Zamano : Half-Yearly Report 2014

zamano plc

Interim Resultsfor the six month period ended 30 June 2014

zamano plc (AIM:ZMNO, ESM:ZAZ), a leading European provider of interactive applications and services to mobile devices, today announced its Interim Results for the six month period ended 30 June 2014.

Highlights

·    Sales of €8.718M (H1 2013 €9.019M) which was significantly ahead of the H2 2013 outcome of €7.015M. 

·    Gross profit for the period of €2.380M (H1 2013 €2.528M) reflected a healthy gross margin of 27.3% (H1 2013 28.0%). Although down slightly compared to the corresponding period last year, the small decline in margin is due to the alteration by zamano of its business mix in the UK.

·    EBITDA of €1.218M (H1 2013 €1.421M) which is 2.5% ahead of the H2 2013 EBITDA of €1.187M. 

·    zamano has benefited from lower finance/interest costs during the first half of this year and as a result, both profit before tax of €0.964M (H1 2013; €0.984M) and profit after tax of €0.873M (H1 2013; €0.858M) effectively matched those recorded in H1 of the previous year. 

·    zamano continued to strengthen its balance sheet position, with cash at 30 June 2014 at €2.973M (€2.262M at 30 June 2013). The cash balances at 30 June 2014 adjusted for the increase in trade debtors are €3.758M, which comprise of balances due from mobile network operators.

Ross Conlon CEO of zamano commented: "In spite of a challenging trading environment in our core product areas, zamano delivered a satisfactory set of results for the period ended 30 June 2014. These results have been achieved on the back of revenue diversification in the UK, good sales growth in Australia, tight cost control and a strong emphasis on the generation of cash.

The Group continues to invest in product development and is firmly focussed on identifying acquisition, investment and joint venture opportunities in the UK and Ireland in order to accelerate the growth of the business. zamano has significant expertise in data analytics, mobile billing/payments and mobile marketing and is targeting its acquisition search where it can add substantial value to any business acquired."

- Ends -

For further information, please contact:

zamano plc

Ross Conlon, Chief Executive Officer

Tel: + 353 1 554 7259

Michael Connolly, Chief Financial Officer

Tel: +353 1 554 7261

Investec Corporate Finance

Shane Lawlor/Conor Murtagh

Tel: + 353 1 4210000

Cenkos Securities

Alan Stewart/Derrick Lee

Tel: + 44 (0) 131 220 6939

Media Enquires:

MCOMM Communications Consultants

Richard Moore

Tel: +353 1 661 9428

Mob: +353 87 241 4751

zamano plc

2014 Half year results announcement

Chief Executive Officer's Statement

Introduction

zamano plc ("zamano") today announces its interim trading results for the period ended 30 June 2014.

We are pleased to announce sales of €8.718M (H1 2013 €9.019M) which was significantly ahead of the H2 2013 outcome of €7.015M.  Gross profit for the period of €2.380M (H1 2013 €2.528M) reflected a healthy gross margin of 27.3% (H1 2013 28.0%). Although down slightly compared to the corresponding period last year, the reason for the margin decline is that zamano has altered its business mix in the UK by expanding its third party sales in the B2B area which carries a lower margin.

The EBITDA outturn for the period was €1.218M (H1 2013 €1.421M) which is 2.5% ahead of the H2 2013 outcome of €1.187M.  This result was achieved despite the investment associated with the launch of Messagehero.

zamano has benefited from lower finance/interest costs during the first half of this year and as a result, both profit before tax of €0.964M (H1 2013; €0.984M) and profit after tax of €0.873M, (H1 2013; €0.858M) effectively matched those recorded in H1 of the previous year. 

zamano continued to strengthen its balance sheet position, with cash at 30 June 2014 at €2.973M (€2.262M at 30 June 2013). The cash balances at 30 June 2014 adjusted for the increase in trade debtors are €3.758M which comprise of balances due from mobile network operators.

Market Review

UK

Our UK operations performed extremely well during the first half of 2014. Sales for the six months ended 30 June 2014 were €6.423M up 15.3% on the same period last year. This translated into a gross profit contribution of €1.813M, 10.3% above the corresponding figure in H1 2013. The reduction in the gross margin percentage in the UK from 29.5% to 28.2% is wholly attributable to increased third party sales in the B2B market during H1 2014.

During the first half of our financial year, zamano continued to work closely with the UK regulator, mobile network operators, industry bodies and aggregators in the development of a code of practice for affiliate marketing in the interactive media and entertainment industry.

Ireland

Irish sales for the period were €1.747M, compared to €2.179M during H1 2013. Gross profit for the period ended 30 June 2014 was €0.508M, down from €0.661M in the first half of 2013. This trend in the Irish business, which was previously reported, resulted from the introduction by ComReg of a new code of practice in mid 2012. The extent of the decline in sales was arrested during the period ended 30 June 2014 although conditions remain challenging.

zamano plc and subsidiaries

Chief Executive Officer's Statement(continued)

Messagehero, our new messaging product targeted at the SME and Enterprise market in Ireland, was launched in the fourth quarter of 2013, and continues to be refined to meet the ever-changing requirements of the market.

During the period, the Group actively explored a number of acquisitions in both Ireland and the UK to complement the Messagehero offering and accelerate our entry into the market.  We shall continue to pursue acquisition opportunities as a means of establishing a stronger foothold for this product.

Other Territories

The highlight here was a stellar performance in Australia where sales were significantly ahead of H1 and H2 2013 due to the successful roll-out of a strategic marketing campaign with new mobile advertising partners.

During the period, we continued to selectively identify territories where we can effectively and efficiently launch products utilising our aggregator relationships and billing platforms.

Other Activities

Over the past couple of years, the board and management of the Group has focussed on the diversification of the business. This is designed to capitalise on the buoyant market environment which currently exists for web and mobile commerce products and services.

In this regard, during the period ended 30 June 2014, zamano put significant time and resources into identifying acquisition, investment and joint venture opportunities in the UK and Ireland. A set of acquisition criteria was formulated and approved by the board. The Group has examined a number of opportunities in mobile media, payments/billing, messaging and related products during the past six months and continues to actively pursue a number of such opportunities, any one of which, if concluded, will diversify the Group's product base.

The effective cash maximisation of the Group's asset base which we have successfully implemented since the start of 2012 puts zamano in a strong position to fund acquisition and other business development initiatives. These acquisition/business development initiatives could be financed by the cash that the business continues to generate and if required, the raising of loan finance from banks and other financial institutions or potentially through the issue of new equity.

Financial Review

As referred to in the Introduction section of this announcement, Group sales in H1 2014 were materially in excess of those recorded in the second half of 2013. This is primarily due to a significant increase in third party B2B sales in the UK. However, as this revenue is lower margin activity, zamano's gross margin contribution for the period fell slightly when compared with the corresponding period in 2013. This fall in gross margin together with the investment associated with the development and launch of Messagehero, resulted in a €0.203M fall in EBITDA compared to H1 2013. The fall in EBITDA was compensated by a significant drop in financing costs resulting in the Group matching the pre and post-tax outturns achieved in H1 2013.

zamano plc and subsidiaries

Chief Executive Officer's Statement(continued)

Moreover, while sales revenues were down marginally (3.3%) on H1 2013, they were significantly ahead (24.3%) of the second half of 2013. This substantial uplift was achieved during a period when the Group deployed significant resources in the areas of product development, acquisition targeting and joint ventures. The overall gross margin percentage for the period of 27.3% held up well compared to the 28.0% recorded during the first half of 2013.

In balance sheet terms, zamano continues to strengthen its overall financial position, with cash at 30 June 2014 amounting to €2.973M. This compares with €2.262M at 30 June 2013 and €2.747M at 30 December 2013. In this regard, while the EBITDA recorded for the first half of 2014 has not manifested itself in a substantial increase in cash balances, the rest of the EBITDA is included in debtors which largely comprise sums due to zamano by some of the largest mobile network operators in the world.

Outlook

In spite of a challenging trading environment in our core product areas, zamano delivered a satisfactory set of results for the period ended 30 June 2014. These results have been achieved on the back of revenue diversification in the UK, good sales growth in Australia, tight cost control and a strong emphasis on the generation of cash.

The Group continues to invest in product development and is firmly focussed on identifying acquisition, investment and joint venture opportunities in the UK and Ireland in order to accelerate the growth of the business. zamano has significant expertise in data analytics, mobile billing/payments and mobile marketing and is targeting its acquisition search where it can add substantial value to any business acquired.

Throughout the first half of the current year, the Group has evaluated a number of acquisition opportunities and it continues to actively pursue a number of these opportunities. The objective here is to acquire a business which, combined with the Group's strategic skills, will diversify its product base in a relatively short timeframe.

Finally, the board and management will continue to operate our core business in an effective and efficient manner in the interests of shareholders. Alongside this, the Group will actively pursue a "buy and build" acquisition strategy to grow the business throughout the rest of 2014 and beyond.

Ross Conlon                                                                                                    17 September 2014

Chief Executive Officer

Directors' responsibility statement

for the six months ended 30 June 2014

Statement of the directors in respect of the unaudited half-yearly financial report

Each of the current serving directors, whose names and functions are listed in the 2013 Annual Report, confirm that, to the best of our knowledge and belief:

On behalf of the Board

John Rockett                                            Ross Conlon                             17 September 2014

Director                                                     Director

zamano plc and subsidiaries

Unaudited condensed consolidated income statement

for the six months ended 30 June 2014

Unaudited condensed consolidated statement of comprehensive income

for the period ended 30 June 2014

zamano plc and subsidiaries

Unaudited condensed consolidated balance sheet

at 30 June 2014

zamano plc and subsidiaries

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2014

for the half-year ended 30 June 2013

zamano plc and subsidiaries

Unaudited condensed consolidated cash flow statement

for the half-year ended 30 June 2014

Notes to the half-yearly condensed consolidated financial statements (unaudited)

1Reporting entity

zamano plc is a limited company incorporated and domiciled in Ireland with shares publicly traded on the Alternative Investment Market (AIM) in London and the Enterprise Securities Market (ESM) in Dublin.

The half-yearly condensed consolidated financial statements of zamano plc as at and for the six months ended 30 June 2014 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.

2Statement of compliance

These unaudited half-yearly condensed consolidated financial statements (the "half-yearly financial statements") have been prepared in accordance with 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 2013 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 2013 are available atwww.zamano.comand when filed, from the Registrar of Companies.  The auditor's report on those financial statements was unqualified.

These half-yearly financial statements were approved by the Board on 17 September 2014 and are available at www.zamano.com.

3Significant accounting policies - basis of preparation

These half-yearly financial statements have been prepared in accordance with the accounting policies set out in the Group's 31 December 2013 published consolidated financial statements, which were prepared in accordance with IFRS as adopted by the EU.

Below is a list of standards and interpretations that were required to be applied for the first period ended 30 June 2014.  There was no material impact to the financial statements in the period from these standards.

·     IFRS 10, "Consolidated Financial Statements"

·     IFRS 11, "Joint Arrangements"

·     IFRS 12, "Disclosure of Interests in Other Entities"

·     IAS 27 (2011), "Separate Financial Statements"

·     IAS 28 (2011), "Investments in Associates"

·     IFRIC 21, "Levies"

The directors are satisfied that there are no significant differences between the carrying value and fair value of assets and liabilities which require further disclosure in these half-yearly financial statements.

There are a number of standards that are not yet required to be applied but can be early adopted. None of these standards have been applied in the period.  There would not have been a material impact to the financial statements if these statements had been applied in the current accounting period.

Notes (continued)

4Estimates

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.  In preparing these half-yearly condensed consolidated financial statements, the significant judgements made by management and the key sources of estimation uncertainty were the same as disclosed in note 4 to the most recently published annual consolidated financial statements.  The most subjective judgement relating to these interim financial statements relates to the valuation of goodwill on a previous business combination.  Details related to our key assumptions in this regard are set out in note 16 to the most recently published annual consolidated financial statements.

5     Segment information

The Group is managed based on three reportable segments which are defined based on geographical markets as follows:  Republic of Ireland (ROI), United Kingdom (UK) and Australia.  It also has sales in other jurisdictions but these are not deemed to be stand-alone reportable segments under the requirements of IFRS 8 and are classified as "other locations" in the table below. 

Information regarding the results of each reportable segment is included below.  Performance is measured based on segment results as included in the reports that are reviewed by the Group's Chief Operating Decision Maker (or 'CODM')

The Group's operations are not significantly impacted by seasonal fluctuations.

(1)Unallocated expenses relate to central overheads such as rent, administration, salaries and other office overhead costs which are not allocated to individual reportable segments.

Notes (continued)

5     Segment information(continued)

(1)Unallocated expenses relate to central overhead costs such as rent, administration, salaries and office overhead costs which are not allocated to individual reportable segments.

6     Income tax

         The major components of the income tax expense in the half-yearly condensed consolidated income statement are:

Notes (continued)

7     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 company by the weighted average number of ordinary shares outstanding during the period.

       Diluted profit per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the company 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:

       Refer to note 14 for details on warrants exercised during the period.

Notes (continued)

8     Adjusted earnings per share

       The following reflects earnings per share based on adjusted net income:

          Adjusted net income is calculated as:

Reconciliation of reported operating profit across business divisions to earnings before interest, tax, depreciation and amortisation (EBITDA). 

Notes (continued)

9     Share-based payments

The Board may offer to grant share options to any director, employee or consultant of the Group and these are usually granted at an exercise price equal to the market price of the company's shares at the date of grant.  The rules relating to the granting of share options are disclosed in the consolidated financial statements for the year ended 31 December 2013.  All of the options granted are deemed to be equity-settled. 

The share-based payments expense for the period was €40,391 (2013 - €23,562).

There were no new options granted during the period (30 June 2013: 6,278,458).  The fair value of options granted during the prior period was calculated at the date of grant using an option pricing model (the Black Scholes option pricing model), taking into account the terms and conditions upon which the options were granted.  Set out below are the principal inputs to the model for these options.

10   Intangible assets

Notes (continued)

10   Intangible assets(continued)

       Goodwill arises from business combinations in prior years.  Details regarding the underlying assumptions determined by the directors in assessing the recoverability of goodwill are

       disclosed in note 16 of the 31 December 2013 financial statements.  The directors are satisfied that the results of the Group for the period to 30 June 2014 are in line with the assumptions applied as at 31 December 2013 and that no other events have occurred in the current period which would require an impairment test of the goodwill as at 30 June 2014 to be undertaken.

       Additions to intangibles for the period to 30 June 2014 were €150,000 which relates to internally capitalised payroll costs on research and development projects.

11   Property, plant and equipment

       Acquisitions and disposals

During the six months ended 30 June 2014, the Group acquired property, plant and equipment assets with a cost of €22,060 (2013 - €60,000).

       No property, plant and equipment assets were disposed of by the Group during the six months ended 30 June 2014 (2013 - €Nil).

12   Loan

The loan outstanding at 30 June 2014 is due to Bank of Ireland and is secured by a first debenture over the assets of zamano plc and each material subsidiary.

13   Capital commitments

       The Group had no capital commitments at 30 June 2014 (2013: €Nil).

14   Related party transactions

       In the period, Pageant Holdings Limited "Pageant" acquired 1,533,333 ordinary shares in the Company at a price of 3.0 cent per ordinary share pursuant to warrants issued to Pageant on 21 December 2012.  Pageant now holds 26,938,510 ordinary shares in the Company representing approximately 27.09% of the entire enlarged issued ordinary share capital of the Company. Peter Furlong, a director of the Company, is also a director of Pageant. 

As at 30 June 2014 the Company owed an arrangement fee of €46,000 to Pageant which arose on a loan liability settled in the prior year.

Independent review report to zamano plc

Introduction

We have been engaged by zamano plc ("the company") to review the condensed set of consolidated financial statements in the financial report for the half-year ended 30 June 2014 which comprise the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report, including the consolidated interim financial statements contained therein, is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the requirements of the AIM rules issued by the London Stock Exchange and the ESM rules issued by the Irish Stock Exchange.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the EU.  The directors are responsible for ensuring that the condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the consolidated condensed financial statements in the half-yearly financial report for the half-year ended 30 June 2014 are not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU, the AIM rules for companies issued by the London Stock Exchange and the ESM rules for companies issued by the Irish Stock Exchange.

Eamonn Russell                                                                                               17 September 2014

For and on behalf of

KPMG

Chartered Accountants, Statutory Audit Firm

1 Stokes Place, St. Stephen's Green, Dublin 2