TIDMMONI
RNS Number : 4739Y
Monitise PLC
09 September 2015
9 September 2015
Monitise announces 2015 results, board changes and progress on
transition to cloud
LONDON - Monitise plc (LSE: MONI) ("Monitise", the "Company" or
the "Group") announces its audited preliminary results for the year
ended 30 June 2015.
FY 2015 Financial Summary
-- FY 2015 revenue declined 6% to GBP89.7m (FY 2014: GBP95.1m).
-- Group EBITDA(1) loss was GBP41.8m, at the lower end of the
Company's guidance range of a GBP40-50m loss (FY 2014: GBP31.4m
loss). H2 FY 2015 EBITDA loss of GBP11.0m was materially smaller
than H1 FY 2015 loss of GBP30.8m.
-- Operating costs were GBP88.3m (FY 2014: GBP93.1m(2) ), with
materially improving underlying cost disciplines reflected in a 32%
half-on-half reduction to GBP35.8m in H2 FY 2015 from GBP52.5m in
H1 FY 2015. Excluding the effect of non-recurring accrual reversals
in H2 FY 2015, the half-on-half reduction was 18%.
-- Adjusted(3) loss after tax for the year was GBP55.3m (FY
2014: GBP43.7m) and adjusted(3) loss per share was 2.7p (FY 2014:
2.6p).
-- Goodwill, capitalised development costs and other intangible
and fixed assets impairments of GBP94.3m were recognised where
technologies or geographies are no longer core to strategy or where
the carrying values of technologies are not supported in the short
term by market readiness.
-- With the changing shape of the business and focus on the
cloud, an onerous contract provision of GBP30.3m was recognised in
respect of a small number of contracts as an exceptional
expense.
-- The above factors, together with share-based payment charges
of GBP28.0m (FY 2014: GBP9.8m) largely in relation to acquisitions,
led to a statutory loss after tax in the year of GBP223.6m (FY
2014: GBP60.1m), equating to a loss per share of 10.8p (FY 2014:
3.6p).
-- Cash capex was at the upper end of the Company's guidance
range at GBP45.0m (FY 2014: GBP26.1m), reflecting investment in the
productisation and development of Monitise technology platforms. H2
FY 2015 capex was GBP19.1m, compared to a peak of GBP25.9m in H1 FY
2015.
-- Gross cash of GBP88.8m as at 30 June 2015 provides balance
sheet strength to see Monitise through to break-even and
beyond.
(1) EBITDA is defined as operating loss before exceptional
items, depreciation, amortisation, impairments and share-based
payment charges.
(2) Prior year cost of sales, gross profit and operating costs
have been restated due to a reclassification of certain service
delivery costs from operating costs to cost of sales. There was no
impact to EBITDA from this adjustment.
(3) Adjustments comprise share-based payments, exceptional
items, impairments and acquisition related amortisation. A
reconciliation is provided in note 9.
Board Changes
-- Elizabeth Buse to step down as CEO and from the Board,
effective 9 September 2015, due to her desire for personal reasons
to return to the United States. Deputy CEO and Chief Commercial
Officer Lee Cameron appointed CEO, effective 9 September 2015.
-- Elizabeth will remain with the business until the end of
October to ensure an orderly transition and handover of
responsibilities.
Strategy Update
-- Monitise provides specialised technology and associated
services that help clients, particularly financial institutions,
deliver innovative digital experiences to their customers.
-- The Company is transitioning to become a cloud business to
meet the evolving needs of the industries and clients it serves. As
previously communicated, going forward the company will focus on
Europe, the Middle East and North America.
-- Monitise's new cloud platform is at the core of its strategy.
The platform provides 'ready-made' products (Software as a
Service/SaaS) as well as a 'build your own' (Platform as a
Service/PaaS) capability, with bank-grade security and compliance
for financial institutions and beyond.
-- This is complemented by a dedicated on-premise platform that
supports businesses that want to leverage Monitise products behind
their firewall, together with the digital agency based in London,
Istanbul and San Francisco, and the London-based content
business.
-- Existing customised solutions will continue to be supported,
but Monitise will not be entering into any new arrangements of this
type. The Company's sales efforts with these clients are focussed
on the cloud platform.
Operational Update
-- During the period, Monitise welcomed deeper partnerships with
Santander, Telefónica and MasterCard with the three companies
investing in the business. The Group's multi-faceted relationship
with IBM also developed further through the year.
-- Monitise's cloud platform launched in April 2015. It is a
private cloud running on IBM's Bluemix scalable infrastructure. It
provides API-based delivery of Monitise SaaS products, as well as
through the Company's new PaaS offering, giving financial
institutions a secure environment where they or other fintech
developers can develop and operate their own applications.
Outlook
-- Revenue growth not expected in FY 2016.
-- Operating costs expected to continue declining in FY 2016
through a combination of headcount rationalisation, lower IT costs,
the exit of non-core geographies and further property
rationalisation.
-- Expectation of EBITDA profitability in H2 FY 2016, and still
targeting EBITDA profitability for full year.
-- Cash position expected to be in excess of GBP45m throughout FY 2016.
Monitise Chairman Peter Ayliffe said:
"Monitise has made substantial progress during the year in
moving the business to the cloud. We are well aware that our
transformation of the business, while absolutely necessary, has
been slower and more challenging than expected and has
significantly impacted our financial performance, which we
recognise has been disappointing and led to us having to revise
some of the financial targets we had set for the year.
We have improved our cost disciplines and the fundamental
drivers underlying our business remain strong. The Board and
leadership team continue to take the necessary tough decisions and
we are confident that Monitise is well placed to deliver value for
shareholders as we serve our clients and partners.
The Board is pleased to announce the appointment of Lee Cameron
as CEO. Lee has been on the Monitise Board since 2008, held a
number of senior executive roles within the Company, is well
respected by clients and has led the evolution of Monitise's PaaS
offering. I would like to thank Elizabeth Buse for capably taking
on the role of sole CEO earlier this year and setting in place many
important changes that have helped to reposition the business for
the future."
Monitise Chief Executive Elizabeth Buse said:
"Since becoming sole CEO of Monitise, I have focussed on the
transition of our business towards the cloud model, while reducing
costs and increasing flexibility and discipline. Our move to become
a cloud business reflects our drive to adapt to the evolving needs
of the industries and clients we serve. A consequence of reshaping
Monitise for growth and profitability is that we have had to
recognise significant non-cash impairments and exceptional one-off
costs.
I have been delighted with client reaction to our cloud platform
and, given Monitise's healthy cash balance and the tough decisions
we continue to take, I am confident that Monitise is now better
positioned for profitability and future growth.
Against this backdrop, I recently informed the Board of my
desire, for personal reasons, to return to the United States.
Consequently, the Board has appointed Deputy CEO, Lee Cameron, to
take over as CEO with immediate effect. Lee has worked alongside me
as we have been repositioning Monitise for the future, is well
respected by clients, and is the right person to lead the business
going forward."
Commenting on his CEO appointment, Lee Cameron said:
"At the heart of Monitise are excellent people and technologies.
It is vital that we build on these strengths as we become a cloud
company. My immediate priority will be to continue to execute the
strategy we have put in place and to ensure that we both serve our
clients and create value for our shareholders. We have the assets,
clients and skills to succeed and I am determined that we build
from here and that Monitise delivers on its potential."
An analyst presentation will be held on Wednesday 9 September
2015 at 9.00am BST at the London Stock Exchange, London, EC4M 7LS.
A live webcast of the presentation will be available to view online
via investor relations on www.monitise.com. A replay facility will
be accessible via www.monitise.com/investor_relations within 24
hours of the results presentation.
About Monitise
Monitise plc (LSE: MONI) is a digital technology company
creating new ways to connect, interact and transact. Our platforms,
products and ideas lead to smarter, better experiences that help
financial services companies and brands across many other sectors
forge closer relationships with their customers. Through our
cloud-based approach, design consultancy and content business, we
make everyday actions easier for millions of people. Find out more
at www.monitise.com.
For further information:
Monitise plc
Lee Cameron, Chief Executive Officer Tel: +44(0)20 3657 0331
Brad Petzer, Chief Financial Officer
Canaccord Genuity
(NOMAD)
Simon Bridges, Emma Gabriel Tel: +44(0)20 7523 8000
Brunswick
Jonathan Glass, Jon Drage Tel: +44(0)20 7404 5959
Forward-Looking Statements
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This document includes forward-looking statements. Whilst these
forward-looking statements are made in good faith they are based
upon the information available to Monitise at the date of this
document and upon current expectations, projections, market
conditions and assumptions about future events. These
forward-looking statements are subject to risks, uncertainties and
assumptions about the Group and should be treated with an
appropriate degree of caution.
Chairman's Statement
Maintaining market relevance and leadership has always been a
strategic priority for Monitise and over the last 18 months this
has necessitated both the development of new technologies and a
restructuring of the business model.
In March 2014 we announced a radical transformation in our
business model to an Application Programming Interface (API)
product-based architecture to support longer-term growth of our
subscription revenues.
The launch of our cloud platform was a success for the business
in the second half of the year and has been acknowledged by many
clients and partners as a compelling solution for the future
delivery of digital banking, payments and commerce. We were pleased
to be able to close the year by announcing our Santander fintech
joint venture and that a major regional US financial institution is
contracting to access this new platform. However, this
transformation of the business, while absolutely necessary, has
been slower and more challenging than expected and has
significantly impacted our financial performance, which we
recognise has been disappointing and led to us having to revise
some of the financial targets we had set for the year. This,
together with the reaction to Visa Inc.'s announcement that it was
reviewing its stake in Monitise, has meant it has been a very
difficult period for shareholders.
Given the decline in the share price and the rapidly changing
and fast growing marketplace in which Monitise operates, the Board
commenced a full Strategic Review of the business in January 2015.
This Strategic Review was all embracing and given the high levels
of corporate activity in our market at the time, explored whether
other businesses could better leverage Monitise's assets and
capabilities to maximise value for shareholders. The review
provided encouraging feedback on our business and strategy and a
number of expressions of interest were forthcoming. These
expressions were indicative, non-binding and structurally complex.
The Board felt that, given the considerable uncertainty over their
deliverability, none of these expressions of interest fully
reflected the longer-term value potential of Monitise, and decided
to continue with the strategy of transforming and streamlining the
business as an independent company.
During the period, we welcomed deeper partnerships with
Santander, Telefónica and MasterCard with the three companies
investing in the business. Our multi-faceted relationship with IBM
has also developed further throughout the year.
Board and Management
At the conclusion of the Strategic Review in March 2015,
Alastair Lukies stepped down from his role as co-CEO. I would like
to thank him for his contribution as the founder and driving force
during Monitise's formative years. His vision, tireless devotion
and energy have created a base from which we can build a long-term
successful business. At the same time, the Board appointed
Elizabeth Buse as sole CEO to lead the Company during the next
stage of its transformational development. Elizabeth had joined
initially as co-CEO in June 2014.
Elizabeth, ably supported by Lee Cameron as Deputy CEO and Chief
Commercial Officer, has brought a clarity and focus to the business
and identified and built a strong senior management team which is
charged with delivering our plans. The executive team is supported
by a diverse Board, with a strong focus on execution,
accountability and governance with the objective of improving
future shareholder value.
With the business on a clear strategic path, Elizabeth has
informed the Board of her desire, for personal reasons, to return
to the United States. Consequently the Board has been reviewing the
appropriate skill-set required to lead the new Monitise business
going forward and has appointed Lee Cameron as CEO.
Lee, who has been on the Monitise Board since 2008 and held a
number of senior executive roles within the Company, is well
respected by clients and has led the evolution of Monitise's PaaS
offering.
Elizabeth steps down as CEO and the Board from 9 September 2015
and will formally leave the business at the end of October. In the
interim, she will work with the Board to ensure an orderly
transition and handover of responsibilities to Lee. I would like to
thank Elizabeth for her contribution to Monitise. Since becoming
sole CEO earlier this year she has set in place many important
changes that have helped to reposition the business for future
growth and profitability.
During the year, I was pleased to announce the appointment of
Stephen Shurrock as a Non-Executive Director representing
Telefónica and Santander, and Amanda Burton's appointment as Senior
Independent Director. Amanda joined the Monitise Board as a
Non-Executive Director in June 2014.
The Board would like to thank our clients, partners, staff and
shareholders for their support during what has been a challenging
year.
Annual General Meeting
The Annual General Meeting of the Company will be held on 22
October 2015 at 10am BST at the offices of Canaccord Genuity, 88
Wood Street London EC2V 7QR.
Peter Ayliffe
Monitise Group Chairman
Chief Executive's Business Review
Monitise's strategy is based on the belief that digital
channels, especially mobile, will transform the way businesses
interact with their customers. The capabilities of digital devices
have led to mobile becoming the primary channel for banking. For
financial institutions this creates an opportunity to form deeper
customer relationships.
However, regulatory developments, legacy infrastructures and
financial challenges are constraining financial institutions'
ability to invest and compete. Further, they are seeing new
competitors emerge with disruptive digital businesses. Financial
institutions need new approaches to innovation which tap into the
emerging 'API economy' and cloud technologies. This is Monitise's
opportunity. Our transition to the cloud is specifically to meet
the evolving needs of the industries and the clients we serve.
Since becoming sole CEO in March 2015, I have embarked on a
drive to focus the business and create a more flexible and dynamic
organisation to respond to these factors. Our strategy has the new
Monitise cloud platform at its core, complemented by our digital
agency in London, Istanbul and San Francisco, our London-based
content team and our on-premise platform. Our target markets are
banks and financial institutions, retailers and fintech
developers.
It has become clear over the past year that the market is not
evolving at the pace we had anticipated, and this impacted market
readiness for some of our more advanced solutions. It is
appropriate therefore that we look critically at our balance sheet
and impair assets that are not essential to our revised strategic
direction. Impairments have been recognised where either
technologies or geographies are no longer core to our near-term
strategy.
Execution of our strategy over the year has been challenging.
Despite considerable progress on reducing costs during the second
half of the year, there has been continued pressure on gross
margins and EBITDA margins due to the cost of supporting our
customised solutions business. We now no longer expect customised
solutions to deliver sustainable recurring revenues because the
market and our clients are increasingly looking to new, more agile
approaches to drive innovation. It is unprofitable to sell, develop
and support these customised solutions and therefore, alongside
short-term profit improvement initiatives, the Company's sales
efforts with these clients are focussed on the cloud platform. As a
result, a small number of contracts associated with supporting our
customised solutions have been identified as onerous. Our statutory
pre-tax loss has also been impacted by scheduled share-based
payments related to acquisitions.
While the overall headline loss is significant, these
adjustments do not impact our cash position. Our strong cash
balance and improving cost disciplines give us the financial
strength to complete our transition to a profitable cloud
business.
Operational Review
-- Transition to Cloud
The cloud platform launched in April 2015. It is a private cloud
running on IBM's Bluemix scalable infrastructure. It provides
API-based delivery of our own SaaS products, as well as through our
new PaaS offering, giving financial institutions a secure
environment where they or other fintech developers can develop and
operate their own applications.
This platform is complemented by our digital agency and content
businesses and the existing on-premise platform. Monitise's cloud
business is expected to be the key driver of the Company's future
growth and profitability.
We have been delighted with the new platform's reception from
clients. At the year-end, we announced that a major US financial
institution had contracted to access the platform. The 50:50 joint
venture formed with Santander on 30 June 2015 will also use the
cloud platform in order to tap into the fintech community to grow
their business and in turn expand the functionality we can make
available to our clients.
-- Digital Agency and Content
The digital agency grew its portfolio with new clients in the
UK, the US, Turkey and the Middle East. Notable clients during the
year included FIAT, FIFA, First Gulf Bank, İ Bank, MasterCard,
Pegasus Airlines, Poten & Partners, RBS, Samsung, Santander,
Türk Ekonomi Bankasi (TEB), Whitbread and Ziraat Bank.
Launch highlights included integrations of Apple's Touch ID and
Apple Watch apps.
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Monitise Content now offers tens of thousands of brands across
dozens of industry verticals distributed direct to consumer and
increasingly via third parties. In June, we announced the launch of
Nectar Tickets, with the UK's largest loyalty programme.
-- On-premise Platform Technology
Our on-premise platform is designed to support those businesses
that want to leverage our products behind their own firewalls.
During the year we enhanced our on-premise offerings, including
Intelligent Messaging, the Company's two-way alerting service, and
Digital Banking. For Digital Banking, we launched next-generation
iOS and Android apps with richer UI features; new passcode and
Touch ID-based access; a responsive design web offering; and back
office and integration improvements.
-- Customised Solution Enhancements
While our future focus is increasingly on our cloud business,
Monitise continued to demonstrate client adoption and innovation
expertise through service enhancements with customised solution
clients. For RBS Group, these included Real Time Registration to
allow new customers access to mobile banking within one day of an
account being opened. UK person-to-person payment service Paym was
integrated into RBS, Clydesdale and Yorkshire Bank services, with
the latter two brands seeing their apps used for more than 33,000
payments worth more than GBP4.6m in just two weeks.
Partnerships
One of Monitise's key assets is its range of partnerships with
leading global businesses:
o During the year, Monitise's multi-faceted relationship with
IBM developed with the launch of the cloud platform, which was
built on IBM's Bluemix scalable infrastructure, and the outsourcing
of a large proportion of our Professional Services function to IBM.
Monitise has utilised IBM resource and technology on a number of
different projects. During the second half, Monitise announced a
new multi-country mobile banking offering via IBM for Société
Générale in Africa, as part of the shared go-to-market strategy.
With our cloud platform live, and a clear direction for the
business, we are looking to refocus our relationship with IBM to
optimise our costs and accelerate adoption of our cloud
offering.
o In September 2014, Monitise announced a strategic partnership
with Santander, led out of Europe, to develop and deploy a series
of mobile banking innovations. During the year, this was reflected
in our digital agency work on SmartBank, the ISA App and Kitti as
well as the Santander/Monitise fintech JV announcement.
o A large design and build project for a customised solution for
Telefónica was completed during the year. Telefónica is now
reviewing appropriate deployment phasing within Latin America.
o A large design and build project for a customised solution for
Yaap, a joint venture between Telefónica, Santander and CaixaBank
has been completed.
o We continue to work with MasterCard on new digital payment
services. These include cross-border mobile remittance
capabilities, mobile transfer solutions and cloud-based payments
services for businesses globally such as financial institutions,
merchants, digital service providers and public sector
organisations.
Business Optimisation
During the year, we have taken a number of actions
including:
o Focusing on priority markets and business opportunities and
only pursuing new geographical opportunities where they are
profitable and directly support partner needs.
o Optimising sales activities to focus on standardised offerings
that generate sustainable, profitable revenue.
o Transferring around 20% of the Company's global employees to
IBM from our Professional Services teams that were focused on
customised platforms and integration projects.
o Taking advantage of lower cost resourcing at our development
hub in Istanbul.
o Enhancing internal reporting and control procedures and
maintaining our focus on cost reduction and cash management.
o We wound down Movida in India, the Company's 50/50 joint
venture with Visa Inc. In Hong Kong, we are in the process of
discontinuing the JETCO service provided with Bank of China. Both
these services used our customised platforms.
Growth Opportunities
Since I joined Monitise in June 2014, the management team has
worked to focus the company on profitable revenue, reducing
unnecessary expense and optimising operating costs. The Group has
undergone significant change. The Strategic Review undertaken
earlier this year, combined with work undertaken subsequently, has
identified a clear direction for Monitise. As set out in our
trading update on 6 July 2015, the future growth and profitability
for Monitise will be delivered through the deployment of our cloud
and dedicated on-premise platforms business, supported by our
digital agency and content teams.
Amid this, we will broaden the business optimisation programme
begun during the last financial year to facilitate a comprehensive
repositioning of Monitise to materially reduce the ongoing cost
base, while improving the performance of our customised solutions
and transitioning clients, where possible, to our new cloud
platform. As previously flagged, we will also be exiting our
non-core geographies. The Monitise that emerges from this
restructuring will be an efficient business focused on Europe, the
Middle East and North America, with the ability to deliver ongoing
profitable growth.
I am confident about the potential of, and future direction for,
Monitise. With the business on a clear strategic path and with a
strong team in place, I have informed the Board of my desire, for
personal reasons, to return to the United States. With my full
support, the Board has been reviewing the appropriate skill-set
required to lead the new Monitise business going forward and has
appointed current Deputy CEO and Chief Commercial Officer, Lee
Cameron as CEO with immediate effect.
Lee has worked alongside me as we have been repositioning
Monitise for the future and is the right person to lead the
business going forward. Lee also enjoys the confidence and trust of
a great many of Monitise's key customer relationships.
I will continue working closely with Lee and the rest of the
management team and will ensure there is an orderly transition and
handover of responsibilities before leaving the business at the end
of October.
I remain confident that the strategy we are pursuing, with our
operational readiness for the cloud, is the right one for Monitise.
We continue to enjoy support from our partnerships with a number of
leading global businesses and our cloud platform, which will be the
key growth driver of the business, has received a positive
reception from clients. These factors combined with our relentless
focus on costs and strong cash position give me confidence that Lee
can continue to develop the business to deliver sustainable growth
and profitability.
Outlook
-- We do not expect revenue growth in FY 2016.
-- Operating costs are expected to continue declining in FY 2016
through a combination of headcount rationalisation, lower IT costs,
the exit of non-core geographies and further property
rationalisation.
-- We expect to be EBITDA profitable in H2 FY 2016, and are
still targeting EBITDA profitability for the full year.
-- We expect the cash position to be in excess of GBP45m throughout FY 2016.
Monitise Chief Executive Elizabeth Buse
Financial Summary
Revenue
Revenue in FY 2015 declined by 6% to GBP89.7m from GBP95.1m in
FY 2014.
As per the change in strategy, the decline was largely driven by
a 39% reduction in one-off product licences to GBP11.9m.
Subscription and transaction revenue saw 6% growth to GBP33.1m.
Subscription revenue was GBP16.9m in H2 FY 2015, up 4% from
GBP16.2m in H1 FY 2015.
The reduction in product licences, while consistent with our
business transformation away from selling upfront perpetual
licences for software, reflected declining market opportunity for
our customised solutions, especially in Europe. It also reflected
the variable and less predictable nature of this type of
non-recurring revenue. Product licences included a GBP5.0m upfront
licence fee from the joint venture with Santander announced on 1
July 2015.
Subscription revenue increased 4% half on half. Contributions
from Content (formerly Markco Media) and the Turkey-based business
(formerly Pozitron) in FY 2015 were offset by the impact of prior
period renegotiations of customised platform contracts on differing
terms.
In FY 2015, development and integration revenue was flat at
GBP44.7m (FY 2014: GBP44.5m). As expected, FY 2015 saw a decline in
billable work from some customised solution contracts in Europe and
the US as deployments matured. This was partially offset by
continuing development work for large clients, as well as projects
with other new and existing clients.
Our development and integration revenue includes contributions
from our digital agency, including Monitise Create and our
Turkey-based business. Both businesses' development and integration
revenue has grown, taking into account support that they provided
for clients of other parts of the Group.
On a geographic basis, revenue was largely flat in the UK and
the rest of the world excluding the US. Revenue declined in the US
by GBP4.1m, largely relating to a single customised platform
contract.
Gross Margin
As a result of improved internal reporting, Monitise has changed
its classification of certain service delivery costs from operating
expenses to cost of sales. There was no impact to EBITDA as a
result of this adjustment.
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The effect of the change on gross profit is as follows:
H1 FY2015 H2 FY2015 FY 2015 H1 FY2014 H2 FY2014 FY 2014
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ---------- ---------- -------- ---------- ---------- --------
Previously reported
Gross Profit 24.2 27.3 51.5 33.8 31.6 65.4
--------------------- ---------- ---------- -------- ---------- ---------- --------
Reclassification
from Operating
Expenses (2.5) (2.5) (5.0) (1.8) (1.9) (3.7)
--------------------- ---------- ---------- -------- ---------- ---------- --------
Restated Gross
Profit 21.7 24.8 46.5 32.0 29.7 61.7
--------------------- ---------- ---------- -------- ---------- ---------- --------
Group gross margin under the new classification is 52% (FY 2014:
65%). Subscription margin was slightly lower at 72% compared to 74%
in FY 2014.
The main contributor to the gross margin fall was the continued
reduction in development and integration margins to 24% in FY 2015
(FY 2014: 43%).
This margin deterioration was driven by projects relating to
customised solutions. It largely reflected incorrect scoping on
fixed price commitments for large-scale projects.
Large projects included the design and build of customised
solutions for Telefónica, Yaap and Virgin Money. The projects with
Telefónica and Yaap are now complete.
Development and integration margins from our digital agency are
higher than those from development of customised platforms.
We expect development and integration gross margins to improve
to levels seen prior to FY 2015, due to the completion of large
fixed price customised solution projects, utilisation of lower cost
resources in Turkey and a focus on contracting on a time and
materials basis for projects going forward.
EBITDA and Operating Costs
The Group EBITDA loss was GBP41.8m in FY 2015 compared to
GBP31.4m in FY 2014, largely reflecting the reduction in revenues
and gross margins.
Operating costs, after reclassification of certain service
delivery costs to cost of sales, were GBP88.3m (FY 2014: GBP93.1m),
reducing 32% half-on-half to GBP35.8m in H2 FY 2015 from GBP52.5m
in H1 FY 2015. Excluding the effect of non-recurring reversals of
GBP3.9m in H2 FY 2015 of H1 FY 2015 accruals, the half-on-half
improvement was 18%.
Good progress was made on cost control in H2 FY 2015. This
included a 12% reduction in total people costs and a 22% reduction
in property costs. Total people costs includes charges relating to
outsourced service providers such as IBM, is before capitalisation
and cost of sales, and excludes the effect of non-recurring accrual
reversals. These reductions were largely driven by headcount
reductions and further integration and rationalisation of
acquisitions.
Total global headcount, including contractors, has reduced from
c.1,250 at 30 June 2014 to c.950 at 31 December 2014 and c.850 at
30 June 2015. Of this reduction, approximately half related to the
transfer of employees to IBM.
Operating costs are expected to continue declining in FY 2016
through a combination of headcount rationalisation, lower IT costs,
the exit of non-core geographies and further property
rationalisation
Other Movements
Depreciation and Amortisation
Depreciation was GBP4.2m in the year (FY 2014: GBP4.0m).
Amortisation of GBP20.7m (FY 2014: GBP15.7m) includes amortisation
of acquired intangible assets of GBP11.7m, capitalised development
costs of GBP5.2m and purchased software licences of GBP3.8m.
Impairments
Impairments of GBP94.3m (FY 2014: GBP4.2m) have been recorded,
relating to capitalised development costs (GBP37.4m), software
purchases (GBP9.5m), goodwill, acquired intangibles and joint
venture investments (GBP45.9m) and leasehold improvements and
computer equipment (GBP1.5m).
Some impairments have been recognised where the technologies or
geographies are no longer core to Monitise's strategy. For example,
some capitalised development costs supporting customised platforms
have been impaired.
Other impairments relate to technologies that do not drive
sufficient economic return in the near term to support their
carrying values. This is due to evolving market conditions,
including readiness of current and prospective clients to adopt
such technologies.
Goodwill and acquired intangibles impairments relate to historic
acquisitions in the Asia Pacific region and a historic acquisition
in Europe.
Share-Based Payments
The share-based payment charge of GBP28.0m (FY 2014: GBP9.8m) is
largely comprised of earn-out share-based payments relating to the
acquisitions of Grapple, Pozitron and Markco Media as well as Group
employee share options grants. The increase over FY 2014 is mainly
driven by earn-out charges for Markco Media, acquired on 26 June
2014.
Exceptional Costs
GBP34.2m of net exceptional costs were recorded in the year,
largely reflecting the recognition of onerous contracts and
restructuring expenses (FY 2014: GBP1.9m, largely reflecting
acquisition expenses).
As part of the ongoing review of the business in response to
evolving market conditions, supporting customised solutions has
been identified as a loss making activity and the business is being
reshaped to focus on a cloud model.
Therefore, a number of contracts, including property leases and
contracts with a third party IT and business services provider,
were identified as onerous. A GBP30.3m provision has been
recognised through exceptional expenses for the lower of the costs
to terminate the contracts or fulfil them over their lifetimes. As
a result of this provision, no further costs in relation to these
contracts are expected to be recognised through the income
statement in later years, however there will continue to be a cash
cost.
GBP4.5m of restructuring items included headcount reduction
costs related to the transition to a cloud model and associated
cost reduction projects. GBP1.8m of exceptional costs, primarily
professional advisor fees, were also recognised in relation to the
Strategic Review carried out from January to March 2015. In
addition, a GBP1.3m non-cash adjustment was made through
exceptional costs to contingent consideration payable for
acquisitions.
Exceptional costs were partially offset by a GBP3.9m credit on
release of liabilities related to the settlement of historic patent
claims associated with the acquisition of Monitise Americas, Inc.
(formerly Clairmail, Inc.).
Loss Before Tax
Group loss before tax was GBP227.4m, compared to a loss in FY
2014 of GBP63.4m.
Tax
A tax credit of GBP3.9m was recorded in the year (FY 2014:
GBP3.4m credit) principally relating to non-cash movements on the
unwinding of deferred tax recognised on acquired intangible assets.
The Group has an unrecognised deferred tax asset of approximately
GBP79.0m that is available for offset against future tax expenses
in the companies in which the losses arose.
Statutory Loss After Tax
The reported statutory loss after tax for FY 2015 was GBP223.6m
(FY 2014: GBP60.1m). On an adjusted basis, excluding share-based
payments, exceptional items, impairments and acquisition related
amortisation, loss after tax was GBP55.3m (FY 2014: GBP43.7m). The
increased loss was largely driven by the reduction in gross profit
for the year.
Loss Per Share
The basic and diluted loss per share was 10.8p (FY 2014: 3.6p).
On an adjusted basis excluding share-based payments, exceptional
items, impairments and acquisition-related amortisation, basic and
diluted loss per share was 2.7p compared to 2.6p in FY 2014.
Cash Flow and Funds
The Group ended the year with a gross cash position of GBP88.8m
at 30 June 2015 compared to GBP129.1m at 31 December 2014 and
GBP146.8m at 30 June 2014. Net cash was GBP88.2m, with finance
lease liabilities becoming immaterial at GBP0.6m.
Free cash outflow excluding exceptional items, funding and
acquired cash was GBP96.4m, compared to GBP63.9m in FY 2014. Free
cash outflow was significantly reduced in H2 FY 2015 at GBP32.8m
compared to GBP63.6m in H1 FY 2015. Net working capital outflows of
GBP8.5m reflect reductions in deferred income and accrued
expenses.
In November 2014, Santander, Telefónica and MasterCard
participated in an equity fundraise, to support the development and
accelerated rollout of Monitise's global platform capabilities with
a net investment of GBP47.6m.
Joint venture funding totalled GBP1.2m in the year, down from
GBP3.4m in FY 2014. Joint venture funding does not reflect the
initial funding of the new joint venture with Santander of GBP3.0m,
which was netted off against the receivable for the licence fee.
Both partners have committed to provide up to a maximum of GBP10.0m
of capital each to the joint venture over two years dependent on
the scale and nature of opportunities identified.
Capital expenditure increased from GBP26.1m to GBP45.0m, as the
Group invested in the productisation and development of its
technology platforms. H2 FY 2015 capital spending was GBP19.1m (H1
FY 2015: GBP25.9m). Capital spending included GBP40.8m (FY 2014:
GBP21.3m) of intangible purchases, including payments relating to
prior year licence purchases. Capitalisation of research and
development costs was GBP29.6m (FY 2014: GBP17.6m).
Cash exceptional expenses were GBP9.5m (FY 2014: GBP1.6m),
largely reflecting restructuring and strategic review costs.
Capital expenditure is expected to reduce significantly in FY
2016 following the development and launch of the new cloud platform
in April 2015. In addition to continued exceptional costs to
support our restructuring, cash outflow will reflect payments
associated with onerous contracts through FY 2016 to FY 2018,
weighted towards earlier years. We would expect activities underway
to limit outflows in respect of onerous contracts in FY 2016 to
mid-to-high single-digit million pounds.
(MORE TO FOLLOW) Dow Jones Newswires
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Performance Indicators
We are committed to providing financial and operational metrics,
aligned to our strategic objectives, to assist with tracking
business progress going forward.
In the past, we have reported non-financial metrics associated
with registered users, live transactions and payments and transfers
initiated via Monitise technology. However, acquisitions have
broadened the scope of the business, and with the shift in focus to
growth through our new cloud platform and working through partners,
these metrics are no longer considered appropriate. For historical
comparison, registered users continued to grow as expected in H2
2015 in line with past trends of c. 500,000 additional users per
month.
New metrics more relevant to the future business direction are
under consideration.
Brad Petzer
Monitise Chief Financial Officer
CONSOLIDATED STATEMENT OF
COMPREHENSIVE
INCOME
for the year ended
30 June 2015
2015 2014
Note GBP'000 GBP'000
------------------------- --------------- ------------------- -------------------------
Revenue 2 89,700 95,101
Cost of sales (43,227) (33,391)
-------------------------- --------------- ------------------- -------------------------
Gross profit 46,473 61,710
Operating costs before depreciation,
amortisation, impairments and share-based
payments(1) (88,273) (93,079)
-------------------------------------------------- ------------------- -------------------------
EBITDA(2) (41,800) (31,369)
Depreciation, amortisation
and impairments(1) (119,196) (23,920)
----------------------------- --------------- ------------------- -------------------------
Operating loss before
share-based
payments and exceptional items (160,996) (55,289)
Share-based
payments(1) (27,977) (9,802)
Exceptional gain on
acquisition
of subsidiary - 7,692
Other exceptional
items(1) 3 (34,151) (1,909)
--------------------------- --------------- ------------------- -------------------------
Operating
loss 3 (223,124) (59,308)
Finance income 442 522
Finance expense (963) (2,398)
Share of post-tax
loss of joint ventures (3,788) (2,251)
---------------------------- --------------- ------------------- -------------------------
Loss before
income tax (227,433) (63,435)
Income tax 3,882 3,370
-------------------------- --------------- ------------------- -------------------------
Loss for the year
attributable
to the owners of the parent (223,551) (60,065)
Other comprehensive income that
may
be reclassified subsequently to
profit
or loss:
Currency translation
differences
on consolidation 8,150 (13,385)
------------------------------ --------------- ------------------- -------------------------
Total comprehensive expense for
the
year attributable to the owners
of
the parent (215,401) (73,450)
Loss per share attributable to owners of the
parent during the year (expressed in pence
per share):
- basic and
diluted 4 (10.8) (3.6)
-------------------------- --------------- ------------------- -------------------------
(1) Total Operating costs after depreciation, amortisation,
impairments, share-based payments and exceptional
expenses (including one-off costs of GBPnil (2014:
GBP112,000) included in Exceptional gain on acquisition
of subsidiary) are GBP269,597,000 (2014: GBP128,822,000).
(2) EBITDA is defined as Operating loss before exceptional
items, depreciation, amortisation, impairments
and share-based payments charge.
The comparative figures include the effects of
the finalisation of acquisition accounting relating
to prior year acquisitions and include a reclassification
of service delivery costs from operating expenses
to cost of sales
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
as at 30
June 2015
Note 2015 2014
GBP'000 GBP'000
-------------------------------------- ---- --------- ---------
ASSETS
Non-current
assets
Property, plant
and equipment 5 7,276 10,135
Intangible
assets 6 216,273 287,767
Investments
in joint ventures 500 529
---------------------------------------- ---- --------- ---------
224,049 298,431
Current Assets
Trade and other
receivables 27,824 37,114
Current tax
assets - 195
Cash and cash
equivalents 88,801 146,828
---------------------------------------- ---- --------- ---------
116,625 184,137
-------------------------------------- ---- --------- ---------
Total assets 340,674 482,568
--------------------------------------- ---- --------- ---------
LIABILITIES
Current Liabilities
Trade and other
payables (34,494) (65,009)
Current tax
liabilities (24) (164)
Provisions (14,658) (313)
Financial
liabilities 10 (10,036) (7,758)
--------------------------------------- ---- --------- ---------
(59,212) (73,244)
Non-current
liabilities
Other payables (3,936) (4,408)
Provisions 10 (15,200) -
Financial
liabilities (335) (7,676)
Deferred
tax liabilities (10,208) (13,931)
--------------------------------------- ---- --------- ---------
Total liabilities (88,891) (99,259)
--------------------------------------- ---- --------- ---------
Net assets 251,783 383,309
--------------------------------------- ---- --------- ---------
EQUITY
Capital and reserves attributable
to owners of the parent
Ordinary
shares 21,682 19,448
Ordinary shares
to be issued 2,511 2,511
Share premium 383,721 336,990
Foreign exchange
translation reserve (2,512) (10,662)
Other reserves 244,214 217,041
Accumulated
losses (397,833) (182,019)
--------------------------------------- ---- --------- ---------
Total equity 251,783 383,309
The comparative figures include the effects of the finalisation
of acquisition accounting relating to prior year acquisitions.
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year
ended 30 June
2015
Ordinary Share-based
shares Reverse payment Foreign
Ordinary to Share Merger acquisition reserve Accumulated exchange
shares be premium reserve reserve losses translation Total
issued
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------- ---------- --------- ---------- ------------- ------------- ------------- ------------- ----------
Balance
at 1 July
(MORE TO FOLLOW) Dow Jones Newswires
September 09, 2015 02:01 ET (06:01 GMT)
2013 15,630 - 216,594 141,914 (25,321) 14,154 (124,745) 2,723 240,949
Loss for
the year - - - - - - (60,065) - (60,065)
Other comprehensive
expense - - - - - - - (13,385) (13,385)
-------------------- ---------- ---------- --------- ---------- ------------- ------------- ------------- ------------- ----------
Total comprehensive
expense - - - - - - (60,065) (13,385) (73,450)
Issue of
Ordinary
shares (net
of expenses) 3,030 - 104,435 79,340 - - - - 186,805
Issue of
Ordinary
shares relating
to prior
year business
combinations 9 2,511 - 285 - (109) - - 2,696
Issue of
Ordinary
shares relating
to exercise
of warrants 490 - 15,158 - - - - - 15,648
Share-based
payments - - - - - 9,569 - - 9,569
Exercise
of share
options 289 - 803 - - (2,791) 2,791 - 1,092
-------------------- ---------- ---------- --------- ---------- ------------- ------------- ------------- ------------- ----------
Balance at
30 June 2014 19,448 2,511 336,990 221,539 (25,321) 20,823 (182,019) (10,662) 383,309
-------------------- ---------- ---------- --------- ---------- ------------- ------------- ------------- ------------- ----------
Balance
at 1 July
2014 19,448 2,511 336,990 221,539 (25,321) 20,823 (182,019) (10,662) 383,309
Loss for
the year - - - - - - (223,551) - (223,551)
Other comprehensive
income - - - - - - - 8,150 8,150
-------------------- ---------- ---------- --------- ---------- ------------- ------------- ------------- ------------- ----------
Total comprehensive
(expense)/income - - - - - - (223,551) 8,150 (215,401)
Issue of
Ordinary
shares (net
of expenses) 1,614 - 46,014 - - - - - 47,628
Issue of
Ordinary
shares relating
to prior
year business
combinations 458 - - 7,133 - (151) - - 7,440
Share-based
payments - - - - - 27,928 - - 27,928
Exercise
of share
options 162 - 717 - - (7,737) 7,737 - 879
-------------------- ---------- ---------- --------- ---------- ------------- ------------- ------------- ------------- ----------
Balance at
30 June 2015 21,682 2,511 383,721 228,672 (25,321) 40,863 (397,833) (2,512) 251,783
The comparative figures include the effects of the finalisation
of acquisition accounting relating to prior year acquisitions.
CASH FLOW STATEMENT
for the year ended
30 June 2015
2015 2014
Note GBP'000 GBP'000
--------------------------------------- ----- --------- ---------
Cash flows used
in operating activities
Cash used by operations,
before exceptional expenses 7 (50,345) (34,784)
Exceptional
expenses (9,491) (1,592)
Net income tax
(paid)/received (141) 415
----------------------------------------- ----- --------- ---------
Net cash used in
operating activities (59,977) (35,961)
Investing
activities
Cash acquired on acquisition of subsidiary
net of cash consideration paid - 4,179
Investments
in joint ventures (1,244) (3,437)
Interest
received 447 331
Purchases of property,
plant and equipment (4,135) (4,819)
Purchase and capitalisation
of intangible assets (40,821) (21,330)
------------------------------------------- ----- --------- ---------
Net cash used in investing
activities (45,753) (25,076)
Financing
activities
Proceeds from issuance of ordinary
shares (net of expenses) 46,995 105,571
Share options and
warrants exercised 879 16,740
Interest
paid (164) (231)
Repayments of finance
lease liabilities (277) (231)
------------------------------------------ ----- --------- ---------
Net cash from financing
activities 47,433 121,849
------------------------------------------ ----- --------- ---------
Net (decrease)/increase in
cash and cash equivalents (58,297) 60,812
Cash and cash equivalents
at beginning of the year 146,828 86,770
Effect of exchange
rate changes 270 (754)
------------------------------------------ ----- --------- ---------
Cash and cash equivalents
at end of the year 88,801 146,828
1. Basis of Preparation
The financial information presented in this Preliminary
Announcement is extracted from, and is consistent with, the Group's
audited financial statements for the year ended 30 June 2015.
The preliminary announcement for the year ended 30 June 2015 was
approved by the Board of Directors on 8 September 2015. The
financial information set out above does not constitute the
Company's statutory accounts for the year ended 30 June 2015 or
2014 but is derived from those accounts. Statutory accounts for
2015 will be delivered following the Company's annual general
meeting. The auditors have reported on those accounts; their report
was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The Group's results have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
Going concern
At 30 June 2015, the Group had cash of GBP88.8m. The Directors
have prepared a cash flow forecast, including reasonable
sensitivities, which shows sufficient funding to see the Group to
break even and beyond. The forecast includes cost savings which
will be generated from the business optimisation programme begun
during the last financial year, encompassing further headcount
rationalisation, exiting from non-core geographies and further
property rationalisation. Furthermore, capital expenditure is
expected to be substantially reduced during the year ending 30 June
2016 following the development and launch of the new platform in
April 2015. This new platform is expected to drive a new, higher
margin revenue stream. The Directors therefore confirm that they
have a reasonable expectation that the Group will have adequate
resources to continue in operational existence for the foreseeable
future and accordingly these financial statements are prepared on a
going concern basis.
2. Segmental information
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. At 30 June
2015, the Group has one operating segment. The operating segment's
operating results are reviewed regularly by the Board of Directors
in order to make decisions about resources to be allocated to the
segment and to assess its performance.
In presenting information on the basis of geography, revenue is
based on the location of the customers. Non-current assets are
based on the geographical location of those assets.
Geographical
disclosures
Revenues Non-current
assets
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- --------
United Kingdom 54,511 55,356 63,153 115,904
Americas 25,114 29,228 142,498 135,880
Turkey 4,731 2,506 16,549 20,872
Europe 2,787 2,045 - -
Rest of World 2,557 5,966 1,849 25,775
------------------------ -------- -------- -------- --------
Total 89,700 95,101 224,049 298,431
(MORE TO FOLLOW) Dow Jones Newswires
September 09, 2015 02:01 ET (06:01 GMT)
------------------------ -------- -------- -------- --------
Products
and services
Revenues
2015 2014
GBP'000 GBP'000
----------------------- -------- -------- -------- --------
Product licences 11,875 19,329
Subscription and
transaction revenue 33,089 31,231
-------------------------- -------- -------- -------- --------
User generated
revenue 44,964 50,560
Development and
integration services 44,736 44,541
-------------------------- -------- -------- -------- --------
Total 89,700 95,101
Revenues derived from single customers whose
revenues are 10% or greater than overall Group
revenues in either the current, or prior, financial
year are given below:
2015 2014
GBP'000 GBP'000
---------------------- ---------------- ----------------
External
customer
A 5,037 10,898
External
customer
B 15,855 19,641
External
customer
C 8,251 12,181
----------------------- ---------------- ----------------
3. Operating
loss
This is stated 2015 2014
after charging:
GBP'000 GBP'000
-------------------------------- -------- --------
Depreciation 4,204 4,032
Impairment of property, 1,501 -
plant and equipment
Amortisation 20,671 15,737
Impairment of intangible
assets 92,380 4,151
Impairment of investment 440 -
in joint venture
Other exceptional 2015 2014
items comprise:
GBP'000 GBP'000
-------------------------------- -------- --------
Acquisition
related expenses 109 2,518
Onerous contracts 30,292 -
Adjustment to contingent
consideration 1,314 (609)
Restructuring 4,485 -
costs
Strategic 1,836 -
review costs
Release of acquisition-related (3,885) -
liabilities
34,151 1,909
-------------------------------- -------- --------
Non-recurring acquisition-related expenses relate to
acquisitions, together with costs incurred for aborted
acquisitions.
The charge for onerous contracts relates to those contracts
under which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefit expected to be received
under it. In particular, obligations associated with a number of
contracts with a third party IT and business services provider have
been provided. Additionally, during the year ended 30 June 2015, a
number of restructuring activities were undertaken which resulted
in several onerous property lease contracts.
Adjustments to contingent consideration reflect the
recalculation of amounts owed to former shareholders of the
acquired businesses based on performance related criteria in
accordance with acquisition related contracts.
Restructuring costs are associated with a number of
restructuring activities undertaken during the year ended 30 June
2015 and principally relate to redundancy and termination
costs.
Strategic review costs related primarily to professional advisor
fees incurred in respect of Monitise's review of its strategy and
ownership structure announced on 22 January 2015.
The release of acquisition-related acquired liabilities relates
to the settlement of a number of historic patent claims associated
with the previous acquisition of Monitise Americas, Inc. (formerly
Clairmail, Inc.).
4. Loss per
share
------------
Basic and diluted
Basic loss per share is calculated by dividing the loss
attributable to owners of the parent by the weighted average number
of Ordinary shares in issue during the year. As the Group is
loss-making, any share options in issue are considered to be
'anti-dilutive'. As such, there is no separate calculation for
diluted loss per share.
2015 2014
------------------------------------ -----------------------------------------------
Weighted Weighted
average Loss average
Loss number per Loss number Loss
for of shares share for of shares per
the (thousands) (pence) the (thousands) share
year year (pence)
GBP'000 GBP'000
-------------- ---------- ------------ ---------- ---------- ------------ ----------
Loss attributable
to owners
of the parent (223,551) 2,069,164 (10.8) 1,687,414 (3.6) (60,065)
------------------ ---------- ------------ ---------- ---------- ------------
The comparative figures include the effects of the finalisation
of acquisition accounting relating to prior year acquisitions.
5. Property, plant and equipment
Office Computer Leasehold
equipment equipment improvements Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------------- ----------- -------------- --------
Cost:
As at 1 July
2013 671 8,856 3,194 12,721
Exchange
differences (12) (63) (8) (83)
Additions 22 3,565 1,878 5,465
Acquisitions 484 241 73 798
Disposals (41) (3,213) - (3,254)
----------------- --------------- ----------- -------------- --------
As at 30
June 2014 1,124 9,386 5,137 15,647
Accumulated - - - -
depreciation:
As at 1 July
2013 269 4,036 367 4,672
Exchange
differences (18) (52) (7) (77)
Charge 206 3,389 437 4,032
Disposals (41) (3,074) - (3,115)
----------------- --------------- ----------- -------------- --------
As at 30
June 2014 416 4,299 797 5,512
----------------- --------------- ----------- -------------- --------
Net book
value:
As at 1 July
2013 402 4,820 2,827 8,049
----------------- --------------- ----------- -------------- --------
As at 30
June 2014 708 5,087 4,340 10,135
Cost:
As at 1 July
2014 1,124 9,386 5,137 15,647
Exchange
differences 143 14 (23) 134
Additions 460 2,103 358 2,921
Disposals (479) (3,214) (47) (3,740)
----------------- --------------- ----------- -------------- --------
As at 30
June 2015 1,248 8,289 5,425 14,962
----------------- --------------- ----------- -------------- --------
Accumulated
depreciation:
As at 1 July
2014 416 4,299 797 5,512
Exchange
differences 152 34 (1) 185
Charge 412 2,960 832 4,204
Impairment - 427 1,074 1,501
Disposals (462) (3,209) (45) (3,716)
----------------- --------------- ----------- -------------- --------
As at 30
June 2015 518 4,511 2,657 7,686
----------------- --------------- ----------- -------------- --------
Net book
value:
As at 1 July
2014 708 5,087 4,340 10,135
----------------- --------------- ----------- -------------- --------
As at 30
June 2015 730 3,778 2,768 7,276
----------------- --------------- ----------- -------------- --------
The impairment charge for the year ended 30th June 2015 is a
one-off amount of GBP1,501,000 which relates to write off of
leasehold improvements associated with certain vacated property
leases and computer equipment which has become redundant mainly as
a consequence of the restructuring activities conducted during the
year.
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The comparative figures include the effects of the finalisation
of acquisition accounting relating to prior year acquisitions.
6. Intangible
assets
Purchased
and
Intellectual acquired Capitalised
Customer property Acquired software development
Goodwill contracts rights technology licences costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
Cost:
As at 1 July
2013 137,663 27,666 222 18,625 6,189 18,882 209,247
Exchange
differences (13,135) (2,518) - (1,172) (20) (116) (16,961)
Additions - - - - 11,452 17,617 29,069
Acquisitions 71,866 20,546 55 9,291 128 - 101,886
Disposals - - - - (763) - (763)
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
As at 30
June 2014 196,394 45,694 277 26,744 16,986 36,383 322,478
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
Accumulated
amortisation:
As at 1 July
2013 - 4,290 215 3,080 2,303 6,711 16,599
Exchange
differences - (623) - (354) (13) (23) (1,013)
Charge - 4,330 7 3,734 2,637 5,029 15,737
Impairment 1,546 - - 476 - 2,129 4,151
Disposals - - - - (763) - (763)
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
As at 30
June 2014 1,546 7,997 222 6,936 4,164 13,846 34,711
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
Net book
value:
As at 1 July
2013 137,663 23,376 7 15,545 3,886 12,171 192,648
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
As at 30
June 2014 194,848 37,697 55 19,808 12,822 22,537 287,767
Cost:
As at 1 July
2014 196,394 45,694 277 26,744 16,986 36,383 322,478
Exchange
differences 8,536 473 - 333 (147) 179 9,374
Additions - - - - 3,051 29,611 32,662
Disposals - - - - (2,007) - (2,007)
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
As at 30
June 2015 204,930 46,167 277 27,077 17,883 66,173 362,507
Accumulated
amortisation:
As at 1 July
2014 1,546 7,997 222 6,936 4,164 13,846 34,711
Exchange
differences 1 368 (1) 226 (146) 31 479
Charge - 6,601 31 5,026 3,803 5,210 20,671
Impairment 40,223 1,853 - 3,365 9,533 37,406 92,380
Disposals - - - - (2,007) - (2,007)
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
As at 30
June 2015 41,770 16,819 252 15,553 15,347 56,493 146,234
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
Net book
value:
As at 1 July
2014 194,848 37,697 55 19,808 12,822 22,537 287,767
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
As at 30
June 2015 163,160 29,348 25 11,524 2,536 9,680 216,273
---------------- ---------- ----------- -------------- ------------ ----------- ------------- ---------
The comparative figures include the effects of the finalisation
of acquisition accounting relating to prior year acquisitions.
Impairment in the year
Impairments comprise goodwill relating to historic acquisitions
in the Asia Pacific region and an historic acquisition in Europe,
as well as previously capitalised software and research and
development costs where either these technologies or geographies
are no longer core to Monitise's future technology strategy in the
short-term due to market readiness.
Goodwill acquired in a business combination is allocated at
acquisition to the cash-generating unit ('CGU') that is expected to
benefit from that business combination. As a consequence of the
strategic review and a number of organisational changes conducted
during the year ended 30 June 2015, Monitise will be able to
identify cash flows going forward at lower levels than has
previously been possible. As a result, Monitise's CGUs have changed
from the previous year to allow a more specific review of
impairments to goodwill.
The carrying amounts of goodwill at 30 June,
post impairment, and the CGUs to which they
are allocated, are as follows:
2015 2014
GBP'000 GBP'000
------------------------------------------------ ---- ---- ---------- ---------
USA 116,629 107,649
Content 16,270 16,270
Create 24,500 24,500
Turkey 5,761 6,866
Unallocated
at 30 June - 39,563
------------------------------------------------- ---- ---- ---------- ---------
163,160 194,848
7. Reconciliation of net loss to
net cash used in operating activities
2015 2014
GBP'000 GBP'000
------------------------------------------------ ---- --- ---------- ---------
Loss before
income tax (227,433) (63,435)
Adjustments
for:
Depreciation and impairments
to property, plant and equipment 5,705 4,032
Amortisation and impairments
to intangible assets 113,491 19,888
Share-based
payments 27,977 9,802
Profit on acquisition
of subsidiaries - (7,692)
Loss/(profit) on disposal
of property, plant and
equipment 24 (361)
Finance costs
- net 521 1,876
Exceptional
costs 34,151 1,909
Share of post-tax
loss of joint ventures 3,788 2,251
--------------------------------------------------- ---- --- ---------- ---------
Operating cash flows before
movements in working capital (41,776) (31,730)
Decrease/(increase)
in receivables 9,055 (11,858)
(Decrease)/increase
in payables (16,968) 16,168
Decrease
in provisions (656) (7,364)
------------------------------------------------- ---- --- ---------- ---------
Cash used in
operations (50,345) (34,784)
The comparative figures include the effects
of the finalisation of acquisition accounting
relating to prior year acquisitions.
8. Net funds
2015 2014
GBP'000 GBP'000
------------------------------------------------ --- ------------ --------
Cash at bank
and in hand 88,801 146,828
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