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(RNS) 2009-09-23 07:02 Zamano PLC - Interim Results
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RNS Number : 5009Z Zamano PLC 23 September 2009 `Press Release 23 September 2009` zamano PLC ("zamano" or "the Group") Interim Results zamano PLC (AIM:ZMNO, IEX:ZAZ), a leading provider of interactive applications and services to mobile devices, today announces its interim results for the 6 months ended 30 June 2009. Mike Watson, Chairman of zamano, commented: "I am pleased to have been appointed Chairman during this exciting time of change and growth in the industry. zamano has all the fundamentals in place to take the business forward, including a strong management team, innovative technology and industry expertise. The short term trading environment is challenging, and a process has been initiated to identify investment opportunities to accelerate the Group's growth plans and to capitalise on its strengths." John O'Shea, CEO of zamano, added: "Management is making progress on the key actions identified in March 2009 including rigorous evaluation of all operations, tight cost control, cash management and measured investment in growth initiatives. During the period the Group improved gross margins and EBITDA margins, maintained adjusted EPS at 2.3 cents and generated EUR2.1 million of operating cashflow. Revenue declined in the period due to the planned shift to lower volume, higher margin revenue as well as the impact of regulatory change and a weak consumer environment. The Group has identified some areas for future revenue growth, which amongst other initiatives will include smartphone applications." Highlights: `* Revenue of EUR13.3 million (2008: EUR23.7 million) and gross margin of` `32% (H1 2008: 27%)` `* Strict investment criteria and cost control supported the increase in` `gross margin and underpinned profitability` `* EBITDA EUR2.3 million (H1 2008: EUR2.5 million) which was in line with` `market expectations` `* Adjusted EPS at 2.3 cents (H1 2008: 2.3 cents)` `* Generated EUR2.1 million operating cash flow from activities` `* Reduced net debt in the 6 months by EUR1.4 million to EUR5.8 million` `* Strong growth in the US and Spanish operations, market entry into South` `Africa` For further information, please contact: zamano plc `John O'Shea, Chief Executive Officer Tel: +353 1 488 5830` Colm Saunders, Chief Financial Officer Tel: +353 1 511 1224 Cenkos Securities `Jon Fitzpatrick Tel: +44 (0) 131 220 9773` `Ken Fleming Tel: +44 (0) 131 220 9772` NCB Corporate Finance `Conor McCarthy Tel: +353 1 611 5100` Media enquiries: `Abchurch Communications Tel: +44 (0) 20 7398 7700` Heather Salmond / Joanne Shears / Mark Dixon `joanne.shears@abchurch-group.com Tel: +44 (0) 20 7398 7709` `mark.dixon@abchurch-group.com Tel: +44 (0) 20 7398 7729` `www.abchurch-group.com` Irish Media enquiries: Edelman `Donnchadh O'Leary Tel +353 1 678 9333` `www.edelman.com` `CEO's statement` I am pleased to welcome Mike Watson as our new Chairman. Mike's knowledge of the industry is a significant benefit to the Group and we are excited about his vision for zamano. I look forward to working with him to identify opportunities to accelerate the Group's growth plans. Revenue declined in the UK and Ireland due to the planned shift to lower volume, higher margin revenue and the impact of external factors such as the new regulations in the UK and Ireland, declining effectiveness of print advertising and low levels of consumer confidence being more severe than expected. In the three months since the period end the Irish revenue has stabilised while the decline in UK revenue has slowed. The Group delivered good performances in the key geographic markets which have been targeted for growth. Its share of the US market grew, with revenue increasing by 44% to EUR1.9 million. Additionally, the Group entered the Spanish market in January 2009 and has quickly established annualised revenues of EUR600,000. In July 2009, the Group entered the South African market and has already established a profitable market position. There has been a continued shift in the Group's routes to market, with advertising spend on print and television substantially reduced while online and mobile portal advertising spend increased. Total advertising spend is down due to lack of suitable mobile portal advertising inventory. Availability is expected to grow in line with mobile internet usage which is forecasted to grow substantially over the next number of years. This increase is being driven by the adoption of new handsets and the reduction in mobile data charges. The cost of accessing mobile data continues to decline and as it does the Group's customer levels are expected to increase. This was evidenced by Vodafone's free mobile internet day in August, when the Group's customer levels on mobile portals increased four fold. A new smartphone application team has been put in place to develop both mobile entertainment and corporate applications. The Group is developing and testing new billing mechanisms to take advantage of the convergence between the mobile and fixed line internet. Furthermore, these new devices and billing methodologies break down the traditional model of mobile network operator billing, and thereby allow the Group to target customers globally, as evidenced by zamano's first iPhone application selling 30,000 copies in 45 countries. The Group is continually realigning resources and skillsets towards developing new revenue streams. While strict cost control measures are in place, the Group has increased its headcount in research and development during 2009 to help ensure it has the skills and products to take advantage of growth opportunities. Market Review The overall market for the provision of interactive applications and services to the mobile is expected to grow over the next three years. This growth is being driven by a number of factors including new mobile billing methodologies, increased adoption of smartphone handsets and reduced data charges. zamano has diverted resources towards supplying this emerging element of the market. The market for the Group's traditional billing model of Premium Rate SMS declined in Ireland and the UK in H1 2009 due to regulatory change and declines in consumer confidence. In the UK, zamano's market position slipped from number five to number seven as a result of a shift to higher margin business model and the reduced effectiveness of the Group's traditional routes to market such as print advertising. In Ireland, zamano increased its market share driven by a number of new customer wins as the Group continues to build on its strong leadership position. The type of content that the Group delivers has changed dramatically over the last 12 months. Mobile ringtones and wallpapers are being replaced by interactive mobile applications, games, competitions and corporate solutions which allow the Group to take advantage of the increasing capabilities of mobile devices. Financial Review Revenue was down by EUR10.4 million from H1 2008 to EUR13.3 million due to declines in the traditional markets: EUR8.8 million in the UK, EUR1.7 million in Ireland and EUR0.6 million in Australia. These declines were partly offset by growth in the US and Spain. The Group's gross margin increased to 32%, which is up 5 percentage points on the same period in 2008 reflecting the increased focus on higher margin revenue and strict metrics for measuring advertising effectiveness. The Group's EBITDA declined by 7% to EUR2.3 million, on a constant currency basis the decline was only 3%. EBITDA margin increased to 17%, up 7 percentage points on same period in 2008 reflecting the effect of higher gross margin and reduced operating costs. Cost management remains strong as evidenced by the fact that administrative expense were reduced by 47% to EUR2.1 million; reflecting strong controls and the benefit of research and development credits. Management continues to maintain its focus on cost reduction, with a number of initiatives underway such as a platform virtualisation project which will reduce platform management costs by 65% in 2010. Cash generation in the Group continues to be strong, with EUR2.1 million of positive cash-flow from operating activities in the first 6 months of the year. At 30 June the Group had cash of EUR6.0 million and EUR11.8 million of debt, which is a net debt of EUR5.8 million. The Group paid down EUR1.2 million of debt in the six month period. Outlook Despite the short term challenges, the Board has confidence in the medium and long term prospects of the industry, and is excited about the high growth areas and the opportunities that they present. The broader industry is growing, and we look forward to refining our strategy and building on our fundamental strengths to capitalise on the expected significant growth in the industry. John O'Shea Chief Executive Officer 22 September 2009 `Unaudited condensed consolidated income statement` for the half-year ended 30 June 2009 `Half - year ended Half-year ended 30 June 2008` `30 June` 2009 `Notes` `EUR'000 EUR'000` `Revenue 4 13,332 23,723` `Cost of sales (9,024) (17,396)` `Gross profit - continuing 4,308 6,327` activities `Other administrative expenses (2,082) (3,929)` `Depreciation (74) (47)` `Amortisation of intangible (1,203) (1,202)` assets `Total administrative expenses (3,359) (5,178)` `Operating profit 4 949 1,149` `Finance income 37 160` `Finance expense (379) (636)` `Profit before tax 607 673` `Income tax credit/ (expense) 5 15 (157)` `Profit for the period - all 622` `attributable 516` to owners of the company `Earnings per share` basic 6 EUR0.008 EUR0.006 diluted 6 EUR0.007 EUR0.006 `Unaudited condensed consolidated balance sheet` at 30 June 2009 `30 June 31 December 30 June` 2009 20081 2008 `EUR'000 EUR'000 EUR'000` Assets `Non-current assets` `Property, plant and equipment 202 262 305` `Intangible assets 20,549 21,397 27,361` `Deferred tax asset 55 45 44` `20,806 21,704 27,710` `Current assets` `Trade and other receivables 4,749 5,943 8,948` `Income tax recoverable 10 15 -` `Cash and cash equivalents 5,957 5,744 5,137` `10,716 11,702 14,085` `Total assets 31,522 33,406 41,795` `Equity` `Share capital 81 81 81` `Share premium 11,156 11,156 11,155` `Capital conversion reserve 1 1 1` `Foreign translation reserve (56) (80) (40)` `Share-based payment reserve 499 424 341` `Retained earnings 1,653 1,031 5,351` `Total equity 13,334 12,613 16,889` `Liabilities` `Non-current liabilities` `Loans and borrowings 8,690 10,703 11,586` `Deferred tax liability 133 268 424` `8,823 10,971 12,010` `Current liabilities` `Trade and other payables 4,894 6,232 8,279` `Business combination accrual 17 1,343 1,373 2,368` `Loans and borrowings 3,076 2,211 1,755` `Income tax payable 52 6 494` `9,365 9,822 12,896` `Total liabilities 18,188 20,793 24,906` `Total equity and liabilities 31,522 33,406 41,795` 1 Amounts at 31 December 2008 are derived from the 31 December 2008 audited financial statements. `zamano plc and subsidiaries` Unaudited condensed consolidated cash flow statement for the half-year ended 30 June 2009 `Half-year ended Half-year ended` `30 June 30 June 2008` 2009 `EUR'000 EUR'000` Cash flows from operating activities `Profit before tax 607 673` Adjustments to reconcile profit for the period `to net cash inflow from operating` activities `Depreciation 74 47` `Amortisation of intangible assets 1,203 1,202` `Share-based payments expense 75 89` `Foreign exchange 24 (21)` `Decrease in trade and other receivables 1,193 240` `Decrease in trade and other payables (1,449) (590)` `Finance income (37) (160)` `Finance expense 379 636` `Cash generated from operations 2,069 2,116` `Interest paid (10) (11)` `Income tax paid - (256)` `Net cash inflow from operating activities 2,059 1,849` Cash flows from investing activities `Payment of deferred consideration on -` `acquisition of (7,290)` `subsidiaries` `Purchase of property, plant and equipment (14) (177)` `Purchase of intangible assets (353) (9)` `Interest received 37 185` `Net cash outflow from investing (330) (7,291)` activities Cash flows from financing activities `Repayment of debt (1,516) (1,525)` `Net cash outflow from financing (1,516) (1,525)` activities `Net increase/(decrease) in cash and cash 213 (6,967)` equivalents `Cash and cash equivalents at 1 January 5,744 12,104` `Cash and cash equivalents at 30 June 5,957 5,137` `Notes to the half-yearly condensed consolidated financial statements (unaudited)` `1 Reporting entity` zamano plc is a limited company incorporated and domiciled in Ireland whose shares are publicly traded on the Alternative Investment Market (AIM) in London and the Irish Enterprise Exchange (IEX) in Dublin. The half-yearly condensed consolidated financial statements of zamano plc as at and for the six months ended 30 June 2009 consist of the results and financial position of the company and its subsidiaries together referred to as "the group." The principal activities of the group are the provision of mobile data services and technology. `2 Statement of compliance` These half-yearly condensed consolidated financial statements (the "half-yearly financial statements") have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 "Interim Financial Reporting", as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published financial statements of the group. The comparative figures included for the year ended 31 December 2008 do not constitute statutory financial statements of the group within the meaning of the European Communities (Companies: Group Accounts) Regulations 1992. The consolidated financial statements for the year ended 31 December 2008 are available at www.zamano.com. The auditor's report on those financial statements was unqualified. These condensed consolidated financial statements were approved by the Board on 22 September 2009 and are available at www.zamano.com. `3. Estimates` The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting polices and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these half-yearly condensed financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as disclosed in note 4 to the most recent published annual consolidated financial statements. `4. Segment information` zamano facilitates communication and interaction between companies and consumers on mobile phones through a range of value-added mobile applications (B2B). zamano also develops, promotes and distributes mobile content and interactive services directly to consumers (D2C). `The group's operations are not significantly impacted by seasonal fluctuations.` `Half-year ended 30 June 2009 B2B D2C Total` `EUR'000 EUR'000 EUR'000` Revenue from external customers `Ireland 3,969 2,731 6,700` `UK 917 3,068 3,985` `USA - 1,859 1,859` `Australia - 678 678` `Spain - 110 110` `Total revenue 4,886 8,446 13,332` `Segment results 986 2,361 3,347` `Unallocated expenses (2,398)` `Operating profit 949` `Net finance costs (342)` `Profit before tax 607` `Income tax credit 15` `Profit for the period 622` `Half-year ended 30 June 2008 B2B D2C Eliminations Total` `EUR'000 EUR'000 EUR'000 EUR'000` Revenue `Ireland 4,517 3,860 - 8,377` `UK 2,000 10,763 - 12,763` `USA - 1,287 - 1,287` `Australia - 1,296 - 1,296` `Sales to external customers 6,517 17,206 - 23,723` `Inter-segment sales 11 908 (919) -` `Total revenue 6,528 18,114 (919) 23,723` `Segment results 1,259 3,678 - 4,937` `Unallocated expenses (3,788)` `Operating profit 1,149` `Net finance costs (476)` `Profit before tax 673` `Income tax expense (157)` `Profit for the period 516` `5. Income tax credit/expense` `The major components of the income tax (credit)/expense in the half-year consolidated income statement are:` `Half-year ended Half-year ended` `30 June 30 June` 2009 2008 `EUR'000 EUR'000` Current tax `Irish corporation tax 153 272` `Foreign tax 2 32` `(Over)/under provision in prior year (20) 15` 135 319 Deferred tax `Movement in deferred tax amounts for the (150) (162)` period `Income tax (credit)/expense (15) 157` `6. Earnings per share` Basic earnings per share amounts are calculated by dividing net profit for the half-year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the income and share data used in the basic and diluted earnings per share computations: `Half-year ended Half-year ended` `30 June 30 June` 2009 2008 `EUR'000 EUR'000` `Net profit attributable to equity holders 622 516` of the company `Half-year ended Half-year ended` `30 June 30 June` 2009 2008 `000's 000's` `Basic weighted average number of shares 81,930 81,662` Dilutive potential ordinary shares: `Employee share options 2,398 3,702` `Diluted weighted average number of shares 84,328 85,364` `7 Adjusted earnings per share` `The following reflects earnings per share based on adjusted net income:` `Half-year ended Half-year ended` `30 June 30 June` 2009 2008 EUR EUR `Adjusted basic EPS 0.023 0.024` `Adjusted diluted EPS 0.023 0.023` Adjusted net income is calculated as: Half-year ended Half-year ended `30 June 30 June` 2009 2008 `EUR'000 EUR'000` `Profit after tax 622 516` `Share-based payments expense 75 89` `Interest on deferred consideration - 145` `Amortisation of intangible assets 1,203 1,202` `1,900 1,952` This information is provided by RNS The company news service from the London Stock Exchange END IR FLLLLKKBZBBV
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