Monitise Plc (MONI)
ISR viewMonitise is leading the way in the provision of mobile banking services in the UK and, through partnerships with key leading financial players and retailers, looks likely to replicate that success in other markets. The valuation is relatively high, but is reflective of the company’s strategic potential.
Monitise now generating significant transaction revenues
Monitise Plc | Published on 25/08/2010Mobile money provider Monitise’s full year results, which were well flagged at the recent fund raising, show strong transaction-led growth in revenues to £6m for the full year (£4.3m in the second half) and adjusted operating losses at £14.3m. The release provides more information on the progress of live US and UK operations towards break even. The company is now executing on the mobile money vision, whilst the £42m net cash on the balance sheet should help it maintain its early mover advantage as it invests in new ventures and in product R&D.
Monitise has reported full year revenues to the end of June of £6m, up 125% on FY09, with pleasing strong growth in transaction revenues and between the first and second half, highlighting the impact of subscriber growth. Transaction revenues increased from £0.5m to £2.9m, with the underlying increase at £2m taking into account Monitise moving to 100% ownership of its UK JV, Monilink, early in the financial year. Second half revenues came in at £4.3m, versus £1.7m for the first half. Subscribers, at over 2m, are growing at 100,000 per month, with smartphone users now 29% of the base (up from 23% at the interims) and using the service an average of 16 times per month. The launch of a new Visa smartphone app for the US will help sustain growth going forward.
Headline operating losses widened from £13.7m to £17.1m, whilst losses net of share based payments and exceptional gains widened from £12m to £14.3m. The release for the first time breaks down revenues and costs into the various live operations, and into investment in technology, new ventures and corporate costs. The ground-breaking UK operation, which serves banks accounting for 55% of the market, recorded full year revenues and operating losses of £3.23m and £2.09m respectively, and is said to now be running at a £5m annual revenue run rate with breakeven targeted by December 2010. The US operation recorded revenues of £0.83m and was very close to breakeven for the year, whilst other live operations reported revenues of £0.76m and losses of £0.42m. Thus, live operations accounted for £2.5m of the adjusted £14.3m loss. The remaining loss was accounted for by: investment in future operations (£2.82m), R&D spending (£4.9m) and corporate costs (£4.05m).
Cashflow matched operating losses fairly closely, with an outflow of £14.7m, leaving period end net cash of £13.2m. This was subsequently bolstered by the July £31m raise from Visa and others, leaving Monitise with a very healthy balance sheet net cash of £42m.
The headlines revenue and operating losses were published at the July 2010 fund raising, so there were no great surprises in the release. However, the greater clarity in terms of revenues and operating losses shows the strong progress towards breakeven of the live operations on a standalone basis, with most of the losses coming from R&D spending, investment in future operations, and corporate costs, the first two of which at least are helping sustain Monitise’s first mover status in mobile money. We managed to catch up with CFO John Brougham and FD Tom Spurgeon, who not surprisingly believe that the results show Monitise starting to execute on the mobile money vision, with the recent fund raise leaving the company fully funded to continue the strong pace of R&D and investment in new ventures.