Zamano Regulatory News (ZMNO)

Press Release

6 March 2014

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 2013. 

Highlights:

· Revenue of €16.034M (down 16.5% on revenue of €19.207M, 2012);

· EBITDA* of €2.608M (up 4.1% on EBITDA of €2.506M, 2012);

· Operating profit of €2.224M (up 8.5% on operating profit of €2.049M, 2012);

· Pre-tax profit €1.918M (up 10.8% on adjusted pre-tax profit of €1.731M, 2012);

· Significant improvement in net cash during 2013 (net cash of €2.139M at 31 December

2013 versus net cash of €0.138M at 31 December 2012);

John Rockett, Chairman, zamano commented: "The Group recorded an improved outcome in the areas of EBITDA and pre and post-tax profits, and, substantially increased its net cash balances during 2013. These improvements were made despite a number of operational setbacks which impacted our revenues".

"In the product and market development area, during the year we launched a new messaging service targeted at enterprises branded Messagehero.com. We expect that initiatives such as this will become an increasing feature of the Group's business strategy in the near term future".

Ross Conlon, CEO, zamano commented: "In spite of the many challenges which confronted zamano during 2013, the Group continued the improvement in its financial performance building on the outcome achieved in 2012".

"The overall market environment for web and mobile commerce products and services remains buoyant. Smartphones remain at the forefront of this growth with global smartphone penetration forecast to exceed 60% by 2016. During the year ahead, zamano will seek to capitalise on the opportunities inherent in its markets by developing strategic partnership, licencing and joint venture arrangements with content providers and product owners".

*EBITDA is calculated as earnings before interest, tax, depreciation, amortisation and share based payment amounts.

- Ends -

For further information, please contact:

zamano plc

Ross Conlon, Chief Executive Officer

Tel: + 353 1 554 7259

Michael Connolly, Chief Financial Officer

Tel: +353 1 554 7261

Investec Corporate Finance

Shane Lawlor/Conor Murtagh

Tel: + 353 1 4210000

Cenkos Securities

Alan Stewart/Neil McDonald

Tel: + 44 (0) 131 220 6939

Media Enquires:

MCOMM Communications Consultants

Richard Moore

Tel: +353 1 661 9428

Mob: +353 87 241 4751

zamano plc & subsidiaries

Chairman's Statement

Zamano is pleased to report on its performance for the financial year ended 31 December 2013.

The Group has recorded an improved earnings outcome for the year with growth in EBITDA* of 4.1% compared to 2012. In addition, the Group also achieved a considerable increase in its net cash position. These improvements were made despite a number of operational setbacks which impacted our revenues.

In 2013, the Group had to contend with the effective closedown of our US business and the ongoing impact of regulation in our two principal markets, Ireland and the UK. These factors contributed to a €3.0 million fall in revenues during the year ended 31 December 2013.

Group operating profits for the year at €2.224 million were €0.175 million (8.5%) ahead of the corresponding figure for 2012 (€2.049 million). The Group achieved a reduction in administrative expenses primarily due to the one-off nature of legal expenses incurred in 2012.

The Group's net cash position improved dramatically to €2.139 million at 31 December 2013, an increase of just over €2.0 million on the net cash figure at 31 December 2012. This is indicative of the strong cash generative capabilities of the business, its relatively high gross margins and inherent operational efficiencies.

In my statement with last year's results, I alluded to the fact that while the Group was in a relatively strong financial position compared to previous years, the effects on revenues and margins of market and regulatory changes underline the risks which characterise the business. Consequently, I indicated that zamano needed to move quickly to expand its geographic footprint and broaden its product-market base.

2013 has provided a sharp reminder of the need for the Group to introduce new products and expand into new territories. In November, due to additional regulatory constraints, we had to effectively withdraw from all activities in the US, having spent over a year trialling a new web and mobile offering there. Furthermore, in the UK, regulation continued to have a negative impact on revenue levels. In Ireland, web and mobile sales remain relatively robust, although, the regulatory environment is demanding.

On a more positive note, zamano entered or re-entered a number of territories during 2013. We are now operating in Eastern Europe, Australia and Norway and will explore a number of other new markets in 2014. As with all new markets, it takes time and resources to get established, but sales are now starting to develop in the above geographies and we anticipate further growth in 2014.

*EBITDA is calculated as earnings before interest, tax, depreciation, amortisation and share based payment amounts.

zamano plc & subsidiaries

Chairman's Statement (continued)

In the new product area, the Group launched a messaging service, branded Messagehero.com, in the final quarter of 2013 to assist small and medium businesses to market their products and services to end users. This service, which is not regulated, has been developed from scratch by the in-house product development team and will be rolled out in the UK once the Irish market launch proves successful.

While the growth in financial performance of the Group achieved in 2012 was sustained in the year ended 31 December 2013, zamano's dependency on the UK and Ireland for sales and gross profit contribution is becoming more pronounced. Recent green shoots in new territories and the launch of the new bulk messaging product for small and medium enterprises demonstrates the increasing capability of the Group to enter new markets and develop new products. This will become an increasing feature of zamano's business strategy in the future. To this end, our business development team will continue to actively pursue joint-venture, strategic partnership, acquisition and merger opportunities in order to strategically re-align the Group.

Since the year end, Ross Conlon has assumed the position of Chief Executive Officer replacing Pat Landy who fulfilled the role for the past two years. On behalf of the Board, I would like to thank Pat for his efforts in significantly improving the financial health of the Group during his time in charge and wish him well in his future endeavours. He will remain on the Board in a non-executive capacity where he will continue to advise in the area of strategic planning and corporate affairs. I am very pleased to welcome Ross to the Board. Ross has been with zamano for six years and has an intimate knowledge of the Group's products, capabilities and ambitions. I am confident that his appointment will enable a seamless transition to take place and I look forward to working with him in managing the strategic development of the business in the years ahead.

Finally, I would like to thank all the Group's employees for their commitment and dedication to the business over the past year and commend them for all their efforts in overcoming the challenges that presented themselves in 2013.

John Rockett

Chairman

zamano plc & subsidiaries

Chief Executive Officer's Statement

Introduction

The financial year ended 31 December 2013 was a year during which the Group continued to improve its financial performance particularly in the areas of earnings and cash generation. However, revenues were negatively impacted primarily as a result of ongoing regulation in the US and the UK. Nevertheless, zamano delivered a satisfactory overall performance during the year, bearing in mind the many commercial challenges that it faced.

The UK and Ireland continue to be the mainstays of the business. However, the Group's activities in the US were severely disrupted by a change in policy of the mobile network operators which resulted in our effective withdrawal from the market.

The overall market environment for web and mobile products remain buoyant. Smartphones remain at the forefront of this growth, with global smartphone penetration forecast to exceed 60% by 2016. The smartphone revolution is a key driver of the mobile entertainment/mobile commerce markets in which zamano operates.

Analysts predict that there will be in excess of five billion active mobile phone users globally by 2016 of which in excess of four billion will be smartphone users. This growth in mobile users gives zamano a larger base of users to potentially target via our global aggregator partners. In 2014, zamano is seeking to capitalise on these relationships by developing strategic partnership, licencing and joint-venture arrangements with content providers and product owners.

Market review

The UK business, which specialises in web and mobile entertainment products, performed well during the course of 2013. Revenues for the year were €9.698 million representing an increase of 2.9% over 2012 (€9.426 million). This resulted in an excellent outcome at gross profit level, with UK gross profit for 2013 coming in at €3.394 million, 9.7% ahead of 2012.

The Irish business, which is comprised of web and mobile products and business-to-business services, performed satisfactorily during 2013. At the interim stage, we flagged the fact that the introduction of a new Code of Practice by Comreg in July 2012 effectively eliminated our Irish subscription based revenues. As a result, revenues in Ireland for the year ended 31 December 2013 were €4.133 million or 42.6% down on 2012. As a consequence, the gross profit contribution from the Irish business for 2013 was €1.179 million as against €1.764 million in 2012, a fall of 33.2%. In October 2013, we launched a messaging service called Messagehero.com targeted at small and medium enterprises. While it is too early to predict how this service will perform, it is expected to enhance sales in the Irish business during 2014.

US sales in 2013 were €0.8 million as against €2.1 million in 2012. In November 2013, we suffered a major setback in this market when our aggregation partner informed us that the mobile operators were no longer running traffic in the US because of a change in regulatory policy. In the light of this, we have withdrawn from all operational activity in this market.

zamano plc & subsidiaries

Chief Executive Officer's Statement (continued)

Market review (continued)

During 2013, the Group entered a number of new territories in Eastern Europe and Norway offering web and mobile services. It also re-entered the Australian market in late 2012. Turnover of €1.4 million was achieved from these territories during the year ended 31 December 2013. The Group expects to increase this turnover figure in 2014.

Financial review

You will have read earlier in the Chairman's Statement that the Group's financial performance in 2013 improved by comparison with 2012. In particular, growth was achieved in EBITDA, operating profit, adjusted profit before tax and adjusted profit after tax. While revenues and consequently, gross profits were down, tight cost controls and operating efficiencies ensured that the Group achieved an increase in earnings for the year.

The UK and Irish web and mobile marketing businesses underpinned the financial performance of the Group in 2013. While revenues were down to €16.034 million from €19.207 million in 2012, a fall of 16.5%, UK revenues at €9.698 million exceeded the 2012 figure of €9.426 million. Irish revenues at €4.133 million, were as expected down on the 2012 figure of €7.205 million, but were creditable given the demise of the Irish web and mobile subscription business during the second half of 2012.

Group gross profit was a respectable €4.976 million. The gross profit margin for the year at 31% was three percentage points greater than 2012, while EBITDA at €2.608 million was 4.1% up on the corresponding figure of €2.506 million in 2012.

The Group recorded an operating profit of €2.224 million in 2013, 8.5% ahead of the operating profit of €2.049 million recorded in 2012. After adjusting for the once-off benefit of the debt settlement in 2012, pretax profits for 2013 of €1.918 million were 10.8% ahead of the 2012 outturn of €1.731 million. Again, adjusting for the debt settlement gains referred to above, profit after tax at €1.711 million was 2.1% ahead of the 2012 figure of €1.675 million, and adjusted basic earnings per share in 2013 at €0.021 equalled the adjusted basic earnings per share figure recorded in 2012.

At the end of 2012, zamano concluded a debt settlement arrangement with its bankers which considerably strengthened its financial position by effectively eliminating its bank debt. The debt settlement arrangement included the drawdown of a mezzanine type loan facility from Pageant Holdings, the largest shareholder in the Group. This loan was refinanced on a term loan basis at commercial rates with our bank in March 2013. The cash impact of this arrangement, taken with the strong operational efficiency of the business, increased gross and net cash balances to €2.747 million and €2.139 million respectively at 31 December 2013 compared to €1.222 million and €0.138 million at the end of 2012. The availability of this cash gives the Group greater flexibility in funding its product-market development programmes in 2014 and beyond.

zamano plc & subsidiaries

Chief Executive Officer's Statement (continued)

Outlook

The Group performed solidly in 2013, despite a challenging operating environment. In the circumstances, the growth recorded in EBITDA, operating, pre and post tax profit was an accomplishment for the business.

The Group managed to establish a toehold in Central and Eastern Europe during the year and also broadened its product base via the launch of Messagehero.com, an innovative messaging product targeted at small and medium businesses. These achievements point the way to the future of the business - a multi-territory, multi-product business with offerings attractive to web, mobile and smart phone users.

During 2014, zamano will strive to capitalise on the opportunities which abound in the web and mobile marketing space. The Group will place an increased emphasis on strategic partnerships and joint ventures as a means of achieving its growth objectives. Zamano intends to maintain a solid core operation in its main area of web and mobile marketing, while gradually re-aligning the business via strategic partnerships and new product development.

Ross Conlon

Chief Executive Officer 

zamano plc & subsidiaries

Condensed consolidated income statement

for the year ended 31 December 2013

Consolidated statement of comprehensive income

for the year ended 31 December 2013

On behalf of the board

Ross Conlon John Rockett

Director Director

zamano plc & subsidiaries

Condensed consolidated balance sheet

at 31 December 2013

On behalf of the board

Ross Conlon John Rockett

Director Director

zamano plc & subsidiaries

Condensed consolidated statement of changes in equity

zamano plc & subsidiaries

Condensed consolidated cash flow statement

for the year ended 31 December 2013

zamano plc & subsidiaries

Notes to the condensed consolidated preliminary financial information

for the year ended 31 December 2013

1 Basis of preparation

The condensed consolidated preliminary financial information, included in the preliminary financial results announcement, which should be read in conjunction with the statement of accounting policies contained in the 2012 Annual Report, has been derived from the consolidated financial statements for the year ended 31 December 2013, which have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU") and effective as at 31 December 2013.

The condensed consolidated preliminary financial information presented herein does not constitute the Company's statutory financial statements for the years ended 31 December 2013 and 2012, with the meaning of Regulation 40(1) of the European Communities (Companies: Group Accounts) Regulations, 1992 of Ireland, insofar as such Group accounts would have to comply with disclosure and other requirements to those Regulations. The statutory financial statements for the year ended 31 December 2013, together with the independent auditor's report thereon, will be filed with the Irish Registrar of Companies following the Company's Annual General Meeting and will also be available on the Company's website, www.zamano.com. Statutory financial statements for the year ended 31 December 2012 have been filed with the Irish Registrar of Companies. The auditor's report on those financial statements was unqualified.

The consolidated financial statements were approved by the Board of Directors on 4 March 2013. 

The financial information is presented in Euro ("€") rounded to the nearest thousand, being the functional currency of the parent Company and its subsidiaries. It has been prepared on the historical cost basis of accounting, except for share based payments, which are based on fair value determined at the grant date of the relevant share option.

The condensed consolidated preliminary financial information includes the results and financial position of the Company and all of its subsidiary undertakings. All significant intercompany account balances, transactions, and any unrealised gains and losses or income and expenses arising from intercompany transactions have been eliminated in preparing the financial information.

zamano plc & subsidiaries

Notes (continued)

1 Basis of preparation(continued)

The preparation of the condensed consolidated preliminary financial information requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing this financial information, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty are the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2012.

The accounting policies applied in the condensed consolidated preliminary financial information are the same as those applied in the consolidated financial statements as at and for the year ended 31 December 2012, as set out on pages 17 to 20 of the 2012 Annual Report. There were no new standards or amendments to standards which were mandatory for the first time for the financial year beginning 1 January 2013 which had a significant impact on the financial information.

zamano plc & subsidiaries

Notes (continued)

2 Operating segments

The Group is managed based on three reportable segments which are defined based on geographical markets as follows: Republic of Ireland (ROI), United Kingdom (UK) and United States of America (USA). 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 consumer and also facilitating the communication and interaction between businesses and consumers on mobile phone 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 is determined to be the board of directors.

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

Year ended 31 December 2013

*Unallocated expenses comprise payroll costs, amortisation of intangibles and central overheads such as rent, administration, overhead costs which are not allocated to individual reportable segments.

zamano plc & subsidiaries

Notes (continued)

2 Operating segments (continued)

* The unallocated assets principally comprise intangibles and Group cash and deferred tax. The unallocated liabilities principally relate to loan liabilities.

zamano plc & subsidiaries

Notes (continued)

2 Operating segments (continued)

Year ended 31 December 2012

*Unallocated expenses comprise payroll costs, amortisation of intangibles and central overheads such as rent, administration, overhead costs which are not allocated to individual reportable segments.

zamano plc & subsidiaries

Notes (continued)

2 Operating segments (continued)

* The unallocated assets principally comprise intangibles and Group cash and deferred tax. The unallocated liabilities principally relate to loan liabilities.

zamano plc & subsidiaries

Notes (continued)

2 Operating segments (continued)

Geographical information

The following tables present revenue and assets based on the geographical location of customers and assets.

Year ended 31 December 2013

Year ended 31 December 2012

zamano plc & subsidiaries

Notes (continued)

3 Income tax expense

 (a) Analysis of charge for the year:

zamano plc & subsidiaries

Notes (continued)

4 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:

zamano plc & subsidiaries

Notes (continued)

5 Adjusted earnings per ordinary share

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