Monitise is up for sale

After a brief reprieve from the bad news, mobile payments expert Monitise has dished out another warning and begun a strategic review which could end up with the business being sold. It blames its transition to a subscription-based business model, but the City is in no mood for excuses and, with the shares down over a fifth on the news, investors clearly do not rate its chances.

Revenue will be flat in the year to June 2015 at £90-100 million versus £95.1 million last year, warned the firm. Monitise had previously predicted top-line growth of 25%, so this equates to a £24 million shortfall. It also means the company will make an even bigger EBITDA loss of £40-50 million this year, at least £10 million more than expected.

That it will slash its cost base far below the £180 million previously anticipated at least keeps the business on track to make a cash profit in 2016. However, with so many disappointments over the past 12 months, the risk of another miss is clearly a worry.

In little over a year, Monitise shares have lost over 80% of their value and, after plunging by as much as a fifth on Thursday, now sit close to a five-year low.

That's not what one would expect if the City thought there was a whiff that the business could be sold at a premium, most likely to an existing customer like IBM or MasterCard.

"It is difficult to assess the value of IP which will not be worth the same for every potential buyer," says Barclays. "At 3.1x FY15 EV/Sales, based on the midpoint of the revised guidance, one would suggest upside to the right suitor, but clearly we deal here with a very high level of uncertainty."

This latest sell-off will hardly impress Santander, Telefónica and MasterCard who pumped over £49 million into Monitise late last year via a placing at 30.5p a share.

Half-year results are out on 17 February ahead of a Capital Markets Day for institutional investors later that day.

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