Blur : Unaudited interim results for the 6 months ended 30 June 2017

blur Group plc

("blur Group", "blur", the "Group" or the "Company")

Unaudited Interim Results

blur Group, the enterprise services platform and marketplace presents its unaudited interim results for the six months ended 30 June 2017.

• EBITDA** loss reduced by 42% compared to H1 2016

• Gross Profit achieved in H1, 2017 vs loss in H1 and FY 2016.

• Revenue grew moderately (4.7%) in the first half of 2017 compared with the second half of 2016.

• Focus on Enterprise customers driving further improvements in operational gearing

  Post H1 2017 events

• Change of Board announced July 12, 2017

• Successful placing oversubscribed raising $2.1m post costs

• Cash Balance as at August 31, 2017 $2.5m

• Review of business model reaffirms Enterprise strategy and investment in technology with lower base operating expenses

**before share based payments and foreign exchange differences

Since July 12, 2017 the company, under the guidance of the new board, has undertaken a review of the company's operations and has reaffirmed its commitment to the Enterprise procurement segment, applying blur's PaaS (Procurement as a Service) platform to improve efficiencies and deliver value for money in partnership with its customers.

The company has undergone a number of changes since period end and I am delighted that Laurence Cook has agreed to serve as CEO taking over the baton from Philip Letts the founder. Laurence has a strong corporate sales background and together with his team will drive further innovation and strive to secure long-term Enterprise customers and revenues through the blur platform.

Going forward we are focused on converting new Enterprise customers whilst continuing to develop the blur Procurement as a Service (PaaS) cloud platform including A.I. enhancements as we scale.

New customer acquisition together with continued investment in its market leading PaaS platform is expected to drive revenue growth and provide a springboard for value creation.

blur Group plc investors@blurgroup.com

N+1 Singer

Shaun Dobson/James White Tel: +44 (0) 20 7496 3000

blur Group is a public company quoted on the London Stock Exchange's AIM market (BLUR) and is headquartered in the UK.

Revenue

In the first half of 2017, blur continued to focus on its Enterprise strategy.

Overall revenue for the six months to 30 June 2017 decreased by 67% to $0.21m (H1 2016: $0.63m) within which Project fee revenue declined by 73% to $0.15m (H1 2016: $0.56m). This reflects the continuing long sales cycles and pilot phases which characterise the typical development of blur's relationship with a larger Enterprise.

The Group's higher margin revenues fell by 14% to $0.06m (H1 2016: $0.07m).

Gross margin

Gross profit was $0.01m in H1 2017 (H1 2016: ($0.01m)). This increase has been driven by the reduction to delivery staff costs charged to cost of sales, which reduced by 53% to $0.09m (H1 2016: $0.19m). Further automation of blur's software platform and delivery processes has driven improved operational efficiency. In addition, blur's focus on Enterprise customers, leads to greater completion of projects which also drives a more efficient delivery function.

Costs

Total administrative expenses decreased by 35% to $1.87m (H1 2016: $2.89m) due to blur's increasing ability to improve efficiency with the launch of blur 6.0. In addition, overall headcount led to a 41% reduction in staff costs compared to H1 2016. Share based payments reduced by 40% compared to H1 2016.

The credit risk associated with the customers using the marketplace resulted in a $(0.11m) (H1 2016:

$(0.01m) bad debt provision included in administrative costs. The credit balance was, in part, driven by recovery of previously provided for debts.

EBITDA

The EBITDA loss (Earnings before Interest, Tax, Depreciation and Amortization, Foreign Exchange movements and Share Option costs) for H1 2016 reduced by 42% to $1.23m (H1 2016: $2.12m).

This was largely driven by the reduction in administrative costs in the period.

Loss after tax

The loss after tax for the period reduced by 35% to $1.79m (H1 2016: $2.74m).

Finance income fell to $0.002m (H1 2016: $0.02m) reflecting lower cash balances held on deposit, together with reduced available returns.

Cash

The cash balance at the period end was $0.98m (31 December 2016: $2.5m).

The Group predominantly holds its cash in sterling. At 30 June 2017, the Group's sterling deposits totaled

£0.73m with a further US$0.03m held in USD and EUR denominated accounts.

blur's reported cash balance has been impacted by $0.13m of unrealized exchange gains in H1 2017 (H1 2016: Loss $0.68m), as the valuation of blur's sterling denominated cash balances were affected by the strengthening in the GBP: USD exchange rate since the end of December 2016.

The net decrease in cash and cash equivalents was 22% lower in H1 2017 compared to H1 2016, driven by improving efficiency and cost reductions. Expressed in underlying GBP and excluding foreign exchange effects, the Group's cash balances reduced by £1.30m in H1 2017 (H1 2016: £1.60m).

Risks and uncertainties

The key business risks affecting the Group remain as stated in the Annual Report for the Year ended 31 December 2016.

Six Months

Ended

Note US$ US$

Cost of sales (203,922) (642,868)

Total administrative expenses 3 (1,868,242) (2,890,566)

Finance income 1,644 20,817

Finance expense (20) -

Tax credit 71,594 136,251

Company (1,787,410) (2,744,272)

US$

(Loss) for the year (1,787,410) (2,744,272)

Exchange gains/(losses) arising on the translation of foreign subsidiaries (could subsequently be reclassified to profit and loss)

Basic and diluted loss per share for losses attributable to the owners of the parent during the year

The results reflected above relate to continuing activities.

The accompanying notes are an integral part of these financial statements.

Called

Up Share Capital

Share Premium

Equity Conversion Reserve

Merger Reserve

Share Based Payment Reserve

Foreign Exchange Reserve

Retained Loss Total

Equity as at 1 January 2016

Loss for the period Share Based Payments

Other comprehensive income

Equity as at 30 June 2016 (Unaudited)

Equity as at 1 January 2017

Loss for the period

Other comprehensive loss for the year

Total comprehensive income/(loss)

Share Based Payments

Equity as at 30 June 2017 (Unaudited)

The accompanying notes are an integral part of these financial statements.

Six Months

Ended

Note US$ US$

Loss after taxation (1,787,410) (2,744,272)

Interest (income)/expense (net) (1,624) (20,817)

Income tax credit (71,594) (136,251)

Fair value movement and unrealized FX (60,634) 124,771 Depreciation of property, plant and equipment 5,788 29,448 Amortization of intangible assets 6 564,810 578,387

Share-based payments charge 10 110,957 183,411 Loss on disposal of property, plant and equipment - (244)

1. Accounting policies Basis of preparation

   The principal accounting policies adopted in the preparation of these condensed financial statements are set out in the full accounts for 2016. The policies have been consistently applied to all the periods presented, unless otherwise stated.

   These condensed financial statements have been prepared in accordance with IAS34 "Interim financial statements", as adopted by the European Union.

   These condensed interim financial statements do not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006. The comparative information for the full year ended 31 December 2016 has, however, been derived from audited statutory financial statements. A copy of the 31 December 2016 statutory financial statements has been delivered to the Registrar of Companies. The auditor's report on those statements was unqualified, but included reference to an emphasis of matter in relation to going concern. That opinion did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

   The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The accounting policies have been applied consistently throughout the group for the purposes of the preparation of the interim statements.

   The Group financial statements consolidate the financial statements of the Company and its subsidiaries (together referred to as "the Group").

   Basis of consolidation

   Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries (the Group) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

   Foreign currency

   The functional currency of blur Group plc and blur Ltd is Pound Sterling, whereas of blur Inc. it is US Dollars.

   The presentational currency is US Dollars ($), as the Group's management believe that in the future the majority of revenues and activity will be generated in US Dollars. This is consistent with prior years.

   The exchange rates used for translating the statement of financial position at 30 June 2017 was at a closing rate of £1 = US$1.3003 (2016: US$1.3390) and the statement of comprehensive income at an average rate of US$1.2949 (2016: US$1.4441).

2. Segmental analysis

   The Group currently has one reportable segment, provision of services, and categorizes all revenue from operations to this segment.

   The Group currently has four reportable categories which are:

3. Project revenues - for the provision of services from projects that list on blur's marketplace, where the customer accepts the bid from the expert supplier and a legally binding contract between blur and its customers is established;

4. Cancellation fees (formerly listing fees) - where the project is cancelled after listing and there is an expectation of collection. The Cancellation fee is a mandatory charge when a customer listed a project and decided to close their trading account or not to select an expert;

5. Premium services - comprising wraparound support services for projects, including blur Manage Ultra, blur Protect Advanced, blur Express, and blur Engage; and

6. Subscriptions and licenses - for the provision of tiered annual subscriptions to service providers to gain access to high value project opportunities and market insights; the provision of access to blur's software Platform and for the provision of subscriptions of blur Data, which analyses the business services landscape including category trends, pricing and timeline forecasts.

   Six Months Ended	Project Revenue Six Months Ended	Year Ended	Cancellation Fees (formerly Listing Fees) Six Six Months Months Year Ended Ended Ended	Premium Services Six Six Months months Year Ended ended Ended	Six months Ended	Subscriptions Six months Ended	Year Ended
   30 June	30 June	31 Dec	30 June 30 June 31 Dec	30 30 June June 31 Dec	30 June	30 June	31 Dec
   2017	2016	2016	2017 2016 2016	2017 2016 2016	2017	2016	2016
   Un- audited	Un-audited	Audited	Un- Un- audited audited Audited	Un- Un- audited audited Audited	Un- audited	Un- audited	Audited
   US$	US$	US$	US$ US$ US$	US$ US$ US$	US$	US$	US$
   98,614	292,399	376,609	- - 112	20,983 - -	32,994	37,988	60,501
   17,245	203,198	276,999	- - 8,678	100 - 2,213	4,039	23,460	27,332
   33,216	64,382	62,169	- - -	- 1,500 1,775	4,345	9,167	17,788
   149,075	559,979	715,777	- - 8,790	21,083 1,500 3,988	41,378	70,615	105,621

   UK USA

   Rest of World

   Total

   The Group operates in three main geographic areas: UK, USA and Rest of the World. Revenue by origin of geographical segment for all entities in the Group is as follows:

   Six Months Ended

   Six Months

   Ended Year Ended

   30 June 2017

   30 June

   2016

   31 December

   2016

   Unaudited Unaudited Audited US$ US$ US$

   UK 152,591 330,387 437,222

   USA 21,384 226,658 315,222

   Rest of World 37,561 75,049 81,732

   Total 211,536 632,094 834,176
7. Loss from operations

   The operating loss as at 30 June 2017 is stated after charging:

   Six Months Ended

   Six Months

   Ended Year Ended

   Unaudited	2016 Unaudited	2016 Audited
   US$	US$	US$
   Amortization of intangibles	564,810	578,387	1,146,376
   Bad debt provision	(108,785)	(8,975)	(50,038)
   Depreciation of property, plant and equipment	5,788	29,448	47,055
   (Profit)/Loss on disposal of property, plant and equipment	-	(244)	(244)
   Staff costs	802,981	1,365,285	2,284,305
   Operating lease expense - buildings	50,228	163,229	225,603
   Foreign exchange (gains)/ losses	(47,877)	(9,756)	31,732
   Other administrative expenses		601,097	773,192	1,331,856
   Total administrative and other expenses		1,868,242	2,890,566	5,016,645

   30 June 2017 30June

   31 December

8. EBITDA

   EBITDA is calculated as follows:

   Six months ended

   Six months

   ended Year ended

   Unaudited	2016 Unaudited	Audited
   Earnings from operations	US$ (1,860,628)	US$ (2,901,340)	US$ (5,093,562)
   Amortization of intangibles	564,810	578,387	1,146,376
   Depreciation of property, plant and equipment	5,788	29,448	47,055
   (Profit)/Loss on disposal of property, plant and equipment	-	(244)	(244)
   Foreign exchange losses	(47,877)	(9,756)	31,732
   Share based payments	110,957	183,411	308,934
   EBITDA	(1,226,950)	(2,120,094)	(3,559,709)

   30 June 2017 30June

   31 Dec 2016

9. Loss per share

   Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The basis for calculating the basic loss per share is as follows:

   Six Months Ended

   Six months

   Ended Year Ended

   30 June 2017

   30 June

   2016

   31

   December

   2016

   Unaudited Unaudited Audited

   US$ US$ US$ Weighted average number of shares for the purpose of earnings per share 47,092,851 47,092,851 47,092,851

   Loss after tax (1,787,410) (2,744,272) (4,768,814)

   Loss per share (0.04) (0.06) (0.10)

   Due to the loss in the period the effect of the share options was considered anti-dilutive and hence no diluted loss per share information has been provided.

10. Intangible assets Trading Software

    Platform US$	Development US$	US$
    COST At 1 January 2016	4,035,850	306,359	4,342,209
    Additions - Internal Development	882,451	-	882,451
    Additions - External Costs Disposals	- (8,359)	- (617)	- (8,976)
    Exchange adjustment	(671,460)	(50,970)	(722,430)
    At 31 December 2016 - Audited	4,238,482	254,772	4,493,254
    Additions - Internal Development Additions - External Costs Disposals	376,704 - -	- - -	376,704 - -
    Exchange adjustment	227,362	13,668	241,030
    At 30 June 2017 - Unaudited	4,842,548	268,440	5,110,988
    AMORTISATION At 1 January 2016	1,492,969	133,560	1,626,529
    Charge for period	1,052,025	94,352	1,146,377
    Disposals	(8,359)	(206)	(8,565)
    Exchange adjustment	(355,948)	(31,819)	(387,767)
    At 31 December 2016 - Audited	2,180,687	195,887	2,376,574
    Charge for period	526,233	38,577	564,810
    Exchange adjustment	135,220	11,846	147,066
    At 30 June 2017 - Unaudited	2,842,140	246,310	3,088,450
    NET BOOK VALUE At 30 June 2017	2,000,408	22,130	2,022,538
    At 31 December 2016	2,057,795	58,885	2,116,680

    Total
11. Trade and other receivables Six Months Ended Year Ended 30 June 2017

    31 December

    2016

    Unaudited Audited

    US$ US$

    Trade receivables - gross 75,24430,047

    Provision for impairment (4,164) (16,093)

    Trade receivables - net 71,08013,954

    Prepayments 215,968 153,395

    Accrued Income 63,67361,920

    Other receivables 491 37,477

    351,212 266,746

    All amounts shown under receivables are due within one year.

12. Loans and borrowings Six Months Ended Year Ended 30 June 2017

    31 December

    2016

    Unaudited Audited Unsecured convertible loan note US$ US$

    Current 13,003 12,341

    Total loans and borrowings 13,003 12,341

    Book value approximate to fair value for the convertible debt and is stated at fair value at initial recognition and at amortized cost subsequently.

    The convertible loan notes (referred to as convertible debt II) were issued in 2011 with a coupon rate of 15% at a total face value of US$78,010. The loan notes are either repayable in four years from the issue date at its total face value, with interest accrued and payable as ordinary shares issued in the Company or can be converted at any time within two years into shares at the holder's option. The value of the liability component and the equity conversion component were determined at the date the instrument was issued.

    Face value Equity conversion

    Fair value of liability

    US$ US$ US$

    As at 1 January 2017 12,341 8,967 21,308

    Accretion in loan note liability value - - - Exchange adjustments 662 - 662

    As at 30 June 2017 13,003 8,967 22,359
13. Share capital Share capital allotted and fully paid up

    Ordinary shares of £0.01 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Pounds Sterling and translated at the historic rate.

    The table below shows the movements in share capital for the year:

    Number of shares Share Capital $ Share premium $

    Six Months Ended	Year Ended	Six Months Ended	Year Ended	Six Months Ended	Year Ended
    30 June 2017	31 December 2016	30 June 2017	31 December 2016	30 June 2017	31 December 2016
    Unaudited	Audited	Un-audited	Audited	Unaudited	Audited
    47,092,851	47,092,851	769,179	769,179	37,425,856	37,425,856
    -	-	-	-	-	-
    -	-	-	-	-	-
    47,092,851	47,092,851	769,179	769,179	37,425,856	37,425,856

    Movement in ordinary share capital

    Balance at the beginning of the period

    Issue of new shares Share issue costs

    Balance at the end of

    the period

    The Group has not issued any partly paid shares nor any convertible securities, exchangeable securities or securities with warrants. The Group does not hold any treasury shares.

14. Share-based payments

    In compliance with the requirements of IFRS 2 on share-based payments, the fair value of options granted during the period or which were granted in previous periods but had an extended period before vesting is calculated either using the Black Scholes option pricing model or on the basis of the fair value of remuneration waived in consideration for the grant.

    Six Months Ended

    Six Months

    Ended Year Ended 31 December

    30 June 2017 30 June 2016

    2016

    In the Statement of Comprehensive Income, the Company recognised the following charge in respect of its share based payment plan:

    Unaudited Unaudited Audited US$ US$ US$ 110,957 183,411 (208,839)
15. Related party transactions Six Months Ended

    Six Months

    Ended

    30 June 2017 30 June 2016 Unaudited Unaudited

    US$ US$

    Consultancy fees1	26,797	69,783
    Service fees 2	-	2,417
    Project revenue 3,4	3,216	16,986
    30,013	89,186

    Out of above balances outstanding at period end in trade payables and accruals are $nil (31 December 2016: $533).

16. Consultancy fees of $26,797 (Six months ended 30 June 2015: $69,783) were paid to Revviva LLC, a company in which K Cardinale has an interest. These were paid for K Cardinale's director services.

17. Service fees of $nil (Six months ended 30 June 2016: $2,417) were paid to CFPro Limited for accounting and consultancy support, a company in which Barbara Spurrier has an interest.

18. Project revenue includes $2,549 (Six months to 30 June 2016: $16,986) in revenue recognized for projects carried out on behalf of Letts Estates Limited, a company in which Philip Letts has an interest. The projects were carried out on an arms-length basis. A balance of $nil is included in aged receivables at the period end (Six months to 30 June 2016: $nil).

19. Project revenue includes $667 (Six months to 30 June 2016: $nil) in revenue recognized for projects carried out on behalf of Tanfield Limited, a company in which Richard Bourne-Arton has an interest. The projects were carried out on an arms-length basis. A balance of $nil is included in aged receivables at the period end (Six months to 30 June 2016: $nil).

20. The following loans are due (to)/from Directors:

    Six Months

    Ended Year Ended

    30 June 2016 31 December 2015 Unaudited Audited

    P Letts: US$ US$

    Opening balance (15,721) (19,603)

    Amounts advanced from the Group 2,028 -

    Expenses incurred on behalf of the Group (46) (624)

    Exchange adjustments (843) 4,506

    Closing balance (14,582) (15,721)

    The loans are interest free and repayable on demand.

21. Events after the reporting date

    On 7 July 2017, blur announced the successful result of a proposed placing, via an accelerated book build, to raise £1.6 million. Whilst blur has made progress in engaging with and delivering projects for multinational blue-chip organisations, converting customer engagement into significant revenues has been slower than anticipated. The funding was intended to provide the business with sufficient working capital to generate new Enterprise customers from the sales pipeline over a 12-month period and time for the incoming board to review the operations and prospects of the business.

    Following the announcement of the July placing, a number of changes have been made to blur Group plc's board of Directors. David Rowe was appointed as chairman with Preeti Mardia, Richard Rae and Richard Croft being appointed to the board as non-executive directors on 12 July 2017. Simultaneous with these new appointments, David Sherriff, Roger de Peyrecave Rob Wirszycz and Kara Cardinale stepped down from the board. Tim Allen, Chief Financial Officer, also stepped down from the board on 28 July 2017 and James Porter, blur's existing group financial controller, will serve as interim finance lead. On 1 August 2017 Philip Letts, Chief Executive Officer stepped down from the board, and was replaced by Laurence Cook on 2 August 2017.

22. Control

23. There is no ultimate controlling party

    Statement of Directors' Responsibilities

    We confirm that to the best of our knowledge:

    •the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

    •the interim management report includes a fair review of the information required by:

24. )DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

25. )DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so

The directors of blur Group plc are listed in and are unchanged from those disclosed in the blur Group plc Annual Report for 31 December 2016, with the exception of Philips Letts who stepped down from the board on 1 August 2017, and Laurence Cook, who joined the board on 2 August 2017.

By order of the Board

David Rowe Chairman

David Rowe

19 September 2019

17