Final Results
Velti PLC
17 March 2008
Velti plc
FOR IMMEDIATE RELEASE 17 March 2008
Velti plc
RESULTS FOR 2007: STRONG REVENUE AND PROFIT GROWTH
Year ended 31 Year ended 31 Change
December 2007 December 2006 %
€'000 €'000
Revenue 19,866 10,816 84%
EBITDA 7,548 4,313 75%
Adjusted EBITDA 7,975 4,379 82%
Operating profit 5,014 3,009 67%
Profit after tax 3,661 2,246 63%
Adjusted profit after tax 4,088 2,312 77%
Basic EPS (in eurocents) 12.3 8.7 41%
Adjusted EPS (in eurocents) 13.7 9.0 54%
Profit after tax and adjusted profit after tax are attributable to the equity
shareholders of the company (after minority rights.) Adjusted figures stated
before the (non-cash) cost of share awards. The EPS figures incorporate the
increased number of shares that was a result of the October 2007 fundraising.
Operational Highlights
• Formed Ansible, a joint venture with one of the world's largest
advertising organisations - Interpublic Group. Ansible is the first global
mobile marketing agency.
• Expanded UK operation and opened new offices in San Francisco and Moscow.
• Successful integration of Digital Rum (UK) and M-Telecom (Bulgaria)
which both contributed positively to 2007 profits.
• Extended geographical footprint with key customer wins in Europe, North
America and Asia.
• Won key operator contracts from Vodafone, Orange, Orascom's Wind,
Cosmote, Austria telecom's MTEL, SingTel's Globe and AT&T.
• Stable revenues from financial services institutions as well as the
public sector for innovative mobile and broadband initiatives
• Won mobile marketing contracts from global brands such as Microsoft,
General Motors, Coca Cola, Verizon, Bayer, Johnson and Johnson, Vogue
Magazine, Mastercard, Colgate-Palmolive, Ferrero, Bacardi, LVMH's Hennessy
and Pepsico's Tasty Foods.
• Won mobile marketing contracts with key media organisations including
MTV, Disney, Associated Press, Fox Networks CBS and Real.
• Senior managers recruited in the US and UK with start dates commencing
January 2008.
Product Development
• Launched version 3.5 of Mobile Marketing Platform (MMP) that features
enhanced advertising and marketing templates for advertising agencies, media
companies and mobile operators.
• Introduced version 4.0 of MMP to key customers.
• Expansion of mobile content management capabilities by providing self
service tools for media groups to manage their own mobile internet sites.
• Velti is assisting operators strategically in their move towards
convergence and triple play.
Successful placing of shares in October 2007
• A very positive response from both new and existing shareholders
• Raised €10.7 million before expenses to accelerate the development of
Ansible and to support rapid organic growth.
David Mann, Chairman, stated:
'2007 has been a very successful year for Velti with strong revenue growth,
excellent profit generation and a significant increase in net cash In 2008 Velti
will continue to maintain its primary focus on providing mobile marketing and
advertising solutions for mobile operators, advertising agencies and media
groups. Since its flotation in 2006, Velti has become a very international
company operating in what is emerging as a dynamic and fast-growing global
market. The Board believes the company is extremely well placed to continue its
highly profitable expansion.'
Alexandros Moukas, Chief Executive Officer added:
'We are delighted to report a further year of strong growth driven by new
business across all client categories, the further development of existing
customer relationships and the expansion of our operations in new territories.
Our Mobile Marketing Platform is being adopted successfully by several of the
world's largest operators and brands, while Ansible, our joint venture with
Interpublic Group has demonstrated significant traction in the marketplace,
working directly with global brands that wish to embrace mobile as the new
marketing medium. In 2008 we expect to see accelerated demand for our services
as mobile marketing and advertising budgets continue to grow significantly. We
will continue the expansion of our sales capabilities across Europe, North
America and Asia and we are in the process of opening sales offices in Dubai,
Mumbai and Beijing'.
CONTACTS
Velti:
Alexandros Moukas, Chief Executive Officer +44 (0) 20 7633 5000
Pantelis Papageorgiou, Finance Director
Bankside: +44 (0) 20 7367 8888
Simon Bloomfield or Steve Liebmann
Royal Bank of Canada: +44 (0) 20 7653 4667
Sarah Wharry
About Velti
Velti's market-leading mobile marketing technology platform, coupled with its
experience in the mobile advertising industry, enables clients around the world
to deliver an extensive range of highly targeted marketing campaigns. With
operations in 16 countries, Velti has implemented projects reaching an estimated
570 million consumers.
Velti's unique Mobile Marketing Platform (version 4.0) manages the full cycle of
planning, execution and monitoring of multiple campaigns across differing mobile
formats and channels, offering customers more than 70 above and below-the-line
mobile marketing and advertising templates, which can be managed from one user
interface.
Velti is a publicly traded company listed on the London Stock Exchange (AIM),
with sustainable growth in revenue and profits. The company is heavily investing
in its customers' future needs, especially in the mobile advertising and mobile
content enablement market. For more information please visit www.velti.com
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
We are pleased to announce our final results for the year ended 31 December 2007
which was another very successful year for Velti. The Group continued its global
expansion in terms of customer wins and strategic alliances and achieved strong
growth in revenues and profits.
Results and Financial Position
During 2007 Velti's revenue grew by 84 per cent to €19.9 million (2006: €10.8
million), profit before tax rose by 64 per cent to €4.5 million (2006: €2.7
million) and profit after tax and minorities increased by 63 per cent to €3.6
million (2006: €2.2 million). Basic earnings per share were 12.3 eurocents
(2006: 8.7 eurocents).
The key drivers of this very positive performance were successful repeat
business from major customers, new business growth across all client groups, the
profitable integration of new acquisitions, and the extension of our
geographical footprint. The results are all the more impressive having been
achieved with heavy investment in new international offices, product development
and sales and marketing resources. These costs reflect the Group's aim to
achieve rapid global expansion.
In October 2007 Velti raised €10.7 million before expenses via a share placing
to institutional investors, further strengthening its balance sheet. This has
enabled Velti to accelerate the development of Ansible, further enhance its
products and operating infrastructure and fund working capital needs stemming
from rapid growth in its business with mobile operators in mobile marketing and
advertising. Year end net cash was €9.9 million (2006: €4.0 million).
Market and Positioning
The market grew significantly in 2007 and it proved to be the year when global
mobile marketing took centre stage as the next major business opportunity in
mobile services. The market is forecast to reach US$19 billion by 2011 (ABI
Research).
The market continued to remain fragmented with many new entrants focused solely
on banner ad serving technologies. In comparison Velti's positioning as 'a one
stop shop' for operators, media companies, advertising agencies and other public
and private sector organisations supports the whole spectrum of mobile marketing
from simple banner ads through sophisticated triple-play and integrated
campaigns.
The enablement of the mobile channel for operators, brands, and media companies
requires significant expertise and managed services capabilities. Velti expects
to see accelerated demand for its services, particularly in the areas of social
networking, mobile communities and user generated content. These capabilities
are supported by the recently introduced Version 4.0 of the Mobile Marketing
Platform.
Velti is continuing to focus on generating repeatable revenue from established
and profitable services whilst also investing in new services and geographic
expansion to drive future growth. Revenue growth is going to be driven by
software license sales, software integration services, managed services and
Velti's Software-as-a-Service offering which was introduced last year.
By being at the intersection of operators, advertising agencies and media
groups, Velti is uniquely placed to benefit from the growth in mobile marketing
as mobile becomes a massive, brand marketing and advertising sponsored medium.
Joint Venture
Central to Velti's strategy of offering comprehensive mobile marketing
solutions, 2007 saw the creation of Ansible, a joint venture between Velti and
Interpublic Group, one of the world's leading advertising organisations. Based
in New York, Ansible was launched as the first global mobile marketing agency.
The agency works directly with brands, agencies and content providers to develop
and deploy mobile advertising and marketing campaigns. Ansible utilises Velti's
proprietary services and mobile marketing technology in all geographies.
There has been a very positive response to the launch of Ansible with key
customer wins within a very short period of time and the board believes that the
joint venture will be a significant driver for future growth and profitability.
Strategy and Business Development
The Group's core strategy remains: to increase repeat business, to continue the
expansion of its geographical footprint and to position itself as an
international provider of mobile marketing solutions.
In support of this strategy, investment in data centre infrastructure and
product development has been a major feature of the past three years and
underpins Velti's continued growth in 2008.
In 2007 Velti completed the rollout of four enterprise-class data centres
located in Dallas, London, Athens and Sofia. This improved infrastructure allows
Velti to fully support the Software as a Service (SaaS/ASP) model, allowing
customers to reduce their infrastructure and operational staff costs. Velti will
continue to develop and enhance this model in 2008 in order to support its
customers and maintain its market leading position.
Mobile Marketing Platform
2007 saw the launch of Version 3.5 of Velti's Mobile Marketing Platform (MMP)
and the introduction of Version 4.0 to key clients. The continued development of
the platform is vital to ensure that Velti remains at the forefront of mobile
marketing technology and to support future customer needs.
Further details are provided in the Operational Review.
Customers
Significant business wins drove strong organic growth and included the
implementation of innovative mobile marketing campaigns for major brands such as
Johnson and Johnson, General Motors, Microsoft, Verizon, Associated Press,
LVMH's Hennessey, Pepsico, Colgate Palmolive, Ferrero, Bacardi, MTV, CBS,
Disney, Vogue Magazine and Mastercard as well as the launch of brand loyalty and
mobile community applications for operators such as Singtel's Globe Telecom,
Austria's MTEL and Cosmofon.
Revenue growth was further driven by repeat business that Velti secured with a
number of major network operators in Europe, namely Vodafone, Orange, Cosmote,
Orascom's Wind and Q-Telecom as well as with financial institutions and public
sector organisations.
Outlook
In 2008 Velti will maintain its primary focus on providing mobile platforms and
services for mobile operators, advertising agencies, media companies and other
large enterprises. The Group expects to see accelerated demand for its services,
particularly in the areas of mobile loyalty and mobile communities. Velti will
continue the expansion of its sales capabilities across Western Europe, North
America and Asia, and open sales offices in Dubai, Mumbai and Beijing. It will
also continue to investigate opportunities in the BRIC region (Brazil, Russia,
India and China) where it sees strong growth potential.
The board sees excellent prospects for delivering a further year of very strong
growth.
David Mann Alexandros Moukas
Non-Executive Chairman Chief Executive Officer
OPERATIONAL REVIEW
Key accomplishments in 2007
Business Model
While the license model is still proliferating for certain operators, a growing
number are looking to managed services and hosted software as a service (SaaS/
ASP) models to drive mobile marketing and advertising forward. This has become
evident in Western and Eastern Europe, Asia and the US. In 2007 a significant
portion of revenue was derived from SaaS/ASP and revenue share agreements, for
instance SingTel, Wind and MTEL. Velti believes this to be a very positive trend
as an installed base generates repeatable and more predictable revenue streams.
Media companies are also beginning to follow this trend in particular Fox TV,
Disney and Liberis Publications.
In support of these developments, in 2007 Velti completed the rollout of
infrastructure in 4 enterprise-class data centres located in Dallas, London,
Athens and Sofia. The data centre infrastructure offers industry leading 99.99%
reliability stated in Velti's Service Level Agreements (a maximum of 52 minutes
downtime per year). This allows Velti to fully support the SaaS/ASP model,
allowing customers to reduce their infrastructure and operational staff costs,
whilst maintaining their desired security, support, operational and integration
requirements.
Moving forward to 2008, Velti will continue to extend their
Software-as-a-Service business model delivering applications over the Web. A new
data centre Is planned for China, as well as further investment in disaster
recovery, ensuring services are geography independent.
Ansible's business is more focused towards the traditional advertising agency
model of fees charged per campaign. However the company is increasingly acting
as advisor to global brands wishing to incorporate mobile marketing and
advertising as part of their future brand and marketing strategy.
Velti and Ansible's relationship is unique. Together they support the needs of
suppliers (media groups and operators) and customers (brands and ad agencies).
This relationship provides flexibility, global reach and an in depth
understanding of the future for mobile marketing.
Customers and organic development
Velti has strategically targeted three key audience groups: operators,
advertising agencies and brands and media groups and publishers:
Operators:
Velti is providing innovative business solutions and software platforms to
enable mobile marketing and advertising through mobile operator branded or white
labelled mobile internet sites, mobile TV, as well as MMS and SMS media. These
solutions also allow operators to enhance customer retention and brand loyalty,
resulting in increased data ARPU, new revenue streams from mobile advertising
and strong customer retention and acquisition. The greater the level of consumer
engagement in mobile campaigns the higher the likely revenue for Velti.
Velti was awarded key contracts with Orange (UK), Orascom Group (Wind Greece),
Vivatel (Bulgaria) and SingTel's Globe Telecom (Philippines).
New business has also been generated from operators that require the development
and management of content portals, namely Vodafone Live, Wind Plus, Cosmote, and
MTEL.
Velti is assisting operators strategically in their move towards convergence and
'triple play'. Two examples that serve to illustrate this are the Vodafone
Online Program and Orange Gigs and Tours campaign. The latter being a campaign
designed by Velti that allowed Orange to promote its broadband services through
an online mobile music community, offering priority mobile ticketing
notification and purchase.
Operators are quickly realising the potential of mobile marketing as a means to
monetise new data services. Velti won significant business in developing mobile
campaigns for Wind, Orange UK, MTEL, Cosmofon, Q-Telecom, Verizon and SingTel's
Globe Telecom. For example, Globe Telecom wanted to increase brand loyalty
amongst its 16.5 million strong subscriber base and create a database of their
pre paid customers. Velti's mobile marketing campaign delivered outstanding
results with over 18 million interactions.
Velti also secured repeat business with major network operators in 2007, namely
Cosmote, Orange, Vodafone, Wind and Q-Telecom
Advertising agencies and brands:
The global media industry is looking at mobile marketing as the next major
advertising platform being largely driven by brands, agencies and operators who
are demanding new ways to engage with consumers. Velti is driving the market
forwards, bringing social networking, user generated content and digital
communities into the mobile marketing mix while also enabling customers to
maximise their investment in traditional media.
In 2007 Velti launched a wide variety of mobile marketing and advertising
campaigns for global brands including Lays, Ferrero, LVMH's Hennessey, Pepsico,
HP, Argos, Colgate Palmolive, Bacardi, Vogue Magazine and Mastercard.
Ansible
In September 2007, Velti and the Interpublic Group (NYSE:IPG), one of the
world's leading marketing services conglomerates, entered into a joint venture
to form Ansible, a full-service global mobile marketing agency. Ansible is
headquartered in New York, with offices in London, Athens, Detroit, and San
Francisco, as well as plans to open offices jointly with Velti in Beijing,
Miami, Dubai, and Moscow later in 2008.
Ansible is the first truly global mobile marketing agency, working directly with
brands, agencies and content providers to develop and deploy mobile advertising
and marketing campaigns utilising Velti's Mobile Marketing Platform and
expertise.
In 2007 Ansible made significant progress working alongside advertising agencies
such as Universal McCann, Lowe, Initiative, McCann Erickson, Weber Shandwick,
Jack Morton, Momentum and MRM to win new business from Johnson and Johnson,
Microsoft, General Motors, Intel, and Bayer. Ansible's work with Johnson &
Johnson for example, included an innovative mobile advice-based community for
mothers-to-be; in this case the Velti MMP was used to design and execute an
integrated opt-in mobile marketing and advertising campaign targeting the
Hispanic US market. The campaign consisted of a Mobile Internet site to enable
access to the Babycenter website, sponsored alerts delivering weekly content,
mobile communities and text to win competitions. This campaign was profiled by
Adweek, and will now be launched in the U.S. English market, as well as tailored
to new developing markets such as India and China.
Mirroring Velti's strategy, Ansible's aim in 2008 is to expand internationally
with a focus on BRIC countries (Brazil, Russia, India and China), and in concert
with client demand. In parallel, through its alliance with IPG, Ansible
recognise a strategic opportunity in developing its mobile media buying
capability, securing mobile media ad spend for major brands.
The significant progress made by Ansible and Velti has resulted in both
companies being individually recognised as two of the 'Top 7 mobile marketing
companies to watch' (AdWeek, 25 February 2008).
Media groups and publishers:
Through its SaaS/ASP model Velti brings media groups the promise of mobile
marketing and advertising that delivers proven ROI. Major media companies are
able to utilise Velti's results driven infrastructure to replicate the ad
sponsored model they have implemented across their traditional and interactive
assets. With Velti's global connectivity capabilities, mobile technology
expertise and the pioneering MMP platform they can deliver a complete ASP
service to media companies. Through Velt's office in San Francisco the Company
is also developing alliances with Web2.0 media companies to provide Mobile ASP
services.
Velti is giving media companies a new channel through which to maximise revenues
from their intellectual property and captive audiences. In 2007 Velti won
business from MTV, CBS, Disney, Real Networks, Associated Press and Fox
Networks. MTV partnered with Velti to launch two new television channels. The
mobile campaign consisted of text to win sweepstakes, a message broadcast for
their opted- in viewers and free mobile downloads that users could forward to
friends.
Other major customers:
Velti has been supporting mobile VAS for South East European banks. 2007 saw
repeat business from the National Bank of Greece, ATE Bank and Eurobank EFG and
won new business from Bank of Piraeus. Public sector contracts continue to be a
stable source of income for the group. The percentage of revenues contributed
from this source was reduced from approximately 30% in 2006 to 15% in 2007. We
expect the contribution from this source to reduce in terms of percentage of
revenues for 2008 and beyond, in line with the rapid growth of the group's other
activities.
Acquisitions
In addition to achieving strong organic growth, management's strategy in 2007
was to expand through carefully targeted acquisitions.
In March 2007, Velti acquired M-Telecom, Bulgaria's leading independent mobile
value added services provider, establishing the company's footprint in an
important market in Central and Eastern Europe. The acquisition of Digital
Rum (UK) in October 2006 established Velti's presence in the UK with clients
including Argos, BAA and Vodafone. Since then, Velti has won new contracts with
existing and new clients.
Both M-Telecom (Bulgaria) and Digital Rum (UK) have successfully been integrated
into the Group and have made a positive contribution to profit for 2007.
Product Development
Velti has made significant investment in software technology that automates,
executes and assures ease of use and quality of output in the creation of mobile
marketing and advertising campaigns.
2007 saw the launch of version 3.5 of the Mobile Marketing Platform and the
introduction of version 4.0 to key customers. The platform now includes the
complete campaign cycle from planning through to execution and monitoring for
any advertising or marketing mobile campaign.
Velti's open architecture allows for third party products and services to be
seamlessly integrated into the platform and to be included in the MMP campaign
cycle. Therefore operators that use third party mobile search solutions, game
platforms, proximity marketing, mobile coupons, picture and barcode recognition
and other niche mobile media are now able to bring all of them under a single
marketing revenue scheme which is transparent for advertising and media buying
agencies. Essentially Velti's platform allows innovative mobile marketing
solutions to be monetised quickly and efficiently.
The MMP now features over 70 enhanced advertising and marketing templates
enabling Velti's customers to reach consumers through new interactive mobile
mediums. Building on more than seven years of experience in mobile advertising
technology development, the Platform allows advertisers and operators to create
campaigns that offer consumers a unique interactive mobile marketing experience.
Loyalty schemes, mobile coupons, social networks and other interactive templates
can now be easily designed, deployed and measured giving marketers new ways to
reach customers through their mobile phones and other portable devices.
Velti's partnership with MTEL serves to illustrate the interactivity that can be
achieved through mobile campaigns. The Bulgarian operator ran a knowledge quiz
campaign to their subscriber base. Consumers had to opt- in by sending a unique
code to enter the competition and collected bonus points for each correct
answer. These bonus points were entered into a daily prize draw for a VW Golf
car. An incredible 12 million interactions with consumers were achieved during
the 12 week promotion from a subscriber base of only 4.5 million.
The Platform also includes a new version of the Personalisation Engine, capable
of retrieving and processing real time data from consumer behaviour resulting in
dynamic segmentation and user-targeting.
Velti is also expanding its mobile content management capabilities by providing
self service tools to media groups that wish to manage their own mobile internet
sites. Whilst these capabilities have existed within Velti's content management
platform for the last 5 years, the focus in 2007 has been the evolution of user
interfaces towards full self service usability by non technical staff.
Growth and Market Potential
Attention and investment in expanding Velti's geographical footprint is a direct
result of Velti's conviction that significant growth opportunities exist.
However growth is not only limited to the advanced areas of Western Europe and
North America, Velti sees strong traction in the BRIC countries. The number of
mobile phones in China and India far surpasses the number of PCs and therefore
interactive marketing will be driven by mobile rather than the PC. China has 500
million mobile users which is due to grow to 600 million by 2008 (Digital Media
Research Institute, University of China, 2006). India had over 217 million
mobile subscribers by the end of 2007 and this was increasing by 8 million per
month. (TRAI, COAI, AUSPI, BDA Analysis).
In 2008, Velti will incur additional costs extending its geographical reach into
these areas. However we believe in the medium term the potential return will be
highly attractive.
The global market is one in which operators, media companies and advertising
agencies meet and there is need for each to understand the other's business
models. Velti is at the intersection of these groups. With over 7 years
experience of delivering mobile VAS and through Ansible's relationship with ad
agencies worldwide, it is uniquely placed to benefit from the global growth in
mobile marketing.
New Appointments
Velti and Ansible made a number of key strategic appointments during the fourth
quarter of 2007, with individuals commencing employment in early 2008.
Aris Hadjiaslani joins as General Manager Velti UK. He brings 20 years
experience of the mobile and VAS market, most recently with Vodafone Group as
Global Director for Future Products (including mobile marketing and advertising)
in the Newbury Headquarters.
Clare Grant joins Velti as Marketing Director, based in the UK office. Clare
brings over 15 years business to business marketing and senior management
experience, latterly with ntl:Telewest Business and Sony Corp.
Paul Cheng joins Velti as VP of Corporate Development in the San Francisco
office, responsible for identifying and managing relationships with strategic
partners. Paul has extensive business development experience as co founder of
Asylum Telecom, Klarium (mobile payments) and Adero Inc.
Kimberley Obremski joins the Velti US team as VP Sales, North America. Kimberley
brings over two decades of sales, marketing, and management experience
previously holding the position of Executive Vice President of Sales & Marketing
for Boston Communications, Inc.
Julie Preis - joins Ansible as VP of Managed Services responsible for project
management. Julie has over 10 years experience of new media and 5 years
experience in the mobile industry building industry leading teams at Motricity..
Nick Wiggin - joins Ansible as Managing Director for EMEA . Nick has over 15
years media experience and over the last 6 years he has developed a strong
international reputation as an expert in mobile marketing, having Chaired the
Mobile Marketing Association from 2005to 2007 and advised WPP and the GSM A
ssociation on global mobile advertising strategy at a senior level.
FINANCIAL REVIEW
In the financial year ended 31 December 2007 the Group posted robust growth in
revenue which reached €19.9 million, a 84 per cent increase compared to 2006
revenue (€10.8 million). This growth demonstrates the strength of our core
markets, mobile marketing and advertising, across mobile operators, advertising
agencies and media groups. Repeat business across all sectors including
operators, advertising agencies, brands, media and other public and private
sector organisations, the addition of new clients and expansion into new
territories fuelled the Group's organic growth while Ansible and M Telecom
contributed substantially to the overall performance. Software licenses and
integration services account for 43% of revenue, while mobile marketing and
value-added services activities for 57% (2006: 73% and 27% respectively).
Gross profit increased 78 per cent and reached €12.3 million (2006: €6.9
million), delivering a gross margin of 62 per cent (2006: 64 per cent). Selling
expenses grew by 133 per cent to €4.6 million (2006: €2.0 million) in support of
revenue growth and anticipated global expansion. Administrative expenses grew by
40 per cent to €2.7 million (2006: €1.9 million) while decreasing to 14 per cent
(2006: 18 per cent) as a percentage of revenue.
Cost of sales and operating expenses include depreciation and amortisation
charges of €2.5 million, (2006: €1.3 million) and share awards of €0.4 million
(2006: €0.1 million). Increased depreciation and amortisation charges resulted
from the Group's planned capital expenditure on technology and data centre
infrastructure which reached €5.4 million (2006: €4.9 million) .These costs have
been central to the Group's ability to support and serve customers globally and
to facilitate Ansible's roll out and integration. Net capital expenditure was
€2.9 million, 19 per cent lower than 2006. (2006: €3.6 million) while falling as
a percentage of revenue to 15 per cent (2006: 33 per cent).
Overall, operating profit grew by 67 per cent reaching €5.0 million (2006: €3.0
million), delivering an operating margin of 25 per cent (2006: 28 per cent).
This was achieved notwithstanding the infrastructure and business development
costs incurred in relation to Ansible's roll out.
Profit before tax reached €4.5 million representing an increase of 67 per cent
compared with last year (2006: €2.7 million). The tax charge for the year,
including deferred tax expense of €0.8 million, was €0.9 million, calculated at
an effective tax rate of 20 per cent (2006: 25 per cent). The effective tax rate
decreased due to lower tax rates prevailing in the new operating territories.
Velti's balance sheet at 31 December 2007 remains strong with a net asset
position of €30.1 million (2006: €16.3 million) and a net cash position of €9.9
million (2006: €4.0 million). Total assets were €41.1 million at 31 December
2007 (2006: €22.1 million). The balance sheet of the Group was enhanced by a
share placing in October which successfully raised €10.7 million before
expenses.
Accounts receivable and prepayments increased by €6.9 million to €15.9 million
(2006: €9.0 million) including significant fourth quarter revenue resulting from
a very successful brand loyalty mobile campaign that took place in Southeastern
Europe. Subsequent to the year end approximately 85% of this revenue has been
collected.
Improved profitability and working capital resulted in an enhanced operating
cash inflow of €2.8 million (2006: €1.2 million outflow) while cash outflow
after investment activities was €4.1 million (2006: €6.6 million outflow)
reflecting the significant investments in product development and infrastructure
and the acquisition cost of M-Telecom.
CONSOLIDATED INCOME STATEMENT
------------ ------------
Notes Year ended Year ended
31 December 31 December
2007 2006
€'000 €'000
------------ ------------
Revenue 2 19,866 10,816
Cost of revenue (7,535) (3,907)
Gross profit 12,331 6,909
Other income 4 25
Selling expenses (4,594) (1,974)
Administrative expenses (2,727) (1,947)
Other expenses - (4)
Operating profit 2 5,014 3,009
Finance expense, net (359) (169)
Share of loss of associates (178) (108)
Profit before tax 4,477 2,732
Tax 9 (910) (603)
Profit after tax 3,567 2,129
Attributable to:
Equity shareholders of the company 3,661 2,246
Minority interest (94) (117)
3,567 2,129
Basic earnings per share (in
Eurocents): 6 12.3 8.7
Diluted earnings per share (in
Eurocents): 6 11.7 8.5
CONSOLIDATED BALANCE SHEET
Notes As at As at
31 December 31 December
2007 2006
€' 000 €' 000
ASSETS
Non -current assets
Property, plant and equipment 1,616 1,342
Intangible assets 7,386 4,841
Investments 1,787 448
Goodwill 8 2,899 599
13,688 7,230
Current assets
Receivables and prepayments 15,861 8,968
Restricted investments 27 27
Cash and cash equivalents 11,616 5,867
27,504 14,862
Total assets 41,192 22,092
SHAREHOLDERS' EQUITY
Share capital 4 2,388 2,125
Share premium account 21,788 11,613
Share-based payment reserve 398 66
Merger reserve 1,071 1,071
Currency translation reserve (251) -
Accumulated profit 4,402 741
Total shareholders' equity 29,796 15,616
Minority interest 326 663
Total equity 30,122 16,279
LIABILITIES
Non-current liabilities
Retirement benefit obligations 143 102
Deferred tax liabilities 1,055 229
Other liabilities 22 -
1,220 331
Current liabilities
Trade and other payables 8,136 3,651
Borrowings 3 1,714 1,831
9,850 5,482
Total liabilities 11,070 5,813
Total equity and liabilities 41,192 22,092
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Accum-
Share Share Share Merger Currency ulated Minority Total
capital premium Based reserve Translation Profits interests €'000
€'000 €'000 Payment €'000 reserve (losses) €'000
reserve €'000 €'000
€'000
Balance at
31/21/05 1,375 - - 1,071 - (1,481) - 965
Minority
interest - - - - - - 780 780
Deferred
tax - - - - - (24) - (24)
adjustment
Share
capital
increase, 750 11,613 - - - - - 12,363
net
of expenses
Issue of
share - - 66 - - - - 66
awards
Net profit
for - - - - - 2,246 (117) 2,129
the year
Balance at
31/12/2006 2,125 11,613 66 1,071 - 741 663 16,279
Minority
interest - - - - - - (243) (243)
Share
capital
increase, 263 10,175 - - - - - 10,438
net
of expenses
Issue of
share - - 332 - - 332
awards
Net profit
for - - - - - 3,661 (94) 3,567
the year
Currency
translation
reserve - - - - (251) - - (251)
Balance at 2,388 21,788 398 1,071 (251) 4,402 326 30,122
31 December
2007
CONSOLIDATED CASH FLOW STATEMENT
Notes Year ended Year ended
31 December 31 December
2007 2006
€'000 €'000
Cash flows from operating activities
Cash generated from used in operations 10 3,349 (713)
Interest paid (458) (348)
Tax paid (50) (178)
Net cash generated from (used in) operating
activities 2,841 (1,239)
Cash flows from investing activities
Purchase of property, plant and equipment (611) (1,181)
Purchase of intangible assets (4,829) (3,747)
Purchase of available-for sale investments (1,639) (556)
Disposal of intangible assets 30
Interest received 136 148
Net cash used in investing activities (6,913) (5,336)
Cash flows from financing activities
Long-term borrowings - (1,681)
Net proceeds from issue of ordinary shares 10,284 12,521
Short term borrowings (232) (865)
Net cash from financing activities 10,052 9,975
(Decrease) /Increase in cash and cash
equivalents 5,980 3,400
Movement in cash and cash equivalents
At beginning of the year 5,867 2,467
Increase 5,980 3,400
11,847 5,867
Effect of exchange rate differences on cash
held (231) -
At end of year 11,616 5,867
Notes
The financial information in this announcement does not constitute statutory
financial statements as defined in section 240 of the Companies Act 1985. The
auditors have indicated that they intend to give an unqualified report, and will
not contain any statement under section 237(2) or (3) of the Companies Act 1985,
on the statutory financial statements for the year ended 31 December 2007.
Copies of the Company's report and financial statements will be sent to
shareholders shortly and will be available at the registered office of the
company: 2 Paris Gardens, London, SE1 8ND, United Kingdom
1. Accounting policies and basis of preparation
The consolidated financial statements of Velti plc (the Company) have been
prepared in accordance with the accounting policies set out in the financial
statements for the year ended 31 December 2006.
The consolidated financial statements include the results of Velti plc and
entities controlled by Velti plc (its subsidiaries) forming the Group (see note
6.). The results of Ansible Mobile LLC, a joint venture formed in 2007, are
consolidated by using the proportionate consolidation method (IAS 31) on the
basis of joint control.
2. Segment information
Velti's emphasis in the 'Telco, Agencies, Brands, Media and Government' is on
software licenses, services, integration, managed services, revenue-share
services and software as a service / application service provision. For the
'Other Public and Private Enterprises' segment the emphasis is narrower, on
software licenses and integration.
Revenue by business segment:
Year ended Year ended
31 December 31 December
2007 2006
€'000 €'000
Telco, Agencies, Brands Media and
Government 16,440 7,586
Other Public and Private Enterprises 3,426 3,230
Total 19,866 10,816
Operating profit by business segment:
Year ended Year ended
31 December 31 December
2006 2006
€'000 €'000
Telco, Agencies, Brands Media and
Government 4,599 2,711
Other Public and Private Enterprises 411 277
Unallocated operating income 4 21
Total 5,014 3,009
3. Borrowings
31 December 31 December
2007 2006
€'000 €'000
Current
Current portion of long-term debt
(within 1 year) 195 750
Short-term loans 1,519 1,081
1,714 1,831
Total borrowings 1,714 1,831
4. Share capital
During the year, the Company issued 3.682.803 shares of 5 p each, at a premium
of 2,05 p per share The Company's issued share capital consists of 32,774,138
ordinary shares of 5 p each.
5. Deferred shares award plan
The Group adopted a share incentive plan on 26 April 2006. Under this plan, any
employed director or any employee of the Group is eligible to receive awards
under the plan. The deferred shares award (DSA) entitles the participant to
acquire shares when the DSA vests by paying an amount of no less than the
nominal value per share. The vesting period is two years. Deferred shares are
forfeited if the participant leaves the Group before the DSA vests.
Details of the awards outstanding at 31 December 2007 are as follows.
Number of Weighted
awards average
exercise price
(in €)
Outstanding at the beginning of period 810,000 0.07
Granted during the period 744,500 0.07
Forfeited during the period (94,500) 0.07
Outstanding at the end of the period 1,470,000 0.07
In the year ended 31 December 2007, the Group recognised a total expense in
relation to the plan of €332,000 (year ended 31 December 2006: €66,000).
6. Earnings per share
Year ended Year ended
31 December 31 December
2007 2006
Profit attributable to equity holders of
the Company (€'000) 3,661 2,246
Weighted average number of ordinary
shares in issue 29,750,987 25,721,472
Weighted average number of ordinary
shares including dilutive effect of
outstanding share awards 31,210,987 26,531,472
Basic earnings per share (Eurocents per
share) 12.3 8.7
Diluted earnings per share (Eurocents
per share) 11.7 8.5
Adjusted earnings per share (1)
(Eurocents per share) 13.7 9.0
(1) Figures stated before cost of share awards
7. Subsidiaries
Velti Plc owns 100% of the share capital of Velti SA (incorporated in Greece),
100% of the share capital of Velti DR Limited (incorporated in the United
Kingdom), 100% of Velti M-Telecom Limited (incorporated in the United Kingdom),
the sole shareholder of Velti EOOD ( formerly M-Telecom EOOD incorporated in
Bulgaria), 100% of Velti North America Holdings Inc (incorporated in the USA)
that in turn holds 50% of Ansible Mobile LLC (incorporated in the USA) and 100%
of Velti Platforms and Services Limited (incorporated in Cyprus). Velti SA owns
79.51% of the share capital of Velti North America Inc (incorporated in the USA)
and 100% of the share capital of Velti Center for Innovation S.A. ('VCI')
(incorporated in Greece). VCI has a 50% holding in mPoint SA (incorporated in
Greece) which is consolidated on the basis of majority control of the Board of
Directors.
During the year ended 31 December 2007 the post-acquisition profit of
subsidiaries acquired during the period was €3,296,000.
Subsidiaries are consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases. Goodwill
arising upon acquisition of subsidiaries and associates during the period
amounted to €2,624,000. This comprised mainly the goodwill on the acquisition of
M-Telecom Limited of €2,473,000 (see note 8). The Directors have assessed the
carrying value of goodwill at 31 December 2007 and consider no impairment is
necessary.
8. Acquisition of Velti M-Telecom Limited
On April 2007, the Company, acquired 100 per cent of the issued share capital of
M-Telecom for deferred consideration of €2,44 mllion. This transaction has been
accounted for by the purchase method of accounting.
Book Value Fair Value
Net assets acquired €'000 €'000
------------ -------------
Property, plant and aquipment 12 12
Receivables and prepayments 111 111
Cash and cash equivalents 13 13
Borrowings (78) (78)
Trade and other payables (91) (91)
Total (33) (33)
Goodwill 2,473 2,473
Total consideration 2,440 2,440
Cash 480 480
Directly attributable costs 40 40
Deferred consideration 1,920 1,920
Goodwill arising on the acquisition of M-Telecom is attributable to the
anticipated profitability of the distribution of the Group's products in the new
markets and the anticipated future operating synergies from the combination.
9. Income tax
The effective tax rate of the Group on profit on ordinary activities is lower
than the standard rate of UK corporation tax due to lower corporation tax rates
prevailing in the operating territories of Group. Indicatively, Greece has a tax
rate of 25% while Bulgaria and Cyprus have a tax rate of 10%.
10. Cash generated from / (used in) operations
Year ended Year ended
31 December 31 December
2007 2006
€'000 €'000
Net profit 3,567 2,129
Adjustments for:
Tax expense 910 603
Interest income (136) (148)
Interest expense 495 348
Depreciation 346 151
Amortisation of intangible assets 2,188 1,151
Amortisation of grants - (666)
Share of loss of associates 178 108
Non cash provisions 725 349
8,273 4,025
Changes in working capital:
Receivables and prepayments (7,375) (6,274)
Trade and other payables 2,411 1,497
Pensions and other post-retirement
obligations 40 39
(4,924) (4,738)
Cash generated from / (used in)
operations 3,349 (713)
This information is provided by RNS
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