Interim Results

RNS Number : 2557K

Bango PLC

20 September 2016

 

20 September 2016   

BANGO PLC

("Bango")

Interim Results

Strong growth in End User Spend and stable OPEX provide foundation for move to profitability

Bango (AIM: BGO), the mobile payments company, today announces its unaudited interim results for the six months ended 30 June 2016.

1h2016 Financial highlights

·       End User Spend (EUS) increased 150% YoY to £46.17m (1h2015: £18.45m)

o   Annualized EUS in June 2016 was £159m, 250% more than June 2015
(143% excluding BilltoMobile)

·       Gross profit on EUS increased to £0.85m (1h2015: £0.61m), up 39% YoY

·       EUS margin of 1.67% (1h2015: 2.06%), in line with forecasts

·       Improved Adjusted LBITDA* -£1.64m (1h2015: -£1.82m)

·       Opex stable at £2.49m (1h2015: £2.43m)

o   Over 5x EUS growth confirms platform scalability

·       Cash balance of £7.24m at 30 June 2016 (30 June 2015: £4.04m; 31 Dec 2015: £12.14m), sufficient to fund the group through to profitability

* Adjusted LBITDA is Operating Loss before depreciation, amortization and share based payments.

1h2016 Operational highlights

·       Acquired US carrier billing business BilltoMobile for £2.15m ($3m) in cash and £0.35m ($0.5m) in Bango shares. Brings initial £55m annualized EUS along with new customers to the Bango Payment Platform, including significant additional Google Play EUS, within existing operational cost base. (May 2016)

·       Launched Direct Carrier Billing (DCB) for Google Play with Idea Cellular, the first Google Play DCB launch in the Indian subcontinent. (Mar 2016)

·       Strengthened Asia presence with senior hire and Tokyo office to support growth across the region. (Feb 2016)

·       Expanded agreement and integration with Microsoft to deliver DCB across all Windows 10 devices. (Jan 2016)

·       New app store billing routes launched in India, Norway, Finland, Belgium, Australia, Indonesia and Malaysia, including a migration to Bango from another provider

Post period highlights

·       Successful completion of first phase of BilltoMobile service transition. Operations and finance now managed from Bango UK with support from Bango US

·       Pokémon GO launch in July 2016 drove significant increase in EUS, most of which is from users purchasing for the first time using DCB

·       Established strategic partnership with Danal Co., Ltd (064260.KQ) to expand reach of the Bango Payment Platform into Korea and China through innovative new payment systems, and to enable stores in Korea and China to leverage the Bango Payment Platform globally

·       Expanded the availability of carrier billing with Microsoft Windows Store in September 2016. For the first time, users in Finland, Norway and Hungary can make purchases from any Windows 10 device, including their Xbox One consoles, using their mobile phone account

 

Ray Anderson, Chief Executive Officer at Bango, commented:  

"Today's results show End User Spend (EUS) growth ahead of expectations. EUS is up by a factor of six since the beginning of last year, and is flowing through into gross profit growth. This demonstrates the ability of the Bango business to handle this rapid pace of growth and add new customers to the platform on a stable cost base.

This EUS growth is fueled by four driving forces - wider smartphone usage, an increasing range of content and services becoming available to users, the activation of additional routes to collect payments from more users and technology developed by Bango to improve the customer experience and increase sales.

With these four growth factors driving Bango's high revenue growth on a stable cost base, we remain confidently on track to become profitable and cash flow positive using Bango's current resources."

This announcement contains inside information as defined in EU Regulation No. 596/2014 and is in accordance with the Bango obligations under Article 17 of that Regulation.

Contact Details:

Bango PLC	FTI Consulting	Cenkos Securities PLC
Tel. [phone]	Tel. [phone]	Tel. [phone]
Ray Anderson, CEO	Matt Dixon	Nick Tulloch
Rachel Elias-Jones, CFO Anil Malhotra, CMO	Chris Lane Rob Mindell	Beth Mckiernan

About Bango

Bango is the standard platform chosen by leading global stores to deliver mobile payments to everyone. As the next billion consumers adopt their first smartphone and look for universal payment methods, Bango will be there to unlock the world of apps, video, music, games and other content that brings those smartphones to life. Global stores plugging into the Bango Payment Platform include Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOG), Samsung (005930: Korea SE) and Microsoft (NASDAQ: MSFT). Bango also partners with leading payment providers around the world to drive new users and revenues through its industry-leading mobile payment solutions. For more information, visit www.bango.com.

 

CEO's statement

These results demonstrate continued strong progress by Bango. The Bango Payment Platform is comfortably processing EUS at a rate of about a quarter of a billion dollars a year, six times higher than at the beginning of 2015. The increasing spend is flowing through into increasing transaction fees, driving up gross profit, while costs are stable, showing the operational leverage of the Bango Payment Platform.

With many more mobile operators being integrated into the Bango Payment Platform, and an increasing range of content and services being provided by leading Bango partners, Bango is confident of continued high growth in transaction volumes.

Unique Bango technology gives the stores substantial value that they cannot get elsewhere. This is demonstrated by the new agreements with major stores won in the first half of 2016, which will fuel further growth in the coming year.

The power and reliability of the Bango technology was confirmed by the positive support Bango has received from major US mobile operators during the acquisition of the BilltoMobile business from Danal, Inc. The opportunity to use Bango technology to improve customer experiences and accelerate DCB growth in the US is significant.

The outlook for 2016 is excellent. The growth trends from existing stores and existing routes continue to be healthy. New app stores and content types are being added. Integration of new payment routes and enhancements to the Bango Boost technology will provide additional growth.

With no significant increases in costs planned as the growth continues, the scene is set for a move to profitability and positive cash flows well within current Bango resources.

Customer acquisition and key partnerships

BilltoMobile acquisition

On 6 May 2016, Bango acquired BilltoMobile, the US based carrier billing services of Danal, Inc. for £2.5m ($3.5m), comprising £2.15m ($3m) in cash £0.35m ($500,000) in Bango shares, plus an additional performance linked amount expected to be less than £25k ($35,000). The acquisition positions Bango as the leader in carrier billing in the US market and consolidates its position as the world's leading provider of carrier billing for app stores.

The acquisition enables Mobile Network Operators (MNOs) and other Bango partners - including Google, Microsoft and PayPal - to use Bango technology for carrier billing in the US, achieving greater scale and higher revenues from carrier-billed payments in this high-value market. Bango is now the only provider of DCB across all four major US MNOs, representing more than 300 million connected devices and handling $80 million of transactions in 2015.

Microsoft

On 5 January 2016, Bango announced an expanded agreement and integration with Microsoft Corp. to deliver carrier-billed payments across Windows 10 devices. Bango has since launched DCB for Windows Store into three European countries across four MNOs, and the pace of rollouts is expected to be accelerated during the second half due to an agreement with a major MNO Group. In addition to Windows 10 PC, tablet and smartphones users, DCB is now available to Xbox One users.

Danal partnership

On 12 August 2016, Bango announced that it had signed a Memorandum of Understanding with Korean mobile commerce company, Danal Co., Ltd (Danal), aimed at strengthening its global payments footprint and for mutual technical and business benefit. Danal payment methods integrated into the Bango Payment Platform will enable Bango's global partners to increase their payment reach and make more sales. Danal merchant partners will gain access to the payment providers integrated into the Bango Payment Platform.

Market development

Idea Cellular DCB for Google Play in India

Bango implemented DCB for the Google Play store in partnership with Idea Cellular in India. Idea Cellular subscribers can now pay for Google Play content, including apps, games, music, books and more, charging the cost directly to their mobile phone accounts. This is the first time Android users in India have been able to charge purchases in the Google Play store, and in-app, to their phone bills.

The regulatory and other complexities of business in India were accommodated by the flexibility of the Bango Payment Platform. Bango expects to build on this significant market entry to enable further sales of content and services using DCB in India.

Increased reach to 1.7 billion users

The addition of new DCB routes, especially in countries with large populations such as India has increased the reach of DCB through the Bango Payment Platform to more than 1.7 billion users. Integrations are underway which could expand that reach to over 2 billion once activated.

Pokémon GO - uplift in revenue and new users

Pokémon GO combines smartphone capabilities and location technology to create a gaming platform where players are able to explore the game in the real world. Players travel to physical sites and use a mobile device to collect and harvest virtual creatures, called Pokémon, which appear on the screen as if they were in the same real-world location as the player. Pokémon GO has been an instant global phenomenon, having been downloaded more than 500 million times, and, significantly for Bango, the game supports in-app purchases for additional in-game items.

In July, spend on Pokémon GO in-app sales generated significant additional EUS, with no sign of attrition from other games and content. Data taken from Bango Dashboard from before and after the launch of Pokémon GO, highlighted very little movement in revenue from the existing top three best sellers and all other content, despite the additional substantial revenue from Pokémon GO content - most of which came from users seen spending for the first time using DCB.

Product development

Security and Privacy

With the increasing demands from regulators and Bango partners for improved security and privacy, a number of additional capabilities were engineered into the Bango Payment Platform - especially relating to personal information protection and the ability to segregate data, or even restrict certain data to specific datacenters in certain countries.

Enhanced API

The Bango API was enhanced to add functionality relating to use of the Bango Payment Platform for more complex payment operations including partial fulfilment and partial refund, together with the corresponding reporting and reconciliation systems. These capabilities enable the Bango Payment Platform to be used in new ways by customers with ambitions beyond simple digital goods and apps.

Project "Jarvis"

Alongside Bango Grid, which speeds up research and activation of routes by Bango partners, innovative technology and an associated toolset and user interface were developed by Bango to further reduce the cost and effort of integrating new DCB and other payment systems. This "Jarvis" technology will ensure that the next hundred or so new payment integrations can be accomplished more quickly through a "plug, test and play" activation process.

Bango Boost

Techniques for increasing the number of active customers and spending levels have been added to Bango Boost. Sophisticated data analysis using a range of tools is available to Bango partners, from which actions to grow EUS can be taken.

Sales and Marketing activity

The acquisition of BilltoMobile enabled Bango to showcase the strengths of the Bango business model and technology. On the back of this deal, a 3-month public relations and media program, supported by US-based Calysto Communications, generated coverage across mainstream and tech media in the US and internationally. CNBC, Fortune, TechCrunch and a number of leading analysts covered Bango's acquisition and the positive impact this deal is expected to have on the US carrier billing market.

Bango published a detailed analysis of how pre-paid subscribers using DCB in Google Play spend more across all services on a mobile network (Proximus in Belgium). This report has been downloaded by operators across the world, many of whom previously believed that customers had a fixed budget for mobile spending, and by diverting some of this budget to low-margin app store purchases, there would be a loss of revenue from spending on high margin network services. The data reported by Bango has shown this not to be the case, and underlined the disproportionally high value that carrier billing buyers represent to mobile operators across all services.

Bango has expanded its global footprint by strengthening its presence in Silicon Valley and Japan. A newly opened office in Tokyo for Bango Japan is headed up by a senior Japanese executive, part of Bango's continued commitment to support its partners in major mobile markets. Senior executive hire Atsuhisa (Andy) Suzuki, joins Bango as Japan Country Manager and regional VP for Asia Pacific. Similarly, Bango has moved to a bigger office in San Jose, close to Google, PayPal and Apple, providing a basis for the longer term location of Bango people to work closely with our main global partners based out of the West Coast of USA. These initiatives on sales development are offset from operational cost savings and so are not expected to materially increase Bango's cost base.

Outlook

Having substantially exceeded Bango's full year target of a 100% increase in annualized EUS, the full year picture for Bango looks very strong and ahead of expectations at the start of the year.

Bango continues to expand its network of payment routes between MNOs and stores, and a healthy pipeline of activations remains for the second half of the year. Among a pipeline of over 200 opportunities being actively pursued, a small number of payment routes in the 2017 pipeline would represent a material increase in EUS.

Ray Anderson

Chief Executive Officer

 

CFO's Statement

Bango business model

Bango earns revenue from every transaction processed through the Bango Payment Platform. Bango revenue is calculated either as a percentage of the sale value or as a fixed amount per transaction. As more sales are made through the Bango Payment Platform, more transaction fees are generated, increasing Bango revenues.

End User Spend (EUS)

EUS is the total of sales processed through the Bango Payment Platform. EUS shows the growth of business through the Bango Payment Platform, and is the most significant Key Performance Indicator that management uses to measure the development of the business and the success of Bango partners.

EUS for 1h2016 was £46.17m, up 150% from 1h2015 (£18.45m) due to growth from the existing activations and the EUS from the acquisition of BilltoMobile Inc. from May 6 2016 to June 30 2016.

At the end of June 2016, Bango had an annualized run rate of £159.0m (1h2015: £42m) which included 143% growth in the Bango EUS (excluding BilltoMobile). Annualized EUS in September 2016 was £167.4m.

BilltoMobile customers are being migrated to the existing Bango Payment Platform and will not be reported separately.

In the past year technology such as Bango Boost has helped generate additional growth of EUS on activated routes by between 20%-80% benefitting the stores, MNOs and Bango.

Revenue

Bango has two revenue streams, which it reports separately. Firstly, revenue from transaction fees due to EUS, secondly, revenue from platform fees paid by stores for new payment integrations.

Bango now reports on the Bango margin from transactions as revenue, instead of reporting a turnover figure which reflects the different commercial models. Turnover used to reflect 100% of a transaction where Bango was principal, and the Bango margin only for agency contracts. The proportion of the Bango business that is principal is now immaterial in comparison to the agency business. Reporting no longer reflects the different commercial agreements with the stores in the revenue figure, simplifying the relationship between EUS, revenue and gross profit. The prior year revenue figures are reported to aid comparison of the current year's performance.

Currently there are no significant costs of sales, therefore revenue is mostly margin on EUS, which is processed at no significant incremental cost. Prior year figures have been restated to reflect the change in reporting policy.

As Bango expects that the agency business will continue to be the significant driver of the business, it is appropriate to now change the presentation. As a result, the 2h2015 and FY2015 figures have been restated using the new presentation. Revenue in 1h2015 is now £0.61m, compared to £1.71m of turnover and FY2015 is now £1.30m compared to £3.20m of turnover. The difference is the principal business that was accounted for gross is now shown net.

Revenue from platform fees are one time fees charged to MNOs or stores for integrations or customized development work, or monthly fees for value adding services such as customer support.

The revenue from EUS more than doubled to £0.77m in 1h2016 compared to £0.39m in 1h2015 due to the corresponding growth of EUS between the two periods.

The platform fees in 1h2016 were £0.08m, down on 1h2015 (£0.23m) as there was less customized development work in the period, partly due to Bango developing tools such as Project Jarvis to speed up the time to activate a connection and reduce costs. Overall, revenue in 1h2016 grew 39% to £0.85m from £0.61m in 1h2015.

Margin on End User Spend

Margin on EUS was 1.67% (1h2015: 2.06%). This remains in line with market expectations and is expected to remain stable during 2h2016.

Bango earns a different margin on EUS in different markets and with different stores, large markets with high EUS will typically have a lower margin. The margin varies due to additional services that Bango offers to the store. In some cases, margin is lower on routes where the volume grows - with a tiered transaction fee being offered. Bango believes that its highly competitive transaction fees are important to sustain market leadership, which is achievable by leveraging the power of a common platform for all customers and payment routes.

Costs

The cost base of £2.49m for the first half of 2016 (1h2015: £2.43m) is stable and in line with forecasts. Exceptional costs of £0.15m relating to the acquisition of BilltoMobile are shown separately as these will not be recurring in 2017. Bango expects there to be some further migration costs of around £0.15m in 2h2016 associated with transitioning the remaining services to the Bango Payment Platform from Danal. The initiatives on sales development in Japan and San Jose are offset from operational cost savings and so are not expected to materially increase Bango's cost base.

Bango continues to review and test its systems to ensure that the Bango Payment Platform is always in a position to handle at least four or five times current EUS levels. As money has been saved through operational efficiencies this has been redeployed on sales and marketing to help grow Bango's market position. Bango also invested £0.6m in continuing to develop new products, the revenue from these developments is expected in FY2017.

LBITDA, adjusted to account for share based payments for the period ended 30 June 2016, was steady at -£1.64m (1h2015: -£1.82m).

Depreciation and amortization for 1h2016 increased to £0.81m (1h2015: £0.75m) due to increased capitalized R&D from prior years coming into use and amortization related to intangible assets purchased in the period. Share based payment charge remains broadly consistent at £0.22m (1h2015: £0.20m) and relates to the Bango share option program which enables all Bango employees to share in the future value of Bango.

Loss and Loss per share

The loss after tax was -£2.66m (1h2015: -£2.68m).

Loss per share 4.12p (1h2015: 5.14p).

Cash

Cash balances were £7.24m on 30 June 2016 (£4.04m on 30 June 2015). On 6 May 2016, $3m was paid for BilltoMobile Inc. The payment was made before the UK voted to leave the EU (Brexit) and therefore when sterling was stronger.

Bango had a negative operating cash flow of -£1.75m (1h2015: -£1.72m) in the half year, but had a strong cash balance of £7.24m (1h2015: £4.04m) enough to take Bango through to profitability.

Rachel Elias-Jones

Chief Financial Officer

Consolidated statement of comprehensive income

for the six months ended 30 June 2016

	Note	Six months ended 30 June 2016 Unaudited	Restated Six months ended 30 June 2015 Unaudited	Restated Year ended 31 December 2015 Audited
		£	£	£
Alternative performance measure (Non-IFRS)
End User Spend		46,167,918	18,449,760	44,684,300
Revenue		853,804	614,299	1,300,130
Cost of sales - payment providers		(5,499)	(7,258)	(33,054)
Gross profit		848,305	607,041	1,267,076
Other administrative expenses		(2,492,292)	(2,431,075)	(4,411,328)
Share based payments		(216,000)	(200,000)	(433,434)
Depreciation		(169,780)	(269,783)	(484,871)
Amortization		(644,160)	(480,188)	(969,013)
Non-recurring items - acquisition of BilltoMobile Inc		(152,478)	-	-
Total administrative expenses		(3,647,710)	(3,381,046)	(6,298,646)
Operating Loss		(2,826,405)	(2,774,005)	(5,031,570)
Interest payable		(7,613)	(10,222)	(20,865)
Investment income		18,141	6,223	24,327
Loss before taxation		(2,815,877)	(2,778,004)	(5,028,108)
Income tax		159,009	100,000	215,317
Loss and total comprehensive loss for the period attributable to equity holders of Bango PLC		(2,656,868)	(2,678,004)	(4,812,791)
Loss per share attributable to the equity holders of Bango PLC
Basic loss per share	5	(4.12)p	(5.14)p	(9.05)p
Diluted loss per share	5	(4.12)p	(5.14)p	(9.05)p

All of the activities of the group are classified as continuing.

Notes 1 to 9 are an integral part of the consolidated financial statements.

 

Consolidated balance sheet

for the six months ended 30 June 2016

As at:		30 June 2016 Unaudited	30 June 2015 Unaudited	31 December 2015 Audited
	Note	£	£	£
ASSETS
Non-current assets
Property, plant and equipment		391,182	643,516	507,295
Intangible assets	88	5,886,774	3,365,196	3,446,612
		6,277,956	4,008,712	3,953,907
Current assets
Trade and other receivables		1,521,491	1,088,952	1,128,897
Research and development tax credits		384,983	100,000	225,974
Cash and cash equivalents		7,239,900	4,039,240	12,135,326
		9,146,374	5,228,192	13,490,197
Total assets		15,424,330	9,236,904	17,444,104
EQUITY
Capital and reserves attributable to equity holders of Bango PLC
Share capital		13,003,569	10,427,599	12,886,350
Share premium account		30,262,948	22,137,953	30,101,510
Merger reserve		1,236,225	1,236,225	1,236,225
Other reserve		2,112,842	1,726,650	1,896,842
Foreign exchange revaluation reserve		83,056	-	-
Accumulated losses		(32,867,955)	(28,139,542)	(30,211,087)
Total equity		13,830,685	7,388,885	15,909,840

LIABILITIES
Current liabilities
Trade and other payables		1,394,713	1,321,942	1,170,244
Finance lease liabilities		160,554	327,144	268,476
		1,555,267	1,649,086	1,438,720
Non-current liabilities
Finance lease liabilities		38,378	198,933	95,544
		38,378	198,933	95,544
Total liabilities		1,593,645	1,848,019	1,534,264
TOTAL EQUITY AND LIABILITIES		15,424,330	9,236,904	17,444,104

Notes 1 to 9 are an integral part of the consolidated financial statements.
 

Consolidated cash flow Statement

for the six months ended 30 June 2016

		Six months ended 30 June 2016 Unaudited	Six months ended 30 June 2015 Unaudited	Year ended 31 December 2015 Audited
	Note	£	£	£
Net cash used by operating activities	6	(1,752,474)	(1,721,513)	(3,234,118)
Cash flows used by investing activities
Purchases of property, plant and equipment		(53,667)	(50,838)	(129,705)
Addition to intangible assets		(2,925,110)	(354,131)	(924,373)
Interest received		18,141	6,223	24,327
Net cash used by investing activities		(2,960,636)	(398,746)	(1,029,751)
Cash flows generated from financing activities
Proceeds from issuance of ordinary shares		-	67,486	11,107,518
Costs associated with issuance of ordinary shares		-	-	(617,723)
Interest payable		(7,613)	(10,222)	(20,865)
Capital payable on finance lease obligations		(165,087)	(149,269)	(311,329)
Net cash (used)/generated from financing activities		(172,700)	(92,005)	10,157,601
Net (decrease)/increase in cash and cash equivalents		(4,885,810)	(2,212,264)	5,893,732
Cash and cash equivalents at beginning of period		12,135,326	6,253,487	6,253,487
Exchange differences on cash and cash equivalents		(9,616)	(1,983)	(11,893)
		12,125,710	6,251,504	6,241,594
Cash and cash equivalents at end of period		7,239,900	4,039,240	12,135,326

Notes 1 to 9 are an integral part of the consolidated financial statements.

Consolidated statement of changes in equity

for the six months ended 30 June 2016

	Share capital	Share premium account	Merger reserve	Other reserve	Foreign exchange reserve	Retained earnings	Total
	£	£	£	£	£	£	£
Balance at 1 January 2015	10,399,463	22,098,603	1,236,225	1,526,650	-	(25,461,538)	9,799,403
Share based payments	-	-	-	200,000	-	-	200,000
Exercise of share options	28,136	39,350	-	-	-	-	67,468
Transactions with owners	28,136	39,350	-	200,000	-	-	267,486
Loss for the period	-	-	-	-	-	(2,678,004)	(2,678,004)
Total comprehensive income for the period	-	-	-	-	-	(2,678,004)	(2,678,004)
Balance at 30 June 2015	10,427,599	22,137,953	1,236,225	1,726,650	-	(28,139,542)	7,388,885

Balance at 1 January 2015	10,399,463	22,098,603	1,236,225	1,526,650	-	(25,461,538)	9,799,403
Share based payments	-	-	-	433,434	-	-	433,434
Share based payments transfer for exercised share options	-	-	-	(63,242)	-	63,242	-
Exercise of share options	42,443	65,075	-	-	-	-	107,518
Issue of new shares	2,444,444	8,555,556	-	-	-	-	11,000,000
Expense of share issue	-	(617,724)	-	-	-	-	(617,724)
Transactions with owners	2,486,887	8,002,907	-	370,192	-	63,242	10,923,228
Loss for the year	-	-	-	-	-	(4,812,791)	(4,812,791)
Total comprehensive income for the period	-	-	-	-	-	(4,812,791)	(4,812,791)
Balance at 31 December 2015	12,886,350	30,101,510	1,236,225	1,896,842	-	(30,211,087)	15,909,840

Balance at 1 January 2016	12,886,350	30,101,510	1,236,225	1,896,842	-	(30,211,087)	15,909,840
Share based payments	-	-	-	216,000	-	-	216,000
Exercise of share options	117,219	161,438	-	-	-	-	278,657
Transactions with owners	117,219	161,438	-	216,000	-	-	494,657
Loss for the period	-	-	-	-	83,056	(2,656,868)	(2,573,812)
Total comprehensive income for the period	-	-	-	-	83,056	(2,656,868)	(2,573,812)
Balance at 30 June 2016	13,003,569	30,262,948	1,236,225	2,112,842	83,056	(32,867,955)	13,830,685

 

1.	General information

Bango PLC ("Bango"), a United Kingdom resident, and its subsidiaries (together "the Group") provide services to facilitate activity in the mobile internet.  Bango's shares are listed on AIM on the London Stock Exchange. The address of Bango's registered office and principal place of business is 5, Westbrook Centre, Cambridge CB4 1YG.

The interim financial statements have been approved for issue by the Board of Directors on 19 September 2016.

2.	Basis of preparation

The condensed interim financial information for the half year ended 30 June 2016 has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRS). They do not include all of the information required in the annual financial statements in accordance with IFRS, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2015.

            The consolidated interim financial information has been prepared under the historical cost convention.

The cash flow forecasts of Bango anticipate increased cash generation from trading operations, therefore the Directors have a reasonable expectation that there are adequate resources to continue its operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

3.	Principal accounting policies

The principal accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2015.

Bango now reports on the Bango margin from transactions as revenue, instead of reporting a turnover figure which reflects the different commercial models. Turnover used to reflect 100% of a transaction where Bango was principal, and the Bango margin only for agency contracts. Reporting no longer reflects the different commercial agreements with the stores in the revenue figure, simplifying the relationship between EUS, revenue and gross profit. The prior year revenue figures are reported to aid comparison of the current year's performance.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements. 

4.	Segment reporting

(a) End User Spend

Bango has identified End User Spend a non IFRS alternative performance measure as its Key Performance Indicator on which all management decisions surrounding investment in the platform and development of intangible assets is based. Key business decisions are based on the total value and volume of transactions that Bango has processed in each month through its payment platform. End User Spend is the total value of a sale net of VAT or other sales taxes and converted using the exchange rate at the point of the sale.

	Six months ended 30 June 2016 Unaudited	Six months ended 30 June 2015 Unaudited	Year ended 31 December 2015 Audited
	£	£	£
End User Spend	46,167,918	18,449,760	44,684,300

(b) Revenue and gross profit

Bango, based on the information reviewed by the management team, has identified two operating segments. Management reporting is based on the gross profit generated from each segment. The segments are not separately managed and therefore Bango's headquarters and its research and development activity are considered group operations and are not allocated to any operating segment. Segment information can be analyzed as follows for the reporting periods under review. 

Six months ended 30 June 2016
	End user activity	Platform Fees	Group	Total
	£	£	£	£
Segment revenue	774,649	79,155	-	853,804
Cost of sales	(5,499)	-	-	(5,499)
Segment gross profit	769,150	79,155	-	848,305
Administrative expenses	-	-	(2,492,292)	(2,492,292)
Share based payments charge	-	-	(216,000)	(216,000)
Depreciation	-	-	(169,780)	(169,780)
Amortization	-	-	(644,160)	(644,160)
Interest payable	-	-	(7,613)	(7,613)
Interest income	-	-	18,141	18,141
Non-recurring items	-	-	(152,478)	(152,478)
Segment net profit / (loss)	769,150	79,155	(3,664,182)	(2,815,877)

Segment assets	547,254	30,097	14,846,979	15,424,330
Segment liabilities	(361,671)	-	(1,231,974)	(1,593,645)
Net assets	185,583	30,097	13,615,005	13,830,685

Six months ended 30 June 2015 (Restated)
	End user activity	Platform Fees	Group	Total
	£	£	£	£
Segment revenue	386,314	227,985	-	614,299
Cost of sales	(7,258)	-	-	(7,258)
Segment gross profit	379,056	227,985	-	607,041

Administrative expenses	-	-	(2,431,075)	(2,431,075)
Share based payments charge	-	-	(200,000)	(200,000)
Depreciation	-	-	(269,783)	(269,783)
Amortization	-	-	(480,188)	(480,188)
Interest payable	-	-	(10,222)	(10,222)
Interest income	-	-	6,223	6,223
Segment net profit / (loss)	379,056	227,985	(3,385,045)	(2,778,004)
Segment assets	355,573	71,795	8,809,536	9,236,904
Segment liabilities	(142,264)	(126)	(1,705,629)	(1,848,019)
Net assets	213,309	71,669	7,103,907	7,388,885

Year ended 31 December 2015 (Restated)
	End user activity	Platform Fees	Group	Total
	£	£	£	£
Segment revenue	841,949	458,181	-	1,300,130
Cost of sales	(33,054)	-	-	(33,054)
Segment gross profit	808,895	458,181	-	1,267,076
Administrative expenses	-	-	(4,411,328)	(4,411,328)
Share based payments charge	-	-	(433,434)	(433,434)
Depreciation	-	-	(484,871)	(484,871)
Amortization	-	-	(969,013)	(969,013)
Interest payable	-	-	(20,865)	(20,865)
Interest income	-	-	24,327	24,327
Segment net profit / (loss)	808,895	458,181	(6,295,184)	(5,028,108)

Segment assets	500,789	192,524	16,750,791	17,444,104
Segment liabilities	(379,890)	(7,235)	(1,147,139)	(1,534,264)
Net assets	(120,899)	185,289	15,603,652	15,909,840

End User Spend revenue is the Bango revenue share for processing transactions through the Bango Payment Platform. Bango earns revenue calculated either as a percentage of the net of tax figure or as a fixed value per transaction. Assets for this segment are amounts due from payment providers. Liabilities for this segment are mainly fees payable to payment providers for provision of services and fees payable to merchants for provision of content sold by Bango to end users.

Platform fees are the amounts paid to Bango by stores for providing services or for operator activations. Assets for this segment are amounts due to Bango for providing these services. Liabilities for this segment represent deferred income for prepaid fees. Group assets include non-current assets and cash and cash equivalents. Group liabilities relate to administrative expenses.

c)         The Group's revenue from external customers is divided into the following geographical areas:

Six months ended 30 June 2016
	United Kingdom	Rest of EU	USA and Canada	Rest of World	Total
	£	£	£	£	£
Revenue	1,834	37,344	317,329	497,297	853,804

Six months ended 30 June 2015
	United Kingdom	Rest of EU	USA and Canada	Rest of World	Total
	£	£	£	£	£
Revenue	44,881	79,457	247,614	242,347	614,299

Year ended 31 December 2015
	United Kingdom	Rest of EU	USA and Canada	Rest of World	Total
	£	£	£	£	£
Revenue	70,816	149,265	486,046	594,003	1,300,130

Revenue is reported based on the location of the customers.  All non-current assets are based in the UK.

5.	Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of Bango PLC by the weighted average of ordinary shares in issue during the period.

	Six months ended 30 June 2016 Unaudited	Six months ended 30 June 2015 Unaudited	Year ended 31 December 2015 Audited
	£	£	£
Loss attributable to equity holders of Bango PLC	(2,658,868)	(2,678,004)	(4,812,791)
Weighted average number of ordinary shares in issue	64,599,207	52,065,723	53,185,680
Basic loss per share	(4.12)p	(5.14)p	(9.05)p
Diluted loss per share	(4.12)p	(5.14)p	(9.05)p

At 30 June 2016 options over 4,027,604 (30 June 2015: 3,394,729) ordinary shares were outstanding. Given the loss for the year, these options are considered to be anti-dilutive. Such options could potentially dilute basic loss per share in the future.

6.	Cash used by operations

	Six months ended 30 June 2016 Unaudited	Six months ended 30 June 2015 Unaudited	Year ended 31 December 2015 Audited
	£	£	£
Loss for the financial period	(2,656,868)	(2,678,004)	(4,812,791)
Depreciation & amortization	813,940	749,970	1,453,884
Revaluation of assets	(159,213)	-	-
Taxation in income statement	(159,009)	(100,000)	(215,317)
Investment income	(18,141)	(6,223)	(24,327)
Interest payable	7,613	10,222	20,865
Foreign exchange movement	9,616	1,983	11,893
Share-based payment expense	216,000	200,000	433,434
Decrease in receivables	(551,604)	20,863	(19,082)
Decrease in payables	224,470	(156,352)	(308,048)
Non-cash issue of shares	278,657	-	-
Foreign exchange revaluation	83,056	-	-
	(1,911,483)	(1,957,541)	(3,459,489)
Corporation tax rebate	159,009	236,028	225,371
Net cash used by operations	(1,752,474)	(1,721,513)	(3,234,118)

7.	Share capital

During the period no share options were exercised.

On 6 May 2016, 586,095 new shares were issued to Danal Inc., forming part of the consideration for BilltoMobile.

During the period 714,500 options were granted to employees, of which includes; 100,000 to Rachel Elias-Jones, 32,500 to Gerry Tucker, 50,000 to Ray Anderson and 50,000 to Anil Malhotra, all Directors. Grants to employees who left in the period resulted in lapses of 506,125 options in the six months to June 2016.

At the end of the six month period ended 4,080,571 (30 June 2015: 3,394,729) share options were outstanding.

8.	Intangible Assets
		Domain Names	Internal Development	Acquired intangibles	Goodwill	Total
		£	£	£	£	£
Cost
At 1 January 2015		32,887	5,322,936	-	-	5,355,823
Additions		-	462,187	-	-	462,187
At 30 June 2015		32,887	5,785,123	-	-	5,818,010
Amortization
At 1 January 2015		32,887	1,831,684	-	-	1,864,571
Charge for period		-	484,507	-	-	484,507
At 30 June 2015		32,887	2,316,191	-	-	2,349,078
Net book value at 30 June 2015		-	3,468,932	-	-	3,468,932

	Domain Names	Internal Development	Acquired intangibles	Goodwill	Total
	£	£	£	£	£
Cost
At 1 July 2015	32,887	5,785,123	-	-	5,818,010
Additions	-	462,186	-	-	462,186
At 31 December 2015	32,887	6,247,309	-	-	6,280,196
Amortization
At 1 July 2015	32,887	2,316,191	-	-	2,349,078
Charge for period	-	484,506	-	-	484,506
At 31 December 2015	32,887	2,800,697	-	-	2,833,584
Net book value at 31 December 2015	-	3,446,612	-	-	3,446,612

	Domain Names	Internal Development	Acquired intangibles	Goodwill	Total
	£	£	£	£	£
Cost
At 1 January 2016	32,887	6,247,309	-	-	6,280,196
Additions	-	536,915	-	-	536,915
Purchased additions	-	-	1,263,194	1,125,000	2,388,194
Foreign exchange revaluation	-	-	75,000	84,213	159,213
At 30 June 2016	32,887	6,784,224	1,338,194	1,209,213	9,364,518
Amortization
At 1 January 2016	32,887	2,800,697	-	-	2,833,584
Charge for period	-	602,054	42,106	-	644,159
At 30 June 2016	32,887	3,402,751	42,106	-	3,477,744
Net book value at 30 June 2016	-	3,381,473	1,296,088	1,209,213	5,886,774

On 6 May 2016 Bango acquired the trade and assets of BilltoMobile Inc. from Danal Inc., the trade and assets are being amortized on a straight line basis over five years in line with the existing Bango accounting policies. Goodwill is reviewed periodically for signs of impairment, based on the cash generating unit of BilltoMobile Inc. BilltoMobile Inc. is being fully incorporated onto the Bango platform and is not managed as a separate unit and therefore all revenues are included within the existing Bango EUS revenue stream.

Bango acquired BilltoMobile Inc. for $3m in cash and issued 586,095 shares equivalent to $500,000.

9.	Publication of non-statutory accounts

The condensed consolidated interim financial information was approved by The Board of Directors on 19 September 2016.  They are unaudited but have been reviewed by the auditors and their report is included within this note.

The financial information set out in this interim report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.  The figures for the period ended 31 December 2015 have been extracted from the Statutory Financial Statements of Bango PLC, which have been filed with the Registrar of Companies. The auditor's report on those financial statements is unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The interim financial information for the six months to 30 June 2016 is unaudited. The interim report together with an analysts briefing presentation will be distributed to all shareholders shortly and will be available on Bango's investor blog at www.bangoinvestor.com.

Independent review report to Bango PLC

 

Introduction

We have been engaged by Bango PLC to review the financial information in the half-yearly financial report for the six months ended 30 June 2016 which comprises the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes (1 to 9). We have read the other information contained in the half yearly financial report which comprises only the financial, operational and post period highlights, CEO and CFO reports, and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to Bango PLC in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to Bango PLC those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Bango PLC, for our review work, for this report, or for the conclusion we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 2. 

 

Our responsibility

Our responsibility is to express to Bango PLC a conclusion on the financial information in the half-yearly financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 2.

GRANT THORNTON UK LLP
Chartered Accountants
Auditor
Cambridge
19 September 2016

 

END

 

 

IR LLFITAAIALIR