Mobile Tornado Group Plc : Final Results

18 April 2013

Mobile Tornado Group plc (the "Group")

Final Results

Introduction

Mobile Tornado Group plc, the leading provider of instant communication mobile applications to the enterprise market, announces its results for the twelve month period to 31 December 2012.

Operational highlights

·      Deal closed with Tier 1 mobile operator in France

·      Partnership agreement with Cellhire plc, short term hire market leader

·      Instant communications platform deployed at London Olympic Games

·      Technical development around Homeland Security market

Financial results

·      Revenue of £1.5 million (2011: £2.0 million)

·      Operating loss of £1.3 million (2011: loss of £0.8 million)

·      Loss after tax £1.7 million (2011: loss of £1.1 million)

·      Basic loss per share of 0.91p (2011: loss of 0.59p)

·      Net debt of £3.3 million (2011: net debt of £2.0m)

Commenting on the results, Peter Wilkinson, Chairman, said:

"I am pleased to report a year of significant progress. Whilst we are yet to see this momentum reflected in the Group's financial performance, I am confident that the deals we successfully closed in the year, together with the work undertaken to deliver them, has set the foundations for a very exciting year ahead."

Enquiries:

Mobile Tornado Group plc                                            +44 (0) 7734 475888

Jeremy Fenn, Chief Executive

Investec Bank plc (Nominated Adviser & Broker)         +44 (0) 20 7597 4000

Andrew Pinder

Dominic Emery

About Mobile Tornado Group Plc

Mobile Tornado Group PLC (AIM:MBT) specialises in the provision of Instant Communications services for mobile devices, with a focus on enterprise workforce management. The Company's main applications are Instant Talk, Instant Locate, Instant Alert & Instant Message enabling organisations to communicate with their employees more effectively and cost efficiently than conventional ways competing private mobile radio solutions. By equipping their workforce with mobile devices and MBT applications, a company can communicate with one or many employees simultaneously, track employee locations, and immediately be alerted of major issues.

For more information about Mobile Tornado visit www.mobiletornado.com.

Financial review

We have recorded a loss for the year of £1.7 million compared to £1.1 million in the previous year. Revenues of £1.5 million compared to £2.0 million recorded in 2011 and Group operating losses were £1.3 million compared to £0.8 million in the previous year.

The increase in activity, particularly with larger customers, has led to an increase in operating expenses to £2.5 million (2011: £2.2 million) which has impacted the results for the period. The decline in revenue is largely explained by a reduction in hardware and software sales to £0.3 million (2011: £0.7 million) as installations for new customers were pushed into 2013. License fee revenue of £0.6 million (2011: £0.8 million) declined overall as revenues for 2011 were boosted by advances of £0.2 million paid by a partner to secure territory exclusivity. The trend is upwards though, and with several new customers set to launch this year I hope to see license revenues begin to climb in 2013.

These losses have been funded by further loans of £1.2m received from InTechnology plc, our 49% shareholder. They remain very supportive of the Company and the strategy that is being pursued.

Business review

The business made progress during 2012 across each of our primary channels to market. These channels are namely:

·      Mobile network operators reselling to their business customers;

·      Regional partners reselling to their business users; and

·      Hardware manufacturers embedding the application into their devices.

Mobile operators

We successfully signed deals with three Tier 1 mobile operators during the period, each following a competitive tendering process. This has validated the quality of our technical platform and the increasing frequency of new opportunities suggests that this market is increasingly receptive to our product suite as our customers and partners seek new revenue opportunities in the new applications driven landscape.

We had hoped that our engagement with American Movil would have moved to launch before the end of 2012, but underestimated the scale of the project and the task of installing our platform into an operator the size of American Movil. This allied to changes to the functionality of the client to allow the application to be targeted at consumers as well as enterprises has meant that we are now looking to a launch during the second quarter of 2013. With more than 70 million cellular subscribers, Telcel in Mexico will be the first of American Movil's Group companies to launch the service. They will be followed by Claro in Brazil with more than 55 million subscribers.

Our technical team continues work with our Tier 1 carrier customer in France and this project should also complete in the near-term with commercial launch taking place shortly thereafter.

The delays we have experienced in these project implementations highlight the scale of the businesses with which we are engaged and with which we continue to grow as a Group, as well as the exciting opportunity we have once the services are successfully deployed with their end user customers.

Regional partners

Our partner in South Africa, Instacom, has continued to develop the Instant Communications market with an extensive reseller network being established across the country and its own associated support infrastructure. This has facilitated engagement with many of the largest transportation, logistics and security companies in Africa.

The mobile telecommunications market is developing rapidly across Africa, aided in many ways by the lack of a significant fixed line network in many African nations. We are exploring new markets and expect to develop a presence in Nigeria, Zambia, Tanzania, Mozambique, Botswana and Namibia during the current financial year.

During the year ended 31 December 2012, we announced a partnership in the UK with Cellhire plc, a global service provider specialising in the delivery of short term communication solutions for major global events. The relationship secured an early endorsement when we provided an instant communication solution to the London Organising Committee for the Olympic Games (LOCOG). Our solution enabled LOCOG to keep in contact with their staff tasked with transporting the Olympic teams, Committees and IOC members to and from venues throughout the UK. The service was used at sailing events in Weymouth, the rowing at Eton Dorney and many other Olympic events including nationwide football venues and the Olympic stadium in East London. LOCOG have commended the high quality of our service, as have those overseas news organisations that also used our service during the Olympics. We are now working closely with Cellhire to provide a similar platform at other global events.

We have completed the installation of a fully redundant server platform into G4S Sweden, which will now allow them to resell our services to their own customers. Similar platforms are now being considered by G4S in Denmark and Finland. We are very positive about our prospects in the Scandinavian market and are hopeful that the traction we have developed will allow us to leverage our services in other G4S territories.

Hardware manufacturers

The ruggedized handset market has continued to expand during the period as manufacturers seek to exploit the huge growth in the workforce management sector. As the demand for application software to enhance the efficiency within remote workforces increases, so does the need for an appropriate device. With an application that can be deployed across every vertical segment of the workforce management sector, the Group is very well positioned to continue to take advantage of this trend. Whether it is logistics, security, retail or healthcare, our instant communications platform delivers a service perfect for any remote worker application.  

As a result, we are regularly approached to embed our applications into ruggedized devices and during the period we were awarded a contract with Handheld Group of Sweden, a manufacturer of rugged mobile computers and PDAs. Handheld Group and its partners deliver complete mobility solutions to businesses in industries such as mining, geomatics, logistics, forestry, public transportation, utilities, construction, maintenance, military and security.

Our relationship with Honeywell has continued to develop during the period following the incorporation of our proposition into their ISV Store, a site dedicated to helping enterprises identify the software applications that best fit their business needs. We are engaged on a number of interesting opportunities with Honeywell and look forward to seeing some results this year.

Technical development

We maintain a defined product roadmap which details the technical developments necessary to both widen the existing applicability of the solution and to ensure that we remain competitive in our current market.  

A market in which we are seeking to play a greater part is Homeland Security. Homeland Security is an umbrella term used to cover the security programme within countries to protect against terrorist activity. Secure communications is a key element within this space and has been served historically by the TETRA technology platform, specifically designed for use by Government agencies, emergency services and the military. As a dedicated platform, TETRA provides secure, certain and encrypted communications and has been deployed by Governments across most of the developed world. However, the deployment of a TETRA platform requires a huge capital commitment and very high operating costs to deploy, and many countries that have not adopted the technology are looking at alternatives. Since Push to Talk delivers many of the functional features that TETRA provides, we are well placed to participate in the development of an alternative. Our technical team has worked throughout the period to combine our Instant Communications suite of applications, with a dedicated handset, the specification of which is controlled by us and is integrated with the required encryption security. We are now engaged with a number of Government agencies as we seek to trial this platform and look forward to reporting the results in due course.

Another development that is currently underway is 'meshing', where handsets are able to work as mini base stations, making communication possible between handsets even where the cellular network signal has failed or is inaccessible. This functionality has been a feature of private radio solutions for many years, increasing the resilience of the solution. We are working to introduce similar functionality alongside our applications, within a dedicated handset, and will therefore be in a position to significantly widen our market proposition.  

Dividend

The Directors are unable to recommend the payment of a dividend in respect of the year ended 31 December 2012 (year ended 31 December 2011: £nil).  The Company currently intends to reinvest future earnings to finance the growth of the business.

Outlook

We are currently installing our Instant Communication platform into customer networks around the world. Operators in Mexico, Brazil and France are all close to commercial launch and we are in advanced stage trials and negotiations with four other operators across North America, Africa, Europe and Asia. The market for value added services amongst mobile operators has increased significantly over the last two years; this growth being driven by the emergence of smart devices and the transition to high speed 4G/LTE networks. The corporate market is traditionally the most profitable for operators, and the fact that we offer an application suite that can be deployed across the whole workforce management sector, means we will continue to be an attractive option for them.

Notwithstanding the current levels of activity, it is essential that we continue to innovate around our technical platform. This requires investment in operational teams to manage the deployments with current and prospective customers, and skilled engineers to assist in the development of new functionality for new markets. Our initiatives within the Homeland Security market are a good example of this and taking account of the pressures within the Global economy, where increased efficiency is being demanded at a lower cost, we anticipate gaining traction in this area during the current financial year.

And finally, I would like to thank the whole Mobile Tornado team for their fantastic efforts over the last 12 months. Our technical and operations team has been stretched to the limit as we engage with major mobile operators across the globe. It is a testament to their skill and commitment that we are in such a strong position in our markets, and I look forward to working with them over the coming year as we seek to deliver continued momentum.

Peter Wilkinson

Chairman

18 April 2013

Consolidated income statement                                                       

For the year ended 31 December 2012

Consolidated statement of comprehensive income                           

For the year ended 31 December 2012

Consolidated statement of changes in equity                                     

For the year ended 31 December 2012

Consolidated statement of financial position                                                

As at 31 December 2012

Consolidated statement of cash flows                                                 

For the year ended 31 December 2012

1   Financial information

The financial information set out in this final results announcement does not constitute statutory accounts within the meaning of s435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012 will be dispatched to shareholders for approval at the Annual General Meeting to be held on 26 June 2013. The statutory accounts contain an unqualified audit report, which did not include a statement under s498(2) or s498(3) of the Companies Act 2006, and will be delivered to the Registrar of Companies.

The Group presents its results in accordance with internal management reporting information. At 31 December 2012, the Board continued to monitor operating results by category of revenue. Under IFRS 8, the Group has only one operating segment. Therefore the results presented in the income statement are the same as those required under IFRS 8, save for the year end entry of IFRS 2 share option charge of £25,000 (year ended 31 December 2011: £1,000).

Revenue by category

Revenue is reported by geographical location of customers. Non-current assets are reported by geographical location of assets.

Our mobile network operator customer in France represents 17% (2011: 6%) and our mobile network operator in Mexico and Brazil represents 28% (2011: 9%) of the total revenue of the Group.

The Annual General Meeting of the Company will be held at Central House, Beckwith Knowle, Harrogate, HG3 1UG on 26 June 2013 at 9.00 a.m. The audited results for the year ended 31 December 2012 will be posted to shareholders shortly and will be available on the Company's website atwww.mobiletornado.comat the same time.