Half Yearly Report

RNS Number : 0288A

Mobile Tornado Group PLC

24 September 2015

 



Mobile Tornado Group plc

("Mobile Tornado" or the "Group")

Half Yearly Report

Mobile Tornado (AIM: MBT), the instant communications service provider for mobile devices, announces its unaudited results for the 6 month period to 30 June 2015.

Financial highlights

·     Total revenue increased 16% to £1.16m (H1 2014: £1.00m)

·     Recurring revenues increased 55% to £0.86m (H1 2014: £0.55m)

·     Adjusted EBITDA* loss of  £0.63m (H1 2014: £1.05m)

·     Loss after tax of £0.46m (H1 2014: £1.13m)

·     Basic loss per share of 0.20p (H1 2014: 0.50p)

*excluding exchange differences

Operating highlights

·     Growth in recurring revenues reflect increased momentum across all the Group's Mobile Network Operator customers

·     New commercial contract agreed with an independent communications service provider in Israel for commercial launch of services during second half of 2015

·     Continued investment in the new technical platform for cloud based deployment scheduled for launch in final quarter of 2015

·     New installations completed for Tier 1 customers in Colombia and Ecuador. Commercial launches scheduled for second half of 2015

·     Commercial partnership agreed with independent communications service provider within the global oil and gas sector.

·     PTT deployment completed with a transportation customer in Brazil

Jeremy Fenn, Chief Executive Officer of Mobile Tornado said: 

"The business has made solid progress during the first half of the year with an impressive 55% growth in recurring revenues from licenses on the prior year. Whilst we will continue to work closely with our Tier 1 mobile network customers, we currently expect that recurring revenues in the second half will be at a similar level to that of the first half. With certain installation and professional services contracts successfully executed in the first half, the Group continues to work hard to convert multiple additional non-recurring contracts in the second half. As ever, the precise timing of such contracts remains inherently difficult to predict, but the board remains hopeful that they will be converted by the year end. We have an excellent customer base of Tier 1 mobile operators, and are now being presented with numerous opportunities to work directly with major corporates and government bodies, where we can supply a dedicated communication platform."

Enquiries:

Mobile Tornado Group plc	www.mobiletornado.com
Jeremy Fenn, Chief Executive	[phone]
Investec Bank plc (Nominated Adviser & Broker)	[phone]
Dominic Emery / Carlton Nelson
Walbrook PR Ltd Paul Cornelius / Helen Cresswell	[phone] or [e-mail]

Chairman's Statement

I am pleased to report that the Group has delivered solid operational and financial progress across the business during the period. Total revenue increased 16% with recurring revenues accelerating 55% due to the widespread adoption of our SaaS PTT services across all our key Tier 1 mobile network operator customers. Increasing revenue and gross margin expansion therefore more than halved the net loss to £0.46m from the same period last year.

Financial results

Total turnover in the six month period to 30 June 2015 increased 16% to £1.16m (H1 2014: £1.00m). Non-recurring revenues, comprising installation fees and professional services, decreased to £0.30m (H1 2014: £0.45m) due to the smaller scale of new installations during the period. However, recurring revenues increased 55% to £0.86m (H1 2014: £0.55m) due to the adoption of the PTT service across the customer base with increasing user subscribers. Gross profit increased by 26% to £1.08m (H1 2014: £0.86m) reflecting the higher margin levels associated with recurring revenues.

Operating expenses improved to £1.71m (H1 2014: £1.90m) due to the lower staffing levels following the restructuring completed during 2014. The Group received an income tax credit in respect of our qualifying investment in R&D activities during the period of £0.37m (H1 2014: £0.22m) further reducing our net operating expenses. As a result, the net operating loss for the period reduced significantly to £0.46m (H1 2014: Loss £1.13m).

Net cash outflow from operating activities during the period also decreased to £0.87m (H1 2014: £1.50m) resulting in net cash and cash equivalents as of 30 June 2015 of £0.13m (H1 2014: £0.82m ). As at 30 June 2015, the Group had net debt of £6.20m (30 June 2014: £4.80m).

Review of Operations

Mobile Network Operators ("MNOs")

We have continued to work closely with our key customers across North and South America, Europe and South Africa. We are now contracted with ten Tier 1 MNO customers and I am pleased to report all have contributed to the 55% increase in recurring revenues we achieved during this financial period.

In South America we have deployed dedicated platforms in four countries; Mexico, Brazil, Colombia and Ecuador, and are now working with these MNOs to target their major enterprise customers. With the legacy iDEN platform approaching end of life, there is an increasing opportunity to switch their instant communication requirements to our next generation PTT platform. We are also engaging with a number of new independent communication specialist partners who work across the 2-way radio market to further expand our addressable market.

In North America, our Tier 1 MNO customer has continued to roll out our PTT service to its enterprise customer base and we look forward to continued progress during the second half of 2015 and into the next financial year.

I am delighted to report that our Tier 1 customer in mainland Europe has also extended its contract for a further three years and is signaling it will launch a range of full PTT commercial services towards the end of this calendar year.

The roll out of PTT services to the three Tier 1 operators in South Africa has been delayed by the upgrade of the technical platform at our local partner Instacom. We expect this upgrade work to be completed by the middle of the second half of this year and for commercial deployment to follow shortly thereafter.

Following the creation of a new business unit in Israel we were approached by the established Tier 1 operators across the region to explore collaboration opportunities for PTT deployments. However, as mutually agreeable terms could not be reached, the Group has decided to partner with an established service provider in the region and focus on the delivery of value added services directly to the enterprise market. We are sufficiently satisfied that they have the credentials, resources and financial stability to capture the huge opportunity in this territory given the size of the existing PTT market.

Independent Solution Vendors (ISVs)

We have continued to engage with partners that have the ambition and capability to integrate our PTT communication solution into existing software applications. Our partner in the transportation sector has recently successfully concluded the installation of their communication solution, incorporating our PTT platform, with a train operator in Brazil. As a direct result of the success of this installation, we are now engaged in a number of other tenders with this partner across the region.

We have also established a partnership with an ISV serving the global oil and gas sector and are currently participating in a number of tenders. We are also seeking a similar engagement in the mining sector.

Hardware manufacturers

The period has seen us formalise our relationships with all of the major rugged handset and accessory manufacturers. These engagements are leading to cooperation on tenders to both mobile network operators and enterprises.

Technical development

We believe that the market for private communication networks will continue to grow rapidly as both enterprise and public bodies look to install their own dedicated and secure voice and data communication services. To meet this demand we have further invested in our technical platform, using software virtualisation and cloud deployment techniques, to significantly reduce the costs associated with the deployment of PTT services. We have already delivered our PTT solution through a virtual private network to one of the largest global security companies and believe the development of this new platform will significantly expand our addressable market to smaller enterprises that need secure instant communication services.  This development project is ongoing and is planned for launch at the end of this calendar year.

Going concern and funding

The Company completed on 15 April 2015 a placing of 22.5 million shares at 6p per share to raise a total of £1.35m. InTechnology plc and the Directors subscribed for 18,581,907 shares comprising 82.6% of the issue.  The Directors believe that the Group has sufficient working capital for the foreseeable future given its contracted revenues, anticipated contracts and continued support from its principal shareholder, InTechnology plc.

Outlook

The business has made solid operational and financial progress during the first half of the year with increasing recurring revenues from licenses providing greater visibility for the second half and full year. Whilst we will continue to work closely with our Tier 1 mobile network customers to ensure that our services are rolled out effectively, we currently expect that recurring revenues in the second half will be at a similar level to that of the first half. With certain installation and professional services contracts successfully executed in the first half, the Group continues to work hard to convert multiple additional non-recurring contracts in the second half. As ever, the precise timing of such contracts, which represent capital expenditure for our clients, remains inherently difficult to predict, but the board remains hopeful that they will be converted by the year end.

The business is currently engaged with a significant number of global blue chip corporates. As well as the Tier 1 customers we service across each continent, we are now seeing an increasing interest in our proposition from within the enterprise communications market, where many corporates and public bodies are now seeking to install and deploy their own dedicated voice and data communication platforms. Our new cloud based platform is planned for launch later this year and will enable us to significantly reduce the costs associated with deployment, management and ownership, which is expected to significantly expand our addressable market over the near term. To allow us to fully capitalize on this opportunity we have increased the technical and business development headcount in the first half which will drive an increased cost-base for the full year. I am hopeful that this investment will generate increasing returns over the short to medium term.

This is an exciting time for Mobile Tornado. We have an excellent customer base of Tier 1 mobile operators, who have shown their faith in our technology. We endeavor to provide each of them with a professional service, working with them to realize the potential from their own customers. We are now being presented with numerous opportunities to work directly with major corporates and government bodies, where we can supply a dedicated communication platform. With limited resources we must ensure that we commit to only those that can deliver a certain return within a reasonable timeframe. I am confident that our dedicated team of professionals across the business will ensure that this happens.

Approved by the board of Directors and signed on behalf of the Board

Peter Wilkinson

Chairman

24 September 2015

Consolidated income statement
for the six months ended 30 June 2015
		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2015		2014		2014
		Unaudited		Unaudited		Audited
	Note	£'000		£'000		£'000
Continuing Operations
Revenue		1,160		1,004		1,746
Cost of sales		(84)		(149)		(280)
Gross profit		1,076		855		1,466
Other operating expenses		(1,709)		(1,903)		(3,969)
Group operating loss before exchange differences,
depreciation and amortisation expense		(633)		(1,048)		(2,503)
Exchange differences		146		45		(13)
Depreciation and amortisation expense		(51)		(66)		(146)
Total operating expenses		(1,614)		(1,924)		(4,128)
Group operating loss		(538)		(1,069)		(2,662)
Finance costs		(297)		(286)		(513)
Finance income		-		6		7
Loss before tax		(835)		(1,349)		(3,168)
Income tax credit		371		220		220
Loss for the period		(464)		(1,129)		(2,948)
Loss per share (pence)
Basic and diluted	3	(0.20)		(0.50)		(1.31)

Consolidated statement of comprehensive income
for the six months ended 30 June 2015
		Six months		Six months		Year ended
		ended		ended		ended
		30 June		30 June		31 December
		2015		2014		2013
		Unaudited		Unaudited		Audited
		£'000		£'000		£'000
Loss for the period		(464)		(1,129)		(2,948)
Other comprehensive income
Exchange differences on translation
of foreign operations		3		9		(18)
Total comprehensive loss for the period		(461)		(1,120)		(2,966)

Consolidated statement of changes in equity
for the six months ended 30 June 2015
	Share	Share	Reverse acquisition	Merger	Translation	Retained	Total
	capital	premium	reserve	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2014	4,499	11,225	(7,620)	10,938	(2,146)	(24,634)	(7,738)
Equity settled share-based payments	-	-	-	-	-	12	12
Transactions with owners	-	-	-	-	-	12	12
Loss for the period	-	-	-	-	-	(1,129)	(1,129)
Exchange differences on translation
of foreign operations	-	-	-	-	9	-	9
Total comprehensive income
for the period	-	-	-	-	9	(1,129)	(1,120)
Balance at 30 June 2014	4,499	11,225	(7,620)	10,938	(2,137)	(25,751)	(8,846)
	Share	Share	Reverse acquisition	Merger	Translation	Retained	Total
	capital	premium	reserve	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2014	4,499	11,225	(7,620)	10,938	(2,137)	(25,751)	(8,846)
Equity settled share-based payments	-	-	-	-	-	(22)	(22)
Issue of share capital on
exercise of options	2	-	-	-	-	-	2
Transactions with owners	2	-	-	-	-	(22)	(20)
Loss for the period	-	-	-	-	-	(1,819)	(1,819)
Exchange differences on translation
of foreign operations	-	-	-	-	(27)	-	(27)
Total comprehensive income
for the period	-	-	-	-	(27)	(1,819)	(1,846)
Balance at 31 December 2014	4,501	11,225	(7,620)	10,938	(2,164)	(27,592)	(10,712)
	Share	Share	Reverse acquisition	Merger	Translation	Retained	Total
	capital	premium	reserve	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2015	4,501	11,225	(7,620)	10,938	(2,164)	(27,592)	(10,712)
Issue of share capital	450	797	-	-	-	-	1,247
Transactions with owners	450	797	-	-	-	-	1,247
Loss for the period	-	-	-	-	-	(464)	(464)
Exchange differences on translation
of foreign operations	-	-	-	-	3	-	3
Total comprehensive income
for the period	-	-	-	-	3	(464)	(461)
Balance at 30 June 2015	4,951	12,022	(7,620)	10,938	(2,161)	(28,056)	(9,926)

Consolidated balance sheet
As at 30 June 2015
		30 June		30 June		31 December
		2015		2014		2014
		Unaudited		Unaudited		Audited
	Note	£'000		£'000		£'000
Assets
Non-current assets
Property, plant & equipment		185		246		213
		185		246		213
Current assets
Trade and other receivables		1,409		1,607		1,472
Inventories		108		100		109
Tax debtor		371		220		-
Cash and cash equivalents		128		824		41
		2,016		2,751		1,622
Liabilities
Current liabilities
Trade and other payables		(3,284)		(3,917)		(3,303)
Borrowings		(777)		-		(1,047)
Net current (liabilities)/assets		(2,045)		(1,166)		(2,728)
Non-current liabilities
Trade and other payables		(2,512)		(2,303)		(2,643)
Borrowings		(5,554)		(5,623)		(5,554)
		(8,066)		(7,926)		(8,197)
Net liabilities		(9,926)		(8,846)		(10,712)
Shareholders' equity
Share capital	4	4,951		4,499		4,501
Share premium	4	12,022		11,225		11,225
Reverse acquisition reserve		(7,620)		(7,620)		(7,620)
Merger reserve		10,938		10,938		10,938
Foreign currency translation reserve		(2,161)		(2,137)		(2,164)
Retained earnings		(28,056)		(25,751)		(27,592)
Total equity		(9,926)		(8,846)		(10,712)

Consolidated cash flow statement
for the 6 months ended 30 June 2015
		Six months		Six months		Year
		ended		ended		ended
		30 June		30 June		31 December
		2015		2014		2014
		Unaudited		Unaudited		Audited
	Note	£'000		£'000		£'000
Operating activities
Cash used in operations	5	(866)		(1,504)		(2,751)
Tax credit received		-		-		220
Interest received		-		6		7
Net cash used in operating activities		(866)		(1,498)		(2,524)
Investing activities
Purchase of property, plant & equipment		(24)		(110)		(148)
Net cash used in investing activities		(24)		(110)		(148)
Financing
Issue of ordinary share capital		1,350		-		2
Share issue costs		(103)		-		-
(Repayment of)/proceeds from borrowings		(270)		-		270
Net cash inflow from financing		977		-		272
Effects of exchange rates on cash
and cash equivalents		-		(5)		4
Net (decrease)/increase  in cash and
cash equivalents in the period		87		(1,613)		(2,396)
Cash and cash equivalents at beginning of period		41		2,437		2,437
Cash and cash equivalents at end of period		128		824		41

1          General information

The financial information in the interim report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and has not been audited or reviewed. The financial information relating to the year ended 31 December 2014 is an extract from the latest published financial statements on which the auditor gave an unmodified report that did not contain statements under section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

2          Basis of preparation

These interim financial statements are for the six months ended 30 June 2015. They have been prepared using the recognition and measurement principles of IFRS.

The interim financial statements have been prepared under the historical cost convention.

The interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2014. The accounting policies have been applied consistently throughout the Group for the purpose of preparation of the interim financial statements.

3          Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £464,000 (30 June 2014: £1,129,000, 31 December 2014: £2,948,000) by the weighted average number of ordinary shares in issue during the period of 233,754,846 (30 June 2014: 224,953,708, 31 December 2014: 224,990,775).

The adjusted basic loss per share has been calculated to provide a better understanding of the underlying performance of the Group as follows:

	Six months ended			Six months ended			Year ended
	30 June 2015			30 June 2014			31 December 2014
	Unaudited			Unaudited			Audited
	Basic and diluted			Basic and diluted			Basic and diluted
	Loss	Loss		Loss	Loss		Loss	Loss
		per share			per share			per share
	£'000	pence		£'000	pence		£'000	pence
Loss attributable to
ordinary shareholders	(464)	(0.20)		(1,129)	(0.50)		(2,948)	(1.31)

3          Share capital and share premium

	Number of	Share	Share	Total
	shares	capital	premium
	'000	£'000	£'000	£'000
At 1 January 2014 and 30 June 2014	224,953	4,499	11,225	15,724
Issue of shares	100	2	-	2
At 31 December 2014	225,053	4,501	11,225	15,726
Issue of shares	22,500	450	797	1,247
At 30 June 2015	247,553	4,951	12,022	16,973
Preference shares
			Number of	Nominal
			shares	Value
			'000	£'000
At 30 June 2014, 31 December 2014 and 30 June 2015			71,277	5,702

Liabilities and preference shares totalling £5,702k were converted into 71,277k 8p preference shares on 28 August 2013. The preference shares are non-voting, non-convertible redeemable preference shares redeemable at par value on 31 December 2018, or, at the Company's discretion, at any earlier date. The preference shares accrue interest at a fixed rate of 10% per annum.    

5          Cash used in operations

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2015	2014	2014
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Loss before taxation	(835)	(1,349)	(3,168)
Adjustments for:
Depreciation	51	66	146
Share based payment charge	-	12	(10)
Interest income	-	(6)	(7)
Interest expense	297	286	513
Changes in working capital:
Decrease/(Increase) in inventories	-	29	30
(Increase)/Decrease in trade and other receivables	57	(525)	(394)
(Decrease) in trade and other payables	(436)	(17)	139
Net cash used in operations	(866)	(1,504)	(2,751)

6          Shareholder information

The interim announcement will be published on the company's website www.mobiletornado.com on 24 September 2015.

 

END

 

 

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