50,000 to £2,500,000. On 20 April 2006 Velti plc acquired the whole of the issued share capital ofVelti SA by way of a Share Purchase Deed and Subscription Agreement. 19,019,335ordinary shares were issued to various parties pursuant to the terms of thisShare Purchase Deed and Subscription Agreement. The acquisition of Velti SA byVelti plc has been accounted for using merger accounting principles. As such,the comparative figures are those of Velti SA and its subsidiary companies. On 3 May 2006 10,000,000 ordinary shares of 5p were allotted at a premium of 95pper share. 6. Subsidiaries Velti SA, a 100% and the sole direct subsidiary of Velti plc, owns: a) 78% ofthe share capital of Velti North America Inc (previously Retaine Inc), a companywhose primary focus is the provision of Mobile Value Added Services and b)99.99% of the share capital of Velti Center for Innovation S.A. ("VCI") whichwas incorporated in 2005. In turn VCI has a 46% holding in Amplus SA and a 45%holding in N Squared SA which are consolidated on the basis of majority controlof the Board of Directors of that company. During the six months period ended 30June 2006 Velti SA and VCI paid an amount of €1,317,010 for acquisitions. Thepost-acquisition loss of the subsidiaries acquired during the period was€228,531. Subsidiaries are consolidated from the date on which control is transferred tothe Group. They are de-consolidated from the date that control ceases. 7. Cash (Used in) / Generated From Operations Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) •'000 •'000 •'000 Net profit before tax 711 252 1,083Adjustments for:Tax expense/(income) - (8) -Interest income - - (6)Interest expense 127 65 290Depreciation 59 26 69Amortisation of intangible assets 449 203 473Amortisation of grants - - (584)Post-retirement benefits - - 28Foreign exchange gain 3 - -Share of loss of associates - 6 6Fair value gain onavailable-for-sale investment - - (2) 1,349 544 1,357 Changes in working capital:Receivables and prepayments (2,214) (125) (648)Trade and other payables (3) 279 195Pensions and other post-retirementobligations 18 11 (5) (2,199) 165 (458) Cash (used in) / generated fromoperations (850) 709 899 This information is provided by RNS The company news service from the London Stock Exchange