Zamano Regulatory News (ZMNO)

Press Release

10 March 2016

zamano PLC

('zamano', the 'Company' or the 'Group')

Final Results

zamano PLC (AIM:ZMNO, ESM:ZAZ), a leading European provider of interactive applications and services to mobile devices, has today announced results for the 12 months ended 31 December 2015. 

Highlights:

· Revenue of €24.3M (up 22.3% on revenue of €19.9M, 2014);

· EBITDA* of €3.0M (up 9.5% on EBITDA of €2.7M, 2014);

· Pre-tax profit €2.4M (up 12.9% on pre-tax profit of €2.2M, 2014);

· Post-tax profit €2.1M (up 13.0% on post-tax profit of €1.9M, 2014);

· Significant improvement in net cash during 2015 (net cash of €6.3M at 31 December 2015 versus net cash of €4.6M at 31 December 2014);

John Rockett, Chairman zamano, commented: "zamano is pleased to report on what was a highly satisfactory outcome on a financial and operational level for the year ended 31 December 2015. The Group maintained its upward progress in respect of revenue and profit during the year."

"The robust nature of the Group's operating performance during 2015 was reflected in a further improvement in zamano's net cash position. At 31 December 2015, net cash was €6.3 million."

"In 2016, zamano will continue to focus on its core activities whilst exploring acquisition or partnership opportunities with a view to diversifying and improving its product footprint."

Ross Conlon, CEO zamano, commented: "The financial year ended 31 December 2015 was another successful one for zamano. The Group maintained its ongoing growth in sales, gross profit, EBITDA, pre-tax and after-tax profits in the year under review."

"The continuing growth of mobile users and the increased penetration of Smartphones is the main driver of growth in mobile payments, mobile commerce and mobile entertainment. zamano's product offerings target the broader mobile commerce and entertainment segments, two of the fastest growing mobile markets globally. Similar to 2014, the Group continued to seek out opportunities for development in buoyant and growing market niches which are a feature of the web and mobile commerce product and services sectors"

"During 2015, the Group examined a number of opportunities in mobile media, payments and messaging with a view to growing the business and diversifying its product and service base. In 2016, it remains an ongoing objective of the Group to find acquisition or partnership opportunities for the business in the web and mobile marketing space"

*EBITDA here is calculated as earnings before interest, tax, depreciation, amortisation and has been adjusted for share based payment expenses.

For further information, please contact:

zamano plc

Ross Conlon, Chief Executive Officer

Tel: + 353 1 554 7313

Michael Connolly, Chief Financial Officer

Tel: +353 1 554 7261

Investec Corporate Finance

Shane Lawlor/Conor Murtagh

Tel: + 353 1 4210000

Cenkos Securities

Derrick Lee/Neil McDonald

Tel: + 44 (0) 131 220 6939

Media Enquires:

MCOMM Communications Consultants

Richard Moore

Tel: +353 1 662 9482

Mob: +353 87 241 4751

Email: ir@zamano.com

zamano is pleased to report on what was a highly satisfactory outcome on a financial and operational level for the year ended 31 December 2015.

The Group maintained its upward progress in respect of revenue and profit during 2015.

Revenue at €24.3 million was 22.3% ahead of the previous year (2014: €19.9 million). This increase was due to the continued development of our business-to-business (B2B) services in the UK and a favourable foreign exchange environment.

Gross profit for the year at €5.1 million was 6.95% ahead of the corresponding figure of €4.8 million recorded in 2014. However, the gross profit margin fell from 24% in 2014 to 21% in 2015 due to the upward surge in UK B2B sales which carry lower margins than zamano's conventional direct-to- consumer (D2C) services.

The growth in gross profit in 2015 together with the effective maintenance of administrative expenses at 2014 levels, were responsible for the increased Adjusted EBITDA, Pre-Tax and Post-Tax profits during 2015. Adjusted EBITDA at €3.0 million was 9.5% ahead of 2014 (€2.7 million). Pre-Tax profit for the year at €2.5 million was 12.9% ahead of 2014 (€2.2 million), whilst the Post-Tax outcome at €2.1 million exceeded the corresponding figure for 2014 of €1.9 million by 13.0%.

The robust nature of the Group's operating performance during 2015 was reflected in a further improvement in zamano's net cash position. At 31 December 2015, net cash was €6.2 million, an increase of €1.6million over the 31 December 2014 net cash figure of €4.6 million. zamano continued to improve its balance sheet position during the period under review due to the strong capacity of the business to generate cash, its ability to quickly realign its product and services offering to meet customer requirements and its rigorous focus on efficient operational controls.

In my last Chairman's statement to shareholders I referred to the Group's ongoing quest to test new markets for its existing products and the efforts being made to introduce new products via its own research and development activities, and the active implementation of a targeted acquisition programme.

During 2015, zamano continued to explore acquisition opportunities in the UK and Ireland, to complement its Messagehero product launched in 2014 with a view to increasing its product footprint in those markets. In addition to this, further progress was made in the development of the Group's micro-payment solution for mobile devices with integrations during 2015 with Vodafone and Three to become an 'approved direct carrier billing partner' with both mobile network operators. Development work is now progressing on the creation of platform infrastructure which will allow merchants to sell goods directly by processing payments via direct carrier billing to customers of Vodafone and Three.

With the increasing reliance during 2015 on the UK, in particular, for revenue and gross profit contribution, zamano redoubled its efforts to adapt and develop its current product offering (as outlined above) as a means of de-risking its business model. The market for web and mobile payments remains buoyant and zamano's skill set in data analytics and mobile payments gives it the capacity to add considerable value to joint ventures, strategic partnerships and acquisitions in the broad mobile commerce space. The requirement to strategically re-align and reposition the Group remains the key objective of the board and management in the immediate future.

In addition to the efforts of the Group on the acquisition front, on 3 August 2015, zamano announced that it had received a preliminary and highly conditional approach regarding a possible offer for the company at an offer price of €0.20 per zamano ordinary share. Zamano and its advisors engaged actively with the potential offeror but discussions regarding the approach were terminated during October 2015.

As in previous years the business continues to face ongoing regulatory changes, particularly in our two principal geographic markets of the UK and Ireland. zamano is totally committed to providing customers with a high level customer experience and service which complies with the regulatory requirements of the markets in which it operates. In keeping with previous years, the Group is working alongside the principal stakeholders in the industry (including regulators and mobile network operators) to ensure compliance with the relevant codes of practice in all of the markets where we have commercial relationships.

Despite challenging and competitive market conditions the Group has delivered another highly satisfactory trading performance in the year to 31 December 2015 on the back of a stellar performance in the UK, where its B2B sales grew significantly. The challenge for the business in 2016 is to continue to maintain and develop its core activities, bring the output of some of its research and development activities to market and conclude business partnership agreements or acquisitions which will strategically position the business for long term growth.

In conclusion, on the occasion of my final Chairman's Statement, I would like to thank all of the Group's employees for their commitment and dedication to the business during my four year term as Chairman. I would also like to acknowledge and thank my fellow directors for their support and advice since taking on the role. It was my pleasure to act in the capacity as Chairman of the Group since 2012, and I wish the board, management and staff of the business every success in 2016 and beyond.

John Rockett

Chairman

Introduction

The financial year ended 31 December 2015 was another successful one for zamano. The Group maintained its ongoing growth in sales, gross profit, EBITDA, pre-tax and after-tax profits in the year under review. It also continued to increase its cash balances, with cash and cash equivalents at 31 December 2015 of €6.3 million being €1.4 million ahead of the corresponding figure for 2014 of €4.9 million.

On the sales front, the UK and Ireland continue to account for a significant proportion of overall Group sales. The upward trend, which manifested itself in UK B2B sales during the second half of 2014, was sustained throughout the whole of 2015. While UK sales were ahead of expectations and also benefited from favourable foreign exchange rates, Irish sales were somewhat down on 2014. Sales in Australia and other smaller territories also failed to reach the numbers achieved in 2014.

The market for mobile products and services continues to grow. Global Smartphone sales were close to 6 billion units in 2015, a penetration level in excess of 60%. Global revenue from mobile content is forecast to reach US$13 billion next year (2017). The number of global mobile payments users is understood to have topped the one billion mark in 2015 which represented circa US$1trillion worth of mobile payments.

The continuing growth of mobile users and the increased penetration of Smartphones is the main driver of growth in mobile payments, mobile commerce and mobile entertainment. zamano's product offerings target the broader mobile commerce and mobile entertainment segments, two of the fastest growing mobile markets globally. With the assistance of its mobile network operator and global aggregator partners, zamano will continue to target mobile content and payment opportunities in its key geographies during the course of 2016 and beyond.

Market Review

zamano's UK operation which is largely comprised of web and mobile entertainment products and business-to-business services had another stellar year in 2015. Revenues in the UK at €20.5 million were 34.9% ahead of 2014 (€15.2 million), this significant increase in sales volumes was largely attributable to the ongoing development of our B2B services activities in this market.

The Irish business which also focuses on web and mobile products and business-to-business services continues to operate in an extremely challenging environment. Sales for 2015 were €3.1 million, down by 14.2% on the equivalent figure for 2014 of €3.6 million. The decline in sales in 2015 (14.2%) was marginally higher than the year on year decline in 2014 (13.2%). However, the contribution margin percentage for the year at 29.7%, held up well when compared to the 2014 outcome of 30.2%. Messagehero, our messaging product for the SME market achieved modest levels of sales during the year, while considerable progress was made in establishing our micro payments solution for mobile devices with 'approved direct carrier billing partnership' integrations being concluded with Vodafone and 3.

Our sales performance in other locations during 2015 failed to match that of 2014. Sales at €0.7 million were 39% down on the corresponding figure of €1.1million in 2014. In 2014, the Other Locations category was boosted by a strong performance in Australia. This was not replicated in 2015 as regulatory changes impacted on our sales performances there. Nevertheless, the gross profit contribution from Other Locations during 2015 at €0.17 million represented a gross margin percentage on sales of 24.8%, a significant uplift on the equivalent figure of 13.0% recorded in 2014.

Financial Review

You will have noted from the Chairman's statement earlier, that the Group maintained its growth in financial performance in 2015 when compared to the previous year. Specifically, zamano recorded growth in real terms in sales, gross profit, EBITDA and pre and post-tax profit in 2015 relative to what it achieved in 2014. The significant increase in sales, albeit at a lower gross margin percentage, together with a tight operational focus on costs, were the main reasons behind the uplift in earnings achieved in the year ended 31 December 2015.

As in previous years, the UK and Irish business were the mainstays of Group financial performance in the year ended 31 December 2015. Group sales at €24.3 million were 22.3% ahead of the €19.9 million recorded in 2014. UK sales in 2015 at €20.5 million were 35.3% ahead of the 2015 outcome of €15.2 million. Irish sales, however, failed to match the stellar sales performance of the UK where revenue of €3.1 million in 2015 was down 14.2% on 2014; nonetheless, the rate of sales decline in Ireland appears to have stabilised.

Gross profits at Group level of €5.1 million were ahead of the €4.8 million recorded in 2014, but the gross margin percentage of 21% was down from the 24% achieved in the previous year. This was almost entirely due to the changing mix of our business in the UK. Adjusted EBITDA at €3.0 million was 9.5% ahead of the 2014 outcome of €2.7 million.

The group achieved an operating profit for 2015 of €2.5 million, which was 9.5% ahead of the corresponding figure of €2.2 million recorded in 2014. Profit before tax at €2.5 million was 12.8% ahead of the €2.2 million achieved in 2014, while profit after tax at €2.1 million was 11.5% ahead of the 2014 outcome of €1.9 million. Basic earnings per share at €0.022 were 15.8% ahead of the equivalent figure for 2014 of €0.019.

The growth in earnings referred to in the previous paragraph was reflected in a considerable strengthening of the balance sheet of zamano. In particular, cash net of loan balances outstanding at 31 December 2015 was €6.3 million, an increase of €1.6 million over the previous year's figure of €4.6 million. The Group's cash balances affords it a high degree of flexibility to fund its ongoing market development and acquisition initiatives, details of which are set out earlier in this statement.

Outlook

In 2015, zamano maintained the growth in operating performance, achieved over the previous three years, in spite of the continuing challenging regulatory and market environment in its key markets of the UK and Ireland and the impending introduction of Payforit, a UK Mobile Network Operators joint initiative to further regulate mobile payments. Payforit will be implemented in 2016 representing a significant regulatory change in the operating environment in the UK. The Group has planned for implementation of Payforit, but its impact on the Group and the industry in general will only be known when fully implemented. The growth recorded in sales, gross profit, EBITDA, pre and post-tax profits and the Group's ability to translate this into cash reflects the operating effectiveness of the business.

Similar to 2014, the Group continued to seek out opportunities for development in the buoyant and growing market niches which are a feature of the web and mobile commerce products and services sector. The Group has increased its focus on developing products in the messaging and micro payments and billing areas. This product development programme is supported by zamano's continuing emphasis on identifying acquisitions, joint venturing and licensing opportunities in its principal markets of the UK and Ireland. During 2015, the Group examined a number of opportunities in mobile media, payments and messaging with a view to growing the business and the diversifying its product/service base.

Outlook (continued)

While we were primarily focussed on our own business development and acquisition activities during 2015, the Group received an approach during the year from a private investment vehicle that expressed an interest in acquiring zamano. After engaging with the party making the approach, terms were discussed but agreement could not be reached on a deal which could be recommended to shareholders and the discussions concluded.

It remains an ongoing objective of the Group to find niche opportunities for the business in the web and mobile marketing space. The Group's capabilities in data analytics and mobile billing payments, together with its relationships with international network operators makes it an attractive partner for a growth orientated media/technology business.

The Board and management will continue to operate its core business of web and mobile marketing and business-to-business services in an efficient manner for the benefit of its stakeholders during the course of 2016. In tandem with its focus on operational efficiency, management will continue to seek out ways of diversifying the product and market base of the business by way of new product development and a renewed focus on acquisitions.

Ross Conlon

Chief Executive Officer

Consolidated statement of comprehensive income

for the year ended 31 December 2015

On behalf of the board

Ross Conlon John Rockett

Director Director

On behalf of the board

Ross Conlon John Rockett

Director Director

1 Reporting entity

zamano plc ('the company") is a company domiciled in the Republic of Ireland. The address of the company's registered office is 3rd Floor, Hospitality House, 16-20 South Cumberland Street, Dublin 2.

The consolidated financial statements of the company as at and for the year ended 31 December 2015 comprise of the financial statements of the company and its subsidiaries ("the Group").

The company's shares are publicly traded on the London Alternative Investment Market ("AIM") and the Enterprise Securities Market ("ESM") in Dublin.The principal activities of the Group are the provision of mobile data services and technology.

2 Basis of preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU,that are effective for financial periods beg. A summary of pronouncements that came into effect after that date and the likely impact of these on the Group are set out in note 4. The consolidated financial statements were authorised for issue by the board of directors on 9 March 2016.

(b) Going concern  

Having regard to the Group's projected earnings over the next 12 months from the date on which these financial statements were approved, the directors consider that it continues to be appropriate to prepare the financial statements on a going concern basis.

(c) Basis of measurement

The consolidated financial statements for the year ended 31 December 2015 have been prepared on an historical cost basis, with the exception of share-based payments, which are stated at grant date fair value.

(d) Functional and presentation currency

These consolidated financial statements are presented in Euro which is the functional currency of the company and the majority of the Group's entities. All financial information presented in Euro has been rounded to the nearest thousand.

(e) Basis of consolidation

The consolidated financial statements consolidate the financial statements of zamano plc and all its subsidiaries up to 31 December 2015. The Group controls an entity when it is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through the power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. All subsidiaries have a financial year end of 31 December.

Business combinations are accounted for using the acquisition method as at the acquisition date, i.e. when control is transferred to the Group.

3 Operating segments

The Group is managed based on two primary reportable segments which are defined based on geographical markets as follows: Republic of Ireland "ROI" and United Kingdom "UK". It also has sales in other jurisdictions but these are not deemed to be standalone reportable segments under the requirements of IFRS 8 and are classified as "other locations" in the table below.

The Group's sales consist of the development, promotion and distribution of mobile content and interactive services directly to consumers and also facilitating the communication and interaction between businesses and consumers on mobile phones through a range of value-added mobile applications. Information regarding the results of each reportable segment is included below. Performance is measured based on segment results as included in the reports that are reviewed by the Group's Chief Operating Decision Maker ("CODM") which the directors have determined to be the board of directors.

The following tables present revenue and profit and certain asset and liability information regarding the Group's reportable segments:

Unallocated expenses include the following non cash items;

€,000

Depreciation 78

Amortisation 368

Share based payment expense 76

Unallocated expenses also include central overhead and payroll costs which are not allocated to individual reporting segments.

3 Operating segments (continued)

Unallocated assets are assets that cannot be attributed to a specific segment and comprise property, plant and equipment, software, deferred tax and group cash. Unallocated liabilities relate to borrowings and corporation tax payable.

3 Operating segments (continued)

Year ended 31 December 2014

Unallocated expenses include the following non cash items;

€,000

Depreciation 60

Amortisation 366

Share based payment expense 77

Unallocated expenses also include central overhead and payroll costs which are not allocated to individual reporting segments.

3 Operating segments (continued)

Unallocated assets are assets that cannot be attributed to a specific segment and comprise property, plant and equipment, software, deferred tax and group cash. Unallocated liabilities relate to borrowings and corporation tax payable.

4 Income tax expense

5 Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighed average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted loss per share computations:

6 Adjusted earnings per ordinary share

The following reflects adjusted earnings per share based on adjusted net income:

Reconciliation of reported operating profit across segments to earnings before interest, tax, depreciation and amortisation ("EBITDA"), adjusted for share based payments expense is as follows:

7 Impairment of goodwill

Goodwill arising from business combinations in prior years was tested for impairment at 31 December 2015. Based on this test, the directors have determined that no impairment charge (2014: Nil) is required in the year.

For the purposes of the impairment testing, goodwill has been allocated to Cash Generating Units ("CGUs") which correspond to significant operating segments of the Group as follows:

The recoverable amount of the goodwill for each CGU has been determined based on a value-in-use calculation using cash flow projections based on EBITDA from financial budgets approved by senior management covering a one year period which have been rolled on for a further 4 year period and includes a terminal value.

Key assumptions used in value-in-use calculations

The calculation of value-in-use for each CGU is most sensitive to the following assumptions:

· the discount rate; and

· the budgeted EBITDA growth rate

The discount rate reflects management's estimate of the risks specific to the CGU. In determining the appropriate discount rate, management has considered factors such as the average cost of capital and expected rate of return and has applied a pre-tax discount rate of 12.7% for both CGU's (2014: 12.6%).

Another key assumption used within the cash flow projections is that EBITDA will grow at 3% per annum for both CGUs from FY2016 to the end of the forecast period.

No reasonable change in the assumptions would result in an impairment to the carrying value of goodwill.

8 Related party disclosures

Compensation of key management

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, and includes the executive and non-executive directors and certain members of senior management.

9 Litigation

In the normal course of business, the Group is involved in various legal proceedings with third parties, the outcome of which is uncertain. Where appropriate, provision is made in the financial statements based on the directors' best estimate of the potential outcome of such proceedings. It is the policy of the Group to rigorously defend all legal actions taken against the Group.

10 Subsequent events

There have been no significant post balance sheet events.

11 Adoption of reduced disclosure framework

The Group prepares its group financial statements in accordance with IFRS as adopted by the EU (EU IFRS). Up until now, in preparing the individual financial statements of the parent company, Irish GAAP has been applied. The Group has considered the options available to it for the preparation of its 2015 individual financial statements and believes it is appropriate to adopt the reduced disclosure framework available under FRS101. There will be no impact at all on the level of disclosures provided in relation to the group in the group financial statements as these will continue to be prepared in accordance with full EU IFRS.

As shareholders, you have the final say in whether or not the company may adopt the reduced disclosure framework. In the event that you consider this adoption is not appropriate, please contact the Company Secretary at zamano plc, 3rd Floor, Hospitality House, 16-20 South Cumberland Street, Dublin 2.